Report and Recommendation of the President to the … (Moat Kla) (145.6 km2), Kampong Thom; and Stung Sen ... decentralization and deconcentration ... Report and Recommendation of

Report and Recommendation of the President to the Board of Directors

Project Number: 37287 November 2007

Proposed Loan and Asian Development Fund Grant Kingdom of Cambodia: Tonle Sap Lowlands Rural Development Project

CURRENCY EQUIVALENTS (as of 29 October 2007)

Currency Unit – riel/s (KR) KR1.00 = $0.000245

$1.00 = KR4,074

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund CDF – Commune Development Fund CLAC – commune land acquisition committee EA – executing agency EIRR – economic internal rate of return ENPV – economic net present value FAO – Food and Agricultural Organization FWUC – farmer water user committee FWUG – farmer water user group GAP – gender action plan GDP – gross domestic product HDI – Human Development Index IA – implementing agency ICS – independent consultant selection IEE – initial environmental examination IFAD – International Fund for Agricultural Development IRC – inter-ministry resettlement committee LARP – land acquisition and resettlement plan MAFF – Ministry of Agriculture, Forestry and Fisheries MEF – Ministry of Economy and Finance MFI – microfinance institution MOI – Ministry of Interior MOWRAM – Ministry of Water Resources and Meteorology MRD – Ministry of Rural Development NCB – national competitive bidding NGO – nongovernment organization NSDP – National Strategic Development Plan O&M – operation and maintenance PDA – Provincial Department of Agriculture PDRD – Provincial Department of Rural Development PDWRAM – Provincial Department of Water Resources and

Meteorology PLAU – Provincial Local Administration Unit PMO – project management office PPMS – project performance management system PPTA – project preparatory technical assistance PRS – provincial resettlement subcommittee PSC – project steering committee QCBS – quality and cost-based selection SDR – special drawing rights TA – technical assistance TSI – Tonle Sap Initiative UNDP – United Nations Development Programme

GLOSSARY

Buffer Zone. A zone that usually surrounds or adjoins core areas, and is used for cooperative activities compatible with sound ecological practices, including environmental education, recreation, ecotourism, and research. In Tonle Sap Biosphere Reserve, a buffer zone of about 5,400 square kilometers (km2) surrounds the core areas up to the outer limit of the flooded forest. Commune. The lowest level of administrative unit in Cambodia, consisting of several villages. Commune Council. An elected body that governs commune administration in Cambodia. In addition to fulfilling its administrative tasks, commune councils participate in informal dispute resolution, plan and implement development projects, perform some agency functions for the central and provincial governments, and conduct advocacy. Development activities consist mainly of small-scale infrastructure and public goods projects. Core Areas. Securely protected sites for conserving biodiversity, monitoring minimally disturbed ecosystems, and undertaking research and other low-impact uses such as education. In Tonle Sap Biosphere Reserve, core areas are in Prek Toal (213 km2), Battambang; Boeng Tonle Chhmar (Moat Kla) (145.6 km2), Kampong Thom; and Stung Sen (63.5 km2), Kampong Thom. Flooded Forest. A descriptive term for the particular natural vegetation that originally covered most of the Tonle Sap’s floodplains. It is now characterized by low forest and shrubs that still account for the productivity of Tonle Sap. Human Development Index. The Human Development Report ranks countries according to a score between 0 and 1 on the Human Development Index (HDI). A country’s HDI score depends on life expectancy at birth; adult literacy; combined gross primary, secondary, and tertiary school enrollment; and real per capita income in purchasing power parity dollars. (United Nations. 1999. Human Development Report 1999. Available: http://www.undp.org/hdro/pp.htm). Livelihood. The capabilities, assets, and activities required for a means of living. A livelihood is sustainable when it can cope with stresses and shocks, and maintain or enhance itself in the present and future without undermining the natural resource base. Lowlands. The land area that is presently under predominantly agricultural (cropping and grazing) use on the flat-lying colluvial-alluvial plain around Tonle Sap Lake (also known as the Great Lake or Tonle Sap). The lower or innermost limit is determined by the boundary of the buffer zone. Provincial Support Team. Provincial support teams will comprise the following: (i) community-driven development specialist, (ii) rural infrastructure/road engineer, (iii) rural infrastructure/irrigation engineer, (iv) procurement specialist, (v) quality assurance engineer, and (vi) an accountant. The team members will work in line department offices, coordinated by the community-driven development specialist in each province. Seila Program. An aid mobilization and coordination framework providing support to Cambodia's decentralization and deconcentration reforms. Under the Government’s overall reform program, a three-tiered system of planning and budgeting is emerging—focused on commune, province, and national levels. The Seila program ended in December 2006. The activities carried out by Seila are now under the mandate of the National Committee for Management of the Decentralization and Deconcentration Reform and within the Ministry of the Interior. Transition Zone. An area in which stakeholders work together in a variety of economic and other activities to manage and develop a biosphere reserve’s natural resources in a sustainable

manner. In Tonle Sap Biosphere Reserve, a transition area of about 9,000 km2 lies between the outer boundary of the buffer zone and highways no. 5 and 6.

NOTES

(i) The fiscal year (FY) of the Government of Cambodia and its agencies ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2007 ends on 31 December 2007.

(ii) In this report, “$” refers to US dollars.

Vice President C. Lawrence Greenwood, Jr., Operations Group 2 Director General A. Thapan, Southeast Asia Department (SERD) Director U. S. Malik, Agriculture, Environment, and Natural Resources

Division, SERD Team leader I. W. Makin, Senior Water Resources Management Specialist, SERD Team members N. Ikemoto, Environment Specialist, SERD

A. Musa, Financial Analysis Specialist, SERD M. Oka, Social Development Specialist, SERD M. J. Rahman, Principal Project Management Specialist, SERD R. Thami, Senior Counsel, Office of the General Counsel

CONTENTS Page

LOAN, GRANT, AND PROJECT SUMMARY i

MAP

I. THE PROPOSAL 1

II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 3

III. THE PROPOSED PROJECT 6 A. Impact and Outcome 6 B. Outputs 7 C. ADF IX Grant Component 9 D. Special Features 10 E. Project Investment Plan 11 F. Financing Plan 11 G. Implementation Arrangements 12

IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 16 A. Benefits and Impacts 16 B. Risks and Mitigation 19

V. ASSURANCES AND CONDITIONS 19 A. Specific Assurances 19 B. Conditions for Loan and Grant Effectiveness 21

VI. RECOMMENDATION 21

APPENDIXES 1. Sector Analysis 22 2. External Assistance in the Tonle Sap Region 28 3. Design and Monitoring Framework 34 4. Summary Cost Estimates 37 5 Project Management and Organization 39 6. Indicative Schedule of Activities 40 7. Procurement Plan 41 8. Indicative Staffing Schedule (For Consultants) 44 9. Accounts and Fund Flow 46 10. Summary Economic Analysis 47 11. Summary Poverty Reduction and Social Strategy 54 12. Summary Resettlement Framework 57 13. Gender Action Plan 62 SUPPLEMENTARY APPENDIXES (available on request) A. Commune and Subproject Selection Criteria B. Province and Commune Development and Investment Planning Cycles C. Selection Criteria and Terms of Reference for Commune Council Supporters D. Detailed Cost Estimates of the Project E. Project Financial Management Assessment F. Consulting Services - Outline Terms of Reference

G. Key Performance Monitoring Indicators H. Resettlement Framework I. Summary Environmental Assessment J. Environmental Assessment and Review Framework K. Economic Analysis L. Summary Description of Core Subprojects M. Resettlement Entitlement Matrix N. Good Governance Framework

LOAN, GRANT, AND PROJECT SUMMARY Borrower Kingdom of Cambodia

Classification Targeting classification: Targeted intervention - Household Sectors: Multisector (Agriculture and natural resources, transport and communication) Themes: Sustainable economic growth, environmental sustainability, capacity development Subthemes: Developing rural areas; natural resources conservation; client relations, network and partnership development

Environment Assessment

Category B. An initial environmental examination was undertaken and an environmental assessment and review framework was prepared.

Project Description The Tonle Sap Lowlands Rural Development Project (the Project) will support 40 communes in the development and upgrading of rural infrastructure through a combination of community led and executed activities; and government agency implemented infrastructure development in the provinces of Kampong Chhang, Kampong Thom, and Pursat in the Tonle Sap basin (Component 1). It will also assist in the creation of new and improved livelihood opportunities in these communes (Component 2); and will strengthen the institutional capacity of commune, provincial, and national organizations (Component 3).

It will benefit people in the communes on the lowlands that lie outside the buffer zone surrounding the Tonle Sap Lake. Poverty rates in these communes average 38%, which is slightly higher than the national average of 36%. About 50% of villages in the selected communes have 40–60% of households living below the national poverty line, with peak levels about 80% of households in Kampong Chhnang.

Rationale Agriculture accounts for one third of Cambodia’s gross domestic product (GDP) and is the main source of livelihood for nearly 80% of the population. Many of the people in the lowland rural communities that surround Tonle Sap depend on agriculture, but they are vulnerable to shocks. Accidents and ill health, seasonal shortages of rainfall (especially at the beginning of the rainy season), seasonal shortages of water (especially drinking water during the dry season), and food shortages resulting from shortfalls in the rice harvest (caused by an unreliable supply of water at the start and finish of both wet and dry rice crops) all increase the vulnerability of people in the lowlands.

Despite the richness of the lake, poverty rates in the basin are higher than in the country as a whole. Over 50% of households do not grow enough rice to meet their needs. Seasonal migration from lowland communities into the lake buffer zone, to supplement diets, risks overexploiting the lake and exacerbating existing

ii

pressures on its resources.

Irrigation is one of the 16 strategic priorities for national development, as a remedial measure to earlier developments which tend to be poorly designed or constructed on a scale that is difficult for communal maintenance. Many schemes now need urgent upgrading to support the needs of the communities. Furthermore, transport and water supply and sanitation infrastructure also require upgrading. Adoption of new agricultural practices and opportunities for off-farm employment in the lowlands are restricted by limited vocational education, poor financial services, and poor rural infrastructure.

The proposed Asian Development Fund (ADF) IX combined loan and grant will enable the Project to focus on community-driven development, linked with provincial level infrastructure investments and creation of new opportunities for on and off-farm employment to reduce poverty and vulnerability in one of the poorest regions of Cambodia.

Impact and Outcome The Project will improve the livelihoods of households in 40 lowlands communes located from the outer limit of the buffer zone to the foothills of the upper watershed area. It will improve access to important production factors in three provinces surrounding Tonle Sap and diversify income-generating opportunities.

Project Investment Plan The total project cost is estimated at $24 million equivalent, including contingencies, taxes, and duties.

Financing Plan ($ million)

Item Total Percent Asian Development Bank Loan 10.10 42.00 Asian Development Bank Grant 9.90 41.00 Government 3.00 12.50 Commune Beneficiaries 1.00 4.50 Total 24.00 100.00

The Asian Development Bank (ADB) will provide a loan of

$10,100,000 equivalent in SDR and a grant of $9,900,000 from its ADF.

Period of Utilization Until 30 June 2015

Estimated Project Completion Date

31 December 2014

Executing Agency Ministry of Water Resources and Meteorology (MOWRAM)

Implementation Arrangements

Several government agencies (at national and subnational levels) will be directly engaged in implementation, including MOWRAM; Ministry of Rural Development (MRD); and Ministry of Agriculture, Forestry and Fisheries (MAFF). Provincial Local Administration

iii

Units (PLAUs) of Ministry of Interior (MOI) in collaboration with commune councils will facilitate community-led developments.

Effective communication among these agencies will be essential, so a project steering committee with membership drawn from participating agencies and chaired by the secretary of state of MOWRAM is proposed to oversee implementation. Provincial coordination committees in participating provinces will facilitate interagency coordination. Project management in Phnom Penh will consist of a project director (senior professional staff, MOWRAM) and four deputy directors provided by MOWRAM, MAFF, MOI and MRD.

Procurement Civil works, goods, and related services will be procured in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time).

Consulting Services Consultants will be selected and engaged in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). The project management office (PMO) will be responsible for the recruitment of a consulting firm using quality and cost-based selection (80:20). A total of 489 person-months of consulting services will be required (55 person-months international and 434 person-months national). Total consulting inputs include individual consultants to be recruited for specified tasks—9 person-months for an international consultant to coordinate Tonle Sap Initiative activities and 11 person-months of post-harvest management specialists (2 person-months international, 9 person-months national).

Project Benefits and Beneficiaries

The Project will provide direct and indirect economic benefits to about 68,000 households with a population of about 354,000 persons in 40 communes selected in the three provinces around the lake. It will improve extension services to 9,600 hectares (ha) that will benefit from irrigation infrastructure development. In addition to irrigation, benefits will be derived from investments in small-scale village infrastructure, increasing agricultural productivity and off-farm business development.

The Project will generate substantial improvements to the livelihoods of people in communes surrounding the buffer zone of Tonle Sap Lake, resulting in environmental benefits in the buffer and core zones by reducing the need for these communities to enter the buffer zone to make up for shortfalls in food production in the dry season. Creation of new jobs and livelihood activities in the lowland communities will reduce pressure on agricultural lands and diminish the incidence of temporary migration to the lake and more distant locations. The Project will increase social capital by strengthening the capacity for communal action, increasing women’s participation, and providing communal infrastructure.

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Risks and Assumptions The Project includes measures to avoid or mitigate environmental, institutional, and financial risks. The principal assumption is that the Government will continue the program of decentralization and deconcentration for strengthening the capacity for decision making at the local level. Recent governance risks identified include (i) procurement; (ii) purchase of expendable materials/services; and (iii) quality assurance of works being subject to risks of corrupt practices, with existing financial and accountability systems not providing expected standards of fiduciary control. The Government is committed to public financial management reform. ADB has previously assisted with public financial management in the Ministry of Education, Youth and Sport,, Ministry of Health, and Ministry of Economy and Finance (MEF). The Government has requested ADB technical assistance (TA) to support improved public financial management in MOWRAM, MAFF, and MRD. The proposed TA is being processed by ADB for approval in 2008. The project consulting services include inputs for procurement and quality assurance specialists at provincial level. ADB and the Government have agreed a good governance framework that will guide executing and implementing agency staff during project implementation.

It is assumed that effective rural financial services will be available in all project areas through existing commercial banks and licensed microfinance institutions. Active coordination between the operations of financial service providers and project interventions will enable project beneficiaries to access the required services, including micro-credit loans.

The Project will involve activities implemented through different ministries, so the project steering committee and provincial coordination committees will provide guidance and leadership in ensuring effective coordination of work programs.

Bassac R.

C A M B O D I A

TONLE SAP LOWLANDSRURAL DEVELOPMENT PROJECT

0 25 50

Kilometers

N12 00'No

o13 30'N o13 30'N

12 00'No

o103 30'E

o105 30'N

o103 30'E o105 30'N

107 00'Eo

107 00'Eo

103 00'E

103 00'E

o

o

11 00'No 11 00'No

14 00'No 14 00'No

National Capital

Provincial Capital

City/Town

Commune Center

Tonle Sap Biosphere Reserve - Core Areas

Selected Communes of TSLSP

National Road

Other Road

River

Transition Zone

Buffer Zone

TSLSP Area

Provincial Boundary

International Boundary

Boundaries are not necessarily authoritative.

Sang Vaeuy

Kouk Thiok Leu

Lvexeng Ruessei

Spean TnaoiPralay

Samprouch

San Kor

Kompong Kou

Chong Doung

Boeng

Sralau

Samraong SaenDar

KompongPreah Koki

Melum

Khon Rang

Tnaot Chum

Anlong Vil

Srae Sdok

KhnarTotueng

Rumlech

Ta Lam

Prasat

Kouk Khmum

Ou Ta Ki

Bansay Traeng

Sambur

Ampil Tuek

BoengTonle Chhmar

THAILAND

C A M B O D I A

LAO PEOPLE’SDEMOCRATIC

REPUBLICTHAILAND

VIET NAMPHNOM PENH

BATTAMBANG

PAILIN

BANTEAYMEANCHEY

PURSAT

KOMPONGTHOM

KOMPONGSPEU

KOMPONGCHHNANG

KOMPONG CHAM

PREAH VIHEAR

SIEM REAP

KOH KONG

BATTAMBANG

PAILIN

BANTEAYMEANCHEY

PURSAT

KOMPONGTHOM

TAKEO

KANDAL

KAMPOT

KEP

SIHANOUKVILLE

PREYVENG SVAY

RIENG

KOMPONGSPEU

KOMPONGCHHNANG KOMPONG

CHAM

MONDULKIRI

RATANAKIRISTUNG TRENG

KRATIE

PREAH VIHEAR

SIEM REAP

ODDAR MEANCHEY

07

-18

71

RM

Prek Toal

PhuniTonle Bet

Saeb

Prek Kak

Moung Roessei

Mongkol Borey

Poipet

Ampil Tuek

Kbal Trach

Kompong Cham

Pursat

Kompong Chhnang

Sisophon

Battambang

Pailin

Siem Reap

Tbeng Meanchey

Kompong Thom

TonleSap

SouthChina Sea

Mekong R.

Mekon

g R.

TonleSap

Gulf ofThailand

I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on (i) a proposed loan, and (ii) a proposed grant, both to the Kingdom of Cambodia for the Tonle Sap Lowlands Rural Development Project.

II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES

A. Performance Indicators and Analysis

1. Tonle Sap Lake and Lowlands

2. Tonle Sap is the largest freshwater lake in Southeast Asia, covering an area of 2,500–3,000 square kilometers (km2) in the dry season. Tonle Sap River, which drains the lake, reverses its flow in the wet season when the waters of the Mekong River flow into the lake to inundate 10,000–16,000 km2 for months. The fisheries of the lake, together with the flooded forest and agricultural lands of the inundated area, have underpinned human activity since ancient times.1 Tonle Sap and the associated heritage of Angkor have defined Cambodia's identity. Today, the land, water, and biotic resources of Tonle Sap directly benefit 40% of the population of the provinces adjoining the lake; and underpin food security and employment elsewhere. The lake benefits the lower Mekong basin as a feeding and spawning area for migratory fish, and is of global significance for biodiversity conservation. 3. The lowland areas of Tonle Sap basin are the flat low-lying areas that extend beyond the biosphere reserve buffer zone to the foothills of the upper watershed. There is no precise boundary between the lowland and the buffer zone, but livelihood activities in the lowland area are predominantly based on a single wet season rice crop. The lowland areas are characterized by soils of low fertility, a climate of pronounced wet and dry seasons, and few income-earning activities or off-farm employment opportunities.2

2. Threats to Tonle Sap

4. In Cambodia, high population growth is increasing the number of people to feed, and consumptive use of the Tonle Sap basin’s natural resources is intense.3 Major threats to the Tonle Sap include overexploitation of fisheries and wildlife resources, particularly through the fishing lot system, conversion of the flooded forest to agriculture, and collection of fuelwood from the remaining flooded forest. Widespread deforestation in the watersheds is destroying habitats, impairing water and soil quality, and increasing siltation rates. As a result, despite the richness of the lake, indicators of poverty in the basin are more severe than in the country as a whole. Seasonal migration from lowland communities to the buffer zone and the lake—to supplement diets and exploit lake resources—exacerbates existing pressures on these resources.

1 These resources are believed to contribute more to national food security in Cambodia than in the other countries

of the Mekong. (Their contribution to gross domestic product [GDP] has been reassessed at 16%. The annual value of the catch is estimated at $200 million–$300 million).

2 Asian Development Bank (ADB). 2005. Technical Assistance to the Kingdom of Cambodia for Preparing the Tonle Sap Lowland Stabilization Project. Manila (TA No. 4756-CAM, approved on 21 December, for $1,000,000).

3 “The rapid degradation of natural resources in the Basin has resulted in high poverty incidence in the region and reinforced the pressure on the lake’s resources. As a result, the lake is facing a serious threat of over-exploitation and its ecosystem has turned quite fragile. If this problem is not addressed decisively and soon, Cambodia could face an environmental disaster of enormous proportions.” Prime Minister Hun Sen. 2007. Keynote speech at the opening of Tonle Sap Forum, Phnom Penh, 5–6 March 2007.

2

3. Poverty and Vulnerability

5. The rural sector in Cambodia accounts for the majority of population, production, and employment in the Cambodian economy as well as the great majority of poor people. The sector continues to struggle under the consequences of war-torn infrastructure and displaced communities. Many of the people in the rural communities in the lowlands that surround Tonle Sap remain vulnerable to shocks. These include (i) shortages of rainfall (especially at the beginning of the rainy season); and (ii) shortages of water, especially drinking water during the dry season, and for cropping at the start and finish of both wet and dry rice crops—leading to shortfalls in the rice harvest. On average, over 50% of rural people do not grow enough rice to meet their needs. 6. In national terms, the Tonle Sap region has the highest incidence of poverty (38%), the second highest average population density (52 persons per km2), and 31% of the population (Table A1.1). About 50% of villages have 40–60% of households living below the poverty line, with a peak of 80% in parts of Siem Reap and Kampong Chhnang. The poor, as defined by low incomes and low consumption bundles, generally tends to have less access to productive resources. For example, poorer villages tend to be located where there is less access to natural resources or where there are lower quality natural resources (e.g., less productive land in areas more vulnerable to flood and drought). Cambodia Human Development Report 1999 reports that poorer villages have less access to markets (14% of villages have a market), infrastructure (43% of villages have access to electricity and 23% have access to piped water), economic services (11% of villages have a bank or credit organization and 4% have an agricultural extension worker), and political power (the average village is 9 km from the district town). As a result, poorer villages tend to depend more on agriculture activities whereas richer villages are more diversified, with trading as the most important economic activity. About 90% of the poor belong to households that rely on agriculture as the primary source of income. These people often suffer from basic food insecurity, manifested as seasonal hunger in the months prior to the major harvest, sometimes leading to a cycle of indebtedness that ends in loss of farm assets such as land. The poor tend to have larger families living under one roof, with younger children and higher dependency ratios (nonworking to working household members). 7. Eighty-five percent of Cambodians are dependent on agriculture and non-timber forest extraction for the major part of their livelihoods, although these activities only account for about one third of gross domestic product (GDP). Opportunities in other sectors, while promising, are inadequate to absorb the 250,000 new entrants into the job market each year, and there are significant opportunities to improve the productivity and sustainability of traditional activities in the rural sector. However, productive infrastructure, technology, markets, and commercial services remain weak in the rural sector; and agricultural output retains the volatility and weather dependence characteristic of a subsistence production pattern. 8. Women and ethnic minorities are vulnerable. Although women have rights to land ownership, they have less access than men to credit, paid employment, education, and health services. They also have fewer opportunities for self-development or participation in community decision making4 since Khmer tradition ascribes a passive role to women. Nevertheless, the gender division of labor is changing overall: women and men play progressively interchangeable roles because women are increasingly called on to meet household needs as men migrate to seek paid employment. Ethnic minorities living in the Tonle Sap basin are the Vietnamese and Muslim Cham; and small communities of indigenous peoples such as Kuy, Por and Phnong. The indigenous peoples are the only ethnic minorities that are officially recognized. Even though most of the Vietnamese were born in Cambodia, they are not Khmer people and are classified

4 Currently, only about 3–5% of women participate in committees such as farmer water user groups (FWUGs).

However, the Ministry of Water Resources and Meteorology (MOWRAM) has set a target for women's participation in decision-making bodies at commune level of a minimum of 10% by 2010.

3

as immigrants. This status limits their participation in community-based natural resource management. The Vietnamese are further deprived by lack of property rights and language barriers. The Cham experience less severe segregation than other minority communities, but all ethnic minorities are disadvantaged because of inadequate representation at management and legislative levels. There are also many displaced or disabled persons, who suffer from poverty and other forms of social deprivation to a greater extent than the rest of the population. B. Analysis of Key Problems and Opportunities

9. Agricultural Water Management. Agriculture accounts for one third of Cambodia’s GDP and is the main source of livelihood for nearly 80% of the population. It is widely believed that lack of availability of sufficient water is the critical constraint on rice production. The Government’s Rectangular Strategy for Growth, Employment, Equity and Efficiency (2004–2008) identifies irrigation as one of 16 strategic priorities for national development. However, about 80% of irrigation schemes in Cambodia were built during the Khmer Rouge era, and even schemes built prior to this were often altered at that time. Such schemes tend to be poorly designed and were constructed on a large scale that is difficult for communal maintenance. Some never operated and other better-designed systems that worked previously have failed because of lack of maintenance (Appendix 1). 5 Inventories provided by the Provincial Department of Water Resources and Meteorology (PDWRAM) in provinces in the Tonle Sap basin list 200 existing water management/irrigation schemes in different states of disrepair, varying in size from about 10 hectares (ha) to 13,000 ha. Many of the small-scale schemes are subsections of large schemes, but few are functioning effectively because of inadequate structures, land leveling, field bunds, 6 and drainage, combined with poor crop husbandry. Several large schemes in the project area have been rehabilitated in recent years or are being upgraded at present, but still lack secondary and tertiary systems to provide effective irrigation. 10. Rural Roads. Rural infrastructure in Cambodia is still far from adequate because of several decades of war and the Government’s lack of resources. Despite having received substantial external assistance (Appendix 2), the rural road network is still poor, resulting in high transport costs and restricted access to markets. Improving access to production factors and inputs, as well as to markets and market information (especially for smallholders), is a key factor in turning agriculture into the driving force of pro-poor growth. In some cases, roads proposed for rehabilitation also function as embankments to retain water for crops. 11. Opportunities for New Rural Livelihoods. Economically, Cambodia is at a crossroads and a major effort is needed to focus on agriculture as the main driver of broad-based and pro-poor growth. While food security and better nutrition continue to be core sector development goals, a move toward commercialization is required to create economic opportunities and enable the sector, especially small-scale farmers, to benefit from new economic activities. Value chain analyses indicate that the largest losses to agricultural producers occur in post-harvest storage, processing, and marketing. Numerous obstacles make a transition from low-level subsistence agriculture difficult. However, improved agricultural technologies and post-harvest value addition, including agro-processing enterprises, offer new opportunities for rural employment. Rural off-farm activities and the integration of agriculture in a rural, private sector led development framework are needed. 12. Rural Financial Services. Capacity building and training can prepare individuals and groups to adopt new on-farm and off-farm enterprises. However, without access to appropriate financial services, the rural poor is unable to take up these opportunities to increase household income. Numerous microfinance institutions (MFIs) are operating in the Tonle Sap area, so it is not necessary to set up a new financial organization to provide financial services (including 5 Halcrow, W.1994. Irrigation rehabilitation study in Cambodia: inventory and analysis of existing schemes. Bangkok:

Mekong Secretariat/Sir William Halcrow & Partners Ltd. (April). 6 Field bunds are the embankments around paddy fields.

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access to savings; credits for micro, small, and medium borrowers; remittances; and money transfer) to the project area. However, access to and use of formal financial services in rural areas7 remains limited; and constrains the use of knowledge about more advanced farming techniques, new markets, and business opportunities. Many MFIs tend to specialize in restricted areas in a few provinces, so outreach is limited in more remote rural regions. This results in poor delivery of financial services, and unrealized potential in agriculture and the rural economy because of the lack of access to seasonal working capital for crop production and off-farm enterprise development. Expansion of outreach programs will require innovative approaches to business skills development in cooperation with financial service providers.

1. The Government’s Response

13. The National Strategic Development Plan (NSDP), 2006–2010, is the formal means of implementing the Government’s Rectangular Strategy. It sets national priorities of alleviating poverty and enhancing economic growth. Enhancement of the agricultural sector is emphasized in order to increase agricultural productivity to boost the incomes of a large portion of the rural poor. Immediate objectives include increased public investment in rural infrastructure, expansion of extension services to support crop and livestock production, legal and regulatory reform to improve security of and access to agricultural inputs such as land and materials, improved natural resource management, and increased availability of rural financial services. Rehabilitation and construction of physical infrastructure is a second emphasis. This includes structures for management of water resources and irrigation as one of its four components. The Government recognizes the importance of ensuring sustainability of irrigation infrastructure and is committed to (i) establishing and strengthening farmer water user committees (FWUC) and farmer water user groups (FWUGs) to improve cooperation for operation and maintenance (O&M), and (ii) the introduction of an irrigation management transfer process to increase participatory management and to implement a rational sharing of O&M between the Government and beneficiary communities. 14. National Strategy for Agriculture and Water (2006–2010). The NSDP encourages ministries to plan in a coordinated manner. The Government’s Strategic Framework for Decentralization and Deconcentration (D&D) reforms promotes a transfer of responsibilities and resources to subnational levels. During the next 5–6 years, the D&D reforms are expected to radically change the way in which government agencies function. In response to the NDSP, the National Strategy for Agriculture and Water includes five main components: (i) strengthening institutional capacity for management for the agriculture and water sectors; (ii) improving food security; (iii) improving agriculture and agribusiness (value chain); (iv) improving water resources, irrigation, and land management; and (v) improving agricultural and water research, education, and extension. 15. Development of water management is guided by the strategy of the Ministry of Water Resources and Meteorology (MOWRAM), which is based on the recognition that the Government is unable to finance and manage the large number of irrigation systems in the country. In 2000, the Government adopted the policy of participatory irrigation management and development, which mandates the establishment, empowerment, and transfer of responsibility of the management, financing, and development of irrigation systems to FWUCs and subordinate FWUGs. With this policy, the Government shifted its emphasis from directly managing irrigation systems to building the capacity of FWUCs to manage their own systems.

2. Lessons

16. Numerous development agencies, including the Asian Development Bank (ADB), provide external assistance to the agriculture sector in Tonle Sap (Appendix 2). Key lessons 7 Commercial banks and licensed MFIs are expanding their branch networks in provincial and district centers,

making access less difficult for rural communities.

5

from ADB’s experience in the sector in Cambodia include: (i) the decisive role of improved water resources management as a prerequisite to stabilizing and increasing agricultural production; (ii) the advantage, in the medium term, of a focus on small to medium-sized irrigation schemes within an integrated river-basin water management framework, where design and management are based on community participation; (iii) the crucial importance of a sustainable financing mechanism for maintenance linked to increased farm incomes; (iv) the need for pro-poor sustainable growth; and (v) improved access to livelihood assets. 17. An extended period of civil disruption has left Cambodia with a severe shortage of skilled and experienced professionals. The proposed executing and implementing agencies are no exception, and previous ADB projects have suffered implementation delays because of limited professional staff to lead the projects. Capacity building is required at all levels of the agencies, particularly in project management, fiduciary control, and participatory development. However, the Northern Rural Development Project and the CCDP (I&II) have successfully implemented investment projects in a decentralized mode, working with provincial line agencies and commune councils.8 18. Efficiency and effectiveness of resource management in the Ministry of Rural Development (MRD); Ministry of Agriculture, Forestry and Fisheries (MAFF); and MOWRAM are critical to successful rural development. Governance risk assessments9 of MRD and MOWRAM provide a detailed diagnosis of key constraints in these institutions, and have underlined the need for a substantial improvement in performance audit and fiduciary control processes and capabilities. 10 Work on the Tonle Sap Sustainable Livelihoods Project has been delayed because of slow recruitment of consulting services. 11 19. The recently completed Agricultural Development Support to Seila (ADESS) Project funded by the International Fund for Agricultural Development (IFAD), shows that a group approach can enable very poor farmers to adopt new or improved farming techniques and technologies. The ADESS Production Start-Up Program assisted extremely poor rural families to take the first step to break out of the poverty cycle. Although the results are encouraging, only about 15% of poor families in Pursat, Banteay Meanchey, Battambang, and Siem Reap benefited from the project. Nevertheless, the approach provides a working model that can be applied more widely.

3. ADB’s Sector Objectives and Strategies

20. ADB’s sector strategy, which is consistent with national strategies and other external assistance, focuses on: (i) improving farmers’ ability to raise productivity, diversify toward higher-value products, and connect to markets; (ii) improving the market environment for private agro-based enterprise growth; and (iii) strengthening institutional capacity for competitive

8 ADB. 2001. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Kingdom of Cambodia for the Northwestern Rural Development Project. Manila (Loan 1862 for $34.73 million, approved on 2 November); ADB. 2002. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grant to the Kingdom of Cambodia for the Commune Council Development Project. Manila (Grant 4007 for $3.0 million approved 3 December). ADB. 2006. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grant to the Kingdom of Cambodia for the Commune Council Development Project 2. Manila (Grant 0066 for $7.8 million approved on 12 December).

9 ADB. 2007. Technical Assistance for Governance and Capacity Development Initiative. Manila (TA 6385-REG for $1.6 million approved 31 January).

10 ADB. 2007. Technical Assistance to the Kingdom of Cambodia for Strengthening Public Financial Management. Manila (technical assistance in preparation November 2007).

11 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Cambodia for the Tonle Sap Sustainable Livelihoods. Manila (Grant 0034 for $15.0 million ADF and $4.74 million Government of Finland approved on 21 December).

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agricultural commercialization. The Tonle Sap Initiative (TSI) and associated Tonle Sap Basin Strategy12 form a core element of the sector strategy. Consistent with ADB’s water policy,13 the TSI supports basin management organizations, and the worldwide trend toward managing land, water, and biotic resources within a framework of basin planning. It involves an integrated program of technical assistance (TA) and investments to overcome binding constraints on poverty reduction while protecting vital ecosystem services in the basin. Without adequate access to water, human health deteriorates and long periods are spent on nonproductive activities such as collection of fuelwood and water. 21. The TSI also gives a geographical focus to ADB’s country strategy and program for Cambodia, 2005–2009,14 forming the basis for effective and efficient setting of priorities and planning assistance in Tonle Sap basin. It provides the framework for ADB assistance to the Government in its efforts to balance demands for accelerated development with international commitments to protect and conserve the unique environment of Tonle Sap basin. The framework is a 15-year program of integrated TA and investment projects that provide support for: (i) capacity development for environmental protect and development management; (ii) strengthening of environmental protection by the Government, line agencies, and people living in the basin; and (iii) investments in infrastructure, which open new opportunities that bring sustainable and inclusive growth to some of the poorest communities of one of the poorest countries in the region. Cambodia is ranked 137 of 174 countries in the Human Development Index (HDI) in the Human Development Report (1999).15 22. The TSI is helping to (i) strengthen capacity for management of the core areas of the biosphere reserve (Tonle Sap Environmental Management Project); (ii) improve water supply and sanitation in basin communities (Tonle Sap Rural Water Supply and Sanitation Project);16 and (iii) improve livelihood opportunities in buffer zone communes (Tonle Sap Sustainable Livelihoods Project). ADB is also financing the Northwest Irrigation Sector Project and the Northwestern Rural Development Project. Future projects will include support for participatory management of the upper watersheds to promote improved livelihoods, protect globally significant biodiversity, and sustain water resources for uses throughout the basin. 23. The Project is the fourth investment project in the TSI and builds on approaches to community driven development being developed in the buffer zone under the Tonle Sap Sustainable Livelihoods Project (footnote 11). The Project will combine infrastructure investments, training, and capacity building to improve the performance of on-farm and off-farm enterprises with the objective of reducing the need for communities to migrate seasonally to exploit resources in the watershed and the buffer and core areas of the Great Lake.

III. THE PROPOSED PROJECT

A. Impact and Outcome

24. The Project will improve livelihoods in three provinces in the Tonle Sap basin, as summarized in the project design and monitoring framework (Appendix 3). Rural communities will use the improved coverage and quality of rural infrastructure (irrigation, roads, village level post-harvest facilities, and markets) and new opportunities resulting from the application of new skills in the pursuit of on-farm and off-farm enterprises to improve their livelihoods.

12 ADB. 2006. From Strategy to Practice: The Tonle Sap Initiative. Manila. 13 ADB. 2002. Water for All: The Water Policy of the Asian Development Bank. Manila. 14 ADB. 2005. Asian Development Bank Country Strategy and Program 2005–2009 Kingdom of Cambodia. Manila.

(January). 15 UNDP. 1999 Human Development Report. Oxford: Oxford University Press. 16 ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Kingdom of Cambodia for the Tonle Sap Water Supply and Sanitation Sector Project. Manila. (Grant 0018 for $18.0 million approved on 20 October).

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25. The Project will provide assistance to accelerate development in 40 selected communes in the Tonle Sap lowlands, which lie outside the buffer zone of the Tonle Sap biosphere reserve, to provide a stable base for improving rural incomes. This will reduce the need for people to migrate into the buffer zone during the dry season. Commune and subproject selection criteria and processes are in Supplementary Appendix A. B. Outputs

1. Improvement of Rural Infrastructure

26. Without roads, essential agricultural inputs cannot be distributed effectively, agricultural yields remain low, and it is difficult and expensive to move produce to market. Therefore, rural infrastructure is critical for improvement of rural livelihoods, including: (i) small-scale infrastructure developed through activities managed by commune councils to increase commune and village assets; and (ii) larger-scale irrigation and rural road infrastructure to support increased economic activities, including on-farm and off-farm enterprises. Improved infrastructure also attracts commercial financial services organizations necessary to support increased economic activities and other essential social services such as health and education.

a. Improvement and Development of Social Infrastructure 27. The Project will provide block grants in the form of the Commune Development Fund (CDF) to be used for the development, rehabilitation, or upgrading of small-scale infrastructure. Social infrastructure needs at commune and village level will be identified and prioritized through the decentralized planning process used to prepare commune investment plans (CIP) summarized in Supplementary Appendix B and included in the Project’s annual work plan and budget. Categories to be funded include civil works for: (i) village markets and other commercial support infrastructure; (ii) communal grain dryers; (iii) rural roads, including drainage, bridges, and culverts—linking villages within the commune or linking inter-commune roads; 17 (iv) irrigation water conveyance and distribution facilities;18 (v) commune council buildings;19 (vi) village water supply and sanitation schemes;20 and (vii) classrooms at existing schools.21 Only infrastructure that is accessible to the poor will be funded under the Project, which implies basic structures with low O&M costs. Beneficiaries of communal grain dryers and irrigation systems will contribute in cash or in kind to share a portion of the construction costs. The maximum cost of an individual activity funded through the CDF will be $20,000 with an average allocation of about $75,000 per commune, including the salary and overheads of commune council supporters, over the life of the Project.

17 Road sections that extend into the buffer zone of Tonle Sap within 1,000 meters will not be eligible for

rehabilitation. 18 The Project will assist FWUGs in the design and layout of field channel reticulation but earthworks will be

performed by volunteer labor. This will not require involuntary resettlement in principle. Land required for channels may be through voluntary donation, if necessary. All farmers giving up land for the channel must confirm the donation before construction/rehabilitation of the channel will commence. The Project will support construction of regulation and crossing structures identified in the CIP and funded through the CDF for improvement and development of social infrastructure.

19 Commune council buildings will be excluded where these are provided through the Commune Council Development Project (footnote 8).

20 Village water supply and sanitation schemes will only be accepted in communes not covered by the Tonle Sap Rural Water Supply and Sanitation Project (footnote 16).

21 Proposals for school classrooms will only be accepted in communes not covered by the Education Sector Development Program. ADB. 2004. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Cambodia for the Second Education Sector Program. Manila (Loan 2122 for $25 million approved on 9 December).

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b. Improvement of Agricultural Water Management Infrastructure 28. The Project will support: (i) rehabilitation of small water management subprojects (typically less than 200 ha)22 covering a total of about 9,600 ha, with fully developed water reticulation below main canals to the field level; and (ii) formation, strengthening, and capacity building of FWUGs and FWUCs for sustainable O&M. 29. Beneficiary farmers will participate in the design of irrigation improvement schemes identified in the commune investment plan; and will contribute23 to scheme development, mainly through voluntary labor for the earthworks for excavation of structure foundations, canals, and on-farm channels. The maximum cost of an individual water management scheme will be $100,000 at an estimated cost not to exceed $550/ha for secondary and tertiary canal infrastructure, including costs of surveys, design, resettlement, civil works, and mitigation of environmental impacts.

c. Improvement of Rural Roads

30. The Project will support subprojects to improve the connection of villages to commune centers and main highways. Recognizing the importance of good transportation links, the Government has put considerable resources into rehabilitation and reconstruction of rural roads throughout Cambodia.24 Improved maintenance of roads is a key government objective. Villages in the project area are mostly clustered close to highways 5 or 6, and the main scope is for rehabilitation of roads up to 10 km long (but mostly 5 km or less) linking the communes to highways 5 and 6. 31. Project support will be limited to improving rural roads and associated structures that are important to the success of development activities of the Project or other agencies working in the communes. Activities will include rehabilitation of strategic rural roads, including upgrading or provision of essential bridges, culverts, and fords; and limited assistance with maintenance. Existing road alignments will be retained except for specific problem areas. Road sections that would extend into the buffer zone of Tonle Sap within 1,000 meters will not be eligible for project support. 32. The Project will support: (i) rehabilitation of about 230 km of rural roads, according to MRD rural road standards including (a) resurfacing and spot repairs; (b) provision of individual bridges and ford crossings; and (ii) organization and training of rural road maintenance committees, including provision of basic road maintenance tools.25 The maximum cost of an individual road subproject will be $100,000. Local communities will contribute labor for construction and maintenance.

2. Rural Livelihoods Improvement and Employment Options Enhancement

33. The Project will support development of new livelihood options for rural communities in project communes aimed at expanding on-farm and off-farm agricultural and nonagricultural income-generating activities. It will support:

22 Larger schemes may be considered on a case-by-case basis. 23 Voluntary contribution of labor will be equivalent to one person day per beneficiary household; or a maximum of the

equivalent of 15% of the scheme cost. Additional labor will be paid at the unskilled labor rate, agreed by the Provincial administration.

24 National and provincial (primary and secondary) roads are the responsibility of the Ministry of Public Works and Transport (MPW&T), but the Ministry of Rural Development (MRD) has sole responsibility for tertiary and sub-tertiary roads (generally referred to as rural roads).

25 Road maintenance committees may be established in communes where the road is not subject to through traffic and the commune accepts responsibility for maintenance of the upgraded roads.

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(i) intensification of rain-fed and irrigated agriculture through (a) organization of farmer groups (for technology dissemination, mutual learning and support, and access to financial services); (b) development and implementation of technology improvement packages, establishment of demonstration farms,26 and training of farmers; and (c) facilitating farmer group access to existing rural financial institutions for farm credit; and

(ii) development of off-farm livelihoods through (a) organization of solidarity groups for development of small-scale business enterprises, (b) identification of market opportunities and viable business activities, (c) training for development of technical skills and business management and record keeping, and (d) assistance in development of business plans and facilitating access to existing financial services.

34. The Project will use the agro-ecosystem analysis and associated technical implementation procedures approach of the national agricultural extension guidelines to identify, with the communes, the most applicable agricultural technology packages as the basis for agricultural investments. Village level technical services will be made available by implementation of programs targeted at increasing people’s income from on-farm and off-farm enterprises. 35. The Project will provide funds to strengthen technical and vocational training capacity at provincial and commune level, and increase accessibility to vocational training for employment and self-employment for socially disadvantaged groups. It will build on the existing framework and institutional capacity for provision of vocational training. It will support technical and vocational training provided at the provincial level through government departments such as the Rural Economic Development Office, nongovernment organizations (NGOs), and private sector programs.

3. Project Management

36. The Project will support coordination and day-to-day management of the Project through (i) capacity strengthening at the executing agency (EA), implementing agency (IA), and commune council level with provision for a limited number of incremental technical staff at selected offices; (ii) consulting services (national and international); (iii) provision of office equipment and facilities; and (iv) provision of supervision vehicles (four-wheel drive vehicles, motorbikes, and bicycles). The Project will support the recruitment and remuneration of two commune council supporters, one female and one male, to be appointed by each commune council for a period of 48 months, a total of 3,840 person-months of support in the 40 selected communes (Supplementary Appendix C). C. ADF IX Grant Component

37. As a poor, debt-stressed country, Cambodia is eligible for Asian Development Fund (ADF) grant financing of up to 50% of its ADB lending program.27 It is recommended that ADB provide the Project with $9,900,000 grant financing from the ADF IX grant facilities. Special justifications include the poverty alleviation focus and the Project’s close alignment with the TSI and the Government’s Rectangular Strategy. The ADF IX grant will support focused capacity building at commune level, aimed at strengthening local decision making and opening access to new business and livelihood opportunities. The Project’s focus on community-driven development will accelerate the reduction of poverty and vulnerability in one of the poorest regions of Cambodia as a basis for sustainable improvements to livelihoods in the Tonle Sap

26 It is expected that the majority of technology improvement package will be related to field and garden crops.

However, support to aquaculture improvements may be provided if requested by the community groups. 27 ADB 2004. ADF IX Donor’s Report, Development Effectiveness for Poverty Reduction. Manila (June).

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lowlands. The grant will support project implementation consultants, including inputs at provincial level to strengthen capacity in line departments to further decentralization and deconcentration efforts. D. Special Features

38. An important feature of the Project will be alignment with the Strategic Framework for Decentralization and Deconcentration Reforms, which promotes major reforms of the current subnational governance system. The framework is a 5-year national program to establish institutional capacity at provincial level, establishing provincial/municipal and district councils, and channeling development spending and capacity building to all levels of the subnational governance system and phasing out of project implementation units.28 In line with the objectives of harmonization and the Government’s wish to empower communes to plan and implement subprojects in collaboration with provincial technical departments, the implementation structure of the Project will be fully consistent with the framework. Consulting services inputs will mainly be deployed in the selected provinces, and will work in line departments to support and develop existing offices. A minimum of incremental staff will be seconded to these departments during the project period to assist with the additional works involved. 39. The Project is consistent with the Government’s intention that a substantial amount of domestic resources and external aid be channeled directly to support newly empowered sub-national units of planning and budgeting. The CDF, managed by the commune councils, will finance component elements of the 5-year commune development plans (Supplementary Appendix B) that are prioritized in the commune investment plan annual planning cycle. The Project will also finance upgrading of irrigation (designed and implemented by MOWRAM/PDWRAM) and road infrastructure (designed and implemented by MRD/Provincial Department of Rural Development [PDRD]), identified in the annual district integration workshops and provincial investment plan. 40. The Project will support provincial implementation through provision of consulting services in each participating province to assist line agency staff to develop the capacity to implement new standard operating procedures as modified in agreement with ADB. 29 The provincial support team will provide training and backstopping to the commune council supporters appointed by the commune councils in project communes, and assist the provincial local administration units to monitor and report the activities undertaken by the commune councils. 41. Access to rural financial services is necessary to enable adoption of new technologies and to establish small-scale rural enterprises. These services are potentially available through existing commercial banking and licensed MFIs in all project communes. The Project will support consulting services to: (i) strengthen the identification of new business opportunities; (ii) coordinate training, capacity development, and pilot demonstration activities; and (iii) facilitate access to financial services in the participating communes, provided by existing financial institutions. It will facilitate individuals and groups to access financial services at commune level by helping identify viable business opportunities, providing training, developing business plans, and making links between financial service providers and interested participants. The use of existing commercial and licensed service providers will provide an innovative solution to ensuring sustainable access to financial services in rural areas beyond the 28 Many project implementation units are of a semi-parallel nature, not fully integrated into government structures. For

example, most report to the Government in some way, with some degree of government staff involvement in aspects of project implementation.

29 Ministry of Economy and Finance (MEF). 2005a. Financial Management Manual for Externally Financed Project/Programs in Cambodia. Phnom Penh (September); MEF. 2005b. Procurement Manual for Externally Financed Project/Programs in Cambodia, Phnom Penh (in two volumes), (September). MEF. 2005c. Standard Operating Procedures for Externally Financed Project/Programs in Cambodia. Phnom Penh (August).

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duration of the Project. The Project will assist financial service providers in providing basic financial management skills training as part of the Project’s capacity development program. To ensure the Project does not distort the credit market at commune level, financial service providers will make all loan decisions based on the providers’ assessment of the credit-worthiness of the applicant and the proposed investment. E. Project Investment Plan

42. The total project cost is estimated at $24.00 million, including taxes and duties of $1.2 million. About $13.54 million is allocated to rural infrastructure, $2.40 million to rural livelihood development, and $4.91 million to project management. Project costs are summarized in Table 1. More detailed costs are shown in Appendix 4 and Supplementary Appendix D.

Table 1: Summary of Project Investment Plan ($ million)

Item Amounta A. Base Costb 1. Development of Rural Infrastructure 13.54 2. Developing Options for Rural Livelihoods 2.40 3. Project Implementation and Incremental Operation Costs 4.91

Subtotal (A) 20.85 B. Contingenciesc 1. Physical 0.63 2. Price 2.15

Subtotal (A + B) 23.63 C. Financial Charges During Implementationd 0.37 Total (A + B + C) 24.00

a Including taxes and duties of $1.28 million. b In mid-2007 prices. c Physical contingencies are computed at 10% for civil works, equipment, vehicles, and training; 6% for other

expenditure. Price contingencies are computed as 3.8% in 2009, 4.2% in 2009, and 5% thereafter on local costs and 0.8% on foreign costs.

d Includes interest during implementation at 1% per annum. Source: Asian Development Bank estimates.

F. Financing Plan

43. It is proposed that ADB provide a loan of $10.1 million equivalent in SDR from its Special Funds resources. The loan will have a term of 32 years, including a grace period of 8 years, with an interest charge of 1% per year during the grace period and 1.5% per year during the remaining term. 44. The Government has requested $9.9 million in grant funds from the ADF to finance (i) social infrastructure, (ii) development of new options for rural livelihoods, (iii) implementation consultants, (iv) the project management office (PMO), and (v) incremental operational costs for the project IAs’ provincial level organizations. 45. The balance of the project cost ($3.0 million equivalent or 12.5% of total project cost) will be funded by the Government’s incremental staff salaries, taxes and duties from their own budgets, and the project beneficiaries will contribute about 1.0 million (4.5% of project cost) in the form of in-kind labor and local materials. The financing plan is in Table 2.

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Table 2: Financing Plan ($ million)

Source Total % Asian Development Bank Loan 10.10 42.0 Asian Development Bank Grant 9.90 41.0 Government 3.00 12.5 Beneficiaries 1.00 4.5 Total 24.00 100.0 Source: Asian Development Bank estimates.

G. Implementation Arrangements

1. Project Management

46. MOWRAM will be the EA responsible for overall management of the Project. Project IAs will have the following responsibilities:

(i) Provincial Local Administration Units (PLAUs) in project provinces: improvement and development of social infrastructure (Component 1a).

(ii) MOWRAM: improvement of agriculture and water management infrastructure (Component 1b).

(iii) MRD: improvement of rural roads (Component 1c). (iv) MAFF: rural livelihoods improvement and income-generating options

enhancement (Component 2).

47. MOWRAM will establish a PMO at the national level, headed by a project director. The PMO will have four deputy directors (one each from MOWRAM, MRD, Ministry of Interior [MOI], and MAFF) who will be responsible for management and supervision of the activities of their respective IAs. The PMO will include technical and accounting staff who have had experience with ADB procedures, rules, and guidelines; and who will be responsible for consultant recruitment, procurement, funds withdrawal, disbursement, and reimbursement. Project implementation arrangements are in Appendix 5. 48. The Government will establish a project steering committee (PSC) to oversee and coordinate project implementation. The PSC will be chaired by a minister of MOWRAM or his delegate, with membership at an appropriate level from the Ministry of Economy and Finance (MEF), MAFF, Ministry of Environment, MOI, Ministry of Women’s Affairs, and MRD. The PSC will meet on a quarterly basis for the first 12 months after loan and grant effectiveness and at least every 6 months thereafter, or more frequently as needed. Within 2 weeks after each meeting, the PSC 30 will submit a copy of the meeting’s minutes to ADB. A provincial coordination committee, to be chaired by the governor or his delegate with membership of the directors of PDWRAM, Provincial Department of Agriculture (PDA), PDRD, Provincial Department of Environment, and chief of the PLAU will be responsible for successful coordination of the Project at provincial level. 49. PLAUs and PDWRAM, PDRD, and PDA will assist in project implementation at the provincial level. Each department head will designate department staff to assist in day-to-day project implementation. Subprojects meeting project requirements (Supplementary Appendix A) will be identified and selected through the decentralized planning process currently used to prepare 5-year commune development plans, annual commune investment plans, and annual provincial investment plans. The relevant provincial departments will assist the commune councils to carry out the pre-investment studies needed to (i) assess the feasibility of the

30 The royal decree approving the formation of Tonle Sap Basin Authority was signed by the King of Cambodia in

September 2007. When operational, the Government may consider assigning steering committee tasks for the Project to the new authority.

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proposed infrastructure investment; (ii) prepare the design and cost estimates; (iii) assess the likelihood of damage to the environment; (iv) assess the resettlement impact, if any; and (v) prepare an O&M plan. Selected social infrastructure subprojects (under Component 1a, funded by the CDF) will be implemented by commune councils with the technical support of appropriate provincial departments. Subprojects under Components 1b, 1c, and 2 will be implemented by the appropriate provincial departments with guidance from the line ministries concerned. 50. The Project will provide for strengthening the capacity of participating provincial departments and commune councils in subproject design and implementation, and financial management through incremental staff support and staff training. A team of international and national consultants will assist the provincial departments and commune councils in the overall planning, design, and implementation; and in addressing specific institutional and technical issues.

2. Implementation Period

51. The Project will be implemented over 6 years from mid-2008 to mid-2014 (Appendix 6). Since the subproject investments will be relatively small in size, and many interventions identified during project design are already identified in the commune investment plan, preparation work in most commune level subprojects is expected to begin within the first year.

3. Procurement

52. Goods and works financed partly or wholly by ADB will be procured in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Equipment to be procured under the Project will consist primarily of office and training equipment, bicycles, motorbikes, utility vehicles, and minor construction equipment and tools. No contract package is expected to exceed $500,000 and international competitive bidding is not envisaged under the Project. Each contract costing between $100,000 and $500,000 will be awarded through national competitive bidding (NCB). Minor equipment and materials costing less than $100,000 will be procured through shopping. 53. No works contract packages are expected to exceed $100,000. Works contracts under Component 1b, 1c, and 2 will be awarded by IAs on the basis of NCB. The procedures to be followed for NCB, for goods and works, will be those set forth in the Government’s Procurement Manual (footnote 34) with clarifications and modifications to be described in the financing agreement between the Government and ADB.

54. Individual works contracts under Component 1a using the CDF will not exceed $20,000 and may be awarded to contractors selected through shopping or direct contracting. Procurement and contract management procedures developed under Seila will be used.31 Works contracts under the CDF may also be awarded to community groups following procedures for community participation in procurement in accordance with ADB’s Procurement Guidelines. The first civil works contract in each province will be subject to ADB approval. Subsequently, the PLAU will maintain documents32

for review by ADB. The project procurement plan is in Appendix 7 and the financial management assessment is in Supplementary Appendix E. 55. All procurement contracts for office equipment over $5,000 and vehicles will be processed and awarded by the PMO. Works contracts under Component 1a will be processed

31National Committee for Support to Communes/Sangkats. 2005. Commune/Sangkat Fund Project Implementation

Manual. 32 These include the commune development plan, bid invitation letters, bid opening statements, bid evaluation reports

or approval documents, and signed contracts between the commune council and contractors, where applicable.

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and awarded by respective commune councils. Works contracts under Components 1b, 1c, and 2 will be processed and awarded by the respective provincial departments.

4. Consulting Services

56. The Project will require a total of 489 person-months of consulting services (55 person-months of international specialists and 434 person-months of national specialists). An indicative staffing schedule is in Appendix 8 and outline terms of reference are in Supplementary Appendix F. All consultants except the postharvest management specialists and the TSI coordinator will be selected and engaged as a firm in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). In selecting the firm, the quality and cost-based selection method (80:20) will be used and the short-listed firms will be required to submit full technical proposals. Provision has been made for postharvest management specialists (international and national) with expertise in postharvest technology to be selected as individual consultants. The Government has agreed to recruit the individual consultants in accordance with ADB’s procedure for recruiting individual consultants. The TSI coordinator will be recruited by ADB to support and coordinate project implementation under the TSI, and improve communication between the EAs of TSI projects and ADB. These arrangements will be described in detail in the project administration manual.

5. Anticorruption Policy

57. ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the Government. Consistent with its commitment to good governance, accountability and transparency, ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the loan and grant regulations and the bidding documents for the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of the Executing Agency and all contractors, suppliers, consultants, and other service providers as they relate to the Project. To encourage greater stakeholder participation and vigilance and to ensure greater transparency and accountability the Project will do the following:

(i) Build capacity within the EA to understand and comply with ADB and government procedures as outlined in the project administration manual.

(ii) Widely publicize the existence of the integrity division within ADB’s Office of the Auditor General as the initial point of contact for allegations of fraud, corruption, and abuse among ADB-financed projects or its staff.

(iii) Establish a project website to disclose information about various project-related issues, including procurement. The website will include information on, among others, the list of participating bidders, name of the winning bidder, basic details on bidding procedures adopted, amount of contract awarded, and the list of goods/services procured. Any bidder may request an explanation from the EA/IA as to why a bid was unsuccessful. The EA/IA will respond within 20 working days.

(iv) Establish a reporting system at commune council offices to disclose information about various project-related issues, including procurement. A public notice board will display information on, among others, the list of participating bidders, name of the winning bidder, basic details on bidding procedures adopted, amount of contract awarded, and the list of goods/services procured.

(v) Notify civil society organizations of the date and location of selected events in the procurement process, including public bid openings, contract signings, progress reviews, and handover ceremonies.

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(vi) Set up a complaints and action task force at the PMO to receive and resolve complaints/grievances or act on reports from stakeholders on misuse of funds and other irregularities.

58. Disbursement to individual communes, provinces, or IAs will be suspended if misprocurement or other irregular procurement action occurs and is not resolved to the satisfaction of ADB. Individual staff of the EA/IAs will be removed from the Project in the event of their confirmed participation in cases of corrupt practices. ADB is processing a TA on Public Financial Management to assist MAFF, MOWRAM, and MRD to strengthen internal audit procedures and ensure improved financial management and transparency in operations. The TA is expected to be implemented in 2008, coinciding with implementation of the Project, and it is anticipated that relevant findings of the TA will be incorporated in the Project.

6. Disbursement Arrangements

59. The Government, through MEF, will open a US dollar denominated account at the National Bank of Cambodia with separate accounts for the project loan and grants proceeds immediately after loan and grant effectiveness. MOWRAM will open US dollar denominated imprest accounts in a commercial bank acceptable to ADB immediately after loan and grant effectiveness. The accounts will be established, managed, replenished, and liquidated according to ADB’s Loan Disbursement Handbook (2007, as amended from time to time). Project advances will be deposited into the imprest accounts on the basis of the estimated next 6 months of project expenditures or a maximum of 10% of the loan/grant amount, whichever is lower. MOWRAM will transfer part of the imprest account funds to second generation imprest accounts held by PDWRAM, PDRD, and PDA with a commercial bank to finance activities under Components 1b, 1c, and 2, respectively. The imprest accounts will be replenished and liquidated on a monthly basis or when the accounts are drawn down by 20% of the initial deposits. MOWRAM will also transfer part of the imprest account fund to the CDF accounts held by participating commune councils with a commercial bank to finance activities under Component 1a. MOWRAM will disburse $1,000 to each commune CDF to enable recruitment of commune council supporters to assist the councils in preparing projects for approval. Appendix 9 shows project accounts and fund flows. 60. The statement of expenditures procedure will be used to liquidate and replenish the imprest accounts for eligible expenditures. Any individual payment to be reimbursed or liquidated under this procedure shall not exceed the equivalent of $50,000. Statement of expenditures documentation will be retained at the PMO and participating provincial departments. Imprest account and statement of expenditures records will be audited during the annual audit process.

7. Accounting, Auditing, and Reporting

61. The Project will be administered in accord with the Financial Management Manual for Investment Projects (footnote 29), which describes the Government’s financial management policies and procedures for efficient and effective implementation of ADB and World Bank projects, and achievement of the objectives. MOWRAM, MRD, MAFF, PLAU, and participating provincial departments and communes will maintain separate accounts for the loan and grant proceeds for the Project. Operating advances to EA/IA staff will be reconciled within 1 week of the end of each month and before further advances are made. IAs will prepare and submit monthly financial reports to PMO by the 15th day of the following month. The PMO will submit a consolidated quarterly report to ADB, MEF, and the PSC not later than 1 month after the end of the reporting quarter. 62. The project accounts will be audited each year by independent external auditors acceptable to ADB. The audited accounts, together with the auditor’s report, will be submitted to

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ADB not more than 6 months after each financial year. The imprest accounts and statement of expenditures will be audited as part of the regular audit of project accounts and financial statements, and the audit report will include auditor’s opinions on the imprest account and statement of expenditures.

8. Project Performance Monitoring and Evaluation

63. Three different kinds of monitoring will be carried out during project implementation: (i) progress monitoring, (ii) safeguard monitoring, and (iii) benefit monitoring and evaluation. The design and monitoring framework (Appendix 3) will be used by the PMO, assisted by the project consultants, to prepare and implement a project performance management system (PPMS) to (i) examine the Project’s technical performance; (ii) evaluate delivery of project facilities; (iii) assess achievement of the Project’s objectives; and (iv) measure the Project’s social, economic, financial, and institutional impacts. Socioeconomic data shall be disaggregated by income group, gender, and ethnic group where applicable. Gender-disaggregated indicators will be established for the PPMS, and monitoring will be continued to ensure that activities are carried out effectively and targets reached. The EA and IAs will be responsible for carrying out PPMS activities. IAs will provide the PMO with quarterly progress reports on their activities, compliance with safeguard requirements, and achievement of outputs. These will be reflected in a consolidated quarterly progress report.33 Quarterly reports will be submitted to ADB, the PSC, IAs, and MOWRAM’s Gender Mainstreaming Action Group within 1 month of the end of each quarter. Baseline data for each commune will be assembled from government sources and through household surveys and participatory monitoring activities. The PMO will establish a baseline data set for each commune within 6 months of loan and grant effectiveness. Detailed analysis of project impacts will be presented in a final monitoring report before project completion. A project completion report will be prepared by the PMO and submitted to ADB within 3 months after completion of the Project. MOWRAM agreed to ensure that a qualified social science or other suitably qualified institution acceptable to ADB will be contracted to conduct independent external monitoring and evaluation of the resettlement process and impacts, with reports provided to ADB and EA every 6 months. Key indicators are identified in Supplementary Appendix G.

9. Project Review

64. ADB and the Government will undertake semiannual reviews facilitated by the PMO. The reviews will: (i) examine the appropriateness of implementation arrangements and schedules of activities, (ii) assess the procedures for commune development and infrastructure development plans, (iii) review compliance with agreed procurement procedures, (iv) analyze the outcomes of capacity building and training programs, and (v) monitor the effectiveness of safeguard procedures. A comprehensive midterm review will be jointly undertaken by the Government and ADB within 36 months of loan and grant effectiveness to identify any problems and constraints encountered, and assess the need for midcourse modification of the project scope and financing and implementation arrangements. Technical and budgetary changes to the project documents, including reallocation of loan and grant proceeds, will also be considered.

IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS

A. Benefits and Impacts

65. Investment in rural infrastructure, combined with delivery of technical services, will 33 Quarterly reports will include: (i) description of progress by component and the Project as a whole during the

period; (ii) changes to implementation plans; (iii) details of resettlement; (iv) implementation of the environment assessment and review framework; (v) major project activities by the PMO, EA, and IAs; (vi) financial and procurement-related information; (vii) problem summaries and proposed remedial action; and (viii) the work plan for the next period. Second and fourth quarter reports will include assessments of impacts on targeted beneficiaries.

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directly benefit about 68,000 households, including 354,000 people in 40 communes (Supplementary Appendix A) in three provinces around Tonle Sap, and will strengthen local government authorities in facilitating and delivering services to these communities. Benefits will include: (i) a reduction in poverty in the target districts, (ii) increased agricultural production and other livelihood activities, (iii) community empowerment, and (iv) increased local government capacity.

66. Economic Benefits. The cumulative and multiplier effects of improved rural infrastructure, increased household incomes, and reduced poverty will enable greater economic activity in the target communes. The Project will assist beneficiary families to start up livelihood activities or enjoy greater participation in them. Project outcomes that will enhance economic activity include (i) increased employment; (ii) increased wealth as a result of accumulation of agricultural assets; (iii) improved access to financial services for poor rural households; (iv) higher food security; (v) value addition at household and small and medium-sized enterprises levels; (vi) improved yields, resulting in tradable surpluses; (vii) greater use of farm inputs, resulting in higher turnover for suppliers; (viii) small-scale infrastructure improvements, including roads and irrigation rehabilitation; and (ix) in the medium and long term, higher levels of tax revenue to the Government, which should lead to improved government services.

67. The Project adopts a sector approach, where the entire scope of project activities is not known at the project preparation stage. Five core subprojects34 were analyzed as representative evaluations of the Project’s economic viability and financial sustainability. The economic internal rate of return (EIRR) was calculated for these subprojects to determine their economic viability and serve as benchmarks for selection of subprojects at the time of project implementation. Base case EIRRs range between 19.0% and 22.1%; economic net present values (ENPVs) are in the range of $419,000 and $520,000; and benefit-cost ratios are estimated in the range of 1.49–1.70. These indicators suggest that, other things being equal, all five core subprojects examined are economically viable since EIRRs are above the cutoff rate of 12%.

68. The five core subprojects selected for the analysis covered a population of about 60,000 people (11,000 households), 63% of which are categorized poor compared to the national average of 36%. Major benefits for target beneficiaries will come from net incremental income generated by livelihood models as a result of the Project’s support to increase cropping intensities, access to finance, and extension service schemes, among others (Supplementary Appendix K includes estimates of livelihood models). Project investment in new infrastructure, as well as upgrading and rehabilitation of existing infrastructure, will bring about a wide range of other benefits—mainly via cost savings. Numerous types of cost savings are expected, including savings from reduced damages from floods, travel time/cost savings for potable water, and health and medical cost savings.

69. A number of other benefits cannot be readily quantified, including (i) reduced food poverty via better food security; (ii) enhanced local capacity through TA in planning and management of infrastructure; (iii) increased exchanges of experience, skills, and farming techniques; (iv) local savings promotion; (v) empowerment of women; (vi) improved teaching and learning quality through school improvements (new construction and rehabilitation); (vii) increased awareness and adjusted mindset in natural resource protection; and (viii) a wide range of benefits and cost savings attributed to rural infrastructure that are not readily quantified such as travel time and vehicle cost savings, transport services development at communes, increased utility of land frontages created by improved intervillage and inter-commune roads, and road links to provincial and national highways. Economic analyses are in Appendix 10 and Supplementary Appendix K.

34 These are (i) Ampil Tuek Commune, Kampong Tralach District, Kampong Chhnang Province; (ii) Pralay Commune,

Stoung District, Kampong Thom; (iii) Rumlech Commune, Banan District, Pursat Province; (iv) Srae Sdok Commune, Kandieng District, Pursat Province (subsequently dropped because of overlap with Tonle Sap Sustainable Livelihoods Project); and (v) San Kor Commune, Kampong Svay District, Kampong Thom Province.

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70. Social Impacts. The major social impacts of the Project are expected to be positive, and will entail improved livelihoods and reduced levels of poverty for the population of the project area. Annual household expenditure is estimated to increase by 26% from $300 to $378 and incremental employment of about 1,000 person-years per annum. The majority (67%) of the benefits will go to farmers, the Government will receive about 36% (mostly in the form of duties and taxes), while new businesses will receive 5%, and hired labor 3%. The estimated poverty impact ratio will be 41%. No involuntary resettlement is foreseen under subprojects funded from the CDF. Safeguards are built into the community decision-making process to deal with any losses that may arise. Significant resettlement impacts are not expected from agricultural water management infrastructure and rural road infrastructure because the works will be improved along existing rights-of-way and will mainly require, if any, the acquisition of minor amounts of land plus compensation for roadside trees, crops, or possibly small buildings. Subproject selection criteria will exclude any activities that cause significant involuntary resettlement. The summary poverty reduction and social strategy is in Appendix 11. The Government and ADB have agreed on a resettlement framework (Appendix 12 and Supplementary Appendix H).35 Allowances, operational and administration costs, surveys, monitoring, and reporting will be financed from loan and grant funds. The resettlement entitlement matrix is shown in Supplementary Appendix M. 71. The Government and ADB have agreed that the Project will ensure the participation of indigenous people, if these communities are located in the project communes. Special attention will be given during planning and implementation of subprojects so that indigenous people will derive maximum benefit from the subproject. The preparation of ethnic minority specific actions will form a part of subproject design in communes where indigenous people live. The Cham is the major group of non-Khmer living in the Project’s target districts and communes. Throughout the target provinces, Cham live in all-Cham and mixed Cham-Khmer villages. Although the Cham are Muslim and form communities based on religious, social, and cultural practices, their livelihoods are similar to the majority Khmer population. 72. The rapid rural appraisal under the project preparatory TA (footnote 2) concluded that women will be beneficiaries of subprojects. Women comprise around half of all workers in the agriculture sector; and contribute more hours of labor to cultivation, agricultural processing, and marketing of agricultural produce than men. In the project communes, the proportion of female-headed households ranges from 8% to 36% based on data from the 2005 Commune Data Base. Female-headed households are poorer—they constitute 41% of the poor and 32% of the poorest wealth categories compared with 18% of rich households and 24% of middle wealth households. The Project’s gender action plan (GAP) ensures that women will benefit equally from the Project compared with men (Appendix 13). It is designed to address the negative impacts of resettlement, if any; and it will ensure that gender issues are mainstreamed into subproject selection, resettlement plans, and environmental assessments. 73. Special measures have been built into the project design to deal with potential social impacts and promote community participation. These include (i) the appointment of male and female commune council supporters by each commune council; (ii) a resettlement framework; (iii) detailed description of participatory practices for subproject identification, design, implementation, and O&M; and (iv) capacity building training for PLAU, PDWRAM, PDRD, PDA, and PMO staff in social safeguards and community participation. Community-driven development specialists will be located in each participating province. 74. Environmental Concerns. An initial environmental examination (IEE) was conducted for the Project as a whole and for the sample subprojects to identify potential impacts, appropriate mitigation measures, and monitoring mechanisms. The environmental assessment 35 The Government approved the resettlement framework (Supplementary Appendix H) on 7 September 2007. ADB

funds can be used for compensation to project-affected persons for loss of income, loss of crops, and economic rehabilitation. Acquisition of land is not eligible for ADB funds.

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is summarized in Supplementary Appendix I. The IEE confirms that the Project is not likely to cause significant adverse environmental impacts since investments are small in scale and mainly focus on rehabilitation or upgrade of existing structures. Subproject screening criteria will exclude subprojects that will be located within or adjacent to environmentally sensitive areas or would cause negative environmental impacts. Projected minor impacts can be minimized with the proposed mitigation measures, and an adequate budget is allocated in the overall project costs for this cost. Subprojects will follow environmental assessment procedures stipulated in the environmental assessment and review framework (Supplementary Appendix J) developed to ensure compliance with the Government’s environmental regulations and ADB’s Environment Policy (2002). B. Risks and Mitigation

75. Risks associated with rural infrastructure activities include limited capacity of provincial and district staff, lack of adherence to technical and environmental standards during construction, and the inability of beneficiaries to operate and maintain investments after completion. The infrastructure to be provided is small-scale, and most of these concerns will be addressed through rigorous supervision, training, and the creation of responsive user groups to ensure maintenance. The consulting services will include community development specialists located in each province, designated as deputy team leaders and leading the provincial support team, to assist line agencies in implementing the Project in accordance with the project administration manual through the existing provincial offices. 76. Recent governance risk assessments have identified (i) procurement, (ii) purchase of expendable materials/services, and (iii) quality assurance of works as being subject to high risk of corrupt practices (footnote 12). Financial and accountability systems do not currently provide an acceptable standard of fiduciary control. The Government is committed to public financial management reform; and has requested ADB assistance for TA to support improved public financial management in MOWRAM, MAFF, and MRD (para. 58). This is expected to become available within 9 months of the project loan and grant effectiveness. A good governance framework has been developed for the Project and agreed with Government to guide EA and IA staff during implementation (Supplementary Appendix N). 77. The Government’s decentralization and deconcentration program is radically changing the way in which government agencies function. The Project will be implemented during a period of evolving decentralization. As a result, it might face coordination problems between national sector agencies and province, district, and commune governments. This risk will be mitigated through the PSC as a forum for interagency coordination of action plans, and regular meetings between the PMO, provincial IAs, and the provincial support teams.

V. ASSURANCES AND CONDITIONS

A. Specific Assurances

78. In addition to the standard assurances, the Government has given the following assurances, which will be incorporated in the legal documents:

(i) The Government will ensure that only subprojects without significant resettlement impacts, as defined in ADB’s Involuntary Resettlement Policy (1995), will be financed by the Project. Subproject short resettlement plans, prepared in accordance with the procedures given in the resettlement framework, will be disclosed to people affected prior to submitting to ADB for review. Approval of the resettlement plan by ADB will be a precondition to award of contracts for civil works.

(ii) The Government will ensure that appropriately qualified and experienced personnel are appointed to the PMO.

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(iii) Within three (3) months of the loan and grant effective date, the Government will establish a provincial coordination committee in each participating province, chaired by the provincial governor or his delegate, with membership consisting of the provincial directors of PDWRAM, PDA, PDRD, and Provincial Department of Environment, and the chief of the PLAU, and which shall be responsible for overall coordination of the Project at the provincial level.

(iv) Within six months of the loan and grant effective date, the Government will ensure the PMO has established a project specific web-site for public disclosure about the use of the loan and grant funds; including details of procurement and contract awards, and reports of the independent monitor. The web site will be updated within four weeks of contract awards. Arrangements for display of project information on commune notice boards will be made.

(v) The Government will ensure that the provincial director of each IA and the chief of the PLAU will identify the technical staff responsible for implementing the Project. All Project staff will be knowledgeable about ADB procedures, including (i) implementation, (ii) procurement, (iii) use of consultants, (iv) disbursement, and (v) prevention of fraud and corruption.

(vi) The Government will ensure that all Project staff are aware of the requirements of the Project’s Good Governance Framework.

(vii) The Government will ensure that MOWRAM establishes a Complaints and Action Task Force to receive and resolve complaints or grievances related to the project.

(viii) The Government will ensure MOWRAM publicizes the existence and role of the ADB Integrity Division.

(ix) Civil society organizations will be notified and invited to observe selected events (bid openings, contract signings, and meetings to review Project progress).

(x) Selection of subprojects will be carried out in accordance with the agreed selection criteria and that subprojects are included in the provincial investment plan or commune investment plan as appropriate and integrated to the annual work plan and budget.

(xi) The Government will ensure that each IA in the participating provinces carries out environmental screening for all proposed subprojects to determine the environmental categorization and prepare the necessary environmental safeguard documents for inclusion in the Project’s annual work plan and budget. MOWRAM will ensure that: (a) environmental assessment documents are based on the environmental screening checklists and on the sample IEE prepared during project preparation; (b) the environmental assessment documents meet ADB’s Environment Policy requirements; (c) IEEs include details of local consultation carried out; and (d) IEEs are submitted to ADB for approval prior to commencing activities under a works contract for a subproject if any critical environmental issues have been identified. The Government will ensure that all civil works contracts include specific measures to mitigate negative environmental impacts and will monitor their implementation.

(xii) The Government will ensure that, in the event unexploded ordnance clearance is needed, the Government and MOWRAM will remove, at its own cost, all unexploded ordnances suspected to exist on subproject sites by engaging the services of a reputable and experienced mine security organization, acceptable to ADB, to carry out and then certify subproject area clearance.

(xiii) The Government will ensure that the EA and IAs utilize the agreed environmental assessment review framework to implement the Project; the EA will monitor the contractors’ implementation of civil works and ensure environmental mitigation measures identified in the IEE are employed.

(xiv) Tender documents will include provisions to ensure contractors’ preferential hiring of local labor, and to comply with the labor law/code including guaranteeing equal opportunities for female workers to work with the principle of equal pay for work of

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equal value. Contractors will be required to recruit women as a minimum of 35% of the paid unskilled labor.

(xv) In the event that indigenous people are affected by, or are beneficiaries of, any subproject, the provincial rural development committee will ensure that ethnic minority specific actions will be prepared and implemented in each subproject area.

(xvi) The Government will ensure that the Project is implemented in accordance with the agreed GAP (Appendix 13) and shall include, but not be limited to the following:

(a) Commune council supporters (1 female and 1 male per commune) will be

hired to enable women’s participation during subproject preparation. (b) At least 30% of the management committee of each group (e.g., FWUG,

FWUC, road maintenance committee, etc.) will be female and all groups will have 30% female members.

(c) On aggregate, at least 30% of the participants of all the training programs will be female. A minimum of 15% of participants at all training programs will be female.

B. Conditions for Loan and Grant Effectiveness 79. As a condition for declaring the loan and grant effective, the membership and mandate of the PSC will be confirmed by the Government; and the PMO will have been established and professional staff appointed.

VI. RECOMMENDATION

80. I am satisfied that the proposed loan and grant would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve:

(i) the loan in various currencies equivalent to Special Drawing Rights 6,466,000 to the Kingdom of Cambodia for the Tonle Sap Lowlands Rural Development Project from ADB’s Special Funds resources with an interest charge at the rate of 1% per annum during the grace period and 1.5% per annum thereafter; a term of 32 years, including a grace period of 8 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft Financing Agreement presented to the Board; and

(ii) the grant not exceeding the equivalent of $9,900,000 to the Kingdom of Cambodia from ADB’s Special Funds resources for the Tonle Sap Lowlands Rural Development Project.

Haruhiko Kuroda President

14 November 2007

22 Appendix 1

SECTOR ANALYSIS A. Tonle Sap Basin in Transition 1. The Tonle Sap Initiative (TSI)1 is a response to severe pressure on Tonle Sap Lake (also known as the Great Lake or Tonle Sap), caused particularly by increasing population and economic development. In the provinces surrounding the lake—Kampong Chhnang, Pursat, Battambang, Banteay Meanchey, Siem Reap, and Kampong Thom—about 38% of the population falls under the official poverty line, and half of the villages have 40–60% of their households living below the poverty line (Table A1). Many poor households migrate seasonally to the lake and upland forests to exploit natural resources and supplement the livelihood gained in their own village. This adds to the pressures placed on the lake by resident communities, and results in rapid overexploitation of fisheries and wildlife, encroachment on the lakeshores for agriculture during the dry season, pollution, and cutting of the remaining areas of seasonally flooded forests.

Table A1: Geographic Distribution of Poverty in Cambodia Population HDI Province Level Percent Densitya Score Rank Kompong Cham 1,608,914 14.1 164 0.475 5 Kandal 1,075,125 9.4 301 0.496 4 Phnom Penh 999,804 8.7 3448 0.936 1 Prey Veng 946,042 8.3 194 0.419 12 Battambangb 816,035 7.1 68c 0.456 6 Takeo 790,168 6.9 222 0.432 10 Siem Reapd 764,443 6.7 68e 0.325 19 Kompong Speu 598,882 5.2 85 0.456 7 Banteay Meanchey 577,772 5.1 87 0.409 13 Kompong Thom 569,060 5.0 41 0.336 18 Kampotf 557,065 4.9 108g 0.448 9 Svay Rieng 478,252 4.2 161 0.429 11 Kompong Chhnang 417,693 3.7 76 0.453 8 Pursat 360,445 3.2 28 0.401 14 Kratie 263,175 2.3 24 0.506 3 Krong Prean Sihanouk 155,690 1.4 179 0.659 2 Koh Kong 132,106 1.2 12 0.374 16 Preah Vihear 119,261 1.0 9 Ratanak Kiri 94,243 0.8 9 0.375 15 Stung Treng 81,074 0.7 7 0.371 17 Mondul Kiri 32,407 0.3 2 0.216 20 Total

11,437,656 100.0 64 0.472

HDI = human development index. a Persons per square kilometer. b Includes Krong Pailin. c Battambang only. Krong Pailin density is 29. Includes Oddar Meanchey. d Siem Reap only. Oddar Meanchey density is 11. e Includes Krong Kaeb. f Kampot only. Krong Kaeb density is 85. Sources: Population figures are from General Population Census of Cambodia 1998; Human Development Index from Cambodia Human Development Report 1997. B. The National Context: National Strategic Development Plan, 2006–2010 2. The National Strategic Development Plan (NSDP), 2006–2010, is the formal means of implementing the Government’s Rectangular Strategy for Growth, Employment, Equity and Efficiency (2004–2008). It sets national priorities of alleviating poverty and enhancing economic growth. Major emphases include (i) enhancement of the agricultural sector; and (ii) rehabilitation

1 Asian Development Bank (ADB). 2006. From Strategy to Practice: The Tonle Sap Initiative. Manila.

Appendix 1

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and construction of physical infrastructure, which includes management of water resources and irrigation as one of its four components. 3. The NSDP set a target of increasing irrigated area from 20% of total cropland in 2005 to 25% in 2010. In response to the NSDP, the Ministry of Water Resources and Meteorology (MOWRAM) considers that its principal focus must be on extending the irrigated area. There are many uncertainties regarding definitions and actual areas, but MOWRAM set a goal in its Strategic Development Plan for the Water Sector, 2006–2010, that farmers of irrigable cropland are better able to manage water over an area that is increasing by at least 10,000 hectares (ha) per year. A similar goal has also been set for rain-fed croplands. These are extremely challenging, but considered necessary if the Government’s Rectangular Strategy is to be achieved in practice. Inevitably, MOWRAM must allocate considerable resources and effort to irrigation systems. C. Agriculture and Water in Cambodia 4. Agriculture accounts for one third of Cambodia’s gross domestic product (GDP) and is the main source of livelihood for nearly 80% of the population. In 2005/2006, the total cultivated area of rice was 2.44 million ha (2.12 million ha in the wet season), with 0.23 million ha of industrial crops and 0.23 million ha of secondary crops. Total rice production in 2005 was 5.99 million tons, giving a national surplus of over 1.30 million tons. Average rice yields have increased markedly to an average of 2.48 tons/ha in 2005. Yields of rice grown during the dry season (December–March) on average are higher than during the wet season (May–September): 3.09 tons/ha versus 2.26 tons/ha in 2005. Total 2005 dry season production was 1.25 million tons (21% of the total). Yield and total production are very dependent on weather conditions and flooding, so recent increases may not necessarily be sustained. 5. Lack of availability of sufficient water is widely perceived as the critical constraint on rice production. The Government’s Rectangular Strategy identifies irrigation as one of 16 strategic priorities for national development. However, according to the Food and Agricultural Organization of the United Nations (FAO), only 20% of Cambodia’s croplands are potentially irrigable because of unfavorable topography, lack of a water source, or unsuitable soil types.2 This means that a large percentage of Cambodia’s croplands will remain rain-fed. Even for croplands that are irrigable, rainfall and stream flow are so variable from year to year that water for supplementary irrigation3 may not be available when it is most needed. The critical time is at the beginning of the growing season (April–May) when the soil must be softened in readiness for ground preparation and rice seedlings must be established. Other times are during the “small dry season” which tends to occur in June–July, and toward the end of the cropping cycle when grain is filling out. 6. MOWRAM’s hydrometeorological databases demonstrate that stream flow in Tonle Sap basin cannot be relied on for supplementary irrigation. Consequently, supplementary irrigation systems dependent on run-of-river water supplies may be of little help at critical times. Some form of storage—with volumes sufficient to supply water during the relatively short critical periods when rainfall and stream flow are insufficient—is desirable. It is not necessary to rely on rivers and streams as sources of irrigation water. Indeed, in view of in-stream values (fish production, navigation, domestic water supply, social uses), it may not be desirable. People increasingly recognize the need to leave sufficient water in a river for human uses other than agriculture, as well as for maintenance of aquatic ecosystems and fisheries. In many other countries with unreliable rainfall, water harvesting is widely used to provide water for tree crops,

2 Source: www.fao.org/ag/agl/aglw/aquastat/cambodia/ accessed 15 August 2007. 3 The greater part of irrigated cropland in Cambodia receives most of its water from rainfall and natural overland flow,

and irrigation systems supply additional (supplementary) water to provide better growing conditions.

24 Appendix 1

vegetables, other high value crops, home gardens, and supplementary irrigation. 4 Water harvesting and storage has been widespread in Cambodia in the past, and there are still thousands of ponds throughout the country.5 However, traditional techniques appear to have fallen into disuse, partly as a result of Khmer Rouge efforts to build standardized systems based on diversion structures and distribution canals. 7. Although Cambodia has recently returned to national self-sufficiency in rice, food security is still a major issue for a large percentage of the population, particularly in Tonle Sap basin. For many households—those with small or no landholdings, infertile soils, or insufficient money to buy fertilizer and high quality seed—their own production does not meet their needs for the entire year. Their hungry season may last for some months, and income-generating activities are essential so that rice can be purchased. D. The National Strategy for Agriculture and Water, 2006–2010 8. The NSDP encourages ministries to plan in a sectoral and coordinated manner. The Government’s Strategic Framework for Decentralization and Deconcentration Reforms also promotes a transfer of responsibilities and resources to subnational levels. During the coming 5–6 years, it can be expected to radically change the way in which government agencies function. The NDSP required that a Strategy for Agriculture and Water be developed by the end of 2006. 9. During 2006, a task force of the Technical Working Group on Agriculture and Water worked on the Strategy on Agriculture and Water, which was expected to be signed off by the Ministry of Agriculture, Forestry and Fisheries (MAFF) and MOWRAM ministers by the end of the year. The goal of the strategy is to contribute to poverty reduction, food security, and economic growth by (i) enhancing agricultural productivity and diversification, and (ii) improving water resources development and management. This will be achieved principally through (i) more efficient use and management of water and land, (ii) increased agricultural productivity, and (iii) enhanced agribusiness processes, (iv) institutional capacity building, and (v) improved access to knowledge and technology. The specific objectives and actions, to be finalized in early 2007, will address the five types of capital already referred to above. Key components of the strategy are pertinent to the proposed Project because they show the range of interventions that could be considered. 10. Strengthen the Enabling Environment. The enabling environment for agriculture and water includes relevant policies, laws/regulations, institutional capacity, etc. Ongoing strengthening is required, e.g., to develop MAFF and MOWRAM capacities to enforce laws and associated sub-decrees related to water use, watershed management, and other natural resources. 11. Mobilize Natural Resources: Water, Land, and Soil. The strategy will include, as examples, promoting improved crop water management through water harvesting/storage, gravity-fed irrigation systems, and technology such as drip irrigation of vegetables; promoting soil fertility management; protecting water resources from pollution and degradation so that they continue to be available for fisheries, ecosystem maintenance, etc.; promoting rice field fisheries and aquaculture; and promoting settlement of cultivable land and securing land ownership against land theft. 4 Critchley, W. Siegert, K. And Chapman, C. Finkel, M. 1991. Water harvesting. A manual for the design and

construction of water harvesting schemes for plant production. Rome: FAO. 5 Rice farmers in the seasonally flooded area around Tonle Sap and on the Mekong–Tonle Sap floodplains store

floodwater behind bunds. As water level drops, recession rice is planted on the newly exposed land, and the stored floodwaters are progressively released to provide supplementary irrigation when required. This technique of supplementary irrigation is in some respects more reliable, but enables farmers to encroach into the buffer zone.

Appendix 1

25

12. Mobilize Human and Financial Resources. The strategy must mobilize and make better use of people and money, including as examples promoting education, training and extension in agriculture and water, development of appropriate technology, more efficient use of skilled people such as extension workers and engineers, better access to money needed for investment and operation and maintenance (O&M), greater engagement of the private sector in agriculture, and water management and agribusiness. 13. Empower People and Communities. The strategy will seek to empower communities to work together and be more self-reliant. This includes, as examples, establishing and supporting farmer water user committees; assisting farmers to establish cooperatives to market crops and purchase inputs; promoting the availability of micro-credit and other funding sources to allow people to invest in crop production and agribusiness development; and encouraging community organizations (commune councils, village development committees, etc., with access to Commune Development Funds) to participate in the planning and operation of community projects for water supply, water management infrastructure, communal rice drying facilities, etc. 14. Increase Productivity of Agriculture. This element of the strategy aims to increase production, reduce production costs per unit of output, and assist in assuring product quality. It will help to achieve increased production of high quality products, thus achieving both food security and commercial goals. Elements of the strategy will include, as examples, improving the quality of inputs such as seeds and fertilizers; reducing harvesting and postharvest losses; and introducing innovative agricultural and water management practices. 15. Extend Commercial Agriculture. The strategy will assist farmers to engage in commercial production by, as examples, providing information and forecasts regarding market demand; promoting new product opportunities; establishing value-added processing facilities; administering arrangements for product quality assurance and food safety; and facilitating entry into profitable markets, particularly via improved transport and storage facilities, marketing infrastructure, bulking/wholesaling arrangements, etc. E. Stabilizing Livelihoods 16. A livelihood includes the capabilities, assets, and activities required to maintain a means of living. A livelihood is sustainable when the assets on which it is based—including human and natural resources—are not being diminished, and a household is able to absorb adversity such as drought or illness without long-term harm. A rapid rural appraisal carried out in 2006 in 32 selected villages of the six provinces confirmed that most households do not have sustainable livelihoods, and are vulnerable to shocks.6 Their physical resources (land, water, natural products) and human resources (skills, knowledge, and healthy labor) are insufficient and/or are deteriorating. A natural response by such a household is to exploit common property resources, which is increasingly leading to the “tragedy of the commons” in Tonle Sap basin. Hence, the urgent need to stabilize and then improve the livelihoods of the lowland communities.

6 ADB. 2006. Rapid Rural Appraisal Summary Report. Manila. TA 4756-CAM consultants’ report (unpublished). The

rapid rural appraisal concluded that 91% of the surveyed households cannot rely on the land they farm and/or resources locally available to survive. In villages with reasonable access, up to 20% of households send at least one member to find wage labor in nearby towns. The future of rural people around Tonle Sap will increasingly rely on a prosperous urban sector.

26 Appendix 1

17. Resources crucial to sustainable livelihoods for rural populations around Tonle Sap are as follows:7 (i) natural capital—land, water, fish, and other living resources; (ii) human capital—healthy and strong members of the household, with the skills and knowledge necessary to provide for their needs; (iii) financial capital—the funds needed to purchase the goods and services they are not able to provide (e.g., fertilizer, seeds, fuel) to cope with unforeseen events (e.g., ill health, marriages); (iv) social capital—the community relationships and institutions needed to enable cooperation and mutual support; and (v) physical capital or infrastructure—household equipment (boats, ploughs, etc.) and facilities (roads, markets, and water management facilities) that are of a public good nature, and must be provided by the community rather than the individual household. 18. The rapid rural appraisal found that villagers ranked the top 10 livelihood issues as follows:8 (i) water management for agriculture (30 villages); (ii) roads and bridges (28 villages); (iii) health and hygiene (28 villages); (iv) wells and drinking water (26 villages); (v) seeds, fertilizer, pest control, farming equipment (21 villages); (vi) access to education; (vii) livestock services (17 villages); (viii) off-farm income generation and training (16 villages); (ix) improved fisheries management (12 villages); and (x) food security (10 villages). Occupational training, village pond water supplies, and access to credit were ranked slightly lower. These results clearly show the importance of physical capital (infrastructure and equipment), human capital (both health and knowledge), natural capital (especially water and fish), and financial capital (to purchase inputs and pay for health and other services). Social capital is not explicitly mentioned, but is essential for the other issues to be addressed successfully.9 19. External support agencies are converging on a model of rural/community development that provide a package of complementary interventions. Examples are the Northwestern Rural Development Project, Tonle Sap Sustainable Livelihoods Project, and Area Development Program approach employed by World Vision Cambodia.10 A strong emphasis is placed on community empowerment (social capital). Capacity building, technical/vocational training, education and extension services, provision of credit, etc. (human and financial capital) are channeled through village development committees, commune councils, and/or other community-based organizations, to engage communities in addressing their needs for natural and physical capital. F. Link between Private Enterprise and Project Interventions 20. An underlying theme of the Strategy for Agriculture and Water is that increased involvement in the cash economy is essential for people to lift themselves out of poverty. Subsistence agriculture is not able to do so or even meet basic food security needs. The rural 7 A fuller description of the five types of capital is in Appendix 1 to ADB. 2005. Technical Assistance to the Kingdom

of Cambodia for Preparing the Tonle Sap Lowland Stabilization Project. Manila (TA 4756-CAM approved on 21 December for $1.0 million).

8 Villagers were aware that the rapid rural appraisal was being carried out by a team supported by the Provincial Department of Water Resources and Meteorology (PDWRAM), which may have influenced the top ranking of water management for agriculture.

9 A participatory rural appraisal carried out in preparation for the Tonle Sap Sustainable Livelihoods Project (footnote 7) found a different order of ranking for the 33 villages located in the transition zone: (i) irrigation systems for dry season cultivation (56%); (ii) access to credit (56%); (iii) livestock activities (40%); (iv) improved health and hygiene (24%); (v) improved roads and bridges (24%); (vi) improved access to education; (vii) better rice seed, fertilizers, and pest control; (viii) non-rice agriculture; (ix) aquaculture; and (x) postharvest production management.

10 ADB. 2001. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Cambodia for the Northwestern Rural Development Project. Manila (Loan 1862-CAM for $34.73 million, approved on 2 November); ADB. 2005. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Cambodia for the Tonle Sap Sustainable Livelihoods Project. Manila. (Grant 0034 for $15.0 million ADF and $4.74 million Government of Finland approved on 21 December); and World Vision Cambodia website. Available: www.worldvision.org.kh/we_do/adp.htm

Appendix 1

27

rapid appraisal showed that increasing numbers of households in Tonle Sap basin already follow such a livelihood strategy, even to the extent of working for extended periods in Thailand to earn money. In the project area, the growth of economic development along the newly rehabilitated highways 5 and 6 will continue to provide more opportunities for employment.

28 Appendix 2

EXTERNAL ASSISTANCE IN THE TONLE SAP REGION

Project Title Duration Source Objective Amount ($ million)

Area of operation

Environment and Natural Resources

Land Management and Administration Project

2002–2007

World Bank

The Land Management and Administration Project aims at improving land tenure security, and promote the development of efficient land markets.

33.9 Nationwide

Natural Resource and Environment Program

2004–2007

Danida To sustain environmental resource management based on environment-friendly, technologically, and socioeconomically sound use of natural resources by communities, the private sector, and the Government; mitigate the detrimental effects of urban and industrial development; and support environmental education, particularly among the younger generation

Nationwide

Master Plan of Water Resources Development in Cambodia

2006–2008

KOICA To establish a master plan and action plan for water resources development, conduct feasibility studies, and improve human resources capacity for water resources development

1.5 Nationwide

Biodiversity Management and Conservation in the Tonle Sap Biosphere Reserve

UNDP/ GEF

Natural resource management, resource inventories, and capacity building

Kg Thom, Kampong Chhnang, Pursat, Battambang, Siem Reap

Mekong River Basin Wetland Conservation and Sustainable Use Program

Ongoing to 2008

UNDP, GEF, the Nether-lands

To establish a multisectoral planning process at national and regional levels; strengthen the policy framework and macroeconomic environment to support wetland biodiversity conservation and sustainable use; and strengthen the information base to improve management of wetlands, including community-based natural resource management

31.5 Mekong region

Appendix 2

29

Project Title Duration Source Objective Amount ($ million)

Area of operation

Technical Services Centre for Irrigation Systems Phase I and II

2001–2005 2006–2009

JICA Build capacity of MOWRAM to design, build, and operate irrigation systems

5.0 Nationwide with pilot areas in Pursat, etc.

Water Resources Sector Project

2007 ADB, AFD

Project preparatory technical assistance to (i) design an irrigation investment project in the Northwestern provinces, based on comprehensive river basin studies; (ii) provide capacity building assistance to MOWRAM; and (iii) establish a Tonle Sap Basin Management Organization

1.3 (anticipate follow-up loan for irrigation of ~20.0)

Tonle Sap basin

Irrigation System Construction and Rehabilitation

Komping Pouy Irrigation Rehabilitation and Rural Development

1998–2006

JICA, APS (Italy), WFP

Rehabilitate and extend the Komping Puoy irrigation system, and strengthen management capacity and systems

5.6 Battambang

Multi-purpose Water Resources Development, Krang Ponley

2004–2009

KOICA Design and construction of irrigation system

Kampong Chhnang

Multi-Purpose Dam Development, Battambang

2006–2007

KOICA Feasibility study of storage options for Stung Sangke River

Battambang

Northwest Irrigation Sector

2005–2010

ADB, AFD

To reduce poverty in selected rural areas in the northwest through rehabilitation and sustainable operation of small and medium-scale irrigation systems and other water-control infrastructure within priority river basins, to enhance agricultural production

22.6 Battambang Banteay Meanchey, Pursat, Siem Reap, Kandal

Stung Chinit Irrigation and Rural Infrastructure

2001–2006

ADB, AFD

To increase income and improve the quality of life by providing sustainable irrigation infrastructure and management, agricultural extension and FWUCs, and rural infrastructure such as roads and markets

23.8 Kampong Thom

Stung Staung Water Resources Development

2005–2008

PRC Irrigation system construction and capacity building

Kampong Thom

30 Appendix 2

Project Title Duration Source Objective Amount ($ million)

Area of operation

Irrigation Project FAO/ funded by Italy

3.0 Battambang

Rural Development

Agricultural Development Support to Seila

2000–2006

IFAD, UNDP, AusAID

To increase food and income security for about 64,500 poor households through a more diversified pattern of crop and livestock production and better access to credit services, leading to capital formation at the household and local levels

10.4 Battambang, Banteay Meanchey, Pursat, Siem Reap

Agricultural Productivity Improvement Program

1997–2004

World Bank

To build institutional and community capacity, provide data and information (including water resources data), and assist in managing irrigation and drainage systems and related infrastructure

8.3 Nationwide

Cambodia Land Management and Administration

2002–2007

World Bank

To improve land tenure security and promote the development of efficient land markets

33.4 Nationwide

Cambodia-Australia Agricultural Extension Project Phase II

2001–2006

AusAID To improve access to agricultural knowledge through a sustainable district-oriented extension system as a focal point for coordinating and facilitating extension services

15.2 All Tonle Sap basin provinces and 7 others

Community-Based Rural Development

2001–2008

IFAD, Germany (GTZ), AusAID, WFP

To increase food production and farm incomes through intensified and diversified crop and livestock production, and increase the capacity of the poor to use services from the Government and other sources for their social and economic development

22.8 Kampong Thom, Kampot

Economic and Social Relaunch of the Northwest Provinces

2006–2010

EU To reduce poverty by intensifying and diversifying agricultural, livestock, and fisheries production; creating economic and employment opportunities;

€26 million Battambang, Banteay Meanchey, Siem Reap

Appendix 2

31

Project Title Duration Source Objective Amount ($ million)

Area of operation

empowering local communities; improving access to social amenities, markets, potable water, and credit facilities; and providing safer and permanent access to arable land and social infrastructure

Emergency Flood Rehabilitation Project (rural infrastructure and irrigation and flood control components)

2001–2003

ADB Rehabilitate selected irrigation infrastructure and rural roads damaged during major floods, and establish/upgrade flood protection works

10.8 (irrigation and flood) 6.4 (rural infrastruct-ure)

Tonle Sap basin provinces (except Banteay Meanchey) and 6 others

Flood Emergency Rehabilitation Project (irrigation and flood control component)

2001–2004

World Bank

Rehabilitate rural roads, and selected irrigation infrastructure damaged during major floods, and establish/upgrade flood protection works; establish FWUCs

8.1 (rural infrastruct-ure)

11.6 (irrigation and flood control)

Tonle Sap basin provinces (except Banteay Meanchey) and others

Improving the Livelihood of Poor Farmers in Southern Cambodia

2003–2008

ADB/ JFPR

To reduce rural poverty through sustainable livelihood opportunities for poor and vulnerable groups of farmers, particularly rural women; small-scale village infrastructure, village revolving funds, and village-based agro-enterprises; social mobilization program and agricultural, horticultural, and livestock training, including intensive support for disadvantaged and landless farm workers; capacity building of local community-based organizations and NGOs

1.8 Kampong Chhnang, Kampong Thom, and 3 others

Integrated Pest Management Farmer Training Project, Phase II

2003–2005

Danida To empower farmers to apply sustainable agricultural production systems through better integrated crop management

1.65 Battambang, Banteay Meanchey, Kampong Chhnang, Kampong Thom, and 3 others

Northeast Village Development

2002 World Bank

To promote rural development through directly productive activities; training in agriculture, fisheries, and vegetable cultivation; microenterprise

6.0 Kampong Thom and 2 others

32 Appendix 2

Project Title Duration Source Objective Amount ($ million)

Area of operation

development; small-scale rural infrastructure; and harbor improvement

Northwestern Rural Development

2002–2007

ADB To reduce poverty through accelerated rural development

35.3 Battambang, Banteay Meanchey, Siem Reap, and O Meanchey

Provincial and Rural Infrastructure Project

2004–2007 (suspend-ed)

World Bank/ IDA IFAD

To provide access to markets through rehabilitation and maintenance of rural roads, and associated capacity building

23.0 Kampong Thom, Siem Reap and 2 others

Reducing Chronic Under-Nourishment

2002–2007

WFP To increase agricultural production by building, maintaining, and rehabilitating existing irrigation systems; building the capacity of farmers to maintain these systems, and strengthening the capacity of government counterpart staff

17.5 All Tonle Sap basin provinces and 4 others

Rural Development Program

2002–2007

Germany (GTZ)

To improve the economic activities of village organizations and their institutions through income-generating activities, natural resource management, and agricultural production

7.0 Kampong Thom, Kampot

Rural Infrastructure Development

2001–2008

IFAD To provide water management infrastructure and promote establishment of the institutional and community capacity to manage Iirrigation and drainage systems and infrastructure

4.0 Kampong Thom

Rural Water Supply and Sanitation

2005–2015

ADB To increase percentage of rural population with access to safe water supplies (target 50%) and sanitation (target 30%), through infrastructure, community mobilization, and assistance with implementation

10.0 Tonle Sap basin provinces (except Banteay Meanchey)

Seila Program 1996–2007

IFAD/ World Bank, PLG, UNDP,

To achieve economic development through demand-driven investments, including institutional capacity

45.6 in 2006

nationwide

Appendix 2

33

Project Title Duration Source Objective Amount ($ million)

Area of operation

bilateral donors, NGOs

building and decentralization, effective delivery of services and infrastructure for local development, and enhanced policy-regulatory environment for decentralization and deconcentration

Support Program for the Agricultural Sector in Cambodia

1995–2008, 1999–2003

EU To increase the income of farming communities, and promote growth and prosperity in rural villages

39.0 Kampong Chhnang and 5 other provinces

Tertiary Rural Infrastructure Program Phases III and IV

1992–2005 2005–2007

Germany (KfW) WFP

To rehabilitate 650 km of rural roads (400 plus 250) and maintain rural roads

15.6 Kampong Thom, Kampong Cham

Tonle Sap Environmental Management

2005–2008

ADB, GEF, UNDP

To develop the capacity for natural resource management coordination and planning, community-based natural resource management, and biodiversity conservation in the Tonle Sap Biosphere Reserve

18.7 Tonle Sap basin provinces

Tonle Sap Sustainable Livelihoods

2006–2010

ADB Finland

To support community-driven development and delivery of demand-driven services, safeguard core areas of the Tonle Sap Biosphere Reserve, build skills and awareness for sustainable livelihoods, and strengthen institutions and processes at all levels

20.3 Battambang, Pursat, Siem Reap, Kampong Chhnang, Kampong Thom

Tonle Sap Rural Water Supply and Sanitation Sector

2006–2011

ADB To provide sustained access to safe water and sanitation, and better hygiene to all communities and their members, including the poorest

18.0 Battambang, Pursat, Siem Reap, Kampong Chhnang, Kampong Thom

Food Security Program Current CIDA Coordinated by local NGO Kampong Chhnang

Project to Support Democratic Development through Decentralization and Deconcentration

2007–2013

UNDP To support implementation of decentralization and deconcentration framework

Nationwide

ADB = Asian Development Bank, AFD = Agence Française de Développement, APS = Associazione per la Partecipazione allo Sviluppo (Italian NGO), AusAID = Australian Aid, CIDA = Canadian International Development Agency, Danida = Danish International Development Assistance, EU = European Union, FAO = Food and Agriculture Organization of the United Nations, FWUC = farmer water user committee, GEF = Global Environment Facility, IDA = International Development Association, IFAD = International Fund for Agricultural Development, JFPR = Japan Fund for Poverty Reduction, JICA = Japanese International Cooperation Agency, KfW = Kreditanstalt für Wiederaufbau, km = kilometer, KOICA = Korean International Cooperation Agency, MOWRAM = Ministry of Water Resources and Meteorology, NGO = nongovernment organization, PLG = Partnership for local governance, PRC = Peoples Republic of China, UNDP = United Nations Development Programme, WFP = World Food Program. Source: Asian Development Bank.

34 Appendix 3

DESIGN AND MONITORING FRAMEWORK

Design Summary

Performance Targets/Indicators

Data Sources/Reporting Mechanisms

Assumptions and Risks

Impact Improved livelihoods in selected communes increase economic activity and household incomes

5 years after project completion: Agricultural production and economic activity in communes increased by 15% Number of households classified poor reduced by 30%

MAFF records on production Provincial statistical records Visual observation of communes Commune council assessment

Assumption • No major

political, economic, or natural resource shocks impact the lowland areas

Outcome Rural populations use improved infrastructure and services in selected communes to increase economic activity and household income

At project completion: Annual cropping intensity increased by 25% Travel time from village to commune market reduced by 10% Women participate in FWUG and other production groups representing about 30% of members A minimum of 30% of committee members are female Small business and/or specialized livelihoods in rural areas increased with 450 new enterprises operating in project communes

MAFF and FWUG records of crop production and intensity Interview with commune councils and beneficiaries FWUG records FWUC minutes of meetings Commune council records

Assumption • Agro-

meteorological conditions are not extreme in 12 months following intervention

Risk • Microfinance

institutions continue to be risk-adverse and do not increase loan portfolio in line with requirements for livelihood investment

Outputs 1. Rural infrastructure is improved 1.1. Rural access roads

improved

230 km of rural access roads are rehabilitated 20 associations for road O&M are formed

PPMS reports and Progress reports ADB Review Mission reports

Assumptions • Decentralization

and deconcentration policy continues to be implemented

• MOWRAM completes improvement/ upgrade of main canal infrastructure that will supply secondary

Appendix 3 35

Design Summary

Performance Targets/Indicators

Data Sources/Reporting Mechanisms

Assumptions and Risks

1.2. Irrigation canals established

1.3. Access to rural

markets is enhanced

2. Rural livelihood options increased 2.1. Access to technical services is improved 3. Project implementation effectively managed

100 km of secondary and 140 km tertiary irrigation canals are rehabilitated, supplying irrigation services to 9,600 ha FWUGs are managing O&M for rehabilitated systems with a minimum of 30% female representation on decision-making committees Viable rural markets are established in 10 selected communes Market O&M organizations are functioning 30% of vocational training course participants utilize microfinance services provided through commercial banks and licensed MFIs for development of small enterprises 50% of households send representatives (with a minimum aggregate/overall participation of 30% female participation) to on-farm and/or off-farm training ( such as technology and postharvest management and processing, vocational training) Project team at national level, 3 provinces, and 40 communes are selected and trained

PRDC monitoring reports National and provincial line agency records Vocational training records and project quarterly progress reports

systems to be upgraded through the Project

• MRD completes upgrading of feeder roads connecting to project improved roads

• Financial services are available in rural areas through existing commercial banks and MFIs

• Public Financial Management TA improves fiduciary practices in MOWRAM, MAFF, and MRD

Risk • O&M budgets

allocated to provincial and commune level are insufficient to maintain infrastructure in operational condition

36 Appendix 3

Design Summary

Performance Targets/Indicators

Data Sources/Reporting Mechanisms

Assumptions and Risks

Quarterly and annual progress reports prepared on time Project completed on time

PPMS and project quarterly progress reports

Activities with Milestones 1. Improve rural infrastructure 1.1. Facilitate commune participatory development planning (ongoing) 1.2. Coordinate work plan with relevant infrastructure institutions (ongoing –

annual cycle) 1.3. Develop detailed feasibility study for rural roads (for related communes) 1.4. Develop detailed feasibility study for irrigation systems (for related

communes) 1.5. Develop detailed feasibility study for rural markets (for related communes) 1.6. Implement construction of civil works (annual work plan) 1.7. Monitor physical and financial progress of the construction/rehabilitation of

relevant rural infrastructure (during construction) 1.8. Establish institutions for O&M of selected infrastructure (ongoing) 1.9. Implement O&M transfer strategy for the selected infrastructure subprojects

(during construction phase) 2. Develop rural livelihood options 2.1. Access to technical services for income-generating activities 2.1.1. Train community level facilitator to form income-generating activity

groups, and facilitate group and individual access to technical and financial services (within 6 months)

2.1.2. Identify and provide training in on-farm activities (such as improved aquaculture, crops, livestock techniques); and/or off-farm opportunities (such as technologies and postharvest processing, vocational training) to group members representing their households (annual work plan)

2.1.3. Assist line agencies to provide training, technology demonstrations, site visits, and other mechanisms for improving on-farm and off-farm activities (annual work plan)

3. Ensure that project implementation is effective 3.1. Develop detailed work plan and implementation guidelines for the Project

(inception phase) 3.2. Recruit and/or train appropriate staff and/or institutions working at national,

3 provinces, and 40 communes (within 6 months) 3.3. Monitor physical and financial progress in according to the set time table

(ongoing) 3.4. Prepare financial and physical progress reports on the Project (quarterly)

Inputs • ADB loan:

$10.1 million • ADB grant:

$9.1 million • Government:

$2.90 million • Beneficiaries:

$1.10 million (in kind)

International consulting services: 55 person-months

National consulting services: 434 person-months Civil works: $14.69 million Training and capacity building:= $0.28 million Agricultural extension supplies: $1.88 million Off-farm enterprises: $0.86 million Equipment: $1.50 million Incremental O&M costs: $1.57 million Consulting services: $2.21 million

ADB = Asian Development Bank; FWUC = farmer water user committee; FWUG = farmer water user group; MAFF = Ministry of Agriculture, Forestry and Fisheries; MFI = microfinance institution; MOWRAM = Ministry of Water Resources and Meteorology; MRD = Ministry of Rural Development; O&M = operation and maintenance; PPMS = project performance management system; PRDC = provincial rural development committee; TA = technical assistance.

SUMMARY COST ESTIMATES Table A4.1: Expenditure Accounts Project Cost Summary

Tonle Sap Lowlands Rural Revelopment Project % % TotalExpenditure Accounts Project Cost Summary Riel Million $ '000 Foreign Base

Local Foreign Total Local Foreign Total Exchange Costs

A. Investment Costs 1. Civil Works

a. Social Infrasturture i. Small-Scale Rural Infrastructure 8,400.0 2,800.0 11,200.0 2,100.0 700.0 2,800.0 25 13ii. Commune Council Assistant Support 800.0 - 800.0 200.0 - 200.0 - 1

Subtotal (A1a) 9,200.0 2,800.0 12,000.0 2,300.0 700.0 3,000.0 23 14b. Agriculture Water Management Infrastructure 15,724.8 5,241.6 20,966.4 3,931.2 1,310.4 5,241.6 25 25c. Rural Roads 13,398.0 4,466.0 17,864.0 3,349.5 1,116.5 4,466.0 25 21d. Land Acquisition and Ressettlement 400.0 - 400.0 100.0 - 100.0 - -

Subtotal (A1) 38,722.8 12,507.6 51,230.4 9,680.7 3,126.9 12,807.6 24 612. Vehicles and Equipment

a. Vehicles 144.0 1,296.0 1,440.0 36.0 324.0 360.0 90 2b. Equipment 93.8 843.8 937.6 23.4 211.0 234.4 90 1

Subtotal (A2) 237.8 2,139.8 2,377.6 59.4 535.0 594.4 90 33. Agricultural Extension and Development Support 6,627.2 - 6,627.2 1,656.8 - 1,656.8 - 84. Off-Farm Enterprise Support 2,976.0 - 2,976.0 744.0 - 744.0 - 45. Training

a. For Infrastructure Management 600.0 - 600.0 150.0 - 150.0 - 1b. For Project Management 400.0 - 400.0 100.0 - 100.0 - -

Subtotal (A5) 1,000.0 - 1,000.0 250.0 - 250.0 - 16. Consulting Services

a. International Consultants - 4,400.0 4,400.0 - 1,100.0 1,100.0 100 5b. National Consultants 3,654.0 - 3,654.0 913.5 - 913.5 - 4

Subtotal (A6) 3,654.0 4,400.0 8,054.0 913.5 1,100.0 2,013.5 55 107. External Audit, Baseline and Impact Studies 1,318.0 1,318.0 2,636.0 329.5 329.5 659.0 50 38. Recurrent Costs

a. Operation and Maintenance i. Operation and Maintenance of infrastructure 2,320.6 - 2,320.6 580.2 - 580.2 - 3ii. Office Operating Costs for Project Implementation 2,340.0 780.0 3,120.0 585.0 195.0 780.0 25 4

Subtotal (A8a) 4,660.6 780.0 5,440.6 1,165.2 195.0 1,360.2 14 7b. Incremental Staff Remuneration 3,058.6 - 3,058.6 764.6 - 764.6 - 4

Subtotal (A8) 7,719.2 780.0 8,499.2 1,929.8 195.0 2,124.8 9 10Total Baseline Costs 62,254.9 21,145.4 83,400.4 15,563.7 5,286.4 20,850.1 25 100

Physical Contingencies 1,826.9 682.2 2,509.2 456.7 170.6 627.3 27 3Price Contingencies 8,138.9 450.4 8,589.3 2,034.7 112.6 2,147.3 5 10

Total Project Costs 72,220.8 22,278.1 94,498.9 18,055.2 5,569.5 23,624.7 24 113Interest During Implementation - 1,469.6 1,469.6 - 367.4 367.4 100 2

Total Costs to be Financed 72,220.8 23,747.7 95,968.5 18,055.2 5,936.9 23,992.1 25 115 Source: Asian Development Bank estimates.

Appendix 4 37

Table A4.2: Expenditure Accounts by Financiers

($'000) Expenditure Accounts by Financiers Asian Development Asian Development Commune Local($ '000) The Government Bank - Loan Bank - Grant Beneficaries Total Foreign (Excl. Duties and

Amount % Amount % Amount % Amount % Amount % Exchange. Taxes) Taxes

A. Investment Costs 1. Civil Works

a. Social Infrasturture i. Small-Scale Rural Infrastructure 319.8 10.0 - - 2,726.5 85.3 151.5 4.7 3,197.8 13.3 741.0 2,137.0 319.8ii. Commune Council Assistant Support - - - - 210.6 100.0 - - 210.6 0.9 - 210.6 -

Subtotal (A1a) 319.8 9.4 - - 2,937.2 86.2 151.5 4.4 3,408.4 14.2 741.0 2,347.6 319.8b. Agriculture Water Management Infrastructure 596.6 10.0 5,071.0 85.0 - - 298.3 5.0 5,965.9 24.9 1,386.0 3,983.3 596.6c. Rural Roads 511.0 10.0 4,599.0 90.0 - - - - 5,110.0 21.3 1,182.3 3,416.7 511.0d. Land Acquisition and Ressettlement 115.0 100.0 - - - - - - 115.0 0.5 - 103.5 11.5

Subtotal (A1) 1,542.4 10.6 9,670.0 66.2 2,937.2 20.1 449.8 3.1 14,599.3 60.9 3,309.3 9,851.2 1,438.92. Vehicles and Equipment

a. Vehicles 37.4 10.0 - - 336.2 90.0 - - 373.5 1.6 336.2 - 37.4b. Equipment 24.3 10.0 - - 218.9 90.0 - - 243.2 1.0 218.9 - 24.3

Subtotal (A2) 61.7 10.0 - - 555.1 90.0 - - 616.8 2.6 555.1 - 61.73. Agricultural Extension and Development Support 186.9 10.0 - - 1,682.3 90.0 - - 1,869.2 7.8 - 1,682.3 186.94. Off-Farm Enterprise Support 85.5 10.0 - - 769.4 90.0 - - 854.8 3.6 - 769.4 85.55. Training

a. For Infrastructure Management 17.2 10.0 - - 154.8 90.0 - - 172.0 0.7 - 154.8 17.2b. For Project Management 11.2 10.0 - - 100.9 90.0 - - 112.1 0.5 - 100.9 11.2

Subtotal (A5) 28.4 10.0 - - 255.6 90.0 - - 284.0 1.2 - 255.6 28.46. Consulting Services

a. International Consultants - - - - 1,153.8 100.0 - - 1,153.8 4.8 1,153.8 - -b. National Consultants - - - - 1,049.4 100.0 - - 1,049.4 4.4 - 1,049.4 -

Subtotal (A6) - - - - 2,203.2 100.0 - - 2,203.2 9.2 1,153.8 1,049.4 -7. External Audit, Baseline and Impact Studies 75.2 10.0 - - 677.0 90.0 - - 752.2 3.1 351.6 325.4 75.28. Recurrent Costs

a. Operation and Maintenance Operation and Maintenance of infrastructure 71.0 10.0 - - - - 638.6 90.0 709.6 3.0 - 638.6 71.0Office Operating Costs for Project Implementation 86.4 10.0 - - 777.6 90.0 - - 864.0 3.6 199.7 577.8 86.4

Subtotal (A8a) 157.4 10.0 - - 777.6 49.4 638.6 40.6 1,573.6 6.6 199.7 1,216.5 157.4b. Incremental Staff Remuneration 871.5 100.0 - - - - - - 871.5 3.6 - 784.3 87.1

Subtotal (A8) 1,028.8 42.1 - - 777.6 31.8 638.6 26.1 2,445.1 10.2 199.7 2,000.8 244.5Total Project Costs 3,008.9 12.7 9,670.0 40.9 9,857.4 41.7 1,088.4 4.6 23,624.7 98.5 5,569.5 15,934.1 2,121.1

Interest During Implementation - - 367.4 100.0 - - - - 367.4 1.5 - - -Total Disbursement 3,008.9 12.5 10,037.4 41.8 9,857.4 41.1 1,088.4 4.5 23,992.1 100.0 5,569.5 15,934.1 2,121.1

Source: Asian Development Bank estimates.

38 Appendix 4

Appendix 5 39

PROJECT MANAGEMENT AND ORGANIZATION

MAFF = Ministry of Agriculture Forestry and Fisheries, MEF = Ministry of Economy and Finance, MOI = Ministry of Interior, MOWRAM = Ministry of Water Resources and Meteorology, MRD = Ministry of Rural Development, PDA = Provincial Department of Agriculture, PDRD = provincial department of rural development, PDWRAM = provincial department of water resources and meteorology, PLAU = provincial local administration unit. Source: Asian Development Bank.

Project Reporting Line

Normal Supervision Line

MOWRAM Executing Agency

PDRD Implementing Agency

MEF Key Supporting Agency

Project Steering Committee

Provincial Project Coordination Committee

Asian Development Bank

MEF

MOWRAM

Project Management

Office

MOI MAFF MRD

PLAU PDA PDRDPDWRAM

40 Commune Councils

Key

INDICATIVE SCHEDULE OF ACTIVITIES

ActivityEstablish PMO at MOWRAMIdentify Project Focal points in Provincial Line DepartmentsProcurement of Consultants - Advance ActionEstablish Project Steering CommitteeSteering Committee Meetings X X X X X X X X X X X X X X XA. Rural infrastructure is improved1. Facilitate commune participatory development planning

2. Coordinate work plan with relevant infrastructure institutions X X X x X X3. Develop detailed feasibility study for rural roads 4. Develop detailed feasibility study for irrigation systems 5. Develop detailed feasibility study for rural markets etc.

6. Monitor physical and financial progress of the construction/rehabilitation 7. Establish institutions for operation and maintenance of infrastructure8. Implement O&M transfer strategy at each subproject

B. Rural livelihood options developed1. Access to technical services for income-generating activities 2. Train CCS to faciltate access to technical and financial services

3.. Implement training in on-farm and/or off-farm opportunities 4. Establish training, demonstration plots, site visits, and other mechanisms on-farm and off-farm activitiesC. Project implementation is effective1. Develop work plan and implementation guidelines for the project2. Recruit and train staff at national, 3 provinces, and 40 communes3. Develop detailed guidelines for project implementation

4. Monitor physical and financial progress against time table

Q4

2007Q1 Q2 Q3 Q4 Q4 Q1 Q2Q2 Q3 Q3Q4 Q1 Q2 Q3Q2 Q3 Q4 Q1Q2 Q3 Q4 Q1

2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

INDICATIVE SCHEDULE OF ACTIVITIES

2008 2009 2010 2011 2012 2013

CCS = commune council supporter, IGA = income-generating activities, O&M = operation and maintenance, MOWRAM = Ministry of Water Resources and Meteorology, PMO = project management office.

Source: Asian Development Bank.

40 A

ppendix 6

Appendix 7

41

PROCUREMENT PLAN Project Information Country Cambodia Name of Borrower Kingdom of Cambodia Project Name Tonle Sap Lowlands Rural

Development Project Loan or TA Reference tbd Date of Effectiveness tbd Amount ($ total from all financiers): $20,000,000 Of which Committed ($) tbd Executing Agency Ministry of Water Resources and

Meteorology Approval Date of Original Procurement Plan 25 October 2007 Approval of Most Recent Procurement Plan 25 October 2007 Publication for Local Advertisementa Period Covered by this Plan 18 months TA = technical assistance, tbd = to be determined. a General procurement notice, invitations to prequalify and to bid, calls for expressions of interest. Procurement Thresholds, Goods and Related Services, Works and Supply and Install Procurement Methods To be used above/below ($) NCB works Less than $300,000 NCB goods Less than $100,000 Shopping works Less than $40,000 Shopping goods Less than $20,000 Community participation Up to $20,000 NCB = national competitive bidding. Procurement Thresholds, Consultants Services Procurement Methods To be used above/below ($) Quality and cost-based selection At least $200,000 Independent consultant selection Less than $200,000 List of Contract Packages in Excess of $100,000, Goods, Works and Consulting Services Ref Contract

Description Estimated

Cost ($’000)

Procurement Method

Expected Date of Advertisement

Prior Review

Y/N

Comments

1 Vehicles 535 NCB Q2 2008 Y Financed by ADB2 Consulting

Services 2,016 QCBS Q4 2007 Y Financed by ADB

QCBS (80:20) 3 Consulting

services 280 ICS Q1 2008 Y Financed by ADB

ADB = Asian Development Bank, ICS = independent consultant selection, NCB = national competitive bidding, Q = quarter, QCBS = quality-and cost-based selection.

42 Appendix 7

A. Procurement and Recruitment Procedures: Cambodia

a. Civil Works

1. For national competitive bidding (NCB) contracts, documents will be modeled on those developed for NCB under previous projects funded by the Asian Development Bank (ADB). This model is a single stage, single envelope model with postqualification. In each province, the responsible implementing agency (IA) will submit the first draft English language version of the procurement documents for the first works contract to ADB for review and approval regardless of the estimated contract amount. For subsequent contracts, ADB will review the documents after the award. ADB-approved procurement documents will be used as a model for all succeeding NCB contracts financed by ADB for the Project. For all contracts, ADB will review the bid evaluation report and proposal for award of contract on a prior review basis. 2. Community Participation in Procurement. Small-scale works contracts under the Commune Development Fund (CDF), with a maximum value of $20,000, may be awarded to community groups following procedures for community participation in procurement contained in ADB’s Procurement Guidelines (2007, as amended from time to time). The first civil works contract in each commune will be subject to ADB approval. Subsequently, the Provincial Local Administration Unit (PLAU) will maintain specified documents for review by ADB. Documents to be retained include the commune development plan, bid invitation letters, bid opening statements, bid evaluation reports or approval documents, and signed contracts between the commune council and the contractors, where applicable.

b. Recruitment of Consultants 3. For ADB-funded contracts, either quality and cost-based selection (QCBS) or independent consultant selection (ICS) will be applied. For QCBS, full technical proposals will be required. To calculate the firms’ total scores, the technical proposals will be given a weight of 80% and the financial proposals 20%. For recruitment of individual consultants recruited by the Government, ICS will be applied. For contracts fully funded by the Government, recruitment documents and procedures will follow government guidelines.

Table A7: Proposed Detailed Contract Packages (greater than $100,000)a

Description

Number of Contracts

Cost Estimate per Contract ($'000)

Aggregated Total Cost Estimate ($'000)

Mode of Procurement

Responsible Agency

A. Goods and Services, Equipment

1. Vehicles 2 270 535 NCB PMO, MOWRAM

B. Consulting Services 1. Implementation Consultants 1 2,300 2,016 QCBS PMO, MOWRAM

2. Tonle Sap Initiative Coordinator

(to be recruited by ADB)

1 180 180 ICS ADB

3. Postharvest Management Specialists

1 100 100 ICS PMO, MOWRAM

ADB = Asian Development Bank, ICS = independent consultant selection, MOWRAM = Ministry of Water Resources and Meteorology, NCB = national competitive bidding, PMO = project management office, QCBS = quality-and cost-based selection. a Subproject selection criteria eliminate projects over $100,000. A total of $9.9 million in multiple contract packages will be supported by the Project over 5 years. Source: Asian Development Bank estimates.

Appendix 7 43

Appendix 8

44

INDICATIVE STAFFING SCHEDULE (FOR CONSULTANTS) 1. The Project will require a total of 489 person-months of consulting services (55 person-months of international specialists and 434 person-months of national specialists) to assist the national, provincial, and commune government agencies; community groups, including water user groups; and other income-generating associations to (i) improve community consultation and participatory planning, and assist in the implementation of community mobilization activities; (ii) strengthen the institutional management capacity and technical knowledge of relevant local government agencies and community groups; (iii) ensure the selection and design of the most suitable and affordable infrastructure upgrading and development for each subproject; (iv) improve land use and agricultural productivity; and (v) facilitate individuals and community groups to develop new off-farm employment opportunities. The consultants’ inputs will be provided intermittently from June 2008 through June 2014. Consultants will be selected and engaged, in accordance with the Asian Development Bank’s (ADB’s) Guidelines on the Use of Consultants (2007, as amended from time to time) through an international firm in association with national firms, and short-listed firms will submit full technical proposals. Provision has been made for postharvest specialists (international 2 person-months and national 9 person-months) with expertise in postharvest technology to be selected as individual consultants. Provision has also been made for the recruitment of an independent consultant to facilitate coordination of the Tonle Sap Initiative1 (9 person months, recruited by ADB). Outline terms of reference are in Supplementary Appendix F. 2. The consultants will assist with overall coordination of the Project through participating agencies at national, provincial, district, commune, and village level. The tasks covered in the terms of reference require integrated management through the deployment of a team of specialists covering a wide range of disciplines (Table A8.1).

1 The coordinator will be recruited by ADB and will be based in the Tonle Sap Initiative Coordination Office located at

ADB’s Cambodia Resident Mission.

Appendix 8

45

Table A8: Summary of Staffing Schedule

Staff 2008 2009 2010 2011 2012 2013 2014 TotalA. International Rural development Specialist/Team Leader 5 3 2 2 1 1 2 16Environment Specialist 2 2Rural Business Development Specialist 2 1 3Community Driven Development Specialist 2 1 1 4Capacity Building and Training Specialist 2 1 3Social/Gender Specialist – including Resettlement 2 1 3Procurement Specialists 1 1 1 3Quality Assurance Specialists 1 1 1 3Post Harvest Management Specialists (Independent) 2 2

Tonle Sap Initiative Coordinator (Independent recruited by ADB) 4 5 9

Unallocated 1 1 2 1 1 1 7Subtotal (A) (person-months) 21 17 7 4 2 2 2 55

B. National Community Driven Development Specialist/Deputy Team Leader per Province (3 positions @ 27 pm)

12 21 18 18 6 3 3 81

Irrigation Engineer (3 positions @ 15 pm) 3 27 15 45

Environment Specialist 1 3 3 3 1 11Rural Business Development Specialist 1 2 2 2 1 8Rural infrastructure Specialist/Road Engineer (3 positions @ 11 pm) 4 18 6 6 33

Social/Gender Specialist – including Resettlement 2 4 4 4 2 16

GIS Specialist 3 8 3 3 1 1 19MIS Specialist 3 8 3 3 2 1 20Procurement Specialists (3 positions @ 6 pm) 3 4 4 4 3 18

Quality Assurance Specialists (3 positions @ 20 pm) 15 15 15 15 60

Accountants (3 positions @ 32 pm) 9 33 15 15 15 9 96

Post Harvest Management Specialists (Independent) 6 3 9

Unallocated 4 4 2 2 2 2 2 18Subtotal (B) (person-months) 44 153 93 75 48 16 5 434

Total (person-months) 65 170 100 79 50 18 7 489 ADB = Asian Development Bank, GIS = geographic information system, MIS = management information system, pm = person-months. Sources: Asian Development Bank estimates.

46 Appendix 9

ACCOUNTS AND FUND FLOW

MOWRAM = Ministry of Water Resources and Meteorology, PDA = provincial department of agriculture, PDRD = provincial department of rural development, PDWRAM = provincial department of water resources and meteorology, PLAU = provincial local administration unit. Source: Asian Development Bank.

Asian Development Bank

National Bank of Cambodia

MOWRAM First generation imprest account for grant proceeds held in commercial bank

3 No. PDWRAM Second generation imprest account for grant proceeds in commercial bank

3 No. PDRD Second generation imprest account for grant proceeds in commercial bank

3 No. PDA Second generation imprest account for grant proceeds in commercial bank

Commune Council Account held in Commercial bank

Commune Council Account held in Commercial bank

40 No. Commune Council accounts held in commercial bank

MOWRAM First generation imprest account for loan proceeds held in commercial bank

Direct payment for services

3 No. PDWRAM Second generation imprest account for loan proceeds in commercial bank

3 No. PDRD Second generation imprest account for loan proceeds in commercial bank

3 No. PLAU Second generation imprest account for grant proceeds in commercial bank

Appendix 10 47

SUMMARY ECONOMIC ANALYSIS

A. Methodology and Assumptions

1. The proposed Project adopts the sector approach, where the entire scope of project activities is not known at the Project Preparatory Technical Assistance (PPTA) stage. Financial and economic analyses were conducted to evaluate the viability of five core subprojects1 selected for feasibility studies rather than for the whole Project (Supplementary Appendix K). The financial and economic analyses of core subprojects serve dual objectives: (i) as a representative evaluation of the whole Project’s economic viability and financial sustainability; and (ii) more importantly, as a set of benchmarking criteria for the selection of future subprojects eligible for Asian Development Bank (ADB) financing as far as financial and economic aspects are concerned. The analyses placed more emphasis on the second objective because only when appropriate subprojects are selected will the whole Project become financially sustainable and economically viable.

2. The financial and economic analyses were consistent with relevant ADB guidelines, handbooks, and technical notes.2 The analyses also incorporated best-practice dimensions in the financial and economic analyses of interventions in the livelihood sector.

3. The Project has an implementation period of 6 years (2008–2014) and the economic life of the project interventions has been assumed to be 20 years (2008–2027). For the present analysis, the prevailing interbank exchange rate of KR4,000 per US dollar3 has been used. A discount rate of 12% has been used to estimate the net present value and serve as a cutoff point for the economic internal rate of return (EIRR).

4. The economic analysis determined incremental benefits attributable to project interventions in the five core subprojects, including: (i) benefits from an expected increase in agricultural production (economic-converted financial revenue); and (ii) realizable cost savings caused by investment in new infrastructure and rehabilitation and upgrading of existing rural infrastructure. The economic viability of each core subproject is evaluated against standard benchmarks (i.e., EIRR >12%, benefit-cost ratio >1.0, and economic net present value (ENPV) >0).

5. Financial revenue and costs were estimated using constant 2007 prices. Financial farm-gate prices are based on findings of the surveys undertaken by the PPTA team for the feasibility study during 2006. The analyses use a world price numeraire where economic prices for traded crop outputs and inputs have been based on World Bank commodity price projections. Labor costs have been shadow-priced at 0.80 of the wage rates while other inputs have been adjusted by the standard conversion factor of 0.90 as applicable for Cambodia.

6. Project investments are assumed to increase productive agricultural areas by improved water management and extension services, enabling increased cropping intensity in all terraces. Table A10.1 outlines the cropping intensity by core subproject and land category. The dry season irrigated area will increase from effectively zero in all subprojects to 6–9% in the with-Project scenario. The cropping intensity for the rain-fed and supplementary irrigation areas also increases 1 These are: (i) Ampil Tuek Commune, Kampong Tralach District, Kampong Chhnang Province; (ii) Pralay Commune,

Stoung District, Kampong Thom; (iii) Rumlech Commune, Banan District, Pursat Province; (iv) Srae Sdok Commune, Kandieng District, Pursat Province; and (v) San Kor Commune, Kampong Svay District, Kampong Thom Province.

2 Asian Development Bank (ADB). 1997. Guidelines for the Economic Analysis of Projects. Manila; ADB. 1999. Handbooks for the Economic of Water Supply Projects. Manila; ADB. 2002. Handbook for Integrating Risk Analysis in the Economic Analysis of Projects. Manila; ADB. 2005. Guidelines for the Financial Governance and Management of Investment Projects Financed by ADB. Manila; ADB. 2006. Handbook for Borrowers on the Financial Governance and Management of Investment Projects financed by the ADB. Manila.

3 National Bank of Cambodia. 10 August 2002

48 Appendix 10

in the with-Project scenario. In terms of land category, the cropping intensity on irrigated areas increases from zero to 150% in the lowland middle terrace area, 135% in the lowland lower terrace, and 170% in the lowland upper terrace. In the rain-fed areas, the cropping intensity also increases significantly—from 115% to 150% in the lowland middle terrace, from 110% to 125% in the lowland lower terrace, and from 141% to 144% in the lowland upper terrace.

Table A10.1: Cropping Intensity Summary - "Without" and "With"

Without With

Subproject Total Arable

Area (ha)

Cropping Intensity

(%)

Dry Season Irrigated

Areaa (ha)

Project Benefited Areab (ha)

Cropping Intensity

(%)

Dry Season Irrigated

Area (ha)

Ampil Tuek 3,258 120 0 3,005 129 250 Pralay 2,760 119 0 2,385 150 200 Rumlech 4,701 141 0 3,432 146 280 Sra Sdok 5,755 108 0 4,348 151 300 San Kor 6,229 108 0 4,684 150 320

ha – hectare. Sources: Project preparatory technical assistance reports.

Table A10.2: Cropping Intensity by Land Category Without With

Land Classification Rain Fed and

Supplementary Irrigation

(%)

Irrigated

(%)

Rain Fed and Supplementary

Irrigation

(%)

Irrigated

(%)

Lowland Lower Terrace 110 0 125 135

Lowland Mid Terrace 115 0 150 150

Lowland Upper Terrace 141 0 144 170 a Existing irrigated areas are poorly served and do not yield substantially more than rainfed

agriculture and have therefore been discounted in the analysis of without project conditions. b About 70–80% of farmers are expected to participate in project activities. Sources: Project preparatory technical assistance reports.

7. During the preparation stage, the PPTA team conducted socioeconomic surveys and documented basic data on current and potential income-generating activities (the livelihood models) in five core subproject locations through sample surveys, focus group discussions, in-depth interviews with relevant local stakeholders, as well as reviewing secondary data and existing literature. As a result, farm and household models were identified as possible livelihood models (on-farm and off-farm) to assist local residents in target areas to improve their living standards. Land-use profiles—classified lowland lower terrace, lowland middle terrace, and lowland upper terrace—were used to identify appropriate on-farm livelihood models. Survey results and information gathered during site visits were used to determine possible off-farm livelihood models.

8. Identified livelihood models (on-farm and off-farm) were analyzed individually to (i) simulate the future income-generating profile for the model owners/operators in the with- and without-Project scenario; and (ii) estimate incremental income attributable to project interventions. It is assumed that all investment and operating costs, as well as the associated revenues

Appendix 10 49

generated by these models, are incremental and would not have been realized without the Project’s interventions.

9. The livelihood models were selected as representative models for analysis and recommended for future implementation because (i) they are considered affordable to start with reasonable capital investments; (ii) they are easy to implement, taking into account local skills, expertise, available resources, education level, and farming culture; and (iii) more importantly, they have reasonable market demand for outputs.

10. The list of livelihood models is not exhaustive and the mixture of livelihood models in each core subproject may not be identical at the time of project implementation. Therefore, further assessment needs to be made in close consultation with local residents to ensure that activities of high value added are selected for implementation by local households and microenterprises. This is to ensure that risks of inappropriateness of the models are minimized at the time of project implementation.

B. Project Benefits

11. The Project’s goal is to improve livelihoods in three provinces (Kampong Chhnang; Kampong Thom; and Pursat) around Tonle Sap basin. Target rural communities will benefit from the improved coverage and quality of rural infrastructure (irrigation, roads, village level postharvest facilities, and markets) as well as new opportunities resulting from the application of new skills in the pursuit of on-farm and off-farm enterprises to improve their livelihoods. In particular, target rural communities will benefit from (i) improved rural infrastructure, including social infrastructure; (ii) rehabilitated and upgraded agriculture water management infrastructure and increased rice production and productivity, and reduced susceptibility to droughts and floods; (iii) improvement of inter-village/commune roads and road links to main provincial and national highways; and (iv) increased income from the creation and development of diversified livelihood options (i.e., on-farm and off-farm agricultural and nonagricultural income-generating activities).

12. Beneficiaries. The five core subprojects will cover a population of about 60,000 people (11,000 households), 63% of which is categorized poor. The poverty incidence is the highest in the San Kor subproject (76%), and the Srae Sdok subproject has the lowest poverty incidence (51%). However, all the five core subprojects selected have poverty ratios substantially above the national poverty ratio of 36%. Table A10.3 outlines the target beneficiary population in the five core subprojects. The majority of the target beneficiaries are involved in agriculture production and local small-scale commercial activities. The Project’s support will help increase cropping intensity to enable local residents to expand agricultural production (rice and non-rice crops), ensure food security in the short term, and reduce poverty in the medium term.

Table A10.3: Target Beneficiary Population Population Poverty Profile

Subproject # Persons # Households # Poor Households % of Total

Ampil Tuek Subproject 12,370 2,379 1,642 69

Pralay Subproject 12,634 2,304 1,198 52

Rumlech Subproject 8,404 1,562 937 60

Srae Sdok Subproject 11,103 1,960 1,000 51

San Kor Subproject 15,383 2,802 2,130 76

Total (estimate) 59,894 11,007 6,906 63

Sources: Project preparatory technical assistance reports.

50 Appendix 10

1. Quantifiable Benefits

13. The major benefits will be net incremental income from the livelihood models as a result of the Project’s effort to increase the cropping intensities, micro-credit support, and extension service support schemes. Supplementary Appendix K outlines the results of individual model analysis in each of the five core subprojects. The financial benefit stream is derived by estimating the net incremental income for each representative livelihood model multiplied by (i) the projected land area in case the model involves agriculture production, and (ii) the number of model replicators in case the model involves off-farm activities and where the number of micro- and household businesses is identifiable. The financial benefit stream4 is then converted into the economic benefit stream using the standard conversion factor. Annual household expenditure is estimated to increase by 26% from $300 to $378.

14. Project investment in new infrastructure, and upgrading and rehabilitation of existing infrastructure, bring about a wide range of other benefits through cost savings. The economic analysis quantifies the cost savings the Project is expected to generate. Numerous types of cost savings are expected, including cost savings from cleaning up and damages after floods, travel time/cost savings for potable water (to and from the river/lake), and health and medical cost savings (formal and informal hospital fees and medical treatments). These benefits from cost savings were estimated for three out of five core subprojects (Ampil Tuek, Pralay, and Rumlech) as they are evident from the scope of priority infrastructure investments. For Srae Sdok and San Kor subprojects, the target population will probably enjoy these benefits, but further assessment will be needed at the beginning of subproject implementation when the commune priorities are confirmed.

2. Nonquantifiable Benefits

15. A number of other benefits cannot be readily quantified. First, food poverty is a critical problem in the majority of communes around Tonle Sap basin. The Project will contribute significantly to ensure food security and gradually eradicate food poverty. While benefits of food poor reduction can quantifiable, these benefits may also be attributed to factors other than project interventions. Second, the Project will help build capacity for local stakeholders, including commune councils and public utility entities in charge of irrigation, roads, and other rural infrastructure. Benefits will mainly come from Project TA in planning, management, operation, and maintenance of irrigation schemes, and social and technical infrastructure. Improved planning will be the key to increase efficiency because the investment in fixed assets (infrastructure) is normally expensive. If investment is not well planned, the level of wastage may be expected to be very high. Improvement in management of operation and maintenance (O&M) activities will also generate benefits from annual cost savings and hence reduce/minimize government budget requirements and enable participatory O&M.

16. Third, in addition to financial benefits, livelihood improvement activities will be a local forum (commune halls)5 for farmers to exchanges experience, skills, and farming techniques to help move away from traditional and backward farming techniques. This forum, together with micro-credit and savings groups, will promote local savings for reinvestment and empower women’s roles and positions in society. Fourth, school improvements (both new construction and 4 The financial internal rate of return for each core subproject is not very useful in the context where the mix of

livelihood activities to be undertaken in each commune is highly uncertain. 5 The Project may support upgrading of commune meeting halls if the commune is not included under the Commune

Council Development Project (ADB. 2002. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grant to the Kingdom of Cambodia for the Commune Council Development Project. Manila. (Grant 4007, for $3.0 million approved on 3 December).

Appendix 10 51

rehabilitation) will significantly improve the teaching and learning quality of commune schools. Indirect benefits will include lower dropouts, increased net enrolment rates, and an increased transition rate to lower and upper secondary schools. Fifth, the Project will contribute to increase awareness and change the mindsets of local people in natural resource protection.

17. Sixth, cost savings that are not readily quantifiable include travel time and vehicle cost savings, transport services development at communes, increased utility of land frontages created by improved intervillage and inter-commune roads, and road links to provincial and national highways. Cost savings may also occur from additional classrooms that may be constructed 6 in the immediate neighborhood. By not having to travel to other villages or communes for schooling to avoid overcrowding, children’s travel time is saved, and parents save financial contributions (formal and informal) to schools outside their home communes.

C. Summary Economic Analysis

18. The EIRR was calculated for the five core subprojects to determine their economic viability and serve as benchmarks for selection of subprojects at the time of project implementation.

19. The results of the economic analysis for the five core subprojects are summarized in Table A10.4. Base case EIRRs range between 19.0% and 22.1%; ENPVs are in the range of $419,000 and $520,000; and benefit-cost ratios are estimated at 1.49–1.70. These indicators suggest that, other things being equal, all five core subprojects are economically viable,7 since EIRRs in base cases are well above the cutoff rate of 12%. As the economic analysis of the five core subprojects serves as an evaluation of the whole Project, it is considered economically viable since the EIRRs exceed the economic opportunity cost of capital benefits quantified. Besides quantifiable benefits, other social, environmental, and capacity building benefits have not been quantified because of measurement difficulties and lack of data. Therefore, the analyses can be regarded as a conservative estimate of the overall benefits.

20. Sensitivity analysis was undertaken to test the robustness of the analysis and the consequences of changes in the following (combinations of) variables: (i) capital cost increase by 10%; (ii) O&M cost increase by 10%; (iii) benefit decrease by 10%; (iv) benefit delay of 2 years; (v) benefit delay of 4 years; (vi) a combination of capital cost increase by 10% and O&M costs increase by 10%; and (vii) a combination of capital cost increase by 10%, O&M cost increase by 10%, and benefit decrease by 10%. The results of the sensitivity analysis for the five core subprojects are summarized in Table A10.4.

21. The results of the sensitivity analysis show that all core subprojects under examination are highly sensitive to delays in project implementation and hence realization of benefits, particularly when benefits delay 4 years (Table A10.4 “low” column). Field experience in Cambodia has recorded significant delays in project implementation with regard to livelihood improvement projects because of limited local capacity, delaying realization of benefits. As such, it is strongly recommended that the project operating entities of the three project provinces pay due attention to capacity building for responsible staff and strictly follow the project implementation schedules. Factors delaying project implementation should be well under control and minimized to ensure the Project’s economic viability. Results of economic and sensitivity analyses for each core subproject are outlined in Supplementary Appendix K.

6 The proposed project plan will allow assistance for classroom construction, upgrading, and rehabilitation in communes

not covered by the Education Sector Development Program. ADB 2004 Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Kingdom of Cambodia for the Second Education Sector Program. Manila. (Loan 2122 for $25 million approved on 9 December 2004).

7 The aggregated indicators (EIRRs, ENPVs, and BCRs) for core subprojects are of little significance in this context.

52 Appendix 10

Table A10.4: Summary Project Economic Analysis

EIRR ENPV% $ BCR Low Median High Low Median High Low Median High

Ampil Tuek 22.10 520,243 1.70 11.40 19.80 22.00 (34,943) 393,770 515,312 0.95 1.53 1.69

Pralay 19.60 440,059 1.54 10.30 17.60 19.50 (115,082) 314,617 432,851 0.86 1.39 1.53

Rumlech 21.40 419,743 1.64 11.10 19.10 21.20 (17,156) 311,925 413,460 0.93 1.47 1.62

Srae Sdok 21.60 502,413 1.67 11.20 19.40 21.40 (49,443) 377,630 493,767 0.93 1.51 1.65

San Kor 19.00 451,526 1.49 10.00 17.10 18.90 (151,349) 315,144 442,443 0.83 1.35 1.48

SubprojectBase Case

EIRR ENPV BCRSensitivity Analysis

( ) = negative, BCR = benefit cost ratio, EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Case 1: Capital Costs + 10%, Case 2: Recurrent Costs + 10%, Case 3: Benefits decrease – 10%, Case 4: Benefits Delayed by 2 years, Case 5: Benefits Delayed by 4 years, Case 6: Capital Costs +10% and Recurrent Costs +10%, Case 7: Capital Costs +10%, O&M Costs +10%, and Benefits Decreased -10%. Sources: Asian Development Bank estimates.

D. Distribution Analysis and Poverty Impact Assessment

22. Distribution analyses have been prepared separately for each core subproject. The following beneficiaries can be identified in the Project: (i) micro- and household enterprises will gain because of positive net financial benefits from livelihood activities; (ii) the Government and/or economy will benefit where financial costs exceed economic costs; (iii) labor will gain where the financial costs of labor exceed its opportunity costs, both in implementation and operation phases of the subproject; and (iv) utility services (mainly irrigation services entities) will lose because direct cost recovery from beneficiaries is lower than required.

23. Distribution of benefits and poverty impact analysis for the five core subprojects is in Table A10.5. Total net benefits are estimated at about $1.9 million. The proportion of benefits accruing to the poor is estimated at $771,000, producing an overall poverty impact ratio of 40.8% of total net benefits, suggesting the Project would make a significant contribution to local poverty reduction. The benefit distribution and poverty impact is shown in Supplementary Appendix K.

Table A10.5: Benefit Distribution and Poverty Impact Assessment (Unit: $, %)

Subproject

Micro-and Households Enterprisesa

Utilitiesb

Labor

Gov/

Economy

Total

Benefit Accrued to the Poorc

Poverty Impact Ratio (%)d

Ampil Tuek 130,200 (13,838) 12,408 70,312 169,082 72,534 42.9

Pralay 255,635 0 13,573 76,912 346,120 108,491 31.3

Rumlech 360,005 (13,422) 10,974 62,186 419,743 158,377 37.7

Srae Sdok 471,028 (51,440) 12,424 70,401 502,413 171,857 34.2

San Kor 509,214 (159,054) 15,205 86,162 451,526 260,221 57.6

Total (estimate) 1,726,082 (267,754) 64,583 365,973 1,888,885 771,479 40.8 ( ) = negative. a Micro- and households enterprises include farmers and rural businesses. b Utilities refer to state entities responsible for operations and maintenance of public utility works including irrigation, water management, road, and other infrastructure. c Proportion of national gross domestic product received by the poor was estimated at 12.6% of total. d Poverty ratios are as follows: 69% in Amil Teuk, 52% in Pralay, 60% in Rumlech, 51% in Srae Sdok, and 76% in San Kor. Sources: Asian Development Bank estimates.

Appendix 10 53

E. Fiscal Impact Analysis

24. The fiscal impact of the Project is important, as it helps assess the sustainability level. In practice, rural livelihood improvement projects often support capital and recurrent cost outlays, making the recurrent cost sustainability issue one of central importance in the economic analysis. The impact on the overall budget after the Project is completed often determines whether the project objectives will be sustained in the long run. Key issues to be addressed include the project investment’s impacts on fiscal indicators such as annual state budget allocation, capital replacement, and recurrent expenditure for during and after the project implementation period.

25. Table A10.6 presents recurrent cost outlays estimated for the whole Project. The essential part is the cost to finance O&M activities to be borne by public utility entities with regard to irrigation, rural water and sanitation, and other civil works. When the project implementation period is completed, the annual cost to be borne by public utility entities is estimated at $274,000 while annual cost recovery (mainly from the irrigation service fee) is estimated at $114,000—leaving an annual deficit of $160,000 to be allocated by the Government. This level of government contribution (subsidy) is considered affordable in the context of development in Cambodia. However, the project operating entities should prepare a realistic cost recovery schedule bearing in mind that (i) the level of subsidies should be made in a transparent manner; and (ii) the more revenue collected via the user pays principle, the lower the subsidy required.

Table A10.6: Summary Fiscal Impact Analysis

Item/Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

A. Total Annual Operation and maintenance Costs (With-Project)

344,368 431,617 509,745 577,278 652,147 661,912 696,945 696,945

1. Irrigation, rural water and sanitation, and other civil works

258 4,646 36,348 108,894 186,065 244,907 273,916 273,916

B. Annual Cost Recovery

1. Annual irrigation service fee

0

0

0

9,500

38,000

66,500

95,000

114,000

C. Annual Cash Flow (A1 minus B1)

(258)

(1,646)

(36,348)

(99,394)

(148,065)

(178,407)

(178,916)

(159,916)

D. State Budget to be Allocated to Utility Entities

258

4,646

36,348

99,394

148,065

178,407

178,916

159,916

( ) = negative. Irrigation service fee will be set by individual water users’ associations = $19 estimate only, comprising $11.4 cash and $7.6 in labor contribution. Sources: Asian Development Bank estimates.

54 Appendix 11

SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY

A. Linkages to the Country Poverty Analysis Is the sector identified as a national priority in country poverty analysis?

Yes

No

Is the sector identified as a national priority in country poverty partnership agreement?

Yes

No

Contribution of the sector or subsector to reduce poverty in Cambodia: Despite relatively robust growth over the past decade, official figures indicate that the incidence of poverty has declined only modestly, from 39% in 1994 to 36% in 1999. Cambodia’s recent growth has been concentrated in urban areas, and based around the garment and tourism sectors. Poverty in Cambodia remains predominantly rural, and the majority of the poor live in rural areas and rely on agriculture for their livelihoods. The poverty rate ranges from a low of 10–15% in Phnom Penh to 40–45% in rural areas, reaching 70–80% in some areas around Tonle Sap basin. Against this background, the current Asian Development Bank (ADB) country strategy and program, 2005–2009, focuses on Tonle Sap Basin to support poverty reduction in one of the poorest and most environmentally sensitive regions of Cambodia. The need for accelerating rural development to achieve poverty reduction is well recognized and is given priority in the (i) Second Socioeconomic Development Plan (SEDP II), 2001–2005, which is the basis of the Poverty Reduction Partnership Agreement between the Government of Cambodia and ADB, 2005; (ii) National Poverty Reduction Strategy, 2003; (iii) Rectangular Strategy for Growth, Employment, Equity and Efficiency, 2004; and (iv) National Strategic Development Plan (NSDP), 2006, which replaces the Second Socioeconomic Development Plan and the National Poverty Reduction Strategy, and incorporates long-term targets in Cambodia’s Millennium Development Goals, 2003 (updated in 2005). The NSDP has six pillars: (i) good governance, (ii) environment for the implementation of the Rectangular Strategy, (iii) enhancement of the agricultural sector, (iv) continued rehabilitation and construction of physical infrastructure, (v) private sector growth and employment, and (iv) capacity building and human resources development. The NSDP places particular emphasis on agriculture, rural development, and infrastructure. According to its indicative budget allocation, the NDSP allocates over 20% to the agriculture and rural development sector and 60% to rural areas. The Government’s commitment to decentralization is a key underlying theme of the above strategies/policies. An important feature of the Project will be increased alignment with the Strategic Framework for Decentralization and Deconcentration Reforms, 2005, which aims to channel a substantial amount of domestic resources and external aid directly to support newly empowered subnational planning and budgeting units. The framework is a 5-year national program to establish institutional capacity at provincial level, establishing provincial/municipal and district councils, and channeling development spending and capacity building to all levels of the subnational governance system. In line with the objectives of harmonization and the Government’s wish to empower communes to plan and implement subprojects, in collaboration with provincial technical departments, the implementation structure of the Project will be fully consistent with the framework. B. Poverty Analysis Targeting Classification: Targeted intervention

What type of poverty analysis is needed? The proposed Project is an integral part of the Tonle Sap Initiative, an integrated program of technical assistance (TA), loan, and grant projects designed to assist Cambodia achieve the twin goals of improving the lives and livelihoods of the population while protecting and conserving the unique biodiversity and environment of Tonle Sap. The proposed project design focuses on improving the livelihoods options for households inhabiting the lowland area stretching from the outer limit of the Tonle Sap Biosphere Reserve’s buffer zone to the foothills of the upper watershed area. It will target 40 poor communes on the Tonle Sap lowlandsa in the three lakeside provinces of Kampong Chhnang, Kampong Thom, and Pursat where about 38% of the population falls under the official poverty line—the highest proportion in the country. Some 50% of villages in these provinces have 40–60% of households living below the poverty line, with a peak of 80% in parts of Kampong Chhnang. Many people in the rural communities reviewed during the rapid rural appraisal and participatory rural appraisal were found to be extremely poor and vulnerable to shocks. On average, over 50% of rural people do not grow enough rice to meet their needs; of these, half have to make up shortfalls of 3 or 4 months’ supply, and shortfalls of 6 months or more are not uncommon for the remainder. They are also vulnerable to a variety of shocks: seasonal shortages of rainfall (especially at the beginning of the rainy season); seasonal shortages of water (especially drinking water during the dry season) and at the start and finish of both wet and dry rice crops; food shortages (especially shortfalls in the rice harvest caused by an unreliable supply of water); and seasonal trends that work against them (such as having to sell rice immediately after the harvest on a buyers’ market). The Project will support community mobilization for formulation of development plans and implementation of small-

Appendix 11 55

scale infrastructure (irrigation, roads, village level postharvest facilities, and markets). It will also increase options for people to develop the necessary skills and access additional financial resources to enable pursuit of new livelihood activities. This will allow them to increase and stabilize rural incomes, and reduce the need for people to migrate into the buffer zone and lake during the dry season. The ability of people living in the lowland communes to improve their livelihoods is constrained by: (i) poor rural infrastructure; and (ii) limited knowledge and access to improved technologies and techniques. The Government and farmers consider improvements to agricultural water management systems crucial to increasing agricultural, primarily rice, production; reducing susceptibility to droughts and floods; ensuring food security; and enabling agricultural diversification. Access to many villages is difficult, particularly during the wet season, because the condition of rural roads is poor. Good access would enable government services to be delivered to rural communities, farmers to buy agricultural inputs and to market surplus produce, and rural people to access health services, education, and other amenities more easily. Other small-scale infrastructure (such as schools, village offices, village meeting halls, markets, produce stores, and crop processing and packaging facilities) will improve the standard of living, support local livelihood activities, and aid community cohesion. C. Participation Process Is there a stakeholder analysis? Yes No

Is there a participation strategy? Yes No

Rural infrastructure needs at commune and village level will be identified and prioritized through the five-step Commune/Sangkat b planning process currently used to prepare 5-year commune development plans and annual commune investment plans. This is a participatory process that involves communities in identifying their needs; and provides for their direct involvement in resource allocation, decision making, implementation, and monitoring at the local level. With the exception of larger roads, communities will also have ownership of completed works, and responsibility for their subsequent operation and maintenance (O&M). Social infrastructure subprojects seeking support from the Project will be identified by the commune council, included in the commune investment plan, and verified at the district integration workshop held in October each year. Support will be provided to ensure full participation by all stakeholders (including intended beneficiaries) in the planning, design, implementation, and operation of subprojects. The Project will utilize commune council supporters recruited by the commune councils and trained by the Project to assist commune councils in designing and managing interventions funded through the Commune Development Fund (CDF). Commune council supporters are expected to be the primary liaison with government departments within the province, facilitating their involvement in advisory TA to the commune councils, village committees, and farmer water user committees (FWUCs). D. Gender Development Strategy to maximize impacts on women: Women in the project area are very vulnerable. They have less access to land ownership and other property rights, credit, paid employment, education, and health services. They also have few opportunities for self-development or participation in community decision making since Khmer tradition ascribes a passive role to women. Nevertheless, the gender division of labor is changing overall: women and men play progressively interchangeable roles because women are increasingly called upon to meet all household needs as men migrate for paid employment. There are also many displaced or disabled persons, who suffer from poverty and other forms of social deprivation more than the rest of the population. At present, only about 3–5% of women participate in the committee farmer water user group (FWUG). The Ministry of Water Resources and Meteorology (MOWRAM) is promoting women's participation in decision-making bodies at commune level to about 10% by 2010. A gender action plan (GAP) has been prepared to ensure gender equality in the distribution of project benefits and to enable active engagement by women in subproject design and implementation. The implementation arrangements and estimated costs of the GAP have been incorporated into the overall project design and costing. The implementation schedule of the GAP will be in line with overall implementation of the Project. Has an output been prepared? Yes

No

56 Appendix 11

E. Social Safeguards and Other Social Risks Item Significance Strategy to Address Issues Plan Required Resettlement Significant

Not significant None

No involuntary resettlement impact is foreseen under subprojects funded from the CDFs (less than $20.000 per commune) and safeguards are built into the community decision-making process to deal with any losses that may arise. Significant resettlement impacts are not expected by agricultural water management infrastructure and rural roads and communication infrastructure (less than $100,000 per project) because the majority will be improved along existing rights-of-way and will require, if any, the acquisition of minor amounts of land plus compensation for roadside trees, crops, or small buildings. A short resettlement plan will be prepared for each subproject has a land acquisition and resettlement impact in accordance with the resettlement framework (Supplementary Appendix H).

Full Short None

Affordability Significant Not significant None

For improvement of agricultural water management infrastructure, farmers will be expected to contribute 15% of the cost of scheme development, in labor for on-farm works digging field and farm channels, and O&M. For rural roads, where a commune expresses willingness to undertake maintenance, the Project will assist commune councils in establishing road maintenance committees, and provide a basic set of road maintenance tools and TA to establish mechanisms to raise funds for routine maintenance locally. Communities are not expected to contribute to the cost of construction, as it is difficult to establish the identity of the users.

Yes No

Labor Significant Not significant None

No adverse impact is anticipated. The Project will create employment opportunities in construction and maintenance, mainly for poor unskilled laborers (35% of paid unskilled laborers will be women), and ensure that equal pay for women and men for work of equal value and all labor laws and regulations are adhered to by all subproject contractors (see Affordability).

Yes No

Indigenous Peoples

Significant Not significant None

The Cham is the major group of non-Khmer living in the project target districts and communes. Throughout the project area, Cham live in all-Cham and mixed Cham-Khmer villages. Although the Cham are Muslim and form communities based on religious, social, and cultural practices, their livelihoods are similar to the majority Khmer population. They practice wet-rice cultivation, and are engaged in various other agricultural (livestock, fishing) and nonagricultural (business, microenterprises) activities. In addition, Vietnamese communities and communities of indigenous peoples, particularly Kuy and Por, are identified in or adjacent to the outer limits of the project area. Although no communities have been identified in the target project communes, the subproject selection criteria include giving priority to subprojects that would provide benefit to those groups and requiring the Project to take indigenous peoples actions where indigenous communities live in project communes.

Yes No

Other risks and/or vulnerabilities

Significant Not significant None

Yes No

a The Tonle Sap lowland was defined during the project preparatory TA (PPTA) PPTA as the land area presently under predominantly agricultural (cropping and grazing) use on the flat-lying colluvial-alluvial plain around Tonle Sap above the buffer zone.

b Sangkat is a Cambodian word for communes or quarters. It is a subdivision of all Cambodian municipalities' districts

Appendix 12 57

SUMMARY RESETTLEMENT FRAMEWORK A. Background

1. The Tonle Sap Lowlands Rural Development Project (the Project) will target a total of nine districts and 40 communes in the three provinces of Kampong Chhnang, Kampong Thom, and Pursat. The expected outcome of the Project will be that rural communities use the improved coverage and quality of rural infrastructure (Component 1) and new opportunities resulting from the application of new skills, in the pursuit of on-farm and off-farm enterprises to improve their livelihoods (Component 2). The Project components and anticipated land acquisition and resettlement impacts are summarized in Table A11.

Table A12: Potential for Land Acquisition and Anticipated Resettlement Impacts

Component Possible Land Acquisition and Resettlement Impacts

A. Improving Rural Infrastructure

Improvement and Development of Social Infrastructure (less than $20,000 per subproject; $70,000 per commune over the life of the Project) 40 Commune Development Funds to be used for community-driven infrastructure subprojects that directly benefit communities and involve community decision-making and management

No involuntary resettlement impacts and/or involuntary resettlement impacts are not significant

• Village (≠ commune) markets (about 100 m²), grain dyers (30 m²), and communal village meeting halls (40 m²) will be constructed in public unused land

• Improvement of village roads will be within existing rights-of-waya

• Construction of drainage, bridges, and culvert will only cause temporary land occupation that may cause access disruption during construction

Improvement of Agricultural Water Management Infrastructure (less than $100,000) Rehabilitation of small water management schemes (less than 200 ha)

No involuntary resettlement impacts and/or involuntary resettlement impacts are not significant

• Rehabilitation of existing secondary canals will be within existing rights-of-way and is not likely to require land acquisition. There may be cases where affected people with title to land have encroached from their legitimate landholding onto land that they do not own.

• Minor land acquisition may be necessary with the enlargement of reservoirs

• Trees and crops within existing rights-of-way will require compensation. Loss of income will also require compensation and significant loss of livelihood will require rehabilitation.

• Little or no significant impact is expected on any household. If the conditions for voluntary land donation are met, subprojects can be implemented through voluntary donation.

Improvement of Rural Roads and Communication Infrastructure (less than $100,000) Rehabilitation of roads; 3.5 m wide laterite surface; up to 10 km (mostly 5 km or less); raising embankments up to 2 m high and provided with culverts in flood zones

No involuntary resettlement impacts and/or involuntary resettlement impacts are not significant

• Rehabilitation of roads would cause temporary occupation of land during construction. Such rehabilitation includes (i) laterite surfacing of existing 3.5 m wide roads, (ii) raising embankments up to 2 m, and (iii) resurfacing and spot repairs. There may be cases where affected people with title to land have encroached from their legitimate landholding onto land that they do not own.

• Trees and crops within existing rights-of-way will require compensation. Loss of income will also require compensation and significant loss of livelihood will require rehabilitation.

• Little or no significant impact is expected on any household. If the conditions for voluntary land donation are met (Supplementary Appendix H, paras. 14 and 15), subprojects can be implemented

58 Appendix 12

Component Possible Land Acquisition and Resettlement Impacts through voluntary donation.

B. Increasing Rural Livelihood Options

Financial Services Improving access to credit through group savings and loans through microfinance institutions

No involuntary resettlement effects are foreseen

• The component will not involve construction of new physical facilities

• Beneficiaries will be determined through community decision making during project implementation. People affected under Component 1 may become beneficiaries of this component.

Technical Services Demand-driven technical services provided by government and nongovernment agencies to mobilize various groups

No involuntary resettlement effects are foreseen

• Various technical training will be implemented using existing facilities. Agricultural extension services will be provided on-farm.

• Beneficiaries will be determined through community decision making during project implementation. Each subproject in the Commune) will ensure that people affected under Component 1, particularly vulnerable affected persons, will benefit from this component.

a In most cases, they are unoccupied but there is a possibility that some landowners alongside the right-of-way encroached from their legitimate landholding onto land that they do not own, for agricultural purposes.

Source: Available at: http://www.adb.org/Documents/Resettlement_Plans/CAM/37287/37287-CAM-RF.pdf B. Policy Framework and Entitlements

2. The resettlement framework (Supplementary Appendix H) is based on laws, regulations, and policies of the Government of Cambodia, principally the Constitution, 1993; the Land Law, 2001; and related sub-decrees and regulations and Asian Development Bank (ADB) policies and guidelines. It was endorsed by the Government and guides the preparation of resettlement plans, if required during project implementation. In all instances where subprojects require land acquisition and resettlement, the provisions and principles adopted in the resettlement framework for the Project will supersede the provisions of relevant decrees currently in force in Cambodia wherever a gap exists between government laws and regulations and ADB policies.

3. The entitlement matrix (Supplementary Appendix M) summarizes the main types of losses and the corresponding nature and scope of entitlement. The extent of impact on vulnerable groups—including poor households, ethnic minority groups, female-headed households, landless households, disabled-headed households, and elderly people without support structures—will be determined during subproject preparation. The Project will pay due attention so that those vulnerable people will become subproject beneficiaries.

C. Institutional Framework

4. The Ministry of Water Resources and Meteorology (MOWRAM), the Executing Agency (EA), through its project management office (PMO), will assure overall planning, coordination, and reporting of this resettlement framework. The EA will guide, support, endorse, and monitor the work of the provincial resettlement subcommittee (PRS) in six participating provinces under the guidance from the inter-ministerial resettlement committee. A PRS1 will be established in each of the three project target provinces.

1 Membership will include directors of provincial departments involved in the project (provincial departments of water

resources and meteorology, rural development, and environment,) and a permanent deputy from target districts (district governors or deputy district governors).

Appendix 12 59

5. In each province, the Provincial Department of Water Resources and Meteorology (PDWRAM) and Provincial Department of Rural Development (PDRD) will appoint a resettlement focal point with responsibility to screen resettlement impact. The resettlement focal point, under guidance from the provincial resettlement subcommittee, will recruit contractors to prepare subproject resettlement plans. In each of the 40 target project communes, a commune land acquisition committee (CLAC) 2 will be established, which will (i) confirm that no resettlement impact is foreseen in subprojects prepared under Commune Development Funds; and (ii) assist the resettlement focal point to consult, disclose, and monitor resettlement plans at commune/village level.

D. Preparation and Implementation of Resettlement Plans

6. Subproject screening will be undertaken through the following steps:

(i) Social infrastructure (commune livelihoods funds). In the commune investment plans, the commune council will confirm—based on the technical option selected on the preliminary subproject design and subproject categorization form—that the subproject falls under category C (no resettlement impact). The resettlement impact categorization form must be attached to the commune investment plan. The commune council chief has to certify that new facilities would be constructed on unused public lands. In case it is decided that the subproject would only require voluntary donation from the commune and/or any individual and not require involuntary resettlement, the commune council chief also has to describe safeguard measures in the commune investment plan. For category B subprojects, follow the procedure in para. 7.

(ii) Water management infrastructure/rural roads and communication infrastructure. Based on the technical option selected and the preliminary subproject design, the subproject falls under either category B (not significant resettlement impact) or C. The provincial level units PDWRAM and PDRD will screen subprojects under this component and ensure that only subprojects whose resettlement impacts remain within the limits of a category B subproject will be financed by the Project.

7. In each province, resettlement planning for all subprojects under category B that are prepared at the same time will be consolidated into a single commune land acquisition and resettlement plan (LARP) prepared by the PDWRAM and PDRD with assistance from the resettlement specialists and CLACs under the guidance of MOWRAM and PRS. The procedure for preparation, finalization, and approval is as follows.

(i) PRS will recruit a professional appraiser to conduct a replacement cost survey in the subproject areas once a year, to determine current market prices for agricultural, residential, and commercial land; different types of structures; and crops and trees.

(ii) In line with subproject (under Components 1 and 2) planning, the resettlement focal point from the PDWRAM and PDRD with assistance from resettlement specialists (consultants), CLAC and village representatives under the guidance of PRS, will (a) undertake a census of all affected persons; (b) conduct a detailed measurement survey following the detailed design of the subproject and demarcation of land

2 Membership of the commune land acquisition committee will include district, commune, and village representatives;

representatives of affected persons for subprojects; and a resettlement focal point from each implementing agency. To address issues of vulnerable affected persons adequately, membership of the committee will include female and, as relevant, ethnic minority representatives.

60 Appendix 12

acquisition requirements; and (c) undertake a socioeconomic survey of at least 10% of all affected persons, and 20% of severely affected persons.

(iii) Following the detailed measurement survey/socioeconomic survey or in conjunction with it, the resettlement focal point from the PDWRAM and PDRD, assisted by resettlement specialists, will prepare a draft commune LARP, and compensation rates and amounts from the replacement cost survey. The official lists of affected persons, their losses, and compensation and assistance amounts will be appended to the draft commune LARP. If the subproject will not require involuntary resettlement, a voluntary land donation report will be prepared and information will be included in the commune LARP.

(iv) The draft commune LARP will be presented to affected persons by the PDRAM and PDRD and other stakeholders in public meetings in villages and communes in the subproject areas. Affected persons will be encouraged to raise issues and make suggestions about land acquisition requirements, compensation rates and amounts, and other aspects of resettlement activities. Copies of the draft commune LARP and/or summary brochures will be available during these consultations. The draft commune LARP will be made available to affected persons at village and commune offices in target communes.

(v) The PDRAM and PDRD, assisted by resettlement specialists, will prepare the final commune LARP, incorporating comments from affected persons and other documents; and submit it for review and approval to the provincial rural development committee and PRS/interministerial resettlement committee (IRC). At this stage, the PDRAM and PDRD or MOWRAM may consolidate several commune LARP into one provincial LARP to facilitate the review. MOWRAM and the PRS/IRC will submit the commune or provincial LARP to IRC and ADB for review and approval. The commune or provincial LARP will be disclosed in accordance with ADB’s Public Communications Policy (2005) to the affected communities and on the ADB website after it has been approved.

(vi) Land acquisition, compensation, and relocation of affected persons cannot commence until the LARP has been reviewed and approved by the IRC, and approval or no objection given by ADB. All resettlement activities will be coordinated with the civil works schedule. Civil works contractors will not be issued a notice of possession of the site until (a) compensation and relocation of affected persons have been satisfactorily completed, (b) agreed rehabilitation assistance is in place, and (c) the site is free of all encumbrances.

E. Consultation, Grievance Redress, and Disclosure

8. Consultation with affected persons will take place from the subproject preparation stage, and will be completed prior to finalization of detailed designs and resettlement plan so that their needs and preferences can be incorporated into the design arrangements where practicable. They will also participate in the various resettlement plan processes, including preparation of the inventory of losses, validation of compensation rates and entitlements, handover of entitlements, monitoring of impacts and benefits, and discussion and settlement of grievances.

9. To ensure that all grievances of those affected on any aspect of land acquisition, compensation, relocation, and determination and payment of entitlements are resolved in a timely and satisfactory manner, and that all avenues for airing grievances are available, the Project will set up a mechanism to deal with any such grievances during project implementation. The affected individuals will be made fully aware of their rights (both verbally and in writing)

Appendix 12 61

during consultations and at each phase of the resettlement process. Detailed procedures for hearing and redressing grievances, including appeal processes, will be made public through an effective public information campaign. The CLAC will record and report on all complaints and their resolution. The independent monitoring agency will be responsible for checking the procedures for and resolutions of grievances and complaints.

10. The EA, assisted by the CLAC, will disclose (i) draft resettlement plans prior to submission for review and approval by ADB; (ii) final resettlement plans approved by ADB, and (iii) any revisions to the resettlement plans as a result of changes in scope or design layout. Final and revised resettlement plans will be posted on ADB’s website following ADB approval. Key information in the resettlement plans, including compensation and rehabilitation options, will be disclosed to those affected before commencement of civil works. The information will be made publicly available in a readily accessible location such as village and commune halls and be in the form of an information leaflet or brochure—all in a form and language that can be readily understood by those affected.

F. Monitoring and Evaluation

11. The resettlement focal point from the PDWRAM and provincial rural development committee, assisted by consultants and CLACs, will supervise the preparation and implementation of the subproject resettlement plan and will monitor and report on all resettlement activities. The EA will consolidate all provincial reports into the project performance monitoring system, which will be used to prepare regular progress reports for submission to ADB. Monitoring and evaluation will focus on social impacts and whether the people affected are able to restore, and preferably improve on, their pre-project living standards, incomes, and productive capacity.

12. The EA will recruit an independent monitoring organization to conduct external monitoring and evaluation of resettlement, focusing on the social impacts of the Project and whether affected persons are able to restore, and preferably improve, their pre-project living standards, incomes, and productive capacity about 12 months after compensation and relocation are completed. All independent monitoring organization reports will be submitted to ADB.

G. Budget

13. All compensation for land and other affected assets will be paid at replacement cost based on current market prices. Compensation rates will be established for each project province and approved by the PRS at replacement cost based on market prices during the replacement cost survey. All costs for subproject resettlement programs under the Project, including compensation and allowances, operation and administration costs, surveys, monitoring, and reporting will be financed by grant funds, with the exception of land acquisition. If ADB funds are utilized, the resettlement plans will identify key activities for which the funds will be used, any disbursal milestones, and auditing requirements that will facilitate appropriate and timely delivery.

62 Appendix 13

GENDER ACTION PLAN 1. In Cambodia, women play vital roles in the economic activities of rural households. They contribute significantly to the agricultural labor force, estimated to represent about 74% of male and 77% of female employment, mainly in rice production and fishery. They also engage in a wide range of livelihood activities, typically including collecting firewood for sale, running small businesses, and raising and selling livestock, which contribute to household income. In addition, women are predominately responsible for domestic chores such as cooking, taking care of children, and fetching water and fuel often from great distances. 2. Despite women’s high contribution to household income, there is a continuing gender inequality in their access to paid employment, financial capital, and skills training. Women’s participation in community decision making is also limited as Khmer tradition (Chbap Srey) ascribes a passive role to women. At present, only about 3–5% of members of farmer water user group (FWUG) committees are female. The Ministry of Water Resources and Meteorology (MOWRAM) is attempting to increase women’s participation in decision-making bodies at commune level to about 10% by 2010. 3. Poverty in the project area has strong gender dimensions. In the project target communes, the proportion of female-headed households ranges from 8% to 36% based on data from the 2005 Commune Database. Female-headed households are poorer—they constitute 41% of the poor and 32% of the poorest wealth categories compared with 18% of rich households and 24% of middle wealth households. The Tonle Sap participatory poverty assessment also indicates that they are more vulnerable to external shocks and social stigma because of the lack of male labor in the household. 4. This gender action plan (GAP) has been prepared to ensure gender equality in the distribution of project benefits and to enable active engagement by women in subproject design and implementation. Gender responsive interventions will be selected to respond to the specific needs of women in the project area. The implementation arrangements and estimated costs of the GAP have been incorporated in the overall project design and costing. The implementation schedule of the GAP will be in line with the overall implementation of the Project. The key principles underlining the GAP are as follows.

(i) Subproject preparation. The Project will engage both female and male commune facilitators to the extent possible. Separate meetings for men and women will be held during subproject preparation so that women will be fully informed about the Project and can express their needs and preferred technical options. Women will be consulted before deciding on infrastructure locations and design. The Project will recruit an international community development specialist (6 person-months, intermittent) with gender background and expertise to ensure that this GAP will be appropriately implemented by commune facilitators.

(ii) Subproject implementation. The Project will engage female trainers to the extent possible. During subproject construction, the Project will also hire women, particularly female-headed households and poor women (at least 35% of unskilled laborers on project investments are expected to be women because men migrate to work outside the communes), and ensure equal pay for men and women for work of equal value. The Project will work to increase the participation of women in commune decision making: a minimum of 30% female representation in all commune committees and groups will be targeted in project communes.

(iii) Training. The Project will recruit a national gender specialist (12 months, intermittent) so that gender sensitization and training in gender-sensitive design will be provided during

Appendix 13 63

project orientation in the inception phase for all levels of project staff, implementation consultants, contractors, commune facilitators, commune councilors, and other stakeholders in order to emphasize the link between the GAP and project performance. The sessions on gender analysis and gender-sensitive monitoring indicators will be included in project management training for project staff and commune councilors to promote gender-responsive subproject preparation, implementation, monitoring, and reporting.

(iv) Monitoring and Evaluation. Gender-disaggregated data will be collected during subproject preparatory surveys (e.g., baseline survey and household surveys). Subproject feasibility studies will include gender-disaggregated and/or gender-specific targets and indicators, and those indicators will be monitored and reported in project quarterly progress monitoring reports. MOWRAM’s Gender Unit will be involved during project review missions. A senior representative of the Ministry of Women’s Affairs will participate in the project steering committee to ensure that the executing and implementing agencies are aware of national gender action plans and commitments.

(v) Resettlement. At all stages involving involuntary resettlement, resettlement identification, planning and management, the Project will ensure that gender concerns are incorporated—including gender-specific consultation and information disclosure. This includes special attention to guarantee women’s assets, property, and land-use rights; and to ensure the restoration of their income and living standards. Resettlement planning and monitoring documents will include gender-disaggregated data.

Table A13: Gender Action Plan

Component Actions Proposed Output 1: Rural Infrastructure • Improvement and

Development of Community-Driven Social Infrastructure (e.g., village markets, village roads, and drainage)

• Improvement of

Agricultural Water Management Infrastructure

• Improvement of

Rural Roads and Communication Infrastructure

• Female commune facilitators (1 female and 1 male commune facilitator per commune) will be hired to enable women’s participation during subproject preparation so that the commune investment plan can reflect women’s preferences. Gender-sensitization training will be part of project orientation training for project staff, contractors, consultants, male and female commune facilitators, commune councilors, and other stakeholders involved in subproject preparation.

• Separate meetings for women and men related to subproject preparation will be held. Women will be fully informed about the Project, including their expected contributions. They will be consulted on the location and design of facilities.

• Female commune assistants will help women in each village to select their female representatives; these representatives will participate in the consolidation of the commune investment plan to ensure that women’s interests are included; then, they will brief their constituents on the ongoing and planned activities.

• At least 30% of training participants related to operation and maintenance (O&M) of selected infrastructure, including the O&M transfer strategy, will be women.

• Gender-sensitive training material in local languages, predominantly Khmer, will be prepared in close consultation with beneficiaries, particularly women.

• The extent of women’s participation will be monitored and incorporated in the project progress reports by the provincial gender focal points and project management office (PMO) member responsible for gender.

• At least one committee member will be female and all groups (e.g., farmer water user group, rural road maintenance committee) will have a minimum of 30% female members.

• Affected women will be fully informed about the Project, its expected impact, and their entitlements during implementation of the resettlement plan. Special attention will be given to women in severely affected households and female-headed households.

• The Project will ensure that contractors’ agreements contain (i) compulsory gender sensitization training for both male and female construction workers, and (ii) an appropriate clause promoting the hiring of women (35% of the unskilled laborers will be women) and equal pay for men and women for work of equal value.

64 Appendix 13

Component Actions Proposed Output 2: Rural Livelihood Options Increased • Technical Services

• Nongovernment organizations and microfinance institutions with a good gender and development record will be encouraged to provide financial and/or technical services in project areas.

• Gender-sensitive training material in local languages will be prepared in close consultation with beneficiaries, particularly women.

• Provision of services to women will be encouraged so that at least 30% of project beneficiaries will be women. The extent of women’s participation will be monitored and incorporated in the project progress reports.

• At least 30% of the female beneficiaries will be included as participants of training on matters related to MFIs (i.e., how to develop a business plan, MFI requirements), conducted by an experienced and gender-sensitive consultant or NGO.

• Separate meetings will be organized for women and men to get their views on categories of on-farm training needs (i.e., kinds of crops, livestock techniques). On-farm training activities, to the extent feasible, will be held in the village or commune and at times convenient to women to enable at least 30% female participation.

• A consultant will be hired to conduct an assessment of the local market needs. This will help in designing off-farm training for male and female beneficiaries, and in getting at least 30% female trainees.

Output 3: Program Management

• The PMO and project director will be responsible for overseeing the implementation of the gender action plan (GAP) and reporting on gender-related achievements in quarterly progress reports to the Asian Development Bank (ADB).

• The terms of reference of the implementation consultants’ team leader will include responsibility for ensuring smooth implementation of the GAP and gender-responsive quarterly progress reports to ADB

• A representative of the Ministry of Water Resources and Meteorology (MOWRAM) Gender Unit will be appointed a member of the PMO, with responsibility for screening subprojects from a gender-responsiveness perspective, monitoring implementation of the GAP, and quarterly gender-disaggregated reporting.

• If the project hires two commune facilitators per commune, one facilitator will be female.

• Each implementing agency at the provincial level should appoint a project staff member to be the gender focal point, with responsibility for monitoring implementation of the GAP and for reporting gender-related achievements and constraints to the PMO.

• The terms of reference of all consultants will include responsibilities to ensure implementation of the GAP related to their work.

• Gender-sensitization training will be carried out as part of the project orientation for all levels of staff, consultants, contractors, commune facilitators, and commune councilors to make them aware of the GAP and receive their participation in developing its implementation plan (i.e., who is responsible for which activity at each level, and the time frame for each activity).

• Both female and male staff will be given equal opportunity to participate in non-gender related training and capacity development programs.

• An international community development specialist with a gender background and a national gender consultant will be recruited to (i) build the capacity of PMO, project staff, and commune facilitators in gender-responsive design and analysis; (ii) preparation of gender-sensitive indicators; and (iii) preparation of checklists for evaluation of the gender responsiveness of proposed subprojects.

• Gender-disaggregated indicators will be established for the project performance monitoring and evaluation system. Monitoring will be ongoing to ensure that activities are carried out effectively and targets reached. Progress reports will include gender-related achievements (e.g., level of participation of women in meetings and committee decisions) and constraints.

• The Midterm Review Mission will assess gender-related achievements and constraints to GAP implementation, and propose adjustments for better project performance.

Source: Asian Development Bank.