Document of The World Bank PROJECT APPRAISAL ......Document of The World Bank FOR OFFICIAL USE ONLY...
Transcript of Document of The World Bank PROJECT APPRAISAL ......Document of The World Bank FOR OFFICIAL USE ONLY...
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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 68506-AZ
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$30 MILLION
TO THE
REPUBLIC OF AZERBAIJAN
FOR THE
SECOND RURAL INVESTMENT PROJECT
June 13, 2012
Sustainable Development Department
South Caucasus Country Unit
Europe and Central Asia Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective March 26, 2012)
Currency Unit = Azerbaijani New Manat
AZN 0.79 = US$1
US$ 1.27 = AZN 1
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AzRIP Azerbaijan Rural Investment Project
AzRIP-AF Azerbaijan Rural Investment Project Additional Financing
AZN Azerbaijani New Manat
CDD Community Driven Development
CIG Common Interest Group
CIS Commonwealth of Independent States
CPS Country Partnership Strategy
ECA Europe and Central Asia Region of the World Bank
EMF Environmental Management Framework
EMPF Environmental Management Plan Framework
ExComm Local Executive Committee
FAO Food and Agriculture Organization
FM Financial Management
GDP Gross Domestic Product
IDP Internally Displaced Person
IFR Interim Financial Report
IBRD International Bank for Reconstruction and Development
IGA Income Generation Activities
LSMS Livings Standards Measurement Survey
M&E Monitoring and Evaluation
MIS Management Information Systems
MP Micro-project
OM Operational Manual
PAT Project Assistance Team
PDO Project Development Objective
PM&E Participatory Performance Monitoring and Evaluation
PMU Project Management Unit
RGAC Regional Grant Approval Committee
ROO Regional Operations Office
SAAC State Agency for Agricultural Credits
SFDI Social Fund for the Development of IDPs
PRA Participatory Rural Appraisal
WG Working Group
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Regional Vice President: Philippe Le Houerou
Country Director: Asad Alam
Sector Director:
Sector Manager:
Laszlo Lovei
Elisabeth Huybens
Task Team Leader: Daniel Owen
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Table of Contents
I. Strategic Context ............................................................................................................ 1
A. Country Context ............................................................................................................... 1
B. Sectoral and Institutional Context .................................................................................... 1
C. Higher Level Objectives to which the Project Contributes ............................................. 3
II. Project Development Objectives ................................................................................... 4
A. Project Components ......................................................................................................... 5
B. Project Financing ............................................................................................................. 6
C. Lessons Learned and Reflected in the Project Design ..................................................... 7
III. Implementation .............................................................................................................. 9
A. Institutional and Implementation Arrangements ............................................................. 9
B. Results Monitoring and Evaluation ............................................................................... 10
C. Sustainability.................................................................................................................. 11
IV. Key Risks and Mitigation Measures .......................................................................... 11
A. Economic and Financial Analysis .................................................................................. 11
B. Technical ........................................................................................................................ 12
C. Financial Management ................................................................................................... 13
D. Procurement ................................................................................................................... 13
E. Social (including safeguards) ......................................................................................... 13
F. Environment (including safeguards) .............................................................................. 15
Annex 1: Results Framework and Monitoring ...................................................................... 17
Annex 2: Detailed Project Description ................................................................................. 20
Annex 3: Implementation Arrangements ............................................................................. 30
Annex 4: Operational Risk Assessment Framework (ORAF) ............................................. 46
Annex 5: Implementation Support Plan ................................................................................ 50
MAP: IBRD 38276
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PAD DATA SHEET
Azerbaijan
Second Rural Investment Project (P122944)
PROJECT APPRAISAL DOCUMENT .
EUROPE AND CENTRAL ASIA
ECSS4
.
Basic Information
Date: 13-Jun-2012 Sectors: Other social services (40%), Microfinance (15%), Water supply (15%), Rural and Inter-
Urban Roads and Highways (15%),
Transmission and Distribution of Electricity
(15%)
Country Director: Asad Alam Themes: Rural services and infrastructure (33%), Participation and civic engagement (25%),
Rural non-farm income generation (25%),
Decentralization (17%)
Sector
Manager/Director: Elisabeth
Huybens/Laszlo Lovei
Project ID: P122944 EA Category:
B - Partial Assessment
Lending
Instrument: Specific Investment
Loan
Team Leader(s): Daniel Owen
Joint IFC: No .
Borrower: Republic of Azerbaijan
Responsible Agency: State Agency for Agricultural Credits (SAAC)
Contact: Mr. Subhan Asgerov Title: Director
Telephone
No.: 994-12-934693 Email: [email protected]
.
Project Implementation
Period: Start
Date: 01-Sep-2012 End
Date: 30-Mar-2017
Expected Effectiveness
Date: 01-Sep-2012
Expected Closing Date: 30-Sep-2017 .
Project Financing Data(US$M)
[ X ] Loan [ ] Grant [ ] Other
[ ] Credit [ ] Guarantee
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Proposed term: The IBRD flexible Loan with a variable spread has a final maturity of 17 years
including a grace period of 4 years.
For Loans/Credits/Others
Total Project Cost (US$M): 53.60
Total Bank Financing
(US$M): 30.00
.
Financing Source Amount(US$M)
Borrower 20.00
International Bank for Reconstruction and
Development 30.00
LOCAL BENEFICIARIES 3.60
Total 53.60 .
Expected Disbursements (in USD Million)
Fiscal
Year 2013 2014 2015 2016 2017 2018 0000 0000 0000
Annual 4.07 6.54 7.02 6.92 4.42 1.03 0.00 0.00 0.00
Cumulati
ve 4.07 10.61 17.63 24.55 28.97 30.00 0.00 0.00 0.00
.
Project Development Objective(s)
The Project Development Objective is to improve access to and use of community-driven rural
infrastructure and expand economic activities for rural households. This would be achieved through: (i)
the provision of grants to finance eligible demand-driven micro-projects in rural infrastructure; (ii) the
provision of training and consultants‟ services to support micro-project development by enhancing the
capacity of engaged local stakeholders in all aspects of micro-project program development; (iii)
building opportunities for rural employment and livelihood support services through the provision of
training and consultants‟ services to carry out pilot livelihood support services in six communities; and,
(iv) supporting project management capacity at the Project Management Unit and its Regional
Operations Offices for the purposes of effective management, implementation and monitoring and
evaluation of Project activities. .
Components
Component Name Cost (USD Millions)
Rural Community Infrastructure 18.90
Technical Assistance for Rural Infrastructure 4.73
Project Management and Results Monitoring 6.37 .
Compliance
Policy
Does the project depart from the CAS in content or in other significant
respects? Yes [ ] No [ X ]
.
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Does the project require any waivers of Bank policies? Yes [ ] No [ X ]
Have these been approved by Bank management? Yes [ ] No [ ]
Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ]
Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X .
Legal Covenants
Name Recurrent Due Date Frequency
Schedule 2, Section I. A. Institutional
Arrangements X
Description of Covenant
1. The Borrower shall carry out the Project in accordance with the Operational Manual 2. The Borrower shall maintain the PMU and ensure it is adequately staffed with qualifications in
accordance with procedures necessary for the carrying out of the project. 3. The Borrower shall ensure the Working Group shall be maintained with broad stakeholder
representation satisfactory to the Bank.
Name Recurrent Due Date Frequency
Schedule 2, Section I. C. Micro-projects X
Description of Covenant
1. The Borrower shall make Grants to Beneficiaries in accordance with eligibility criteria and procedures
acceptable to the Bank. 2. The Borrower shall make each Grant under a Grant Agreement with the respective Beneficiary on
terms and conditions approved by the Bank.
Name Recurrent Due Date Frequency
Schedule 2. Section I. D. Safeguards X
Description of Covenant
The Borrower shall ensure that the Project is carried out by the Project Implementing Entity in
accordance with the provisions of the EMF and/or EMP(s). .
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Conditions
Name Type
Description of Condition
Team Composition
Bank Staff
Name Title Specialization Unit
Myrtle Laura Diachok Operations Officer Monitoring and Evaluation
SDV
Joseph Paul Formoso Senior Finance Officer Disbursement CTRLA
Ahmet Gokce Consultant Procurement ECSO2
Daniel Owen Senior Social Development Specialist
Task Team Leader ECSS4
Hiwote Tadesse Senior Program Assistant
Operations ECSSD
Deepal Fernando Senior Procurement Specialist
Procurement ECSO2
Rufiz Vakhid Chirag-
Zade Senior Operations
Officer Institutional
Arrangements ECSS1
Ghada Youness Senior Counsel Legal LEGEM
Gulana Enar Hajiyeva Environmental Specialist Environment ECSS3
Yagut Iltifat Ertenlice Procurement Assistant Procurement ECCAZ
Norpulat Daniyarov Sr Financial Management Specialist
Financial Management ECSO3
Martin Henry Lenihan Senior Social Development Specialist
Social Safeguards LCSSO
Sabina Vagif Majidova Team Assistant Logistics ECCAZ
Tural Jamalov Financial Management Specialist
Financial Management ECSO3
Non Bank Staff
Name Title Office Phone City
Peter Reid Consultant, Livelihood Specialist
Lyme Regis
Yoshiko Ishihara Consultant Rome .
Locations
Country First Administrative
Location Planned Actual Comments
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Division
Azerbaijan Beylaqan Rayonu Beylagan Rayon X
Azerbaijan Yardimli Rayonu Yardymli Rayon X
Azerbaijan Salyan Rayonu Salyan Rayon X
Azerbaijan Sabirabad Rayonu Sabirabad Rayon X
Azerbaijan Saatli Rayonu Saatly Rayon X
Azerbaijan Bilasuvar Rayonu Bilasuvar Rayon X
Azerbaijan Neftcala Rayonu Neftchala Rayon X
Azerbaijan Masalli Rayonu Masally Rayon X
Azerbaijan Lerik Rayonu Lerik Rayon X
Azerbaijan Lankaran Rayonu Lankaran Rayon X
Azerbaijan Imisli Rayonu Imishli Rayon X
Azerbaijan Calilabad Rayonu Jalilabad Rayon X
Azerbaijan Astara Rayonu Astara Rayon X
Azerbaijan Agcabadi Rayonu Aghjabadi Rayon X
Azerbaijan Tartar Rayonu Tartar Rayon X
Azerbaijan Zardab Rayonu Zardab Rayon X
Azerbaijan Zaqatala Rayonu Zaqatala Rayon X
Azerbaijan Yevlax Rayonu Yevlakh Rayon X
Azerbaijan Oguz Rayonu Oghuz Rayon X
Azerbaijan Ucar Rayonu Ujar Rayon X
Azerbaijan Tovuz Rayonu Tovuz Rayon X
Azerbaijan Samaxi Rayonu Shamakhi Rayon X
Azerbaijan Saki Rayonu Shaki Rayon X
Azerbaijan Samkir Rayonu Shamkir Rayon X
Azerbaijan Kurdamir Rayonu Kurdamir Rayon X
Azerbaijan Qabala Rayonu Qabala Rayon X
Azerbaijan Qusar Rayonu Qusar Rayon X
Azerbaijan Quba Rayonu Quba Rayon X
Azerbaijan Xacmaz Rayonu Khachmaz Rayon X
Azerbaijan Qazax Rayonu Qazakh Rayon X
Azerbaijan Goranboy Rayonu Goranboy Rayon X
Azerbaijan Qax Rayonu Qakh Rayon X
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Azerbaijan Ismayilli Rayonu Ismayilli Rayon X
Azerbaijan Goycay Rayonu Goychay Rayon X
Azerbaijan Daskasan Rayonu Dashkasan Rayon X
Azerbaijan Balakan Rayonu Balakan Rayon X
Azerbaijan Barda Rayonu Barda Rayon X
Azerbaijan Abseron Rayonu Absheron Rayon X
Azerbaijan Agsu Rayonu Aghsu Rayon X
Azerbaijan Agdas Rayonu Aghdash Rayon X
Azerbaijan Gadabay Rayonu Gadabay Rayon X
Azerbaijan Agstafa Rayonu Aghstafa Rayon X
Azerbaijan Qobustan Rayonu Gobustan Rayon X
Azerbaijan Samux Rayonu Samukh Rayon X
Azerbaijan Siyazan Rayonu Siazan Rayon X
Azerbaijan Xizi Rayonu Khizi Rayon X
Azerbaijan Haciqabul Rayonu Hajigabul Rayon X .
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I. Strategic Context
A. Country Context
1. Over the past decade, Azerbaijan has experienced many of the same challenges as other Commonwealth of Independent States (CIS) transition economies including deterioration in
infrastructure and service provision and increasing inequality. Infrastructure attrition in
Azerbaijan has been particularly acute in rural areas and the poor quality of public infrastructure,
exacerbated by a weak public expenditure framework, has been one of the factors impeding
development since the mid-1990s. Roughly 45% of the main and regional roads are in poor
condition, hindering social and economic development and limiting growth prospects in rural
areas of the country. The Government places high priority on infrastructure provision, including
power supply and gasification, irrigation investments and major highways crucial for the
development of Azerbaijan as a transport corridor, internal connectivity and the development of
regions within the country.
2. Since independence, oil and gas discoveries have given Azerbaijan new means for combating poverty and developing a diversified and sustainable middle-income economy.
Driven by the oil boom, per capita income rose from a post-independence low of just US$470 in
1995 to $4,820 in 2009. The economy has continued to grow in recent years, recording an
average annual GDP growth rate of 24% in 2005-2008, with 12% growth in the non-oil sectors.
3. Strong growth and rising government social spending have reduced poverty markedly, from 49% in 2001 to 16% in 2008 and to 7.6% in 2011, according to official estimates. This
decline has been largely driven by high growth rates averaging more than 20% over the period.
Higher minimum wage rates over the last decade are likely to have contributed to poverty
reduction. Minimum wages were last increased by 10% in January 2012 to the equivalent of
US$118 a month. Social transfers, including a well targeted social assistance program, have also
contributed to declining poverty. Data suggests that while rural and urban poverty rates have
fallen sharply, much of the poverty is rural.
4. Azerbaijan‟s development challenge is to maintain momentum by strengthening the non-oil economy, improving competitiveness and by building skills and strengthening its institutions.
Azerbaijan faces an important challenge in improving governance and fighting corruption and
new challenges are emerging in economic prospects. The rapid growth derived from oil and gas
revenues is likely to plateau over the coming decade and decline thereafter. While Azerbaijan
has weathered the global economic crisis relatively well, the crisis has underlined the need for a
diversified economy, market-based policies and improved social services.
B. Sectoral and Institutional Context
5. Deficiencies in basic infrastructure (roads, water, and energy) in rural areas serve as an obstacle to poverty reduction by discouraging people and businesses from residing in or
investing in rural space. Despite the tripling of government investment in basic infrastructure
since 2006, there are still important gaps in terms of access and quality of public services
between urban and rural areas. While over 90% of households in Baku have access to piped
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water, the same is true for less than 33% of households in rural areas and in many parts of the
country outside Baku people receive as little as three hours supply per day. Similarly, rural
communities suffer from unreliable supplies of gas and electricity, a problem that becomes
especially acute in remote mountainous areas where access may be completely lacking.
Furthermore, the 2009 Country Economic Memorandum states that domestic vehicular traffic
has increased 10% per year since 2003, leading to increasing pressure on local road networks and
negative impacts on rural economic development. According to the 2008 Living Standards
Measurement Survey (LSMS), improved access to, and the quality of public utilities will not
only improve household livelihoods and living conditions but also the operating environment for
rural enterprises such as food processing and light manufacturing.
6. While rural poverty reduction depends on increasing incomes from agriculture and the diversification and growth of the non-farm rural economy, there are significant constraints
facing the development of both sectors. Currently, employment in rural areas does not
guarantee a route out of poverty; the working poor account for 60% of the rural poor compared
to 50% for the whole country and 35.6% in urban areas. This is due to the poorly paid and
seasonal nature of employment in rural areas (median monthly earnings AZN 75 versus AZN
120 in urban areas), the lack of non-farm rural enterprises and the numerous constraints farmers
face in maximizing income earned from agriculture. A key constraint is the weakness in
infrastructure provision such as rural roads, irrigation and drainage systems. Irrigation is
particularly problematic, with at least 50% of all irrigated land damaged due to the effects of
salinity resulting from degraded irrigation and drainage systems. Similarly, farm profitability
and off-farm employment is constrained by undeveloped value chains with farmers typically
producing for their own consumption or sale in informal markets at very low prices. This is
compounded by the absence of market infrastructure such as storage, packaging and processing
facilities. Despite these constraints, agri-food is a key sector for the country‟s development,
being the second largest exporter after oil and gas and employing close to 40% of the total
workforce in full-time or seasonal employment. There are significant opportunities for
generating off-farm employment at the upper end of the agricultural value chain which is
currently underdeveloped.
7. There are important disparities between urban and rural areas in terms of access to health services and education attainment. Physical remoteness to health care has been cited in
the 2008 LSMS as an explanation for lower utilization by the poor. Over two thirds of women in
the poorest quintile surveyed by the LSMS reported distance from a health facility as
representing a barrier to access, versus 14% in the richest quintile. Similarly, health service
utilization for both out-patient and in-patient services is higher in Baku and other urban areas
than for rural areas. For education, in rural areas, post-secondary education attainment rates are
below 11% compared to 40% in Baku. In general, rural areas have lower access to both pre-
school and post-secondary education, while the quality of the learning experience at primary and
secondary levels is affected by the poor condition of school facilities.
8. Institutional capacity at the local-self government level to address these urban-rural disparities is growing and in need of support. Key institutions at the local level in Azerbaijan
include Municipalities and Local Executive Committees. Local Executive Committees
(ExComms) represent the various agencies and line Ministries of Central Government and are
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primarily focused on regulatory functions and the development needs of larger settlements.
While elected Municipal Councils were established by law in 1995, they are still relatively new
institutions with limited responsibility (for roads, parks, cemeteries and some aspects of social
care) and financial capacity to support the provision of critical rural infrastructure. The Second
Rural Investment Project in Azerbaijan (AzRIP-2) is well placed to support the developing
decentralization agenda through mobilizing local communities to work closely with both
ExComm authorities and municipalities in the development of infrastructure in underserviced
rural communities.
9. Aside from the decentralization agenda, AzRIP-2 further reinforces a range of other Government strategies and programs. AzRIP-2 complements specific strategies such as the
Regional Development Program covering 2009-2012 which is focused on strengthening the
productive potential of the regions in non-oil sectors (such as agriculture and tourism) and
improving living conditions to ease the pressure on migration to Baku. AzRIP-2 is similarly
aligned with Government action programs in other sectors such as infrastructure (prioritizing
power supply, roads and social infrastructure), and the state program for agriculture covering
2008-2015 which prioritizes the rehabilitation of irrigation networks and the development of
food processing enterprises. The Operational Manual (OM) specifies that micro-projects which
do not confirm to national legislation and regional development programs will not be supported
by AzRIP-2.
10. In terms of rationale for Bank engagement, AzRIP-2 not only builds on the successful implementation of the original project, but also the experience with Community Driven
Development operations elsewhere in the region and globally. Beyond Azerbaijan, the World
Bank has supported a range of successful Local and Community Driven Development (CDD)
activities across Europe and Central Asia (ECA) that finance improved service delivery,
infrastructure provision and income generation in countries as diverse as Croatia, the Kyrgyz
Republic, Poland and Russia. These projects respond to the infrastructure and service deficits
that arose during the transition era following the privatization of collective farms and local
industries previously responsible for social infrastructure and service provision. They also
respond to a need to support alternative, more participatory and transparent forms of local
governance. These projects build on global best practice by the Bank to support participatory
decision making, local capacity building, and community control of resources through CDD.
Over the last decade, the Bank has increasingly used CDD projects across a range of countries to
address critical infrastructure needs and the current global CDD portfolio amounts to
approximately US$2 billion of Bank investments per year. According to the 2008 World
Development Report on Agriculture for Development, CDD can also contribute to the agriculture
for development agenda by first focusing on the provision of basic services and public goods and
then by supporting income generating activities once basic needs have been met.
C. Higher Level Objectives to which the Project Contributes
11. The Country Partnership Strategy (CPS) for Azerbaijan for 2011-2014 is focused on achieving results in two key pillars: (i) building a competitive non-oil sector; and (ii)
strengthening human and social services; with a cross-cutting filter for improving governance
and institution-building across all activities. The importance of improved access to rural
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infrastructure through cost-effective approaches that support rural communities‟ demand-driven
infrastructure investment priorities is emphasized in the CPS. Rural infrastructure projects have
a high impact on employment generation. Rehabilitation of small scale irrigation works
increases productivity significantly and school rehabilitation leads to increases in school
enrollment. The CPS identifies the primary vehicle for achieving these outcomes as the
Azerbaijan Second Rural Investment Project.
12. The Government‟s current development program is laid out in its strategy document “State Program on Poverty Reduction and Sustainable Development 2006-15”. The broad
development goals include: maintaining macroeconomic stability; creating enabling conditions
to improve income-generating opportunities; improving the quality and access to basic health
and education services; improving infrastructure; and strengthening the social protection system
to better protect vulnerable groups. The project is also in line with the objectives of the state
programs on regional development, poverty reduction and food security.
II. Project Development Objectives
A. PDO
13. The Project Development Objective is to improve access to and use of community-driven rural infrastructure and expand economic activities for rural households. This would be achieved
through: (i) the provision of grants to finance eligible demand-driven micro-projects in rural
infrastructure; (ii) the provision of training and consultants‟ services to support micro-project
development by enhancing the capacity of engaged local stakeholders in all aspects of micro-
project program development; (iii) building opportunities for rural employment and livelihood
support services through the provision of training and consultants‟ services to carry out pilot
livelihood support services in six communities; and, (iv) supporting project management
capacity at the Project Management Unit and its Regional Operations Offices for the purposes of
effective management, implementation and monitoring and evaluation of Project activities.
B. Project Beneficiaries
14. Under Component A - Rural Community Infrastructure, beneficiaries will include individuals in rural communities in the 11 currently un-serviced rayons (Shabran, Siyazan, Xizi,
Abseron in the North, and Agcabadi, Beylaqan, Masalli, Uardimli, Lerik, Astara and Lankaran
Rayons in the Mugan-Salyan Zone) who will benefit from mobilization and access to improved
infrastructure. Other beneficiaries will include households and individuals from well-performing
micro-projects in the 45 existing rayons served under the original Azerbaijan Rural Investment
Project (AzRIP) and the Azerbaijan Rural Investment Project Additional Financing (AzRIP-AF),
who will benefit from second generation community infrastructure and livelihood support
services.1 These rayons comprise: Aghsu, Balakan, Gabala, Gakh, Gobustan, Guba, Gusar,
Ismayilli, Khachmaz, Oghuz, Shaki, Shamakhi, Zakatala in the North; Aghstafa, Barda,
Dashkasan, Gadabay, Goranboy, Khanlar, Qazakh, Samukh, Shamkir, Tartar and Tovuz in the
1 AzRIP became effective on January 18, 2005. The total project costs were US$21.10, of which US$15 million was financed
from a Bank loan. On March 27, 2008, additional financing of US$15 million was approved to support the expansion of
activities under AzRIP. The closing date for AzRIP was March 31, 2012.
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North West; Aghdash, Goychay, Hajigabul, Kurdamir, Ujar, Yevlakh and Zardab in Lower
Shirvan; Bilasuvar, Imishli, Jalilabad, Neftchala, Saatly, Sabirabad and Salyan in Mughan
Salyan, and; Babek, Julfa, Kengerli, Ordubad, Sadarak, Shahbuz and Sherur in Nakhchivan.
Micro-projects in Nakhchivan are to be fully financed by Government funds. Other zones are
eligible for World Bank financed micro-projects. Individual, household and community-level
beneficiaries will be measured, tracked and monitored (incorporating social and gender data
disaggregation) using baseline surveys and follow-up impact evaluation. It is expected that in
total 600 eligible communities in 56 rayons will be serviced under AzRIP-2 and an estimated
1,500,000 community members are expected to benefit from infrastructure investments. Under
Component B – Technical Assistance for Rural Infrastructure, beneficiaries are projected to total
130,000 under participatory rural appraisal engagement; 9,000 in training and 10,000
beneficiaries in Community Network activities including workshops, cross visits and
Community Investment Conferences. Livelihood pilots are expected to benefit approximately
1,200 people. Women‟s empowerment through incubating leadership and participation in
decision-making has been a prominent feature of AzRIP‟s results narrative and a strong gender
focus will continue under AzRIP-2.
C. PDO Level Results Indicators
15. Achievement of the Development Objective will be assessed through the increase in access to and use of rural infrastructure; the change in access to markets and basic social services
through improved rural infrastructure; and improved economic opportunities for rural
households. The outcome and intermediate indicators are specified in Annex 1.
II. Project Description
A. Project Components
16. The project is a Specific Investment Loan (SIL) with a total investment cost estimated at US$53.60 million, of which US$30 million will be financed by the World Bank Loan. The
Project will scale up AzRIP both geographically into currently un-serviced rayons and vertically
through the inclusion of pilot livelihood support services and second generation institutional
support in current AzRIP active project areas. The Project has three components.
17. Component A - Rural Community Infrastructure. This component will finance demand-driven micro-projects in rural infrastructure. Micro-projects eligible for finance through
Project proceeds would increase access to, and quality of local economic and social
infrastructure, such as roads, rural water supply, irrigation, schools, clinics and markets. Costs to
be supported from the project include identification, design, construction, rehabilitation, and
initial operation and maintenance of the micro-projects. Potential investments include basic
economic (e.g., rehabilitation of secondary roads, potable water systems, irrigation infrastructure,
electricity transformers) and social (e.g., school and clinic rehabilitation and construction)
infrastructure, based on priority needs identified by communities. The Project will target rural
communities (greater than 1,000 and less than 10,000 people with smaller communities open to
clustering with neighboring communities to achieve scale) in regions that meet established
selection criteria and have a higher relative incidence of poverty. The average size of micro-
projects will be US$70,000, while projects over US$85,000 will require prior review. Current
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micro-project cycle procedures will be maintained in the new Project, including local governance
arrangements involving local authorities and sectoral line ministry representation in project
screening and approval and public and private sector linkages for key operation and maintenance
medium-term projections. Three categories of micro-project grants will be supported under
Component A: (i) micro-projects in previously un-serviced rayons which meet eligibility criteria
set out in the OM; (ii) second generation micro-projects in active AzRIP communities with high
performance ratings from previous micro-project implementation and which meet eligibility
criteria set out in the OM, and; (iii) micro-projects submitted by Common Interest Groups
supported under the pilot scheme in Component B which meet eligibility criteria as established
in the OM.
18. Component B - Technical Assistance for Rural Infrastructure. The objective of this component is to enhance the capacity of engaged local stakeholders, including community
groups, local authorities, Regional Grant Approval Committees, Project Assistance Teams and
staff in the Regional Operations Offices in micro-project program development and to provide
technical assistance for pilot livelihood support initiatives. Stakeholder capabilities in functions
of contracting, procurement, financial management, and participatory monitoring and evaluation
will be strengthened. Livelihood support services will be piloted in six communities selected
among communities that successfully implemented economic infrastructure projects under
AzRIP and meet eligibility criteria described in the OM. Livelihood support services will
include mobilization and organization of common interest groups (CIGs), identification of
income generation activities (IGAs), preparation of business plan proposals, legalizing CIG
status, and training CIG members in business management. CIGs that are well organized and
performing in accordance with standards set out in the OM and equipped with quality business
plans may submit their proposal as a micro-project under Component A, Category (iii).
19. Component C - Project Management and Results Monitoring. This component will finance the administrative and operational project implementation and management costs,
including overheads of Project Management Unit (PMU) professional staff, as well as PMU and
four Regional Operations Offices (ROOs) and their associated support staff, project outreach,
and support to Regional Grant Approval Committees (RGACs). AzRIP-2 will continue the
current practice of regular and rigorous project monitoring and evaluation using mixed
quantitative and qualitative methods and results based, gender disaggregated indicators
implemented on multiple levels – project, rayon and community. AzRIP-2 will also maintain the
intensive effort of physical verification of works and technical aspects of sub-project
implementation.
B. Project Financing
20. The Lending Instrument for the project is a SIL of US$30 million for a period of 5 years from 2012 to 2017. The Loan will be a single currency (US dollar denominated), variable spread
loan, with a maturity of 17 years inclusive of 4 years of grace, a front end fee of 0.25%, with
repayments linked to commitment.
21. Total project financing requirements are estimated at US$53.60 million, inclusive of price and physical contingencies, taxes, interest, and the front-end fee. The Government of
Azerbaijan will finance US$20 million towards total project costs, including 100% of costs of
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7
micro-projects for Nakhchivan. The World Bank Loan of US$30 million will finance
Components A, B and C. Information on costs and financing sources is provided in Table 1.
Table 1. Project Costs by Component and Use of Financing
Project Components
Project Cost
(in millions)
IBRD
Financing
%
Financing
1. Component A: Rural Community Infrastructure
2. Component B: Technical Assistance for Rural infrastructure 3. Component C: Project Management and Results Monitoring
Front-End Fees
Total Project Costs
41.64
4.75 7.21
0.075
53.60
18.90
4.73 6.37
30.00
63
16 21
C. Lessons Learned and Reflected in the Project Design
22. The proposed project is a repeater project, building on the current AzRIP design and institutional and implementation mechanisms with day-to-day management under the aegis of
the existing PMU, which will be strengthened with additional core and technical staff as needed.
The repeater project is founded on a similar yet enhanced PDO, project design and institutional
arrangements as the existing project.
23. AzRIP, under implementation since 2005, has garnered widespread recognition for its strong results record and positive impact. The high quality operation has successfully achieved
its development objectives and has been acknowledged for delivering tangible results on the
ground and improving people‟s lives. The cumulative record of AzRIP is one of significant
improvement of rural communities‟ access to infrastructure services, improved mobility and
increased farmers' incomes. Beneficiary surveys have indicated that travel times to schools and
markets have been reduced by 47% and 26% respectively as a result of the rehabilitation of rural
roads. Livelihoods have improved significantly. The rehabilitation of irrigation systems,
reaching over 700,000 people, has increased average productivity by roughly 30% and added
more than $1 million to the value of production in project areas while primary school enrollment
has increased by 25% subsequent to school rehabilitation. Moreover, in villages where roads
have been rehabilitated under the project, 78% of farm products are now brought to markets in
nearby towns by farmers themselves (as opposed to 18% in non-project areas). In project areas,
farmers can now sell their produce at their farms at 20% higher prices, while prices for the same
products in non-project areas have decreased. A keen emphasis on sustainable infrastructure,
maintenance contracts and accountability has helped ensure that over 90% of infrastructure
rehabilitated is operational. The income of over 600,000 farmers has increased and 150,000
rural poor now have access to safe water. Women‟s empowerment has been a prominent feature
of AzRIP‟s implementation results narrative and a gender focus will continue under AzRIP-2 to
support women‟s participation and empowerment and dedicated gender tracking and monitoring
of project implementation and impacts.
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8
24. The AzRIP-2 approach to local development pays particular attention to issues of sustainability and maintenance. Participating communities prepare maintenance plans and cost-
share for maintenance of assets in conjunction with municipalities and service providers.
Financial and institutional sustainability has been strengthened through mobilization by
municipalities and line ministries of over US$800,000 for the operation and maintenance of
rehabilitated infrastructure.
25. A Social Assessment carried out as part of preparation of AzRIP-2 reaffirmed the appropriateness of design choices and presented a series of recommendations which have been
integrated in the revised OM for the project. These relate to additional advocacy and promotion
work in new rayons with larger concentrations of internally displaced people; review of
settlement size eligibility criteria for national minority group areas with smaller settlement sizes;
and intensified efforts to foster women's leadership.
26. Impact evaluation findings from the first phase of AzRIP demonstrate a significant economic boost as a result of project interventions and improvements in financial security
resulting from asset value and service enhancements and increases in on-farm and off-farm
income. A Cost-Benefit analysis of AzRIP micro-projects carried out in 2010 recorded very
high net present values and monetary appraisals of anticipated revenues from micro-projects at
85 times the value of initial investments. Participating communities from the first phase of
AzRIP have expressed strong demand for AzRIP to stimulate livelihood and income generating
opportunities and AzRIP-2 is incorporating this sequential evolution in project design.
Experience from CDD practice globally attests to the viability of this model and phased
evolution of a CDD program from an initial focus on welfare and public goods to second
generation public plus private goods and a productive investment focus.
27. Building on lessons learned under AzRIP, rayons that have demonstrated successful results from AzRIP micro-project implementation will be eligible to request further support for
complementary rural infrastructure investments under a second generation window in
Component A. Evidence suggests that several engagements in one community are more likely to
have an impact on poverty reduction. These second generation micro-projects will also step up
efforts to crowd in private sector participation and thereby leverage additional capital, as well as
new ideas and skills in support of local development initiatives. An incremental approach is to
be incorporated within AzRIP's community engagement strategy to introduce support for
productive infrastructure and livelihoods support services. Diagnostic work on livelihoods to be
undertaken during the first year of Project implementation will determine the appropriate support
services for income generation and livelihood strengthening in the pilot communities. The
selected pilots would be targeted at a restricted number of communities that successfully
implemented economic infrastructure projects under the original project and would be
conditional on feasibility assessments. Probable areas of support would be business
development services, local organizational capacity strengthening, market and institutional
linkages and value addition initiatives.
28. Over the longer-term, the expected transformative impact of AzRIP-2 is twofold: (i) to facilitate the translation of enhanced social capital into financial capital and economic well-
being; and (ii) to secure gains achieved in solidarity and social cohesion at the local level and
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9
extend these pathways into improved governance and accountability between citizens and the
State. The intensive investment in social capital in AzRIP-2 is manifested by the design
emphasis on social and gender inclusion, social mobilization, collective decision-making,
establishment of local governance groups and networks (community networks, cross-visits
between communities and regional and national community investment knowledge sharing and
networking) and broad mandates on transparency, information access and communications. The
expected outcomes from such social capital investment include improved local governance, a
sustained demand side stimulus for inclusive economic growth and continued attention to
targeting to the most vulnerable and a focus on social inclusion.
29. The proposed operation is hence aligned with the CPS‟s cross-cutting filter on 'improving governance and institution building‟. In particular, the articulation within the AzRIP sub-project
cycle of roles and responsibilities at the rayon level and its attendant municipal governance
support can be broadly understood as supporting decentralization efforts in Azerbaijan.
III. Implementation
A. Institutional and Implementation Arrangements
30. The proposed project builds on the ongoing AzRIP design and its institutional and implementation mechanisms which proved to be successful in terms of achieving results on the
ground. The project will be under the general management of the State Agency for Agricultural
Credits (SAAC), which is the Ministry of Agriculture‟s agency for overseeing international rural
development projects. Day-to-day management of the project will be delegated to the Project
Management Unit (PMU) constituted within SAAC. The PMU has successfully implemented
the on-going AzRIP. It reports to the Director of SAAC and would have direct responsibility for
management, administration and coordination of the proposed project. The PMU has developed
the necessary experience and competence to manage all core functions including program
management, regional coordination, community mobilization and facilitation, capacity building,
training, procurement, financial management and monitoring and evaluation (including
environmental monitoring). This would facilitate a smooth transition from the current to the new
project. Annex 3 provides a chart of the proposed project organization. The project
implementation arrangements are described in detail in the OM. The OM for AzRIP-2 is based
on the manual utilized for guiding operations under the previous project and updated and revised
accordingly. The PMU comprises core staff, including the Director, Deputy Director, Engineers
and Community Development, Procurement, Financial Management, M&E and MIS Specialists.
As required, the project could also finance additional core and technical staff to provide
specialized inputs that are not currently available in the project structures and also to ensure that
all project activities are carried out effectively. In particular, the implementation of livelihood
activities will require a full-time Coordinator in the PMU. It is also proposed to add a Legal
Specialist to the core PMU team and to enhance its communications competencies. The PMU
has acquired solid experience in procurement and has established a reliable and effective
accounting and internal control systems under AzRIP. The PMU will continue to use these
arrangements for the financial management of AzRIP-2. The PMU is planning to retain existing
accounting software and accounting staff.
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10
31. The project institutional arrangements at the national level also include the project Working Group (WG) established by SAAC to review the OM on a quarterly basis and adopt
revisions, as required. The WG includes representatives of the Ministries of Economic
Development and Agriculture, the Parliamentary Commission on decentralization, Regional
Grant Approval Committees and civil society.
32. At the regional level, the PMU will be supported by the Regional Operations Offices (ROOs) which are the PMU representatives in the project zones to support and monitor the
community project portfolio. The existing ROOs would continue to operate as under the
previous AzRIP projects. The ROOs have been operating as umbrella offices, incorporating
Project Assistance Teams (PATs), Technical Design Companies and Regional Grant Approval
Committees (RGACs) in one location, under the coordination of a Program Specialist
functioning as an extension of the PMU. This has worked well, and the same approach will be
adopted for AzRIP-2. The PATs are currently functioning as the Service Providers for providing
community mobilization, training and consultancy services for communities. The RGACs will
continue to review the project proposals for approval, while the Technical Design Companies
will help to develop local capacity for infrastructure development and maintenance.
B. Results Monitoring and Evaluation
33. The implementing agency of AzRIP has a good system in place for monitoring and evaluation, including an intensive effort of physical verification of works and technical aspects
of sub-project implementation, which is conducted at several levels (project, rayon and
community). Reports from the field are generated regularly to produce monthly, quarterly and
annual progress reports. Several improvements will be made in AzRIP-2, including: (i)
sharpening of existing indicators and generation of new indicators with which to track progress
and measure impact, in particular to assess women‟s participation and empowerment, economic
changes and social capital impacts; (ii) improved monitoring and reporting on the complaints and
grievance redress mechanisms which were built into AzRIP; and (iii) using MIS information
more effectively for internal and external communications.
34. Impact Evaluation and Special Studies. A rigorous impact evaluation with quantitative and qualitative components will be conducted for AzRIP-2. Specifically, the project plans to
conduct impact evaluation baseline, mid-point and end line field surveys. As part of the
monitoring and evaluation framework, the project will also undertake several thematic
evaluations and studies including the effects of the sub-projects on technical quality, women‟s
participation and empowerment, economic changes and social capital impacts.
35. Regular monitoring and reporting, including maintaining the MIS, will be carried out by the PMU, who would also undertake the special studies with the assistance of contracted
consultant services. The impact evaluation and more complex special studies will be supported
by the Bank‟s Development Impact Monitoring and Evaluation (DIME) team.
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11
C. Sustainability
36. This project will continue to use the AzRIP model which has demonstrated sustainability by using an integrated approach to infrastructure development which combines sound economic
analysis in the selection of micro-projects, solid engineering design with support from Technical
Design Companies and attention to social dynamics and environmental sustainability.
Operations and maintenance plans prepared by communities will allow them to identify potential
funding gaps and develop financing mechanisms and strategies for long-term maintenance
requirements.
IV. Key Risks and Mitigation Measures
37. Since the proposed project builds on the ongoing AzRIP design and its institutional and implementation mechanisms, the overall risk is anticipated to be Low. Potential risks are
summarized in the Operational Risk Assessment Framework (Annex 4). The proposed Project
has been strongly endorsed by the Cabinet of Ministers and the Prime Minister‟s Office and the
Project will coordinate closely with relevant central and local line ministries and agencies.
Project implementation risks are expected to be Low as existing PMU staff are experienced and
strongly committed to the project, and appropriate mitigation measures are in place, including
increased monitoring and evaluation at several levels, to ensure transparency and accountability
within the project.
V. Appraisal Summary
A. Economic and Financial Analysis
38. For the original project, an ex-post cost benefit analysis was conducted for 18 of the 340 micro-projects implemented between 2005 and 2009. This exercise was completed by an
independent consultant, who selected an equal number of projects from each of the three target
regions, as well as an equal number of water (potable and irrigation), health, and roads projects.
The findings of the cost-benefit analysis demonstrated a positive economic return from the
micro-project investments.
Ex-Post Cost Benefit Analysis of a Sample of 18 Micro-Projects
Project type
Project
Cost
Stream
Project
Benefit
Stream
Net Present
Value Budget
Number of
beneficiaries
Average for four water projects 39,979 143,096 103,117 31,171 1,444
Average for two irrigation
projects 54,631 11,776,892 11,722,261 34,154 1,200
Average for six health post
projects 442,719 120,334 80,582 38,281 2,645
Average for six roads projects 36,313 1,190,578 1,154,264 30,796 1,626
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39. In addition to the above analysis, the beneficiary assessment for the original project also demonstrated important socio-economic benefits. Where AzRIP rehabilitated rural roads, the
travel time to school and markets was reduced by 47% and 26% respectively. Moreover, 78% of
farm products are now brought to markets by farmers themselves, eliminating costly
intermediaries. This represents a significant achievement compared to non-beneficiary villages
in the same region where only 18% of farm produce are brought to market by the farmers
themselves. The value of agricultural production increased by more than US$1 million where
irrigation systems were rehabilitated and primary school enrollment increased by 25% after
rehabilitation of school buildings.
40. As a repeater project, supporting similar types of sub-projects, it is expected that AzRIP-2 will yield similar positive economic returns and socio-economic benefits. However, given the
expected large number of micro-projects, a full cost-benefit analysis will not be carried out for
each micro-project. However, economic criteria and basic economic analytical tools will be used
to appraise micro-projects both at the community level (who will assess the financial costs of the
project and the degree to which it benefits the majority of community members), along with the
RGAC who will score each proposal based on a number of economic criteria. The specific
economic criteria to be used are outlined in the OM.
41. The livelihoods pilots will also be designed and implemented on the basis of economic feasibility analysis to be undertaken during the first year of AzRIP-2 implementation, prior to
launching the livelihood initiatives.
B. Technical
42. Project investments will be based on appropriate technology for the infrastructure needs of local communities, the majority of which have already been tested and validated under the
original project. Over the course of AzRIP implementation, the technical quality of the
completed infrastructure works has improved significantly. In the last year of the project, the
World Bank Task Team Engineer and engineers working for the independent evaluation
consultants deemed construction and engineering works completed in a sample of micro-projects
to be satisfactory. The preparation of each community micro-project is supported by a Technical
Design Company hired by the PMU for each operational zone who ensures technical norms and
standards are adhered to. The Technical Design Companies are responsible for helping with the
preliminary designs of each project, comparing technical and costing feasibility of alternative
designs, preparing technical documentation packages, environmental standards, as well as the
preparation of implementation monitoring and sustainability plans. Each community must also
designate a Community Engineer to collaborate with the Technical Design Company and Project
Assistance Team Engineers. Furthermore, a maintenance plan designed to ensure the
sustainability of the micro-project after its construction must be presented by the community
before the project is approved. For AzRIP-2, these practices will be scaled up to new project
areas and the OM will address in detail technical norms and standards for project preparation,
implementation, as well as operation and maintenance. Also, regular internal and external
technical audits will be undertaken to ensure construction meets the required technical standards.
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13
C. Financial Management
43. The financial management (FM) arrangements have been assessed as satisfactory under AzRIP and will be continued under AzRIP-2. The PMU will be responsible for FM
arrangements. The most recent FM supervision (December, 2011) indicates that the Accounting
and Internal Control system of the PMU is reliable and effective. Under AzRIP, the PMU have
submitted timely Interim Unaudited Financial Reports (IFRs) and project audit reports, the
quality of which have been assessed as satisfactory to the Bank. FM staffing arrangements of the
PMU were also assessed as adequate. The PMU will continue to use these arrangements for the
proposed project. The Bank and management of the PMU will work together to ensure that the
current PMU staff and systems for the proposed project needs are retained. Currently, the PMU
fully complies with the audit requirements of the ongoing project. As is the case with AzRIP,
independent auditors will audit project financial statements under terms of reference acceptable
to the Bank and in accordance with International Standards on Auditing (ISA). The PMU will
submit quarterly IFRs covering the period of one quarter, format and content of which have been
agreed with the PMU.
D. Procurement
44. A procurement assessment carried out during the pre-appraisal of AzRIP-2 in April 2011 found three potential risks: (i) the procurement environment may be affected by the problems
related to governance and corruption; (ii) probable attempts of administrative intervention in
procurement and selection under the AzRIP-financed sub-projects; and (iii) as the project
embraces community participation procurement, the pilot livelihood initiatives may face
procurement risks due to lack of capacity at that level.
45. The assessment concluded that due to their previous involvement in AzRIP, PMU staff are familiar with Bank procurement procedures and have acquired the adequate experience and
capacity to carry out procurement activities related to the proposed Project. Risk mitigation
measures were discussed with PMU during project appraisal. The Procurement Plan will be
updated at least annually (or as required) to reflect project implementation needs. Procurement
under Component A - Rural Community Infrastructure will be will be carried out by the
communities under the guidance of the ROOs.
E. Social (including safeguards)
46. The primary stakeholders driving this project are the communities themselves, who will be actively supported in identifying, selecting, planning, implementing and maintaining
infrastructure micro-projects. Communities targeted for assistance will be those suffering
serious infrastructure deficits and will be identified using socio-economic infrastructure
indicators provided by rayon authorities. This ensures that the most disadvantaged communities
in terms of infrastructure access are targeted for mobilization. Under the original project, about
30 communities whose primary inhabitants were national ethnic minorities benefited from
micro-projects and this number is expected to expand under AzRIP-2 as the project moves into
new rayons in the east of the country where ethnic minorities such as the Lezgins account for a
larger proportion of the population. A number of these rayons also border conflict-affected
areas.
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14
47. Social development principles such as participation, transparency, gender and social inclusion and local ownership underpin the micro-project selection, preparation and
implementation process.
48. Aside from communities, other key stakeholders include Rayon ExComm authorities (local representatives of central government) and the relatively new municipalities. ExComm
authorities play a key role at critical junctures in the micro-project process including the
selection of project communities, the decision to mobilize, securing the relevant permits, and the
handover of specific community projects for operation and maintenance to the relevant line
agencies and ministries. Rayon ExComm representatives also participate in the RGACs.
Currently, municipalities have limited responsibility for rural roads, parks, and cemeteries, as
well as limited financial resources. AzRIP-2 will complement the national decentralization
agenda through engaging municipal officials as community project group members, targeting
training and capacity building measures at municipal officials, and transferring rural roads to
municipalities for operation and maintenance purposes. Furthermore, there is strong
involvement of private sector stakeholders in the form of contractors for the construction of civil
works, as well as Technical Design Companies who support communities in project design and
supervision.
49. Positive social impacts of the Project will include reduced travel time to access markets and social services resulting in improved incomes, as well as enhanced human capital, increased
agricultural productivity, job creation during micro-project construction and increased
availability of power and potable water to households. Alongside these tangible benefits, it is
also expected that communities will benefit from increased levels of social capital, with
community members, especially women, becoming more engaged in decision making that
affects their lives, along with increasing trust, transparency and information sharing among
community members. This will largely be the result of the strong emphasis placed on consensus
building, broad based participation and community ownership during the community project
process.
50. Compared to the social benefits, Project social risks are relatively minor and mitigation measures are already in place from the original project. Potential risks include elite capture and
gender bias in sub-project selection, the exclusion of IDPs and ethnic minorities from decision
making processes and project benefits, and potential resettlement impacts of micro-projects. In
order to assess these risks, a Social Assessment was conducted in March 2011. This analysis
found that the risk of elite capture was minimal, as AzRIP successfully introduced informed
participation of the beneficiaries and transparent decision-making at the community level. The
approach created a strong sense of community ownership of the infrastructure project during its
identification and planning, as well as for operations and maintenance.
51. In terms of gender, women actively participated in the process and were well represented in the community level project committees („Community Group‟). AzRIP-2 will continue to
promote these key principles while paying closer attention to new challenges related to the
inclusion of Internally Displaced Persons ( IDPs) and ethnic minorities, such as intensifying
mobilization and participation of IDPs in the two new rayons (Agdzhebedi and Beilagan) where
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15
their presence is significant; better coordination with the Social Fund for the Development of
IDPs Project (SFDI); and more emphasis on female leadership. AzRIP-2 will attempt to capture
social outcomes rigorously through a set of social capital indicators.
52. AzRIP-2 does not trigger OP 4.10 (Indigenous Peoples), but the Social Assessment carried out as part of project preparation examined some aspects of one major national minority
group (the Talysh) in the southern rayons, which will be included in the newly expanded
coverage areas of AzRIP-2. The study found that the Talysh are integrated in wider society.
Interactions with Government institutions (rayon ExComm and municipality) are well
established and communications in the national Azeri language are not a constraint. Key village
institutions are not different from those in other areas and, with prevailing practices of broad
leadership structures and public meetings, are unlikely to provide an obstacle to AzRIP-2‟s
approach of inclusive participation and transparent decision-making. Like other areas, women
holding public offices, such as teachers and health workers, actively participate in public
meetings and are listened to. The project does not trigger OP 4.12 (Involuntary Resettlement) as
it will not finance activities that will require land acquisition or the displacement of livelihoods
or residences. These potential impacts will be screened out using provisions in the EMP
checklist.
F. Environment (including safeguards)
53. The project does not raise any significant adverse environmental concerns. Experience derived from the original AzRIP indicates that positive environmental impacts resulted from the
implementation of micro-projects such as improved irrigation, water supply and sewerage
systems. The potentially adverse environmental impacts of AzRIP-2 are mainly associated with
civil works during micro-projects‟ implementation, and include, inter alia, dust, noise, soil and
water pollution, generation of waste materials, waste disposal (including medical waste), and
damage to soil by excavation works.
54. Environmental Assessment. These potential negative environmental impacts trigger the Operational Policy OP 4.01. The impacts are minor and can be prevented or minimized through
appropriate preventive actions and mitigation measures. Therefore, the project is classified as
Environmental Category „B‟, requiring a partial environmental assessment. Since micro-projects
are not pre-identified and will be determined in the course of project implementation by
applicant communities through intensive participatory processes, an Environmental Management
Framework (EMF) will be applied which will establish screening mechanisms and govern the
process of development and implementation of specific mitigation plans. The EMF for the
original AzRIP has been updated by the Borrower to address impacts from the newly proposed
activities to strengthen rural livelihoods and to reflect the expanded geographical coverage. The
updated EMF has been discussed with stakeholders and has been publicly disclosed by the
Borrower on April 15, 2011.
55. Capacity for the EMF implementation has been built under the original project through a series of training regularly provided to the PMU, its Regional Offices and potential beneficiary
communities. The PMU Environmental Specialist is responsible for training delivery, assisting
the Regional Offices and applicant communities throughout the micro-project cycle and closely
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16
supervising implementation of specific preventive and mitigation measures by project
beneficiaries. The same good practice will continue under AzRIP-2.
G. Other Safeguards Policies triggered
56. Projects on International Waterways. As was the case with AzRIP, AzRIP-2 will support activities on rehabilitation or construction of irrigation and drainage systems, water
supply improvement and wastewater treatment. Such activities are likely to be developed inter
alia on rivers flowing into the Caspian Sea and trans-boundary rivers, which are international
waterways for the purposes of the World Bank Operational Policy on Projects on International
Waterways (OP 7.50). It is expected (and also based on the experience under the original
project) that proposed micro-projects would not produce a noticeable change for the abstraction
volumes of the systems and would not have an adverse change to the quality or quantity of river
flows, while the works would not change the nature of the original systems. With OP 7.50 being
triggered, riparian states have been notified accordingly.
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Annex 1: Results Framework and Monitoring .
Country: Azerbaijan
Project Name: Second Rural Investment Project (P122944) .
Results Framework .
Project Development Objectives .
PDO Statement
To improve access to and use of community-driven rural infrastructure and expand economic activities for rural households. .
Project Development Objective Indicators
Cumulative Target Values Data Source/ Responsibility for
Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection
Percentage increase in
access to and use of rural
infrastructure Percentage 0.00 0.00 15.00 20.00
3 times during
project (baseline,
mid-term, final)
Randomized impact evaluation
DIME, Contracted firm
Percentage of households
that are satisfied with the
quality of basic rural infrastructure
Percentage 10.00 40.00 64.00 3 times during project (baseline,
mid-term, final)
Randomized
impact evaluation DIME, Contracted firm
Percentage reduction in travel time to market,
hospital, school, safe
water source
Percentage 0.00 30.00 48.00 3 times during
project (baseline, mid-term, final)
Randomized
impact evaluation DIME, Contracted firm
Percentage change in
income from household
economic activity Percentage 0.00 16.00 23.00
3 times during
project (baseline,
mid-term, final)
Randomized impact evaluation
DIME, Contracted firm
.
Intermediate Results Indicators
Cumulative Target Values Data Source/ Responsibility for
Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection
Number of micro-projects Number 79.00 79.00 215.00 368.00 521.00 600.00
3 times during
project (baseline,
mid-term, final)
Randomized impact evaluation
DIME, Contracted firm
Direct project
beneficiaries Number 197500.00 197500.00 537500.00 920000.00 1300000.00 1500000.00 Quarterly and
annual project reports
Project MIS PMU/ROOs
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18
Female beneficiaries Percentage Quarterly and
annual project reports
Project MIS PMU/ROOS
Participants in
consultation activities
during project
implementation (number)
Number 700.00 700.00 2000.00 3500.00 4800.00 5600.00 Quarterly and
annual project
reports
Project MIS PMU/ROOS
Intended beneficiaries
that are aware of project
information and project supported investments
Number 0.00 13000.00 35000.00 61000.00 86000.00 100000.00 3 times during project (baseline,
mid-term, final)
Randomized
impact evaluation DIME, Contracted firm
Number of Women in
Community Project Committees
Number 0.00 160.00 400.00 700.00 1000.00 1200.00 Quarterly and
annual project reports
Project MIS PMU/ROOs
Percentage of subprojects where necessary
maintenance operations
are taking place with community engagement
Percentage 0.00 0.00 0.00 0.00 0.00 70.00
Six-month and 1
year after MP
completion
Micro-project evaluations
PMU/ROOs
Grievances registered related to delivery of
project benefits addressed
(%)
Percentage 0.00 0.00 60.00 60.00 70.00 80.00 Quarterly and
annual project reports
Project MIS PMU/ROOs
Change in community
members who feel they
have some influence in community decision-
making processes
(male/female)
Percentage 0.00 0.00 0.00 30.00 30.00 40.00
3 times during
project (baseline,
mid-term, final)
Randomized impact evaluation
and qualitative
studies and focus groups
Contracted firm
Change in degree of people‟s trust in
community groups
Percentage 0.00 0.00 10.00 20.00 40.00 60.00
3 times during project (baseline,
mid-term, final)
Randomized
impact evaluation and qualitative
studies and focus
groups
Contracted firm
Change in people‟s willingness to contribute
to community project
costs
Percentage 0.00 0.00 15.00 30.00 50.00 60.00
3 times during
project (baseline, mid-term, final)
Randomized
impact evaluation
and qualitative studies and focus
groups
Contracted firm
No. of trainees in
capacity building
activities by kind of activity
(male/female/youth/
minorities/IDPs/municipal/ExComm)
Community training;
Cross visits; Seminars; Conferences
Number 0.00 1100.00 5500.00 10000.00 14500.00 19000.00
Quarterly and
annual project
reports
Project MIS PMU
No. of villages which
hold community-wide Number 0.00 0.00 30.00 60.00 90.00 120.00 Measured 6 and 12
months after
Regional
evaluations PMU
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19
meetings organized by
Community Group to discuss public matters
after project completion
(measured at 6 and 12
months after completion
of sub-project)
project completion
No. of communities with new projects
implemented with
internal resources (including activities with
municipality and ExComm)
Number 0.00 0.00 50.00 110.00 260.00 420.00 Measured 6 and 12
months after project completion
Regional
evaluations, PMU
No. of communities with
projects implemented with external resources
Number 0.00 0.00 30.00 60.00 90.00 120.00 Measured 6 and 12
months after project completion
Regional
evaluations PMU
.
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Annex 2: Detailed Project Description
Azerbaijan: Second Rural Investment Project (P122944)
1. Objective: The Project Development Objective is to improve access to and use of community-driven rural infrastructure and expand economic activities for rural households. This
would be achieved through: (i) the provision of grants to finance eligible demand-driven micro-
projects in rural infrastructure; (ii) the provision of training and consultants‟ services to support
micro-project development by enhancing the capacity of engaged local stakeholders in all
aspects of micro-project program development; (iii) building opportunities for rural employment
and livelihood support services through the provision of training and consultants‟ services to
carry out pilot livelihood support services in six communities; and, (iv) supporting project
management capacity at the Project Management Unit (PMU) and its Regional Operations
Offices (ROOs) for the purposes of effective management, implementation and monitoring and
evaluation of Project activities.
2. This repeater project is a Specific Investment Loan (SIL) with a total investment cost estimated at US$53.6 million, of which US$30 million will be financed by IBRD. The Project
will scale up AzRIP both geographically into currently un-serviced rayons and vertically through
the inclusion of pilot livelihood support services and second generation institutional support in
current AzRIP active project areas.
3. The Project has three components:
Component A - Rural Community Infrastructure -US$41.64 million
4. Two categories of micro-project grants will be supported under Component A: (i) micro-projects in previously un-serviced rayons which meet eligibility criteria set out in the Operational
Manual (OM); (ii) second generation micro-projects in active AzRIP communities with high
performance ratings from previous micro-project implementation and which meet eligibility
criteria set out in the OM, and; (iii) micro-projects submitted by Common Interest Groups
supported under the pilot scheme in Component B which meet eligibility criteria as established
in the OM.
5. The current AzRIP provides investments in demand-driven micro-projects to eligible communities in five regions (Mughan-Salyan, Lower Shirvan, Nakhchivan, North and North
West). This component will extend coverage and provide funding for demand-driven micro-
projects in rural infrastructure in eleven new rayons in the North and in the Mugan-Salyan zones.
The average size of the micro projects will be US$70,000, while micro-projects valued at over
US$85,000 will require prior review by the Working Group. Micro-project expenses eligible for
financing from the project include identification, design, construction and rehabilitation of the
investment. Potential investments, based on priority needs identified by communities include,
inter alia, rehabilitation or construction of:
Potable water systems
Irrigation infrastructure
Sewerage and drainage systems
Secondary roads and small bridges
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Small-scale local electricity distribution
Primary schools and kindergartens
Health centers
Community centers
Parks
Market places
6. Costs: This component will support costs related to the identification, design, construction, rehabilitation, and initial operation and maintenance of the investment.
Beneficiaries are required to share the cost of the investment and to ensure the availability of
funds for O&M after the grant funding has been completed. Micro-projects require a minimum
community contribution of 10% of the investment cost, of which at least 2% must be in cash.
7. Eligibility: The project targets newly eligible rural communities and communities in existing project coverage areas in 56 rayons across the country (11 new rayons and 45 rayons
served under AzRIP). These comprise the North zone rayons of Aghsu, Balakan, Gabala, Gakh,
Gobustan, Guba, Gusar, Ismayilli, Khachmaz, Oghuz, Shaki, Shamakhi, Zakatala and new
rayons of Absheron, Khizi, Shabran and Siyezen and; North West zone rayons of Aghstafa,
Barda, Dashkasan, Gadabay, Goranboy, Khanlar, Qazakh, Samukh, Shamkir, Tartar and Tovuz;
Lower Shirvan zone rayons of Aghdash, Goychay, Hajigabul, Kurdamir, Ujar, Yevlakh and
Zardab and Yevlakh; Mughan Salyan zone rayons of Bilasuvar, Imishli, Jalilabad, Neftchala,
Saatly, Sabirabad and Salyan and new rayons of Aghjebedi, Astara, Beylagan, Lenkaran, Lerik,
Masalli and Yardimli; Nakhchivan zone rayons of Babek, Julfa, Kengerli, Ordubad, Sadarak,
Shahbuz and Sherur. Micro-projects in Nakhchivan are to be fully financed by Government
funds. Other zones are eligible for IBRD financed micro-projects.
8. These rayons will benefit from mobilization and access to improved infrastructure. Households and individuals from well-performing micro-projects in the 45 existing rayons
served under AzRIP will benefit from second generation community infrastructure and
livelihood support services.
9. The size of the communities should be greater than 1,000 and less than 10,000 people, but smaller communities can cluster with neighboring communities to achieve scale, in regions
that meet established selection criteria and have a higher relative incidence of poverty. A total of
600 micro-projects are expected to be implemented in communities meeting eligibility criteria.
10. Current micro-project cycle procedures as detailed in the AzRIP OM will be maintained in the new Project. Grants to project beneficiaries shall be delivered in accordance with
eligibility criteria and procedures acceptable to the Bank and shall include the following: (a) the
Grant(s) shall be denominated in Manat; (b) grants for financing micro-projects under
Component A shall be made available to: (i) municipalities; community-based organizations
registered as legal entities, which consist of representatives of rural communities with
populations of more than 1,000 and less than 10,000 (including clusters of smaller communities
that add up to 1,000), eligible under the OM; and any other associations and organizations as the
Government and the Bank may agree.
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11. ROOs shall launch a promotion and outreach campaign, issue requests for micro-project proposals and assist in the preparation of micro-project proposals. Investments will be identified
by beneficiaries, prioritized through local participatory planning processes, and appraised
according to technical, financial, social, economic, institutional and environmental criteria set
out in the OM. Micro-project committees formed as part of community mobilization, as defined
in the OM, shall submit proposals of micro-projects to ROOs on behalf of their respective
community. ROOs shall appraise and evaluate micro-project proposals based on the following:
(i) impact on the community; (ii) institutional capacity to implement the service intended by the
Micro-project; (iii) financial viability; and (iv) technical and environmental safety. Any micro-
projects involving land expropriation shall not be eligible for consideration. ROOs shall register
the results and forward the summary evaluation of proposals to the respective Regional Grant
Approval Committee (RGAC) for their approval or rejection. Any members of the RGACs who
may have a potential conflict of interest in a particular proposal shall recuse themselves from
making a decision on that particular proposal.
12. The amount of individual grants shall be based upon the estimated cost of goods, works services and operating costs that will be required for the Micro-project, and shall not exceed 90%
of the overall costs of Micro-projects. The Government shall take necessary actions, satisfactory
to the Bank, to ensure that, where proposals approved by the RGACs call for implementation of
micro-projects by community-based organizations that are not already registered as legal entities,
the charters of such organizations shall be registered in accordance with the laws of the
Government in a timely manner. The Government shall provide each Grant under a Grant
Agreement with the respective beneficiary community on terms and conditions approved by the
Bank, which shall include the following:
(a) The Beneficiary shall ensure that the grant funds are used exclusively for the
purposes specified for the Micro-project approved by the RGAC.
(b) The Beneficiary shall provide no less than 10% of the total cost of the Micro-
project, in cash or in-kind.
(c) The Government shall obtain rights adequate to protect its interests and those of
the Bank, including the right to: (i) suspend or terminate the right of the Beneficiary to
use the proceeds of the Grant, or obtain a refund of all or any part of the amount of the
Grant then withdrawn, upon the Beneficiary‟s failure to perform any of its obligations
under the Grant Agreement; and (ii) require each Beneficiary to: (a) carry out its Micro-
project with due diligence and efficiency and in accordance with sound technical,
economic, financial, managerial, environmental and social standards and practices
satisfactory to the Bank, including in accordance with the provisions of the Anti-
Corruption Guidelines applicable to recipients of loan proceeds other than the
Government; (b) provide, promptly as needed, the resources required for the purpose; (c)
procure the goods, works and services to be financed out of the Grant in accordance with
the provisions of this Agreement; (d) maintain policies and procedures adequate to enable
it to monitor and evaluate in accordance with indicators acceptable to the Bank, the
progress of the Micro-project and the achievement of its objectives; (e) (1) maintain a
financial management system and prepare financial statements in accordance with
consistently applied accounting standards acceptable to the Bank, both in a manner
adequate to reflect the operations, resources and expenditures related to the micro-
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project; and (2) at the Bank‟s or the Government‟s request, have such financial
statements audited by independent auditors acceptable to the Bank, in accordance with
consistently applied