eople’s Democratic Republic: Sustainable Natural Resource ... · sustainable natural resource...

Completion Report

Project Numbers: 37579-032, 37579-012 Grant Numbers: 0144 and 0145 Technical Assistance Number: 7241 January 2018

Lao People’s Democratic Republic: Sustainable

Natural Resource Management and Productivity

Enhancement Project This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS Currency Unit – Lao Kip (KN)

At Appraisal At Project Completion (26 January 2009) (6 January 2017)

KN1.00 = $0.0001178689 $0.0001219

$1.00 = KN8,484 KN8,202

ABBREVIATIONS ADB

ANR – –

Asian Development Bank agriculture and natural resources

DAFO – District Agriculture and Forestry Office DMF – design and monitoring framework DPC – Department of Planning and Cooperation EIRR – economic internal rate of return FDI – foreign direct investment GAP – gender action plan GIS – geographic information system IFAD – International Fund for Agricultural Development Lao PDR – Lao People’s Democratic Republic MAF – Ministry of Agriculture and Forestry NSEDP – National Socio-Economic Development Plan O&M – operation and maintenance PAFO – Provincial Agriculture and Forestry Office PAM – project administration manual PCR – project completion report PIC – project implementation consultant PPCP – public–private community partnership PPRR – project procurement-related review PPTA – project preparatory technical assistance RRP

SPA – –

report and recommendation of the President special project administration mission

SPM – subproject preparation manual TA – technical assistance

WEIGHTS AND MEASURES

ha (hectare) – 10,000 square meters kg (kilogram) – 1,000 grams km (kilometer) – 1,000 meters t (metric ton) – 1,000 kilograms

NOTES

(i) The fiscal year (FY) of the government and its agencies ends on 30 September. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 30 September 2009.

(ii) In this report, "$" refers to United States dollars.

Vice-President Stephen Groff, Operations 2 Director General Ramesh Subramaniam, Southeast Asia Department (SERD) Director Jiangfeng Zhang, Environment, Natural Resources and Agriculture

Division, SERD Team leader David Salter, Principal Natural Resources and Agriculture Specialist,

SERD Team members Sisavanh Phanouvong, Senior Project Officer, SERD

Eileen Quisumbing-Battung, Project Analyst, SERD Theonakhet Saphakdy, Social Development Officer (Gender), SERD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 3 C. Project Costs 7 D. Disbursements 8 E. Project Schedule 8 F. Implementation Arrangements 8 G. Conditions and Covenants 8 H. Related Technical Assistance 8 I. Consultant Recruitment and Procurement 9 J. Performance of Consultants, Contractors, and Suppliers 9 K. Performance of the Borrower and the Executing Agency 10 L. Performance of the Asian Development Bank 10

III. EVALUATION OF PERFORMANCE 11

A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 11 D. Preliminary Assessment of Sustainability 12 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13

A. Overall Assessment 13 B. Lessons 14 C. Recommendations 15

APPENDIXES

1. Project Design and Monitoring Framework 16

2. Completion Review of Subprojects 21

3. Status of Compliance with Grant Covenants 45

4. Summary of Social Safeguard Issues 61

5. Summary of Gender Equality Results and Achievements 62

6. Technical Assistance Completion Report 77

7. Main Text of the Subproject Preparation Manual 79

8. Calculation of Overall Project Rating 122

BASIC DATA A. Loan Identification

1. Country

2. Grant Numbers

3. Project Title

4. Borrower

5. Executing Agency

6. Amounts of Grant

7. Project Completion Report Number

Lao People’s Democratic Republic

0144/0145

Sustainable Natural Resource Management and Productivity Enhancement Project

Lao People's Democratic Republic

Ministry of Agriculture and Forestry

$20,000,000 (ADB),

SDR10,100,000 (IFAD)

1671

B. Grant Data 1. Appraisal – Date Started – Date Completed 2. Grant Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Grant Agreement

5. Date of Grant Effectiveness – In Grant Agreement – Actual

– Number of Extensions 6. Closing Date – In Grant Agreement – Actual – Number of Extensions

5 October 2008 14 October 2008 28 November 2008 1 December 2008 23 February 2009 23 March 2009 (ADB) 8 July 2009 (IFAD)

21 June 2009 (ADB) 4 January 2010 (IFAD) 8 September 2009 (ADB) 23 July 2009 (IFAD) 1 (ADB) 0 (IFAD) 31 December 2015 (ADB) 30 September 2016 (IFAD) 10 May 2016 (ADB) 27 July 2016 (IFAD) 0

7. Disbursements a. Dates

Initial Disbursement

G0144-LAO: 2 October 2009 G0145-LAO: 15 October 2009

Final Disbursement

23 June 2015 3 February 2016

Time Interval

(months) 69 76

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Effective Date

G0144-LAO: 8 September 2009 G0145-LAO: 23 July 2009

Original Closing Date

31 December 2015 30 September 2016

Time Interval

(months) 76 86

b. G0144-LAO: Amount ($)

Category Original

Allocation1

Last Revised Allocation2 Net Amount Available

Amount

Disbursed

Undisbursed

Balance3

Civil Works 231,100 185,951 185,951 185,950 1 Vehicles and Equipment

- 4WD Vehicles 186,400 302,405 302,405 302,405 0 - Motorcycles 92,900 111,200 111,200 111,200 0 - Equipment 695,400 540,665 540,665 540,664 1 Consulting Support - International

Specialists 2,460,800 4,193,916 4,193,916 4,186,657 7,259

- National Specialists 2,464,400 242,992 242,992 241,957 1,035 - Specialist Support 204,300 299,060 299,060 299,060 0 Special Studies 1,179,600 470,106 470,106 470,106 0 Subprojects - Commercialization 4,528,200 6,008,116 6,008,116 6,008,116 0 - Natural Resource

Management 1,813,100 1,544,873 1,544,873 1,545,048 (175)

Training - Staff Training 359,900 216,922 216,922 216,921 1 - GIS Training 254,900 128,517 128,517 128,516 1 Implementation and Supervision

- Incremental Staff 2,174,800 2,181,814 2,181,814 2,180,920 894 - Implementation and

Management 3,354,200 3,573,463 3,573,463 3,578,298 (4,835)

Total 20,000,000* 20,000,000 20,000,000 19,995,818 4,182

ADB = Asian Development Bank, GIS = Geographic Information System, IFAD = International Fund for Agricultural Development. 1 Based on the grant agreement dated 23 March 2009. 2 As a result of the fluctuation between the United States dollar and the special drawing right (SDR), the grant profile

in the Grant Financial Information System was adjusted to allow for the utilization of the International Fund for Agriculture Development grant balance.

3 A refund of $4,182.26 was made to Asian Development Bank on 27 April 2016.

c. G0145-LAO: Amount ($)

Category Original

Allocation1

Last Revised Allocation2 Net Amount Available

Amount

Disbursed3

Undisbursed

Balance4

Subprojects - Commercialization 3,638,614 5,270,224 5,270,224 4,846,669 423,555 - Natural Resource

Management 8,168,317 8,485,549 8,485,549 8,301,539 184,010

- Poverty Reduction 2,673,267 1,827,385 1,827,385 2,034,690 (207,305) Allocated 519,802 0 0 0 0

Total 15,000,000 15,583,158 15,583,158 15,182,898 400,260

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1 The Grant Financial Information System (GFIS) records the grant amount in United States (US) dollar, while the grant agreement shows the grant amount in special drawing rights (SDR10100,000).

2 As a result of the fluctuation between the US dollar and SDR, the grant profile in GFIS was adjusted to allow for the utilization of the International Fund for Agriculture Development (IFAD) Grant balance.

3 Based on GFIS (grant disbursements by contract). 4 Includes a refund of $7,734.32 to IFAD on 24 June 2016.

8. Local Costs (Financed) – 0%. ADB local cost financing is not applicable to this project. C. Project Data

1. Project Cost ($’000)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 35,000 35,178 Local Currency Cost 1,775 1,775 Total 36,775 36,953

2. Financing Plan ($‘000)

Cost Appraisal Estimate Actual

Implementation Costs Borrower Financed 1,775 1,774 ADB Financed 20,000 19,996 IFAD 15,000 15,183

Total 36,775 36,953

IDC Costs 0 0

Total 36,775 36,953

ADB = Asian Development Bank, IDC = interest during construction, IFAD = International Fund for Agricultural Development.

3. Cost Breakdown by Project Output ($‘000)

Output Appraisal Estimate Actual

1. Capacity Building for Agriculture and Natural Resource Sector Management

9,682 3,114

2. Investment in Resource Management and Productivity Enhancement

18,131 21,948

3. Implementation Management 6,279 11,891 Contingencies 2,683 0 Interest during implementation 0 0

Total 36,775 36,953

Note: Numbers may not sum precisely because of rounding.

4. Project Schedule

Item Appraisal Estimate Actual

Date of Contract with Consulting Firm Q2 2010 17 August 2010 Civil Works Contract1 Date of Award of First Procurement Q2 2009 28 August 2010 Completion of Work Q1 2010 30 November 2010 Equipment and Supplies First Procurement Q3 2009 19 June 2010

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Last Procurement Q3 2009 11 June 2015 Completion of Equipment Installation Q4 2009 25 June 2012 Subproject Contract Date of Award of First Procurement Q1 2011 20 September 2011 Completion of Work Q4 2011 31 May 2012

1 Civil works category includes 10 small-scale civil works contracts for the refurbishment or rehabilitation of project coordination offices and geographic information system offices in Vientiane and four provinces (excluding Salavan).

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 23 July 2009 to 31 December 2010 Satisfactory Satisfactory From 1 January 2011 to 31 March 2011 On Track From 1 April 2011 to 30 June 2011 Potential Problem From 1 July 2011 to 30 September 2011 Actual Problem From 1 October 2011 to 31 March 2013 On Track From 1 April 2013 to 30 June 2013 Potential Problem From 1 July 2013 to 27 July 2016 On Track

D. Data on ADB Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersa

Pre-Startup 29 Mar–4 Apr 2009 1 7 a Pre-Inception 23–28 Sep 2009 4 24 a, b, c, d Special Review 20–24 Nov 2009 3 15 b, d, e Inception 14–20 Jan 2010 4 17 b, d, f, g Grant Review No. 1 23–26 Nov 2010 3 10 b, d, f Grant Review No. 2 7–13 Jun 2011 3 12 b, l, k Grant Review No. 3 29 Oct–2 Nov 2011 2 8 b, l Midterm Review 30 Nov 2012–9 Jan 2013 6 40 h, i, j, k, l, m Special Project Administration 29 Apr–3 May 2013 4 20 k, n, o Grant Review No. 4 15–26 Jul 2013 2 22 n, o Grant Review No. 5 10–17 Feb 2014 3 14 h, o, k Grant Review No. 6 30 Jun–4 Jul 2014 3 12 k, o, p Grant Review No. 7 11–16 Feb 2015 4 20 k, o, p, r Grant Review No. 8 25–28 Aug 2015 2 8 o, p Project Completion Review 9 Jan–28 Feb 2016 5 22 h, k, l, q

a a = senior natural resources economist; b = environment specialist; c = climate change specialist; d = assistant project analyst; e = financial due diligence specialist; f = project implementation officer; g = senior portfolio management specialist; h = senior natural resources and agriculture specialist; i = social development specialist; j = young professional; k = senior project officer; l = associate project analyst; m = senior finance and administration officer; n = unit head, project administration; o = water resources specialist; p = associate safeguards officer; q = social development officer (gender); r = project analyst.

I. PROJECT DESCRIPTION

1. The expected impact of the Sustainable Natural Resource Management and Productivity Enhancement Project in the Lao People’s Democratic Republic (Lao PDR) was more efficient and sustainable natural resource management, and improved sector productivity. The expected outcome was enhanced institutional capacity at provincial and national levels to manage natural resource sustainably. The expected outputs were (i) capacity building for agriculture and natural resource sector management, (ii) investment in resource management and productivity enhancement, and (iii) project management. The project was implemented in the five southern provinces: Attapeu, Champassak, Salavane, Savannakhet, and Sekong, with a total of 42 districts and a combined population of 2.08 million people. The provinces cover 58,200 square kilometers (km2) and include 2,261 villages and 343,866 households, with an average poverty rate above 38%. The executing agency was the Ministry of Agriculture and Forestry (MAF) through its Department of Planning and Cooperation (DPC).1

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

2. The impact, outcome and outputs in the report and recommendation of the President were aligned with the government’s goals and Asian Development Bank’s (ADB) strategies, which made the project relevant at approval. The government’s 6th National Socio-Economic Development Plan (NSEDP) (2006–2010) and 7th NSEDP (2011–2015) sought increased food production and security, production for agro-processing, stabilized shifting cultivation, and sustainable forest management, consistent with its National Growth and Poverty Eradication Strategy. ADB's country strategy and program for the Lao PDR, 2007–2011 stated that assistance for the agriculture and natural resource sector will support improved sector policy, strategy and institutions, and investments in rural infrastructure for private sector-led, pro-poor sustainable growth.2 ADB's Strategy 2020 promotes environmentally sustainable growth based on natural resources protection.3 The mandate of the International Fund for Agricultural Development (IFAD) is rural poverty reduction, and IFAD’s cofinancing was invested in farmers’ groups capacity building, agriculture commercialization, and poverty reduction. 3. Sector Background. At project formulation, the agriculture and natural resources (ANR) sector was characterized by unprecedented inflows of foreign direct investment (FDI) in cross-border contract farming and plantation-style commodity production land concessions. The investors included businesses from the People’s Republic of China, India, Republic of Korea, Thailand, and Viet Nam. The scale of these developments was significant—153,000 hectares (ha) allocated in Savannakhet alone and more than 200,000 ha in the five southern provinces. Such land concessions have considerable development potential, but major concerns emerged: (i) leases were often under provincial authorities whose processes and requirements for approval and management were not well established; (ii) leases of 20–50 years were common; (iii) land concessions were allocated without proper feasibility or safeguards-based analyses; (iv) little consideration was given to the impact on food security, local livelihoods, and natural resources; and (v) annual rentals were low in comparison to potentially more rewarding land use. FDI had

1 ADB 2009. Report and Recommendation of the President to the Board of Directors: Proposed Grant to the Lao

People’s Democratic Republic for the Sustainable Natural Resource Management and Productivity Enhancement Project, Manila.

2 ADB. 2007. Country Strategy and Program: Lao People's Democratic Republic, 2007–2011. Manila. 3 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank 2008–2020. Manila.

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high risks for environmental damage and limited transparency, mainly benefiting foreign and affluent domestic interests and potentially disadvantaging vulnerable groups. 4. Rationale—Overall. The government wanted to manage FDI to ensure that benefits were realized and harmful elements were avoided. ADB's country strategy and program proposed a two-part strategy for ANR sector issues: (i) improved sector policy, strategy, and institutions, which became output 1; and (ii) investments in public rural infrastructure to facilitate private sector-led, pro-poor sustainable growth, which became output 2. The core issues of inputs, activities, and outputs related to the private sector’s FDI are critical too but outside the project’s design and control. The design and monitoring framework (DMF) lacks mitigating measures at the outcome level. The uncertainty of the duration of the moratorium on the allocation of land concessions larger than 100 ha, that came in effect less than 1 year before grant approval, could have been foreseen as a potential risk to achieving the project outcome. The Prime Minister’s Order No. 13 of June 2012 suspending land concessions, which lasted until after project completion, also weakened the original rationale for the project. 5. Rationale—Capacity Building. The capacity of the government’s line agencies needed to be strengthened to assess FDI proposals for land concessions; monitor and enforce compliance with laws, contracts and licenses; and protect natural resources. This would be facilitated by building government capacity in screening and appraisal techniques, including economic feasibility, social acceptability, and environmental stability, as formal approval requirements. The project aimed to assess the impact from potential FDI proposals and initiate public disclosure of land concession awards. Existing land concessions were to be assessed, and a database of concessions with noncommercial information was to be posted on a public website. The commercial terms and conditions of the concessions were to be recorded in a confidential database for compliance monitoring and for the administration of the government’s concession commitments. 6. Rationale—Investments. Investments in public rural infrastructure were expected to enhance and stimulate associated private investments in concessions and contract farming, thereby addressing a range of sector objectives, including agriculture commercialization, natural resource protection, and food security. Eligible subprojects were to include rural infrastructure, specific purpose extension initiatives, and piloting storage and post-harvest handling technologies. Although MAF was the executing agency, the breadth of the infrastructure is reflected in the composition of the technical review committee, which was expected to comprise experts from relevant ministries and departments, including MAF; Water Resources and Environment Administration; Ministry of Industry and Commerce; Ministry of Communications, Transport, Posts, and Construction. The varied interests of the committee members were potentially an open-ended list of investments not necessarily aligned with the project objectives. The criteria for subproject approval provided no guidance on public or private sector involvement, or on infrastructure, production, or service investments. Additional potential subprojects were not screened during project preparation. 7. Design and monitoring framework. The original DMF and the corresponding design summary and targets lacked the geographic focus needed to generate project benefits. Economically viable and financially sustainable subproject investments were used as outcome and output indicators, but they were not well defined and lacked target dates for achievement. Output indicators did not specify quantities, dates, and baselines. In November 2009, the special review mission noted the need to identify measurable indicators for the DMF. The special project administration mission in April–May 2013 reviewed and revised the DMF. However, it was never

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processed for approval, and the executing agency’s project completion report (PCR) considered the original DMF unrealistic. 8. Change in government policy. Preceding the 2012 suspension of land concessions, the 2007–2008 suspension demonstrated government's oscillating concerns and skepticism about what became the basis of the project rationale and design. Early policy work under output 1 stressed that FDI land concessions required "an in-depth policy study to arrive at a more beneficial investment scheme that equally favors the poor and the government with the least environmental repercussion."4 FDI concessions and contract farming had three main benefits: (i) maximize the economic benefits from underutilized lands, (ii) contain slash-and-burn upland farming, and (iii) provide valuable FDI. However, the study found that a national policy favoring power generation, mining, and land concessions as source of cash for the country was undermining food security. The 2012 land concession suspension was meant to reevaluate the activity.5 MAF's PCR found that the land concessions resulted in "adverse social and environmental impacts on the livelihoods of local people."6 9. Soundness and adequacy. The DMF, RRP, and project administration manual (PAM) do not provide sufficient clarity on the focus of project activities and support to MAF’s implementation. One objective of the project was to strengthen MAF’s limited implementation capacity.7 However, MAF was required to implement the project with unclear objectives and implementation arrangements. More importantly, the soundness of the project depended on the continuation of a policy that the government questioned before grant approval and subsequently suspended. Although the DMF identified this as a risk, no mitigating measures were proposed. B. Project Outputs

10. Actions after suspension of land concessions. The 2012 suspension of issuance of land concessions meant that the project could not be implemented as designed. Instead of changing the scope of the project, an informal process was adopted during the first grant review mission.8 The project implementation consultants (PICs) were made to redesign the project activities into the subproject preparation manual (SPM) and subproject implementation manual. The second grant review mission suggested these manuals were elaborating on the PAM. However, the SPM made fundamental changes that were not in line with the ADB-approved RRP and PAM.9 The executing agency reported that ADB "approved" or made "no objection" to these fundamental changes, but this could not be confirmed in ADB’s archives. The main text of the SPM is in Appendix 5. There was no indication of any due diligence or safeguards requirements being updated.10

4 Government of Lao PDR, MAF. 2011. Policy Trends, Opportunities, Constraints, and Gaps in Relation to MAF

Agricultural Development Strategy for 2011–2015. Policy Working Document. No. 1. Vientiane (30 June). 5 The Prime Minister's Order No. 13/PM of 11 June 2012. 6 Government of Lao PDR, MAF. 2015. Sustainable Natural Resource Management and Productivity Enhancement

Project (SNRMPEP) Project Completion Report. Vientiane. 7 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Grants to the Lao

People’s Democratic Republic for the Sustainable Natural Resource Management and Productivity Enhancement Project. Manila, and ADB. 2014. Project Procurement-Related Review—Grant 0144 (SF) and Grant 0145: Sustainable Natural Resource Management and Productivity Enhancement Project. Manila.

8 ADB (Southeast Asia Department). 2010. First Grant Review Mission to Lao PDR: Sustainable Natural Resource Management and Productivity Enhancement Project. Back-to-office report. 23-26 November 2010. (internal).

9 ADB (Southeast Asia Department). 2011. Second Grant Review Mission to Lao PDR: Sustainable Natural Resource Management and Productivity Enhancement Project. Aide Memoire. 7-13 June 2011 (internal).

10 Government of Lao PDR, MAF. 2012. Sustainable Natural Resource Management and Productivity Enhancement Project Annual Progress Report 2010-2011. Vientiane; and Government of Lao PDR, MAF. 2011. Quarterly Progress

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1. Output 1: Capacity Building for Agriculture and Natural Resource Sector Management

11. Redesign. At project approval, output 1 was projected to account for 26% of the project cost. Although the rationale for output 1 no longer existed, activities under the component continued, reaching 8% of total project cost. MAF and ADB agreed to "align capacity building and resource mapping inputs more closely to subproject preparation" (footnote 9), effectively becoming an administrative cost, in addition to increasing project management costs, to support output 2. Except for the policy development subcomponent, the reorientation to support output 2 was confirmed in the grant review in November 2011.11 12. Output 1: Subcomponent 1(i)—Land Suitability Assessment and Participatory Land Use Mapping. The Geographic Information System (GIS) Office of the National Agriculture and Forestry Research Institute was strengthened to become the Resource Mapping Unit attached to the National Soil Analysis Division, with four key staff to assist in agricultural land use planning and zoning. GIS equipment and resource mapping facilities were set up and the web map server was developed. Training materials were developed, and national and provincial staffs were trained in GIS application, ground truthing, data management, web map server operations, basic land use planning, and mapping. A total of 85 courses trained 243 national staff and 1,152 provincial staff. The mapping focused on land use and land suitability for output 2 subprojects, but it also met the RRP DMF output target for mapping in 42 districts of the five southern provinces. However, the RRP’s objective to enable staff to present technically based recommendations before land concessions were awarded could not be met because of the suspension of concessions. It is likely the outcomes and impacts were not fully supported except through output 2. National and provincial GIS units were handed over to line agencies and functioned independently of the project (footnote 11). 13. Output 1: Subcomponent 1(ii)—Capacity Building for Compliance with Environmental and Social Safeguards and Other Social/Gender Development Aspects. The RRP intended to develop capacity in sector agencies for public and private investment proposals, including FDI land concessions. Instead, the SPM refocused on output 2, with training conducted for national, provincial, and district officials. The output target in the DMF was not achieved. 14. Output 1: Subcomponent 1(iii)—Capacity Building in Investment Appraisal. The RRP design addressed investment appraisal at the national level for private proposals for concessions exceeding 100 ha and at the provincial level for concessions up to 100 ha. The project's response to the suspension of land concessions was to halt concession-related activities and refocus on output 2. For Provincial Agriculture and Forestry Office (PAFO) and District Agriculture and Forestry Office (DAFO) staff, 29 training sessions on subproject design and appraisal were conducted. The DMF output target was not met for the number of land concessions reviewed and economic and financial social viability incorporated by MAF and the National Land Management Authority. 15. Output 1: Subcomponent 1(iv)—Capacity Building of Producer Association Sustainability. The Project carried out a training needs assessment, and identified potential service providers for producer and farmer groups. As few institutions in the Lao PDR can deliver skills training in technical areas and management functions, government staff and the PICs

Report January-March 2011. Vientiane. This is not confirmed in the second or third grant review back-to-office reports or aide memoires.

11 ADB (Southeast Asia Department). 2011. Third Grant Review Mission to Lao PDR: Sustainable Natural Resource Management and Productivity Enhancement Project. Back-to-office report. 29 October–2 November. (internal).

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trained the trainers. The trainees then trained 896 producer and farmer groups involved in output 2, mostly focusing on extension for on-farm activities. The output 2 subprojects reviewed by the PCR mission (Appendix 2) included examples of a wide range of training included in subproject costs without clear links to needs or likelihood of adoption. The DMF output indicator for the number of producer groups made financially independent was not met. 16. Output 1: Subcomponent 1(v)—Policy Development. The RRP included a national-level activity aimed at "higher echelons of government" (footnote 1, para. 21) and addressed policies related to land concessions, farmer groups, World Trade Organization requirements, MAF's agriculture policy development, and others. These goals were beyond the capacities of the two consultants engaged. MAF expressed concerns about the appropriateness of a project focused on the five southern provinces as a means for national policy engagement. With the suspension of land concessions, the project undertook studies in related areas, including farmers’ land certificates and sugarcane contract farming, which influenced sector policies. A policy facilitator team was established involving DPC and project staff to address agricultural modernization and commercialization. It included studies on (i) concepts for the public–private community partnerships (PPCPs); (ii) the Lao PDR agricultural commercialization efforts to meet World Trade Organization food safety requirements; and (iii) trends, opportunities, and gaps in MAF’s agricultural strategy for 2011–2015. Implementation differed substantially from the RRP, and the approach did not achieve the planned output of government and donors committed to a common agricultural development framework. However, it contributed to the output 1 indicator of policy documents and dialogue, and the outcome indicator of improved ANR policy analysis.

2. Output 2: Investment in Resource Management and Productivity Enhancement

17. Redesign. The RRP investment component aimed to complement investments in land concessions and contract farming to support the impact target of increased forest cover. However, both subprojects prepared during the project preparatory technical assistance (PPTA) involved public rural infrastructure subprojects and were used for the financial and economic justification of the project. Eligible subprojects were to include rural infrastructure, specific purpose extension initiatives, piloting grain storage, and handling equipment using post-harvest handling technologies. The redesign of output 2 began when the first grant review mission agreed to remove the other ministries from the technical review committee. After that, the subprojects focused on producer groups (footnote 8). The SPM restricted the scope of subprojects further by excluding any agency not involved in agricultural production and solely infrastructure subprojects, and by limiting agricultural infrastructure to small-scale subprojects and equipment supporting production outputs.12 The SPM introduced new activities, including revolving funds, as part of every subproject, and promotion of PPCPs. By the end of 2011, the focus of output 2 had shifted to private sector-oriented subprojects, mostly on production, and the introduction of revolving funds and PPCP arrangements without appropriate detailed feasibility studies. The 71 subprojects were categorized as (i) agriculture commercialization (33), (ii) poverty reduction (30), and (iii) natural resource management (8). 18. The RRP includes 18 vague selection criteria. Following the inception mission in November 2009, the number of criteria were reduced to 8 in the revised PAM of February 2010. Selection and preparation processes formed part of the first five review missions until the introduction of the SPM in 2011. MAF’s PCR found the PAM lacked clarity and that the subprojects could have been better identified at the PPTA stage (footnote 6). This provided an opportunity for a project redesign as reflected in the SPM. Output 2 no longer complemented Output 1.

12 Government of Lao PDR, MAF. 2011. Subproject Preparation Manual. Vientiane.

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19. Subproject feasibility studies. The PICs undertook 25 feasibility studies based on a template they had developed. Dedicated subproject consultants prepared another 46 feasibility studies. However, the economic expertise provided to develop the template was inadequate, and most feasibility studies were weak on economic due diligence. As an example, the conversion from financial to economic values mistakenly applied the standard conversion factor to revenues, thus producing incorrect values for the economic internal rate of return (EIRR).13 20. The five coffee subprojects reviewed in Appendix 2 demonstrate other weaknesses in the feasibility studies. For example, subprojects claimed yields varying from 4 metric tons (t) per hectare (4 t/ha) to 11 t/ha, in contrast to 2 t/ha reported by provincial and district staff. Two feasibility studies indicated coffee crop budgets based on annual budgets for paddy. The analytical approach used was suitable for public sector investments, but not appropriate for the analyses of private sector investments, including cooperatives and production groups. Proper analysis requires projected financial statements to assess financial soundness and working capital requirements. These were absent in the feasibility studies, possibly because of the redesign from public to private subprojects. 21. Before the midterm review, MAF had compressed 450 subproject proposals into 71 subprojects, all of which ADB had approved. The midterm review noted concerns about the subprojects’ technical and economic soundness, as well as the absence of (i) gender action plans (GAPs); (ii) safeguard plans and measures; and (iii) arrangements for monitoring and reporting on the performance of the revolving funds, PPCPs, or the intended beneficiaries. Addressing these issues became an important follow-up action.14 22. Subproject implementation. The Project management made frequent changes (Appendix 2), during subproject implementation with more than half of the subprojects fundamentally changed from the original feasibility study. Substantial changes included (i) canceling some activities to introduce or increase other activities, (ii) reducing the number of target villages, (iii) relocating the subproject from one geographic area to another, and (iv) canceling revolving funds.15 Changes not classified as substantial included (i) switching from one crop to another, (ii) extending previous development partner or private sector activities, and (iii) implementing production without the proposed post-harvest and value-chain activities. Apparently, no mechanism was in place for consultation and agreement with ADB on these changes, and no indicators were in the DMF. 23. The changes often sought to address the needs of the beneficiaries choosing from diverse subproject activities that were outside the original feasibility study design. Of the 11 subprojects changed, 3 may have resulted in negative EIRRs while the 8 other subprojects may have improved on the original subproject design. 16 The overall project design included complex arrangements for the selection and preparation of the feasibility study without any process for

13 The mistake was repeated in the MAF PCR, which involved recalculation of the feasibility study, not evaluation of

the subprojects as implemented and changed from the feasibility studies. 14 ADB (Southeast Asia Department). 2013. Midterm Mission to Lao PDR: Sustainable Natural Resource Management

and Productivity Enhancement Project. Back-to-office report. 30 November 2012– 9 January. (internal) 15 Of the 7 subprojects in Appendix 3 that had budgeted revolving funds, 2.5 (less than 40%) are considered functional,

2.5 were budgeted but not implemented, and 2 (almost 30%) failed (including ATP/PR/03, for which the first revolution of cattle is not due until 3 years after project completion but will not provide stock to revolve based on the current pace of herd development).

16 In the case of CPA/NRM/01, high-value green cardamom intended for a production subproject failed because the exotic crop is not adapted to local conditions. However, the activity adopted the crop and developed planting materials to be planted after the subproject with an estimated 35% EIRR for the plantation activity. The subproject could be justified as a grant-funded research and development investment but not, at the time, as a production investment.

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making the subsequent changes needed when faced with implementation challenges. The changes appear to have been made in the field, and the level of consultation is unclear. ADB could not effectively monitor implementation and may not always have been aware of the changes. C. Project Costs

Table 2: Project Cost Summary: Estimated and Actual ($‘000)

Output

Appraisal Estimate

Actual Change

$ ,000 % $ ,000 % %

1. Capacity Building for Agriculture and Natural Resource Sector Management

9,681.90 26 3,113.89 8 (68)

2. Investment in Resource Management and Productivity Enhancement

18,131.00 49 21,948.13 59 21

3. Implementation Management 6,279.00 17 11,891.25 32 89 Contingencies 2,683.10 7 0 0 (100) Interest during Implementation 0 0 0 0 0 Total 36,775.00 100 36,953.27 100 0

Financing Government Contribution 1,775.00 5 1,774.63 5 0 ADB 20,000.00 54 19,995.82 54 0 IFADa 15,000.00 41 15,182.90 41 1 Total 36,775.00 100 36,953.35 100 0 ( ) = negative, ADB = Asian Development Bank, IFAD = International Fund for Agricultural Development.

Note: Percentages may not total 100% because of rounding. a The change in IFAD funding is because fluctuations in the United States dollar and special drawing right (SDR)

exchange rate. Source: Asian Development Bank.

24. The total project cost was $36.95 million compared with the appraisal estimate of $36.78 million. The actual total financing closely matched the financing plan. Substantial changes in output costs reflected the changes in project design during implementation. Output 1 was reduced in scope and capacity building costs were lowered by $6.57 million (68%). The variance and contingencies were used to increase output 2's subproject investments by $3.82 million (21%) and implementation management in output 3 by $5.61 million (89%). 25. Implementation management became 32% of project costs. However, Output 1 essentially became a support cost for output 2, thus increasing implementation management support by 8% of project costs. Management and support thus rose to 68% of total output 2 costs. Adding the inputs of the two-supporting technical assistance (TA) projects discussed (Section H), management and support costs rose to about 76%. Some of the output 3 costs, such as feasibility study preparation, could have been charged to output 2 as they were integral to subproject preparation and implementation. 26. The substantial shift in resources from output 1 to implementation management in output 3 weakened the links from all three outputs up to the project outcome and impact. Thus, this change reduced the project’s overall economic and financial returns. Reallocation of consulting services from sector capacity building to implementation support likely provided PAFO and DAFO with improved capacity for subproject implementation.

8

D. Disbursements

27. Disbursements initially lagged, although project management activities proceeded. Output 1 was substantially scaled down, and implementation of output 2 was delayed because of difficulties in clarifying processes and in identifying and preparing subproject feasibility studies. With the adoption of the SPM, subprojects were prepared and approved in 2011–2012. Thus, disbursements increased and grant proceeds were fully disbursed by the planned closing in June 2015. E. Project Schedule

28. The project’s complexity and MAF’s capacity to execute the project posed risks of delays, which were compounded by the lack of clarity in the documents for output 2 subproject preparation. This was not resolved until finalization of the SPM. By 1 March 2012, all subprojects had been approved, enabling the rate of progress to increase and the June 2015 completion target to be achieved without extension. F. Implementation Arrangements

29. The executing agency was MAF through the DPC. The implementing agencies were the Offices of Provincial Governor of the five southern provinces. Separate project agreements were signed with each of the five implementing agencies. The national project coordination office was established and was assigned overall responsibility for project management; provincial project offices were established in each PAFO. A high level of implementation responsibility was assigned to the provincial project offices, which lacked the needed capacity. Project appraisal recognized the limited executing agency and implementing agency implementation capacities. To compensate, substantial PIC resources were provided. G. Conditions and Covenants

30. The project included 46 covenants relating to environment (6), social (8), financial (9), and other areas (23). No covenant was modified, suspended, or waived during implementation. The PAM scheduled the establishment of a project performance monitoring system in the first year, but the midterm review and special project administration (SPA) mission noted that the complex system was not effective and that reporting was ad hoc. Compliance with the implementation of environmental and social safeguards was delayed, and the GAP did not start until mid-2013—more than a year after all subprojects were approved and 82% of the civil works were completed. All covenants were complied with (Appendix 3). The project complied with Sections 4.02–4.04 and schedule 4, paragraphs 1–3 of the grant agreement. H. Related Technical Assistance

31. The Japan Special Fund-financed technical assistance (TA) for the Sustainable Natural Resource Management and Productivity Enhancement Project was approved on 23 February 2009 and the consultants were fielded on 1 September 2009.17 The TA aimed to develop training materials and to provide on-the-job training to ensure subprojects funded by the grant were properly screened, prioritized, and evaluated. The anticipated outcomes were (i) increased awareness of social and environmental safeguards; (ii) safeguards incorporated into subprojects to improve beneficiary ownership; (iii) a comprehensive set of training materials developed for

17 ADB. 2009. Technical Assistance to Lao People’s Democratic Republic for Sustainable Natural Resource

Management and Productivity Enhancement Project. Manila

9

subsequent agency training nationwide; and (iv) a database of all relevant GIS data, maps, and data on safeguards compliance available at national, provincial, and district levels. The TA activities were not well synchronized with the project. Hence, overall the TA is rated less than successful. The gender, environmental, and social safeguards analyses were found inadequate during the midterm review. The TA failed to contribute to effective implementation of the grant project. The performance of the executing agency is rated satisfactory (Appendix 6). 32. The Japan Fund for Poverty Reduction also financed the TA for Supporting Decentralized Rural Infrastructure Development. This TA was approved on 29 May 2012 and completed on 8 December 2016. Some of its activities supported the project, including (i) training for 8 districts on animal health, PPCP, agriculture extension, operation and maintenance (O&M), and revolving fund management;18 (ii) training of 27 government staff and 344 production group leaders in O&M of rural infrastructure; (iii) supporting 8 districts and 21 subprojects with training in O&M, cross-cutting issues in relation to gender development and inclusion, ethnicity, displacement, and the environment; (iv) supporting women's participation and skills in farmer and production groups, and facilitating their direct access to project benefits; and (v) training of 250 PAFO and DAFO staff and 875 group members as trainers in producer group skills, irrigation O&M, machinery maintenance, and hand tractor and large tractor O&M. The TA was rated successful.19 I. Consultant Recruitment and Procurement

33. Consultants were recruited in accordance with ADB’s Guidelines on the Use of Consultants (as amended from time to time) and the method specified in the procurement plan. The PICs were to provide 84 person-months international and 638 person-months national consulting services for $3.8 million (actual 96.5 person-months international and 458 person-months national). The project procurement-related review (PPRR) could not ascertain the compliance of the PICs recruitment with ADB requirements because of missing documentation.20 34. The PPRR reviewed processes for 38 contracts: 2 for consultancy selection, 12 for goods and civil works through national competitive bidding, and 24 through shopping. The review of the national competitive bidding contracts found issues concerning the opening and evaluation of bids, as well as issues with bid proposal similarities and publication of evaluation results. The PPRR concluded that procurement processes were mostly compliant with relevant requirements and made proposals to improve the processes, which the executing agency adopted, leading to a decrease in the procurement processing time. These proposals included (i) grouping similar goods into bigger and fewer packages, (ii) using the Lao PDR language in shopping and national competitive bidding packages, (iii) using the evaluation criteria to assess technical and financial bids carefully, and (iii) training procurement staff and committees. J. Performance of Consultants, Contractors, and Suppliers

35. MAF considers the performance of consultants—both PICs and individuals—satisfactory. However, the PICs prepared the SPM without following relevant ADB guidelines, requirements, and due diligence. The quality of the investment appraisal template prepared by the PICs was not of the required standard, nor a basis for capacity building. The PICs provided inadequate support

18 ADB. 2012. Technical Assistance to Lao People’s Democratic Republic for Supporting Decentralized Rural

Infrastructure Development Project. Manila. 19 ADB. 2017. Technical Assistance Completion Report: Supporting Decentralized Rural Infrastructure Development

Project in Lao PDR. Manila. 20 ADB. 2014. Project Procurement-Related Review—Grant 0144 (SF) and Grant 0145: Sustainable Natural Resource

Management and Productivity Enhancement Project. Manila.

10

to the executing agency in ensuring compliance with ADB social and environmental safeguards; gender, procurement, and financial management requirements; and the segregation of duties in financial management. The executing agency PCR assesses the performance of suppliers and contractors as satisfactory (footnote 6). All 82 civil works contracts were completed within the agreed time frame. A total of 174 contracts were awarded for goods. Although there were delays in import clearance and tax exemption, these did not hinder implementation. K. Performance of the Borrower and the Executing Agency

36. The performance of the borrower and the executing agency is rated satisfactory. The RRP noted that the project complexity would require significant project management skills and strong capacity building. The State Audit Organization's 2009–2010 project audit recommended improvements that were being applied by MAF in financial management arrangements, and these continued in response to the PPRR’s recommendations in 2013. The PPRR noted the national project coordination office’s insufficient capacity in procurement, financial management, and engineering 3 years after the PIC contract began, indicating limited capacity development. 37. In the implementation of the approved subprojects, the executing agency adapted to changing circumstances. When the revolving fund schemes failed, alternative means were employed such as introducing an entrepreneur or a commercial cash system to replace the role of the fund. The executing agency also responded positively to requests such as allowing farmers to change to crops with better market links. Although a formal process with agreed criteria and procedures to make such changes was lacking, the responsive approach may have enhanced the implementation efficiency of some subprojects. Moreover, the project initiated cooperation with centers of technical excellence in agriculture and rural development, as well as the private sector, to bolster investment benefits and sustainability. L. Performance of the Asian Development Bank

38. ADB’s performance is rated partly satisfactory. Design weaknesses, including an acknowledgement of the executing agency’s limited capacity to implement a complicated project, left the project with challenges that affected implementation. ADB missions agreed with MAF to redesign subprojects according to the SPM, rather than the PAM. ADB then approved the ensuing 71 subproject feasibility studies, enabling subproject implementation to commence. At the midterm review, it was found that ADB due diligence standards were not fully followed in the subproject designs, indicating insufficient rigor in the subproject approval process. However, the due diligence shortcomings, especially in safeguards were to a large extent applied retrospectively. ADB fielded 14 missions, which discussed with MAF and IFAD ways to address weaknesses in the PAM and DMF, but these initiatives were not followed through. The DMF’s scope was not revised to reflect the important changes in output 1 and output 2. This reduced stakeholder ability to properly monitor and understand project performance. The SPA mission of April–May 2013 noted that both IFAD and MAF were concerned that frequent changes in ADB project officers influenced implementation consistency and caused delays. The PPRR also concluded that frequent changes in ADB’s project officer—four in 4 years since grant effectiveness—undermined the projects implementation (footnote 20). Noteworthy is the strong support for revising and implementing the GAP from the Lao Resident Mission. ADB provided ample capacity building technical assistance support for implementation in addition to the PIC, however, this support was not well synchronized with subproject implementation which dampened its effectiveness. These factors contributed to ADB’s overall performance.

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III. EVALUATION OF PERFORMANCE

A. Relevance

39. At approval, the project was congruent with the government's 6th and 7th NSEDPs and the National Growth and Poverty Eradication Strategy; ADB's country strategy and program for Lao PDR, 2007–2011 and Strategy 2020; and IFAD's poverty reduction mandate. However, the project’s outputs had weak links to the outcome. The project design also lacked selectivity and focus and had significant deficiencies that could have been foreseen but were not addressed quickly enough, or not at all. The land concession moratorium in 2007–2008 and the subsequent suspension of land concession activity in 2012 could have been reasonably foreseen as compromising the project's relevance. 40. Gaps were foreseen in the 2005 program evaluation, which was cited by the RRP "that ADB activities in the ANR sector should be more selective and focused in terms of composition and spread."21 The recommendation was not applied well in the project design as support was allowed for a wide range of subproject activities. There were inconsistencies among the DMF, RRP, PAM, and the criteria for selection of subprojects, as well as the introduction of the SPM, which delayed implementation. Not all of these issues were rectified during project implementation. 41. The issue of subproject selection was raised during each of the first five review missions before the SPM was agreed upon, but the proposed revisions of the PAM were left pending. The lack of clear indicators in the DMF was raised during the special review mission in November 2009, but no revisions were agreed upon until the SPA mission in April–May 2013. However, the revised DMF with indicators that can be monitored was never adopted. The design shortcomings and lack of timely remedial action resulted in a less than relevant rating. B. Effectiveness in Achieving Outcome

42. The RRP's intentions for output 1 in terms of improved ANR policy analysis outcomes were not quantified. Output 1 had a 68% reduction in planned expenditure and a reduced scale of activities, in favor of scaling up output 2. Because of the limited achievement of the outcomes, the project is rated less than effective. 43. The project failed to establish sound processes for subproject appraisal and feasibility studies, compromising the development of institutional capacity to prepare and implement economically viable and financially sustainable investments. No financial due diligence was undertaken on the introduction of revolving funds and engagement with private sector partners. Gender, social, and environmental safeguards were retrofitted after subproject approval and, in most cases, well after subproject implementation had started. Retrospective application of these safeguards for subprojects already under implementation may have mitigated serious issues, but this does not meet ADB's objective of incorporating safeguard measures to contribute to an optimal subproject design. C. Efficiency in Achieving Outcomes and Outputs

44. The RRP justified the project based on the economic analysis of two public rural infrastructure projects—one rural road rehabilitation subproject with an estimated 23.5% EIRR

21 ADB. 2005. Sector Assistance Program Evaluation: Agriculture and Natural Resources Sector in the Lao People's

Democratic Republic. Manila.

12

and one irrigation rehabilitation subproject yielding an estimated 19.3% EIRR. The SPM concentrated on productive investments, which were found to be economically efficient. 45. Of the 71 subprojects, 20 were visited and reviewed. Indicative EIRR calculations were made for 15 of the 20 subprojects as implemented, and the resulting EIRRs ranged from negative to 69% for an average of 25%.22 Most benefits were derived from increased and better market-oriented production. This is consistent with the RRP's indicated positive benefits for rural development investments. An EIRR of 18% is required for a highly efficient rating, but the project is rated efficient because of the weakness in project reporting, the wide range of results, inadequate subproject appraisal and implementation processes, and the high costs for implementation support and management. D. Preliminary Assessment of Sustainability

46. Several subprojects had substantial private sector partners with financial resources, production skills, and access to national and international markets. 23 Other subproject beneficiaries acquired production skills during implementation and are accessing market links in local markets or supplying traders.24 Most output 2 activities reviewed generate cash flows, which were incentives for the private owners to continue and provide the resources to do so. Output 1 activities do not generate cash flows and rely on government funding. Some output 1 subcomponents, such as policy development, have produced discreet benefits during the project period, and government will decide whether they provide sufficient benefits to be continued. Overall, the project is rated likely sustainable. E. Impact

47. MAF carried out an impact survey in May–July 2015 and reported to the final ADB review mission 25–28 August 2015. The survey results showed that (i) average annual household incomes increased by 34%, (ii) underweight children (weight-to-age) dropped to 20% from 43%, (iii) rice productivity increased by 69%, (iv) income from non-rice crops increased by 70%, (v) poverty incidence halved to 31% from 65%, and (vi) overall ANR production increased by 35%.25 The report did not provide supportive analysis. 48. The baseline for these improvements is not from the earlier project baseline survey but from interviewees’ recollections of 2010 conditions. The criteria for the selection of villages and their roles in the project were unclear from the report, which does not include any control villages (villages with no project involvement) for comparison. The 19 pages of questionnaire omitted questions on either the project or other projects, and interventions that may have jointly contributed to the achievement of the reported results. A better structured survey based on better defined DMF indicators would have produced clearer results on project impacts and increased confidence in the findings. One table in the survey report presents the EIRRs of 10 subprojects,

22 The average is calculated with the two subprojects with unquantified negative return valued at 0%. 23 For example, subprojects CPA/COM/01, CPA/COM/08, SEK/COM/02, SAL/COM/05, and SEK/COM/04. 24 In the case of bong wood, traders from Viet Nam are the main buyers. 25 The sample size of the impact survey is 900 households. The sample households were selected from 20 villages,

chosen evenly from the five project provinces. Each village has 45 sample households. Of these samples, 59% belong to ethnic groups and 10% are households headed by women. The survey was undertaken by one international consultant and two national consultants on an individual basis, supported by 40 staff recruited from the project areas to act as enumerators. In comparison, the baseline survey, was conducted by a firm, which sampled 135 villages and interviewed 5,009 households.

13

averaging 69%.26 Of these 10 subprojects, 7 with average EIRRs of 77% were among the 20 subprojects visited after project completion. When their EIRRs were recalculated, they yielded a viable EIRR of 18%. The overstatement of the EIRRs may be reflected in the other claimed benefits. Still, overall project impact is rated satisfactory. 49. Environment. In August 2014, ADB approved the relevant subproject initial environmental examinations and environment management plans. Overall, the environment safeguards were retroactively complied with and there were no significant negative impacts. 50. Involuntary resettlement and indigenous peoples. All social safeguard grievances received have been resolved. The revised due diligence reports for involuntary resettlement and ethnic groups incorporating comments were submitted to ADB in July 2015; the external monitoring report for social safeguards was submitted in August 2015. Only minor and isolated negative impacts (cash compensation for loss of paddy in two standing crops and restoration of livelihoods to two households in one subproject) were identified. All entitlements were provided following the corrective action plan. Individual land acquisition consent forms were secured. The due diligence reports for ethnic groups found that positive impacts from subprojects accrued to ethnic groups. Similarly, only minor and isolated negative impacts were reported, and these were mitigated. The external monitoring report for social safeguards confirmed these findings. No issues are outstanding (Appendix 4). 51. Gender impacts. The GAP was retroactively integrated into subproject activities. The GAP included 16 gender activities and 13 quantitative targets. At project completion, 15 (94%) activities and 12 (92%) targets were achieved. The project used sex-disaggregated data for reporting results. In the RRP, the GAP did not include specific targets for women’s participation and access to project benefits. During the midterm review, the GAP was revised to align with project activities. The GAP helped empower women by (i) setting quotas for their participation in decision making and support for more positive attitudes; (ii) improving their knowledge and practices to enable a shift from subsistence-based to market-based household economic activities; and (iii) creating opportunities for women farmers to access technology, which increased family incomes. 52. GAP implementation is rated successful based on the level of achievements that were supported by gender staff in ADB’s Lao Resident Mission. These included (i) 5,238 land certificates issued in the names of both spouses; (ii) 6,192 (57.5%) women producer group members, exceeding the target of 45%; (iii) 16,152 of 23,785 (68%) household members of water user groups registered jointly in the names of both spouses, surpassing the target of 50%; and (iv) 616 women heads of households included as project beneficiaries. These achievements led to empowerment outcomes for women and strategic changes in gender relations, including a higher proportion of women in leadership positions in producer groups (52% against a target of 40%) and water user group management positions (39% against a target of 30%). This will contribute to the sustainability of project gains in gender equity (Appendix 5).

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

53. The original project design could not be implemented without modification. Formal changes in scope and incorporation of appropriate due diligence and monitoring measures were

26 Government of Lao PDR, MAF. 2015. Project Completion Socio-economic Impact Assessment Survey Report.

Vientiane.

14

not done. The suspension of the FDI land concessions had a significant impact on output 1, which was meant to be straightforward public sector capacity building but did not secure full government support. Most of the subcomponents of output 1 were reduced in scale and redesigned in the SPM to support subprojects in output 2, thereby becoming part of the project management activity. 54. The RRP justified output 2 on the basis that subprojects would typically be public sector activities improving rural infrastructure, while also allowing investment in agricultural production. The SPM failed to address the issue of mixing public and private goods within the same project without appropriate due diligence and implementation arrangements. The SPM fell short of developing a model for private and small and medium-sized enterprise finances, and failed to distinguish between the public and private nature of subprojects. Implementation procedures aimed at public subproject investments were applied without modification to private sector subprojects. 55. Based on the project’s performance rating of less than relevant, less than effective, efficient, and likely sustainable, the project is rated less than successful (Appendix 8).27 This rating is because of (i) the original project design shortcomings; (ii) the failure of the project to effectively and transparently adjust, in line with ADB project administration requirements, to the changing policy environment during implementation; and (iii) inadequate subproject selection, design, and due diligence processes. B. Lessons

56. The following lessons learned from the project are primarily concerned with project design and the problematic interface between planning, implementation, and administration:

(i) The responsibility for successful project implementation is shared by the executing agency and ADB. The implementation capacity of executing agencies needs to be recognized early in project preparation, and design measures need to be identified to accommodate capacity constraints.

(ii) Proactive executing agency engagement and appointment of appropriate counterpart staff to the PPTA are needed, and the continuation from design to implementation is essential.

(iii) Project design needs to be based on empirical evidence and relevant experience so that the project appraisal and approval documents (especially PAM and DMF) are clear, selective, logical, and focused in terms of composition and geographic spread. They also must be implementable in the context of the capacity of the executing agency and implementing agencies.

(iv) ADB needs to ensure that the PPTA consultants are properly interacting with the executing agency throughout the preparation process to attain high confidence in the investment resources achieving the intended impacts and the project being implemented in accordance with ADB requirements.

(v) DMFs need rigorous critical analysis during PPTA and RRP processing to ensure causality in the links. Indicators and targets must be set clearly and realistically, and provide an effective basis for implementation monitoring. Identified risks to achievement of the impact and outcome should be addressed with realistic mitigating measures and, if needed, changes in project design.

27 The project scored 1.5 against the equally weighted criteria following ADB. 2016. Guidelines for the Evaluation of

Public Sector Operations. Manila.

15

(vi) When subprojects have to be designed during implementation, eligibility, selection, prioritization criteria, and subproject screening need to be carried out during PPTA to clarify the scope of the project, eliminate any problematic subprojects, and minimize transaction costs. Subproject preparation needs to be done at levels of government that have the experience and capacity for such work.

(vii) Retrofitting safeguards to subprojects that are almost complete must be avoided since this creates a tendency to ignore safeguard problems as the investment is committed, and design quality may be undermined.

(viii) The number of review missions, rigor of the review, efficient and effective follow-up, and frequency of changes in project officers need to be related to the capacity of the executing agency. Reporting systems need to identify implementation challenges before they become problems, and agreed upon solutions need to be vigorously followed up.

(ix) Proper statistical methods must be applied to all surveys, monitoring, and reporting to achieve reliable information about project performance and impact.

(x) TA inputs need to be synchronized with investment project implementation.

(xi) The list of grant covenants is unnecessarily detailed, with many of the items being operational issues that would be more appropriate for the PAM.

C. Recommendations

57. Considering the major restructuring and downsizing of the capacity building activities for output 1, it is recommended that similar work be in response to initiatives and commitments from the government. Such responses would be more appropriately met by TA support rather than incorporated into a larger investment project, particularly one that is already complex. 58. MAF should continue to monitor the development and performance of the farmer production groups—both to assess the sustainability of the groups and how they evolve, and to inform the design of future initiatives. If the groups become financially sustainable commercial entities, they could be considered for further small and medium-sized enterprise development. The private sector partners in smaller PPCPs and the larger private sector actors should also be monitored to see how their relations with the groups and contract farmers develop to suggest ways in which future interventions may encourage such relationships and leverage private sector investments. 59. Timing of the project performance evaluation report would be best after the 2018 rainy season to facilitate field trips 3 years after the end-of-project implementation and 4–5 years after group formation. The focus of the project performance evaluation report should be on the social and financial sustainability of the groups, the PPCPs, and understanding the factors that contribute to successful performance.

16 Appendix 1

PROJECT DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Targets and/or Indicators

PCR Mission Assessment

PCR Mission Comments on Achievements

Impact More efficient and sustainable natural resource management, and improved sector productivity

By 2020, in the participating provinces: 1. Forest cover has increased to 55% of land area from 43% 2. Average gender and ethnic disaggregated rural incomes have increased by 25% from 2008 levels 3. Incidence of rural malnutrition has dropped by 50% over 2008a

1. Forest cover has remained stable with natural forest being replaced by plantations.c 2. Incomes rose.

3. Malnutrition has declined. 4. ANR production has increased.

Partly achieved.

Weak links (i) indicators to impact statement; (ii) outputs to outcome to impact; and (iii) impact survey - attribution to project tenuous

1. Partly achieved 2. Partly achieved 3. Partly achieved 4. Partly achieved

Appendix 1 17




4. ANR outputs and value added have increased by 35% over 2008b 5. Sector openness has increased by 50% from 2008

5. Number of producer groups and private sector investments has increased.

5. Partly achieved

Outcome Enhanced institutional capacity at provincial and national levels to manage natural resource utilization in a sustainable manner

By project completion: 1. Land-based investments are economically viable and financially sustainable, and social and environmental safeguards analyses are incorporated 2. ANR policy analysis is improved (main sector issues being addressed) 3. Donors agree to SWAP- type processes

1. MAF’s Department of Planning and Cooperation has an appraisal unit trained in mapping. 2. Five policy papers produced. 3. Upland working group formed.

Partly achieved Outputs have weak relationship to outcome.

1. Partly achieved

2. Achieved Policy 3. Partly achieved

Outputs 1. Capacity building for agriculture and natural resource sector management implemented

Partly achieved Output scope drastically reduced

18 Appendix 1




(i) National and provincial staff capable of financial and economic appraisal and safeguard analyses

(ii) Land use and suitability mapping completed in the five provinces

(iii) Producer groups trained and self- sustaining

(iv) Government and donors committed to a common agricultural development framework

2. Investment in resource management and productivity enhancement completed

1. (i) Number of land concessions reviewed and economic, financial and social viability incorporated by MAF and NLMA

1. (ii) Land suitability and broad zoning maps prepared for all districts in five provinces by 2010

1. (iii) Number of producer groups financially independent

1. (iv) Policy documents drafted (food security in uplands, subregional trade integration, etc.); Policy dialogue around MAF policy papers produced

2. (i) ANR investments are viable (EIRR exceeds 12%) and financially

1.(i) Land use plans for output 2 prepared.

1 (ii) Training in mapping techniques carried out and 42 district maps prepared. 1. (iii) Producer groups formed and received training. No producer group is reported to be financially independent. 1. (iv) Five policy documents prepared. No formal commitment to a common framework. 2. (i) The project used inappropriate methods

1. (i) Partly achieved

1. (ii) Partly achieved 1. (iii) Partly achieved

1. (iv) Partly achieved 2.Partly achieved

2. (i) Partly achieved

Appendix 1 19




3. Efficient project management operational

and institutionally sustainable (WUA and farmer groups established and fully functional) by 2015

2. (ii) 45–50 subprojects meet individual performance targets (6–13 subprojects per province by 2015 completed) 2. (iii) Land use maps prepared at village level in subproject areas

for EIRR calculation and inadequate due diligence. Variable likelihood of sustainability among subprojects. Around 749 groups were established. 2. (ii) 71 subprojects were implemented. Weak feasibility study preparation and design. Inadequate implementation monitoring. 2. (iii) 254 land use maps prepared.

2 (ii) Partly achieved 2. (iii) Achieved. 3. Partly achieved. Very high overhead costs, weak subproject preparation quality, inadequate

20 Appendix 1




3. (i) PCO and PPOs established and operational

3. (ii) Subprojects are identified, prioritized, and approved (number of projects by province by year)

3. (iii) Subproject funds disbursed (by amount, province, and year)

3. (i) PCO and PPOs established and operational.

3. (ii) 71 subprojects approved and implemented. Weak feasibility study preparation and design. Inadequate implementation monitoring.

3.(iii) Timely disbursements.

subproject reporting. 3. (i) Achieved

3. (ii) Partly achieved

3 (iii) Achieved

ANR – agriculture and natural resources, EIRR = economic internal rate of return, MAF = Ministry of Agriculture and Forestry, NLMA = National Land Management Authority, PCO = project coordination office, PCR = project completion report, PPO = provincial project office, SWAP = sector–wide approaches, WUA = water users association. a Standard anthropometric measures of height-to-age, weight-to-age, and weight-to-height. b Defined as value of ANR imports and exports as share of sector value added.

c Chittana Phompila, Megan Lewis , Bertram Ostendorf and Kenneth Clarke. 2017. Forest Cover Changes in Lao Tropical Forests: Physical and Socio-Economic Factors are the Most Important Drivers. Vientiane, Lao PDR.

Appendix 2 21

COMPLETION REVIEW OF SUBPROJECTS

I. Introduction

1. This appendix summarizes the findings of the project completion report (PCR) mission’s field visits to 20 subproject sites in January 2017. The review discusses the implementation of the subprojects and their likely effectiveness, efficiency, and sustainability.

2. The review includes estimates of the economic internal rate of return (EIRR) at completion for 15 of the subprojects for comparison with the two subproject examples used in project preparation. The estimates are based on information supplied during the field visits and some data from the subproject feasibility studies.

3. Implementation of most subprojects has deviated from the approved feasibility studies and, in 10 cases (listed as "Changed" in the summary table), the differences are substantial and there is little connection between the approved and implemented subprojects. Funds have been spent on items other than those approved but the calculations here assume that the full budgeted amounts were reallocated for investment in the subproject and not reallocated to uses outside the subproject. 4. All financial values in the EIRR calculations are expressed in millions of kip at constant prices. The $ values have been converted from kip at an exchange rate of $1 = KN8,202. 5. Domestic prices have been used for revenue/benefit calculations and costs have been converted to economic values using a standard conversion factor of 0.9 and labor costs have been converted to economic values using a shadow wage rate factor (SWRF) of 0.9 also. These follow recent ADB studies in the Lao PDR.

Summary of Subproject Review

Subproject As FS Changed Comments

ATP/COM/03 10% Dry season crops implemented but not fish and livestock activities.

ATP/PR/01 -11% Proposed livestock practices not adopted and no irrigation development.

ATP/PR/03 12% Activities switched from bong, rice, and livestock to coffee in eight fewer villages.

CPA/COM/01 37% Cashew developed as proposed but context changed by $9 million. The Korean private sector processing investment.

CPA/COM/05 23% Proposed integrated organic rice farming changed to rice noodles (measured EIRR) and improved rice varieties.

CPA/COM/07 45% Farmers switched from exotic crops to familiar crops with existing market links, improving the project.

CPA/COM/08 positive Likely effective, efficient, and sustainable due to CPC production and market support. However, unknown joint costs of project between the CPC, farmers, and French Development Agency (AFD) prevent EIRR calculation.

CPA/NRM/03 negative Project changed from production to adaptation of exotic green cardamom, which can be the basis for new production projects with an estimated EIRR of 35%.

22 Appendix 2

Subproject As FS Changed Comments

SAL/COM/02 51% High returns on repair of irrigation system and premium organic production.

SAL/COM/04 cannot be calculated

Only 20% of the project was agricultural support (half for a tractor) and 63% was accumulated maintenance of a 3 km road upgraded four years ago. This could be beneficial but no road benefits were calculated.

SAL/NRM/01 17% Bong price volatility influences the EIRR. SAL/PR/01 suggests larger scale bong planting is more efficient, and SEK/PR/01 suggests economies of scale for coffee.

SAL/PR/01 69% Post-harvest and market activities were not implemented but the planted area increased from 425 ha to 742 ha.

SAL/PR/03 positive Likely effective, efficient, and sustainable as commercial systems are in place, but EIRR was not calculated due to joint costs of the project between the private sector and farmers.

SEK/COM/02 14% Processing to increase value added.

SEK/COM/04 cannot be calculated

Designed project based on in-kind revolving fund which failed to revolve. Intervention of entrepreneur made the project successful, with much larger non-project investments likely effective, efficient, and sustainable.

SEK/PR/01 25% Improved coffee development

SEK/PR/02 cannot be calculated

Project was implemented but in a different area where data for EIRR was not available.

SVK/COM/02 45% As with SAL/PR/01, post-harvest, value chain activities were not implemented.

SVK/COM/04 40% Demonstrations and revolving funds (40% of project costs) were not implemented but accumulated irrigation maintenance was done and supported area increased from 150 ha to 210 ha, giving higher returns.

SVK/COM/08 negative Instead of cane production, the project bought grant-funded tractors to save on the cost of the mills’ land development charge. There being no market failure, it is considered that benefits are financial only, with no economic benefits.

CPC = Coffee Producers Cooperative, FS = feasibility study, EIRR = economic internal rate of return, ha = hectare.

A. Attapeu Province i. ATP/COM/03: Cash crop commercialization in five villages of Samakhixia

District and Somkhot Village of Saysettha District.

Received by ADB 26 December 2011 ADB approval 25 January 2012

6. The subproject targeted five villages in the two districts of Samakhixia and Saysettha, with 964 households, of which 484 were poor before the project. Activities would include land use planning and certification, establishment of producer groups, small civil works for checking dams, provision of pump sets for irrigation, demonstrations, and setting up of revolving funds. Benefits were to come from incremental production of wet and dry season paddy, watermelons, ducks, poultry, and pigs, with an estimated EIRR of 16%. 7. Before the project, there was insufficient water for dry season crops and little technical knowledge. From 2012 to 2015, the project undertook small civil works to increase water storage,

Appendix 2 23

provided pumps and pipes to distribute water, established production groups, provided training and demonstrations, and set up a "revolving fund" to accumulate income from the use of the five pumps to fund maintenance costs. 8. Benefits come from dry season cropping of mostly watermelon, some long beans, and cucumber, which are all sold in the local market. The farmers recognize that if they plant more to supply the limited local market, then prices will fall. The farmers have not adopted the proposed fish (fingerlings were released into the ponds during implementation but they only provide for home consumption) poultry, and pig (only two families persisted) production. 9. In the dry season, watermelon is grown on about 20 hectares (ha) which gives a revenue of KN36 million/ha at a cost of KN4 million/ha at a price of KN3,300 per kilogram (kg) at a yield about 11 metric tons (t) per ha (11 t/ha). An additional 70 person-days of labor are required per hectare. The men water the plantations while the women plant and tend to them. 10. Wet season paddy yields are said to have increased from 1.5 t/ha to 3 t/ha due to improvements to the soil from watermelon cultivation and increased cattle fodder/manure. Based on the cash flows from crop production, an EIRR of about 10.3% was achieved, including costs of the unsuccessful promotion of fisheries and small livestock, as summarized below.

EIRR = economic internal rate of return, ha = hectare, t = metric ton.

ii. ATP/PR/01: Livestock-based integrated farming system in Taatseng Village of Xansai District


11. Taatseng Village migrated from upland to lowland soon after 2000 and the people were mainly engaged in shifting cultivation. The subproject aimed to support land development for cattle raising and paddy, construct an irrigation scheme, establish fodder plots, purchase livestock, build capacity of farmers, and manage the health of the livestock. Benefits would come

million kip 1 2 3 4 5 6 7 8 9 10 to 15

Wet Season

Paddy

Ha 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0

Incremental Yield t/ha 1.5 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0

Incremental Revenue KN/ha 3.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0 60.0

0.9 Incremental Labor KN/ha 0.5 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8 10.8

Net revenue 49.2 49.2 49.2 49.2 49.2 49.2 49.2 49.2 49.2 49.2

Dry Deason

Water Melon

Ha 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0

Revenue KN/ha 36.0 720.0 720.0 720.0 720.0 720.0 720.0 720.0 720.0 720.0 720.0

0.9 Production cost KN/ha 7.2 144.0 144.0 144.0 144.0 144.0 144.0 144.0 144.0 144.0 144.0

0.9 Labour KN/ha 1.89 37.8 37.8 37.8 37.8 37.8 37.8 37.8 37.8 37.8 37.8

Net revenue 538.2 538.2 538.2 538.2 538.2 538.2 538.2 538.2 538.2 538.2

0.9 Investment cost 4,834 4,834

Net Cash flow (4,247) 587 587 587 587 587 587 587 587 587

EIRR 10.3%

Year:

24 Appendix 2

from commercial livestock development, sales from some 350 heads per year, and from wet and dry season irrigated paddy production on a 50 ha plot. 12. Land certificates for 300 ha of grazing land to were given 50 families for a reduced paddy area of 30 ha. No irrigation system was constructed but training was provided and is said to have increased wet season yields on the 30 ha area by 1 t/ha. There is no dry season paddy.

13. Cattle were distributed to 66 families who were trained to vaccinate them to reduce mortality (families had to buy the vaccine). Fodder plots were established and training in livestock raising was given. However, instead of increasing the stock of 266 cattle distributed in 2012, the 2016 stock was just 236. The farmers have opted for the traditional system of livestock as a store of wealth rather than a source of income. So, instead of the 350 sales per year, the level of sales was some 20 to 30 per year to finance major periodic expenditures but the stock of cattle/wealth is also not increasing. 14. The reduced area, lack of irrigation for paddy, and farmers’ effective rejection of more commercial livestock practices, with actual sales about 30 heads per year instead of 354 head per year, suggest that this subproject’s EIRR is more likely negative compared to the 25% in the feasibility study.

*10 labor days/ha for extra 1 mt yield ** Feasibility study annual cattle cost excluding fodder plot and fencing maintenance and reduced by 75% for smaller herd and sales.


iii. ATP/PR/03: Poverty reduction through promotion of sustainable agriculture in three kum bans in Xansai District


15. The subproject area covers three kum bans, with 21 project villages in Xanxai District. The people live on upland agriculture, with upland rice yields from 0.8 to 1 t/ha. About 50% of households are short of food for more than six months per year. Some 50% of households raise

million kip 1 2 3 4 5 to 15

Wet Season

Paddy

Ha 30.0 30.0 30.0 30.0 30.0

Incremental Yield t/ha 1.0 30.0 30.0 30.0 30.0 30.0

Incremental RevenueKN/ha 2.0 60.0 60.0 60.0 60.0 60.0

0.9 Incremental Labor* KN/ha 0.3 8.1 8.1 8.1 8.1 8.1

Net revenue 51.9 51.9 51.9 51.9 51.9

Cattle

Head per Year 30.0 30.0 30.0 30.0 30.0

Revenue KN/head 2.1 61.5 61.5 61.5 61.5 61.5

0.9 Production cost** KN/yr 33.0 33.0 33.0 33.0 33.0 33.0

Net revenue 28.5 28.5 28.5 28.5 28.5

0.9 Investment cost 3,071 2,887 184 - - -

Net Cash flow (2,806) (104) 80 80 80

EIRR -11.0%

Year:

Appendix 2 25

livestock (pigs and poultry) but few can sell livestock for income. Sources of income are wild cardamom, coffee, and bong wood. The feasibility study projected benefits in 21 villages from (i) sales of bong wood, (ii) value of additional rice production, and (iii) improved livestock sales value. 16. Responding to farmer interests, bong, rice, and livestock played little role in implementation. The number of kum bans was reduced to 2 and villages to 13 due to their remoteness. The remaining villages chose the following crops instead of the subproject package:

Kum ban Village Chosen Activities

Nam Xu

1 Chaleamxai Cattle

2 Dak Khaoat Rice

3 Dak Siet Coffee

4 Dak Nyok Excluded - too remote

5 Dak Lamor Excluded - too remote

6 Dak Pok Mae Cardamon

7 Dak Xum Poultry, cardamon, peanuts

Sam louang

1 Dak xao Excluded - too remote

2 Dak Maethavone Excluded - too remote

3 Dak seng Excluded - too remote

4 Dak ben Excluded - too remote

5 Dak Dao Excluded - too remote

6 Dak Padou Excluded - too remote

Nam Ngone

1 Dak Lakao Coffee, bong, poultry

2 Dak Baog Coffee

3 Dak Nyaye Coffee

4 Dak Yat Coffee

5 Dak Liem Coffee

6 Donechanh Coffee, bong, vegetable

7 Dak Keu Coffee

8 Dak Nong Coffee

17. Rice was reduced to one village, bong to two, and livestock to three. Coffee was chosen in 9 of the 13 villages, influenced by the example of an earlier IFAD coffee project. 18. Cattle (107) and goats (15) were distributed to 17 families in 2013, with the intention that farmers raise them for four years and then give the same number of animals they received to another family in a "revolving fund". The first "revolution" is not scheduled until 2018, but with the current stock level of 113 cattle, it is unlikely that any significant number of animals will be transferred. The feasibility study’s economic analysis projected some poultry sales but no cattle or goats. 19. Coffee has been planted on 200 ha and the current yield is 0.4 t/ha but this should increase to 2 t/ha as the plants mature. No allowance was made for coffee processing but the governors of Attapeu and Sekong provinces agreed to transfer one of Sekong's five mills to Attapeu. The mill is owned by a village and district committee but it is operated by a private sector contractor who is required to mill all the project farmers' coffee at a current rate of KN200/kg, with non-group members paying KN300/kg. Contract farming has been arranged with an Indonesian group that

26 Appendix 2

purchases a yearly minimum of 15 t of milled coffee, equivalent to 75 t of beans. The mill operator buys beans at KN3,200/kg and sells milled coffee at KN16,200/kg, with a 5:1ratio of beans to milled coffee. 20. The mill used by the group was not included in the subproject costs and feasibility study, so neither its costs (unknown) nor benefits can be included in the evaluation of the subproject, which is based on the production of fresh beans for sale to the mill at the mill’s purchase price. 21. The feasibility study projected an EIRR of 15% but the project, as implemented, is substantially different. The table below indicates an estimated EIRR of 12% for the coffee activity, assuming the total investment costs were incurred.


B. Champasak Province

1. CPA/COM/01: Shifting cultivation reduction through commercialized cashew cultivation in eight villages of Hadxaikhoun Kum ban, Khong District

Received by ADB 11 February 2011 ADB approval 2 March 2011

22. The subproject aimed to improve livelihoods of 1,286 households in eight villages in Khong District, Champasak Province, by providing land development and micro irrigation for cashew plantations, with intercropping in early years, market information system, and a revolving fund for agricultural inputs – a nursery and capacity building for groups and farmers. The feasibility study included some $15,000 for processing and marketing development. 23. Implementation substantially followed the plan at farm level. The project supported land use planning and land allocation to open up land for cashew plantation, which was a previously unused concession. Each family received 2 ha, technical support, and 408 seedlings, with the first 200,000 seedlings provided by the Government of Viet Nam on a grant basis and farmers subsequently buying seedlings from the project nurseries. The planned revolving funds were not established and cash payments applied instead. 24. Cultivation began in late 2010 and 2011. The first harvest was in 2014 and harvest improved in 2015, with yield of 700 kg/ha to 800 kg/ha sold at KN12,000/kg to a Lao trader. The


Coffee Beans

Ha Total 200 200 200 200 200

Yield t/ha 0.0 0.0 0.4 1.2 2.0

Yield Total 0 0 80 240 400

Revenue KN/mt 3.2 0 0 256 768 1,280

0.9 Production cost KN/ha 1.85 332 332 332 332 332

Net revenue -332 -332 -76 436 948

0.9 Investment cost 3,728 2,796 466 466

Net Cash flow (3,128) (798) (542) 436 948

EIRR 12.2%

Year:

Appendix 2 27

harvest is spread over some time as the crop matures. Weeding is undertaken twice per year and cow dung used as farmers (not supported by the project) raised cattle under the cashew trees. In early years, paddy and peanuts were used as intercrops but the ability to intercrop is limited by available labor as well as lack of water, which prevents intercrops such as sesame. 25. The 2017 yields on project plantations are expected to be about 1 t/ha and this could rise to 2 t/ha after 10 years on a low input model or 3 t/ha with optimal inputs. The minimum farm-gate price for raw nuts is $1/kg. Some farmers have separate paddy land for home consumption and some sales. Some work as hired labor at a daily rate of KN40,000 for men and women. 26. The project, as approved by ADB, started without a marketing plan but market linkages and processing activities by the private sector have transformed the scale of the project. A memorandum of understanding was signed on 12 August 2015 with G-Farm Lao Company, a wholly owned subsidiary of the Korean multinational G-Farm Company. The company undertook a feasibility study in 2015, designed the new factory, and started construction in 2016, ready to commence production in 2017. 27. Present farm production is about 3,000 t, including some 1,000 t from the project, but the new processing capacity will be 50,000 t and the company will initially import raw nuts from Cambodia. The investment in the factory is about $6 million and a further $3 million is being invested in rapid development of plantations on a contract-farming basis to replace the imports. Production will be wholly exported to the People’s Republic of China, the Republic of Korea, and Europe. 28. The feasibility study estimated an EIRR of 31% for on-farm development and the recalculation below suggests 37%. The attraction of significant foreign direct investment (FDI) is clearly a substantial achievement for project management in greatly increasing the scale and value added of production. The commercial activity has been successfully transferred to the private sector and whether there is a role for continued public sector involvement (there is no apparent market failure) is questionable, particularly in the use of scarce grant funds.


2. CPA/COM/05: Integrated rice-based farming for the commercialization of rice cultivation in Khong District.

Received by ADB 16 January 2012 ADB approval 3 February 2012

29. The project as approved aimed to create a sustainable value chain for integrated rice farming and commercialization to improve livelihood opportunities for 848 households in four villages. Producer groups would be established for integrated rice farming to supply internal and

million KN 1 2 3 4 5 6 7 8 9 10 11 12 13 on

Cashew Nuts

Ha Total 500 500 500 500 500 500 500 500 500 500 500 500 500

Yield t/ha 0.0 0.0 0.0 0.8 0.9 1.0 1.1 1.3 1.5 1.7 1.9 2.2 2.5

Yield Total 0 0 0 375 450 500 570 650 740 844 962 1,097 1,250

Revenue KN/t 8.2 0 0 0 3,076 3,691 4,101 4,675 5,328 6,073 6,923 7,891 8,995 10,253

0.9 Production cost KN/ha 0.74 332 332 332 332 332 332 332 332 332 332 332 332 332

Net revenue -332 -332 -332 2,744 3,359 3,769 4,342 4,996 5,741 6,591 7,559 8,662 9,920

0.9 Investment cost 6,328 3,433 1,483 1,411

Net Cash flow (3,765) (1,816) (1,744) 2,744 3,359 3,769 4,342 4,996 5,741 6,591 7,559 8,662 9,920

EIRR 36.8%

Year:

28 Appendix 2

external markets. Organic farming would use green manure crops and large mechanized farming would move from subsistence to commercial farming. Micro irrigation would help reduce water scarcity. The benefits would be improved agricultural yield and output, and the feasibility study's EIRR of 15% is based entirely on improved rice yields from wet and dry season crops. It is not clear how this is integrated rice-based farming. 30. Project activities covered four core villages and were extended to other villages. Two villages were visited and each had applied project elements but neither applied the whole project.

31. In the core village, there is no rice cultivation but rice is purchased by the producer group to process into rice noodles. The project provided equipment and buildings to mill rice into powder and cut the noodles. A "revolving fund" was set up as working capital, with an initial 18 t of rice (about KN90 million) to be used by members as raw material and repaid in cash, not in kind. The fund is maintained as a group micro-finance fund, with interest on credit at 2% per month, used to finance equipment repairs. Members only pay electricity costs for use of equipment. Members can save in the fund and are paid with a share in the year-end profits from the 2% interest. The group has an example in a village development fund of KN400–500 million. 32. In processing rice into noodles, 100kg of rice at KN4,000/kg makes 90 kg of noodles consuming KN10,000 of electricity and transport, packaging, and other variable costs at KN2,000/kg. The wholesale price is KN8,000/kg and retail price is KN10,000/kg. This suggests a margin of about KN1,500/kg of noodles wholesale and KN3,500/kg retail. 33. In the extension village visited, only paddy is grown and it was irrigated before the project. Thus, there was no irrigation investment. The project provided improved varieties to 10 families with 12 ha (feasibility study has 120 ha dry season and 150 ha wet season) resulting in 0.5 t/ha to 1.0 t/ha yield improvements and improved quality, allowing the paddy to be bought by the IndoChina Development Partners for higher value marketing. No revolving fund was set up.

34. Neither village implemented the project as designed but they applied different elements which were likely viable. The EIRR for the rice noodles investment is estimated at 23% compared to the 15% in the feasibility study, but there is insufficient cost data for the paddy production.

Notes: 1. Production revolves fund twice per year with 36 t rice input.

2. Half production sold retail and half wholesale. EIRR = economic internal rate of return, Ha = hectare, t = metric ton.


Rice Noodles

Production t 32.4 32.4 32.4 32.4 32.4

Rice input t 36.0 36.0 36.0 36.0 36.0

Revenue KN/t 9.0 292 292 292 292 292

Production cost

0.9 Rice Input KN/t 3.6 130 130 130 130 130

0.9 Electricty KN/t 0.1 3 3 3 3 3

0.9 Variable costs KN/t 1.8 58 58 58 58 58

Net revenue 100 100 100 100 100

0.9 Processing unit KN 517

0.9 Group formation KN 1

Investment cost KN 518

Net Cash flow (417) 100 100 100 100

EIRR 22.7%

Year:

Appendix 2 29

3. CPA/COM/07: Integrated vegetables and fruit trees cultivation commercialization in Pakxong District

Received by ADB 16 January 2012 ADB approval 9 February 2012

35. The project intended to increase organic food production and increase family incomes by: (i) land use planning in five target villages, (ii) formation of vegetable and fruit tree production groups with equipment and facilities, (iii) establishment of revolving funds, (iv) setting up of a marketing information system, (v) construction of irrigation systems, (vi) establishment of demonstration plots for organic vegetables and fruit trees, and (vii) establishment organic fruit tree production focusing on grapes, apricots, plums, strawberry. The feasibility study estimated a 14% EIRR based on grape, apricot, and strawberry production. 36. During implementation, farmers rejected the exotic grapes, apricots, and strawberries as they had no knowledge of these varieties and activities were changed to the known quantities of chili, jackfruit, cabbage, eggplants, and others which also had established market links. This change again reflects the conservative nature of the farmers and need for the project to accommodate them.

37. Instead of the 50 households in five groups/villages, the project addressed four groups/villages but with 113 households and some 100 ha rather than the feasibility study’s 20 ha. About 42 ha are planted with chili, yielding 4.5 t/ha at KN10,000/kg, with traders purchasing from the villages. Jackfruit is planted on 57 ha at 277 trees/ha, the first harvest will be in 2017, the third year after planting, and the initial yield is expected to be about 14 t/ha, rising in subsequent years.

38. Dao company can be involved in marketing by buying and drying the fruit. It is possible that such arrangements would support farmers to adopt more exotic fruits with an assured market.

39. The feasibility studies projected the exotic crops to be sold at prices similar to the jackfruit and chili, and the indicative calculation below suggests that the increased planted area will contribute to an EIRR of about 45% rather than the feasibility study’s 14%.

EIRR = economic internal rate of return, ha = hectare, t = metric ton. Note: Area, yield, and price data from beneficiary interviews, production costs from executing agency PCR.

million KN 1 2 3 4 5 6 7 8 9 10 to 15

Chilli

Ha 43 43 43 43 43 43 43 43 43 43

Yield t/ha 4.5 194 194 194 194 194 194 194 194 194 194

Revenue kn/t 5.1 979 979 979 979 979 979 979 979 979 979

0.9 Production cost kn/ha 5.9 254 254 254 254 254 254 254 254 254 254

Net revenue 725 725 725 725 725 725 725 725 725 725

Jackfruit

Ha 57 57 57 57 57 57 57 57 57 57

Yield t/ha - - - 14 15 16 17 18 18 18

Yield t - - - 798 855 912 969 1,026 1,026 1,026

Revenue KN/t 2.1 - - - 1,636 1,753 1,870 1,987 2,104 2,104 2,104

0.9 Production cost KN/ha 5.9 337 337 337 337 337 337 337 337 337 337

Net revenue (337) (337) (337) 1,300 1,417 1,533 1,650 1,767 1,767 1,767

0.9 Investment cost 3,138 3,138

Net Cash flow (2,749) 389 389 2,025 2,142 2,259 2,376 2,493 2,493 2,493

EIRR 45.3%

Year:

30 Appendix 2

4. CPA/COM/08: Enhancement of coffee production and quality through the Association of Coffee Producer Groups (ACPG), Pakxong District

40. This project, along with SEK/COM/02 and SAL/COM/05, forms a coffee promotion program implemented by the project in districts of three provinces in partnership with what was then called the Association of Coffee Producer Groups (ACPG) and is now the Coffee Producers Cooperative (CPC).


41. The subproject planned to improve livelihoods of 1,027 households in 18 villages of Pakxong District by (i) strengthening producer groups, (ii) improving coffee production, (iii) improving coffee quality by upgrading and constructing coffee processing and storage facilities, and (iv) establishing a management information system to report coffee prices and quality requirements to producer group members. 42. French technical support through AFD for organic certified coffee and small-scale processing began in 2006. There were 36 producer groups by 2011 and, with project support, this has increased to 54 at the beginning of 2017. There are now about 1,000 households in the three districts covered by this project and SEK/COM/02 and SAL/COM/05.

43. The project started capacity building through ACPG in 2012 and, in 2013, it started to supply new equipment and inputs to groups. The group visited received project equipment valued at KN250 million but also funded KN120 million for new buildings and equipment. This project ended in 2015 and CPC continues to manage and coordinate the groups with diminishing French support, which includes a marketing specialist jointly funded by the French and CPC's own resources.

44. All the coffee is certified organic and CPC offers a guaranteed minimum price of KN3,700/kg for organic red beans compared to the KN2,500/kg for nonorganic red beans. Fair Trade and organic certification provide a premium of $1/kg of green beans, equivalent to $0.2/kg of red beans, which cover CPC's production and administration costs. CPC has sufficient working capital to pay cash on delivery for coffee, supporting the financial condition of groups and their members. Over the project period, annual production in the Pakxong groups has increased from 100 t to 400 t as the AFD and project-supported plantations expand and mature.

45. The project is likely viable and sustainable in all three districts, though allocation of the joint costs and benefits between the AFD project, the three ADB/IFAD subprojects, CPC, and the farmers is not possible with available data.

5. CPA/NRM/03: Integrated green cardamom cultivation in Pakxong District

Received by ADB 16 January 2012 ADB approval 30 January 2012

46. The subproject sought to increase the value of village forests to encourage villagers to conserve and protect natural forests. Outputs included: (i) land use planning in seven villages, (ii) introduction of green cardamom nursery and clove seedlings, (iii) training in cardamom domestication, harvesting, and processing, (iv) production groups formed and trained, and (v) establishment of processing and packaging facility.

Appendix 2 31

47. The attraction of green cardamom is its $15/kg price compared to native cardamom's $1/kg, but it is not grown in the Lao PDR. In 2013, the new variety of seedlings was imported from India but all failed in the first year of nursery planting. In 2014, the nursery was reestablished and a new generation was successfully raised in 2015. In 2016, a small quantity of fruit was produced but could not be sold. The third generation appears well adapted to local conditions and will be distributed from the nursery for the first time in 2017, two years after the project completion.

48. In 2017, the subproject participants intend to plant 176 ha using non-project funds and this should produce about 800 kg/ha at first harvest in 2020. The maximum yield will be about 1,500 kg/ha and harvests will be possible from year 3 to year 15. There is no existing local market but there are substantial export markets in India, the Arab countries, and Europe if market links can be established. This task is currently assigned to PAFO.

49. Cloves and bay leaves were also trialed but failed.

50. The subproject to plant 1,000 ha of cardamom over five years as a production project failed. This was not a failure of implementation but of project design, which assumed that exotic crops (cardamom and cloves) could be adopted for immediate production. Research and development involves substantial uncertainty but removes uncertainty and creates a new crop rather than a new plantation. Based on the indicative calculations below using the executing agency PCR costs, plantations of the new crop would achieve an EIRR of 35% so long as market linkages are established before planting/investing.

EIRR = economic internal rate of return, ha = hectare, t = metric ton Note: Development, production costs and revenues based on economic analysis in EA PCR.

C. Salavanh Province

a. SAL/COM/02: Integrated rice-based farming for the commercialization of organic rice cultivation in Wapi District


51. The project sought to improve livelihoods of 1,700 households in 10 villages in Wapi District by: (i) constructing and rehabilitating two irrigation systems, (ii) providing a revolving fund for agricultural inputs, (iii) supporting equipment for post-harvest processing, (iv) enhancing rice

million KN 1 2 3 4 5 6 7 8 9 10 11 12 to 15

Green Cardamon

Year 1 ha 200 200 200 200 200 200 200 200 200 200 200 200

t/ha 0 0 0 0.8 1 1.2 1.4 1.5 1.5 1.5 1.5 1.5

Year 2 ha 0 200 200 200 200 200 200 200 200 200 200 200

t/ha 0 0 0 0 0.8 1 1.2 1.4 1.5 1.5 1.5 1.5

Year 3 ha 0 0 200 200 200 200 200 200 200 200 200 200

t/ha 0 0 0 0 0 0.8 1 1.2 1.4 1.5 1.5 1.5

Year 4 ha 0 0 0 200 200 200 200 200 200 200 200 200

t/ha 0 0 0 0 0 0 0.8 1 1.2 1.4 1.5 1.5

Year 5 ha 0 0 0 0 200 200 200 200 200 200 200 200

t/ha 0 0 0 0 0 0 0 0.8 1 1.2 1.4 1.5

Total Area ha 200 400 600 800 1000 1000 1000 1000 1000 1000 1000 1000

Total Yield t 0 0 0 160 360 600 880 1180 1320 1420 1480 1500

Revenue KN/t 66 0 0 0 10,499 23,622 39,370 57,742 77,427 86,613 93,175 97,112 98,424

0.9 Production costkip/ha 11.1 1,993 3,986 5,979 7,972 9,965 9,965 9,965 9,965 9,965 9,965 9,965 9,965

Net revenue -1,993 -3,986 -5,979 2,526 13,656 29,404 47,777 67,461 76,648 83,209 87,146 88,459

0.9 Investment costkip/ha 73.8 14,764 14,764 14,764 14,764 14,764 - - - - - - -

Net Cash flow (16,757) (18,750) (20,743) (12,237) (1,107) 29,404 47,777 67,461 76,648 83,209 87,146 88,459

EIRR 35.4%

Year:

32 Appendix 2

seed production, (v) establishing seven types of demonstration plots, and (vi) building capacity for villages' staff and farmers. 52. The project started in 2012. There was irrigation rehabilitation work but no increase in irrigated area. Six organic rice production groups were established in six villages with 180 households as members who farmed 485 ha. An additional 60 ha, previously used for maize, beans, and nonorganic rice crops, was used by the project for rice seed production for a total of 545 ha. In-kind revolving funds were established to lend rice seed and organic fertilizers, with repayments made in paddy.

53. Organic paddy attracts a premium price of KN2,000/kg compared to KN1,500/kg for nonorganic rice.

54. Traders buy the crop at the farm gate. Dry season yields increased from 3 t/ha – 4 t/ha to 4 t/ha – 4.5 t/ha and wet season rice from 3 t/ha – 3.5 t/ha to 3.5 t/ha to 4 t/ha. There was a saving on the cost of chemical fertilizers but this was offset by the increased labor requirements for compost and other practices. The combination of the premium price and increased yields can typically increase annual revenue from KN10 million to KN16 million with no increased production cost.

55. The indicative re-estimated EIRR below, based on the feasibility studies’ 300-hectare model with a two-year development period, suggests a rate of 51% compared to the feasibility study's 16% based on the combined price and yield benefits.

EIRR = economic internal rate of return, ha = hectare, t = metric ton. *10 labor days/ha to harvest extra yield.

million KN 1 2 3 4 5 to 15

Paddy

Ha 0 150 300 300 300

Wet Season

FW Yield - Organic t/ha 3.75 0 563 1,125 1,125 1,125

FWO Yield - Nonorganic t/ha 3.25 0 488 975 975 975

FW Revenue - Organic KN/mt 2.00 0 1,125 2,250 2,250 2,250

FWO Revenue - Nonorganic KN/mt 1.50 0 731 1,463 1,463 1,463

Incremental labor KN/ha 0.27 0 41 81 81 81

Incremental Revenue 0 353 707 707 707

Dry Deason

FW Yield - Organic t/ha 4.25 0 638 1,275 1,275 1,275

FWO Yield - Nonorganic t/ha 3.50 0 525 1,050 1,050 1,050

FW Revenue - Organic KN/t 2.00 0 1,275 2,550 2,550 2,550

FWO Revenue - Nonorganic KN/t 1.50 0 788 1,575 1,575 1,575



Total Incremental Revenue 0 800 1,601 1,601 1,601

0.9 Investment cost 2,601 2,601 - - - -

Net Cash flow (2,601) 800 1,601 1,601 1,601

EIRR 51.0%

Year:

Appendix 2 33

b. SAL/COM/04: Integrated commercial cultivation of sweet potato, peanut and banana in Lao Ngam District

Received by ADB 23 December 2011 ADB approval 10 February 2012

56. The project sought to develop new varieties of crops for production, support for post-harvest processing, link roads with markets, and develop cultivating technology for sweet potatoes, peanuts, and bananas, to improve livelihoods of 1,474 households in nine villages. 57. Some 13 production groups were established for banana (6), sweet potato (2), and peanuts (5). Together, they had members from 325 households (1,100 less than the target members), and had planted 323 ha of project crops. Banana was planted on 117 ha, yielding some 5 t/ha and sold at KN30,000/bunch. This is about KN2,000 per kg for a 15 kg bunch. Peanuts are grown on 115 ha, yielding 3 t/ha and sold at KN6,000–KN8,000/kg. Sweet potato and other root crops are grown on 91 ha and in labor intensive production can yield 35 t/ha which are sold at KN500–KN1,000/kg.

58. Subproject support for agricultural production is $102,000, which is 20% of project cost. Of this, $55,000 is for purchase of one tractor, $45,000 for revolving fund, and $2,000 for establishment of production groups. It is not clear how these activities will result in the increased planted areas. However, 63% of the project cost is for accumulated maintenance on a 3 km stretch of road, which the feasibility study says "was upgraded four years ago and now is in poor state".1 This would result in lower transport costs and improved farm-gate prices, but development impacts in the road influence area would have occurred four years previously and not be repeated.

59. The causal link between the project and the claimed production benefits is unclear and the vehicle operating cost savings have not been estimated.

c. SAL/NRM/01: Integrated forest conservation by reducing the slash and burn in Tumlan, Ta Oy, and Samouay districts

MAF Letter to ADB 16 November 2011 ADB approval 23 January 2012

60. The subproject planned to improve livelihoods for 2,046 households in 26 villages by: (i) planning land use, (ii) identifying native forest areas, (iii) establishing groups for forest conservation development, (iv) establishing a community nursery, and (v) creating income generation opportunities. For coffee, bong tree, black pepper, and poultry raising activities, benefits arise in improved agricultural yields and output. 61. The project was implemented in 13 villages rather than 26, as the other villages were too remote and the project had insufficient time to serve them. This was due to over optimistic planning in the feasibility study. Information was collected on the nine villages in the Samouay District visited where the project has been supporting 80 households since 2012.

62. Bong trees were planted on 15 ha at 1 ha per household. The first harvest is after seven years, so it will be in 2019. Bong will be sold to traders from Viet Nam who have bought natural

1 Government of Lao PDR, MAF, 2012, Feasibility Study for SAL/COM/04: Integrated commercial cultivation of sweet potato, peanut and banana in Lao Ngam District. Vientiane

34 Appendix 2

bong since 1995 and cultivated bong since 2005 in a World Food Programme project. Prices have fluctuated from KN4,000kg to KN5,000/kg dried bong in 2010 to KN7,000/kg in 2013 and to KN3,000/kg in 2016 as increased production has forced prices down. The yield is 10 t/ha to15 t/ha.


63. Coffee has also been planted on 15 ha at 1 ha per household for non-bong households. Coffee had previously been planted on a small scale in the area, so both bong and coffee are known varieties to the farmers. Coffee planting started in 2012 and was first harvested in 2014. Vietnamese traders purchase the dried red bean coffee at KN3,000/kg. 64. In this district, the project's black pepper and poultry activities have not been undertaken. Other income is earned from rice, cassava, poultry, pigs, goats, and off-farm construction labor, particularly with a 48 km, German road construction project over the last five years.

65. The indicative EIRR at completion is 17% compared to the feasibility study's 16%.2 The 17% projection used the highest farm-gate price of KN7,000/kg. At the lowest price of KN3,000/kg, the EIRR falls to 7.4%, emphasizing the need to establish market linkages before committing to increased production. SAL/PR/01 discusses higher returns to a larger-scale development.

66. The production model applied is the same as the ones applied in poverty reduction and commercialization projects but it is counted here as natural resources management purely because the beneficiaries were and are engaged in slash-and-burn cultivation.

2 This despite feasibility assumptions of unrealistic 8.4mt/ha coffee yields and bong harvests from year 3.

million KN 1 2 3 4 5 6 7 8 9 10 11 12 to 15

Bong

Ha 15 15 15 15 15 15 15 15 15 15 15 15

Yield rate t/ha - - - - - - 10 11 12 13 14 15

Yield t - - - - - - 150 165 180 195 210 225

Case 1: 7,000kip/kg

Revenue KN/t 7.0 - - - - - - 1,050 1,155 1,260 1,365 1,470 1,575

0.9 Production cost KN/ha 2.6 39 39 39 39 39 39 39 39 39 39 39 39

Net revenue (39) (39) (39) (39) (39) (39) 1,011 1,116 1,221 1,326 1,431 1,536

Case 2: 3,000kip/kg

Revenue KN/t 3.0 - - - - - - 450 495 540 585 630 675


Net revenue (39) (39) (39) (39) (39) (39) 411 456 501 546 591 636

Coffee

Ha 15 15 15 15 15 15 15 15 15 15 15 15

Yield t/ha - - 0.4 1.2 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Yield t - - 6 18 30 30 30 30 30 30 30 30

Revenue KN/t 3.0 - - 18 54 90 90 90 90 90 90 90 90


Net revenue (28) (28) (10) 26 62 62 62 62 62 62 62 62

0.9 Investment cost 2,596 2,596 - - - - - - - - - - -

Case 1: Bong @ 7,000kip/kg

Net Cash flow (2,662) (66) (48) (12) 24 24 1,074 1,179 1,284 1,389 1,494 1,599

EIRR 17.0%


Net Cash flow (2,662) (66) (48) (12) 24 24 474 519 564 609 654 699

EIRR 7.4%

Year:

Appendix 2 35

d. SAL/PR/01: Bong wood commercial planting and improving farmer livelihood in focus kumban of Samouay, and Taoy districts

Received by ADB 17 February 2011 ADB approval 2 March 2011

67. The subproject aims to improve livelihoods and reduce poverty for 425 households in 12 villages of Samuay and Taoy districts through land use planning and bong tree planting. These are the same districts in SAL/NRM/01 which plant bong trees. However, in this case, the farmers are not engaged in slash-and-burn cultivation so this is considered poverty reduction rather than natural resources management. 68. The activities include: (i) land use planning and land allocation, (ii) establishment of farmer production groups, (iii) establishment of a bong tree nursery, (iv) establishment of plantations for bong trees and cash crops, and (v) support for marketing and processing. None of the proposed processing, community market, drying floor, and storage structures was implemented.


69. In Samouay, the project covers 10 villages with 618 households with 1 ha each. In Ta-Oy, two villages with 124 households with 1ha per household are covered. The 742 households exceed the planned 425 households. The project and planting began in 2011, so the first harvest should be collected in 2017. There was some intercropping in the first three to four years after planting but shade from the bong tree was too great thereafter. Intercrops were rice, cassava, and banana. Product is sold to Vietnamese traders as with SAL/NRM/01. 70. Allowing for the increased area, the re-estimated EIRR is 69% at KN7,000/kg but it remains at about 48% even at the lower price of KN3,000/kg compared to the feasibility study's 37%. It appears that the economies of scale from a larger project focused on bong alone is a much more robust option than the smaller scale approach of SAL/NRM/01.

million KN 1 2 3 4 5 6 7 8 9 10 11 12 to 15

Bong

Ha 742 742 742 742 742 742 742 742 742 742 742 742

Yield rate t/ha - - - - - - 10 11 12 13 14 15

Yield t - - - - - - 7,420 8,162 8,904 9,646 10,388 11,130

Case 1: 7,000kip/kg

Revenue KN/t 7.0 - - - - - - 51,940 57,134 62,328 67,522 72,716 77,910

0.9 Production cost KN/ha 3.0 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235

Net revenue (2,235) (2,235) (2,235) (2,235) (2,235) (2,235) 49,705 54,899 60,093 65,287 70,481 75,675

Case 2: 3,000kip/kg

Revenue KN/t 3.0 - - - - - - 22,260 24,486 26,712 28,938 31,164 33,390

0.9 Production cost KN/ha 3.0 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235 2,235

Net revenue (2,235) (2,235) (2,235) (2,235) (2,235) (2,235) 20,025 22,251 24,477 26,703 28,929 31,155

Intercrop (Paddy)

Ha 742 557 371 186 - - - - - - - -

Yield t/ha 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0

Yield t 1,484 1,113 742 371 - - - - - - - -

Revenue KN/t 2.0 2,968 2,226 1,484 742 - - - - - - - -

0.9 Production cost KN/ha 1.4 1,002 751 501 250 - - - - - - - -

Net revenue 1,966 1,475 983 492 - - - - - - - -

0.9 Investment cost 3,884 3,884 - - - - - - - - - - -


Net Cash flow (4,152) (760) (1,252) (1,743) (2,235) (2,235) 49,705 54,899 60,093 65,287 70,481 75,675

EIRR 69.2%


Net Cash flow (4,152) (760) (1,252) (1,743) (2,235) (2,235) 20,025 22,251 24,477 26,703 28,929 31,155

EIRR 48.7%

Year:

36 Appendix 2

e. SAL/PR/03: Promotion of commercial pig raising, poultry, and fishery with value chain approach by promoting producer groups and business service providers in Salavanh, Wapi, Tumlan, and Khonsedon districts


71. The project planned to create sustainable value chains for small livestock and meat by providing improved livelihood opportunities for 1,950 households in 67 villages of Salavanh, Wapi, Tumlan, and Khonsedon districts. All target families would be organized and capacitated as producer groups for healthy livestock rearing. The project would also promote six business service providers for supply of litters of small livestock (pigs, native ducks and chicken, and fish), processed feed, and processed meat products for external markets. 72. The project started in 2012 and established production groups: (i) 10 pig production groups with 80 households, (ii) 8 fish production groups with 40 households, (iii) 10 duck production groups with 50 households, and (iv) 15 chicken production groups with 73 households.

73. Pigs: Two production centers for pig breeding have been established, one for government and one for the private sector. Both sell piglets at a discount of KN450,000/head for group members compared to KN500,000 for nonmembers. The government center sells some 700 piglets per year to nonmembers and has sold 2,414 to group members to date. Pigs are sold after four months fattening (80kg+) at KN16,000/kg live weight. This gives members a margin of over KN830,000.

74. Fish: The project supplied 1,000 kg of parent stock to the government center to produce fingerlings which sells to group members at KN300 each and to nonmembers at KN500. In the period 2012 to 2015, 2.7 million fingerlings were sold to members and 800,000 per year to nonmembers. The private sector provides fingerlings independently from the project but there remains a shortage of supply and fingerlings are imported to meet demand. The most common fish are perch and tilapia, for which a 300-gram (g) fish can be sold for KN30,000. Other varieties of fish cost more.

75. One ha of fish production pond costs about KN67 million per year for feed, maintenance and other operating costs but it can produce an annual net profit of KN250 million. With experience, 200,000 fishes can be raised per ha, twice over a 14-month production and maintenance cycle. Market traders buy at farm gate but farmers may also deliver to retailers for higher prices. All fishes are sold live.

76. Ducks: The project distributed 700 parent stocks to the 10 production groups, including incubators, vaccines, vaccination equipment, and other supplies. Ducklings are sold at 45 days old in pairs at KN15,000/pair. They are fattened for 6–8 months and then sold. Drakes are typically 3 kg to 4 kg and sell for KN120,000 to KN150,000 while ducks weigh 2 kg to 2.5 kg and sell for KN70,000 to KN80,000. Sales are in local markets and the farmer often sells directly to customers.

77. Chickens: The project distributed 900 parent stocks to the 15 production groups, including incubators, vaccination equipment etc. Chickens are sold at 45 days old (not as chicks) for KN12,000/pair and then fattened for six months before being sold in local markets for KN40,000 to KN50,000 per bird at weights of 1.5 kg to 2 kg.

Appendix 2 37

78. Lack of data on breeding, mortality, and private sector activities does not allow calculation of a project-specific EIRR. The cash flows of the centers and raising/fattening activities suggest likely sustainability. Project design excluded any revolving funds (in-kind or cash) so the project-financed activities are operated on a commercial basis and are likely sustainable. D. Sekong Province

a. SEK/COM/02: Enhancement of coffee production and quality through the Association of Coffee Producer Groups (ACPG), Thateng District

79. Note: This project, along with CPA/COM/08 and SAL/COM/05, forms a coffee promotion program implemented by the project in districts of three provinces in partnership with what was then the ACPG and is now the CPC.

Received by ADB 26 December2011 ADB approval 26 January 2012

80. The subproject planned to improve livelihoods of about 293 households in eight villages of Thateng District by: (i) strengthening producer groups, (ii) improving coffee production, (iii) improving coffee quality through upgraded coffee processing and storage, and (iv) establishing a management information system on coffee prices and quality requirements. 81. To increase production and improve quality, the project promoted production practices, engaging each household in practical hands-on activities using commonly available resources. Construction of wet mills provided centralized processing, standardized quality control, and secured the supply chain product flow required for organic certification, based on CPC experience in Pakxong and Lao Ngyam. The wet mills demonstrated the effectiveness of centralized processing and enabled the groups to develop technical and management skills to consistently produce high quality coffee. The eight new groups added to CPC capacity helped meet demand for CPC's quality coffee and enhance the overall viability of CPC as coffee exporter/producers.

82. Implementation substantially followed the approved plan, supporting 145 households in seven villages through provision of seedlings, fertilizer, training, and milling capacity. The mills are owned by the producer groups and process crops of members at KN250/kg and KN300/kg for nonmembers. These cash funds cover operation and maintenance (O&M), and repairs. Currently, members produce 60 t of raw coffee. Some nonmembers sell raw coffee to traders while the group sells processed coffee to CPC for KN3,000/kg and more for better quality coffee.

EIRR = economic internal rate of return, ha = hectare, t = metric ton. On the reported planted area of 185 ha yield are projected to increase to 2t/ha as trees mature.

million KN 1 2 3 4 5 6 7 8 9 10 to 15

Coffee

Coffee throughput (t) 60.0 72.0 86.3 103.6 124.2 149.0 178.7 214.4 257.2 370.0

Revenue KN/mt 3.7 222 266 319 383 460 551 661 793 951 1,369

Production cost

0.9 Raw beans KN/mt 2.3 135 162 194 233 279 335 402 482 579 833

0.9 Variable costs KN/mt 0.3 15 18 22 26 31 37 45 54 64 93

Net revenue 72 86 104 124 149 179 214 257 309 444

Investment costKN 1,381 - - - - - - - - -

Net Cash flow (1,309) 86 104 124 149 179 214 257 309 444

EIRR 14.3%

Year:

38 Appendix 2

83. Coffee is the main cash crop in the district, with some sales of vegetables (cabbage, lettuce, etc.) in local and Thai markets. No rice is grown. The feasibility study indicated an EIRR of 25%3 and recalculation at completion suggests an EIRR of 14%, as shown in the table above, based on the coffee processing investment.

b. SEK/COM/04: Promotion of commercial pig raising, poultry, and fishery with value chain approach by promoting producer groups and business service providers in Thateng and Lamam districts


84. The project planned to create a sustainable value chain for small livestock and meat to improve livelihoods of 1,950 households in 50 villages by forming producer groups for healthy livestock rearing. There would be six business service providers for supply of litters of small livestock (pigs, native ducks and chicken, and fish), processed feed, and processed meat products. Implementation would be based on "in kind" revolving funds and an entrepreneur began producing piglets at a rate of 50–60 per quarter to be distributed to farmers but the farmers proved reluctant to "revolve". The entrepreneur then took the initiative to develop the pig business on normal commercial terms, establishing a slaughterhouse in 2013. The project also focused on pigs, providing technical support to the entrepreneur to establish a privately-owned piglet production center. The project provided parent pigs to the center, which were paid for in the cash equivalent distribution of piglets to project farmers in four villages for fattening, and funded the distribution of 20 piglets to each of the 20 villages each year. Project farmers receive feed and technical support from the project as well as a 20% discount on piglets purchased from the center. 85. To date, the center has sold 4,300 piglets to project and non-project farmers to extend the benefits beyond the project. Two-month old piglets are sold at KN500,000/head and after fattening for three months are sold back to the entrepreneur's slaughter house at KN16,000/kg live weight – about KN1.9 million per pig.

86. The fattened pigs weigh some 120 kg, of which about 60 kg is meat. The best pigs are sold wholesale at KN40,000/kg and local sales at KN35,000/kg. Each pig provides 8 kg of offal (KN35,000/kg), 12 kg of bones (KN15,000/kg), and 35 kg of skin (KN10,000/kg). The butchered pig produces KN2.9 million. 87. This has proven to be a sound business model, which the entrepreneur is extending to cover poultry, ducks, and turkeys without project support. The feasibility study indicated an EIRR of 27% but the implemented project has been quite different but profitable. The disaggregation of the joint investment costs incurred by the entrepreneur and the need to distinguish between project and non-project costs and benefits prevent recalculation.

88. Actual implementation could better inform design of similar commercial and value chain projects, though the ability of the entrepreneur to provide both equity and commercial loans raises questions on the appropriateness of scarce grant funds for such commercially viable projects.

3 The feasibility study includes a purported coffee crop budget which is in fact an annual crop and appears to be a

paddy crop budget.

Appendix 2 39

c. SEK/PR/01: Poverty reduction through the enhancement of coffee in Ayun, Tat Tra, Dak Chung, and Sieng Luang kum bans, Dakchung District


89. The subproject planned to improve livelihoods and reduce poverty for some 641 households in 25 villages of Dakchung District by (i) developing producer groups, (ii) improving coffee production, (iii) improving coffee quality through introduction of wet processing machinery and operating techniques, and (iv) developing linkages to markets. The project focused completely on coffee, which provides the main household income (KN5.6 million per ha), supplemented by sales of poultry, pigs, and – in a few cases – surplus upland rice. 90. Implementation followed feasibility study design, providing farmers with inputs and training for nurseries and plantation. Weeding is undertaken three times per year, requiring four labor days per ha each time, and hired labor rates of KN30,000/day for men and women. Harvesting takes 10 labor days per ha and is paid at KN500/kg. The total subproject planted area is 333 ha.

91. Traders collect coffee from the site at KN1,200/kg for red beans and KN3,000/kg for dried beans. The feasibility study estimated an EIRR of 29% and recalculation), based on the project as implemented, suggests an EIRR of 25%.4


d. SEK/PR/02: Poverty reduction through promotion of sustainable agriculture in four kum bans in Dakching District

Received by ADB 16 January 2012 ADB approval 24 January 2012

92. The subproject planned to improve the livelihood of 748 households in 21 villages in Dakching District by improving production systems in remote upland areas. The project would: (i)

4 The feasibility assumes an unrealistic yield of 4 t/ha (cf 8.4 t/ha for coffee in SAL/NRM/01) and again gives an annual

paddy budget as coffee crop budget.


Coffee Beans

Ha Total 333 333 333 333 333

Yield t/ha 0.0 0.0 0.4 1.2 2.0

Yield Total 0 0 133 400 666

Revenue KN/t 3.0 0 0 400 1,199 1,998

Production cost

0.9 Plant tending labor days/ha 10.8 3,596 3,596 3,596 3,596 3,596

0.9 Plant tending labor KN/day 0.027 97 97 97 97 97

Harvesting labor KN/mt 0.450 0 0 60 180 300

0.9 Production cost KN/ha 1.4764 442 442 442 442 442

Net revenue -540 -540 -200 479 1,159

0.9 Investment cost 1,337 1,337 - - - -

Net Cash flow (1,877) (540) (200) 479 1,159

EIRR 24.8%

Year:

40 Appendix 2

establish production groups, (ii) construct or rehabilitate three irrigation schemes, (iii) provide revolving funds for inputs, and (iv) demonstrate new agricultural technology. 93. The activities proposed in the feasibility study were undertaken but not in the proposed project area, as the three irrigation systems to be rehabilitated were included in a larger project. Water resources were developed in the different locations and used for household water supplies as well as livelihood activities. Water was used for irrigation, fisheries, livestock (cattle and buffalo), vegetables (lettuce, cabbage), nurseries, and wet processing of coffee beans.

94. While this is another example of the flexible implementation of approved project activities, there is insufficient information to estimate a meaningful EIRR to compare with the feasibility study's 19% based on rice, pigs, and poultry.

E. Savannakhet Province

a. SVK/COM/02: Promotion of organic vegetable production systems in Phak Kha, Non Savanh, Thasano, and Doneseng villages of Kaisone Phoumvihan District

MAF Letter to ADB 1 February 2012 ADB approval 10 February 2012

95. The subproject planned to increase productivity of mainly irrigated organic vegetables and secondarily of rain-fed lowland rice and upland crops in the wet season, improve livelihoods and reduce poverty of 735 households in four villages in Kaisone Phoumvihan District by (i) organizing four organic vegetable production groups; (ii) providing fenced vegetable production plots, shade houses, and micro-irrigation systems; (iii) demonstrating improved organic vegetable production methods in fields and shade houses, and the production and use of bio fertilizers and bio pesticides for vegetable production; (iv) providing refrigerated warehouse and truck for processing and storage of fresh vegetables; (v) organizing private sector collaboration for collection, processing, packaging, and marketing of organic vegetables; (vi) establishing a revolving fund to help organic producer groups; (vii) organizing land use plans and soil analysis; and (viii) building capacity through training for farmers and local extension staff. 96. About 30% of the refrigerated storage and transport investment was not implemented. Also, instead of private sector collaboration in marketing, farmers sell organic produce in an organic market supported by Japanese International Cooperation Agency three days per week. Producer groups have been organized in four villages, with 105 member households producing vegetables on 12.2 ha of land in village plots that range from 2 ha to 5 ha. The land used was an unused state land which has been allocated to the farmers. The land is managed by the producer group, which reallocates the land if a farmer ceases to be interested in the activity.

97. In the dry season, only a small part of the area (about 20%) can be planted as the provided wells and micro-irrigation are constraints. With adequate water, more than 10 harvests per year are possible with typical growing periods of 25 to 30 days. Each household's plot could produce up to 7 t per year for the following: bell pepper, KN15,000/kg; lettuce, KN20,000/kg; morning glory, KN7,000/kg; and red onion, KN25,000/kg. Other crops include spring onion and mint. The most popular crops are spring onion and coriander, which are in high demand and easy to sell at good prices.

Appendix 2 41

EIRR = economic internal rate of return, Ha = hectare, t = metric ton. *Based on feasibility study/EA data. ** Based on site visit.

98. The project was implemented from 2012 to 2015 and the producer groups have established sustainable financial systems, without revolving funds, for sharing joint costs and financing production on a cash basis. 99. The table above re-estimates the EIRR at completion at 45% compared to the feasibility

study's 30%.

b. SVK/COM/04: Promotion of integrated rice-based farming system in

Decentralized Irrigation Development and Management Sector Project’s 5 irrigated area of Khanthachanh and Thapho irrigation systems, Saiphouthong District


100. The subproject aimed to increase productivity of mainly rice and other crops, such as dry season maize and peanuts, to improve livelihoods of 670 households in the two villages of Khanthachanh and Thapho. This would be achieved through (i) construction/repair/rehabilitation of both Khanthachanh and Thapho irrigation systems (pumps and 400 meters of canal) which pump water from the Mekong River; (ii) provision of revolving funds for improved seed multiplication and supply, developing integrated crop-livestock systems, and procurement and supply of green manure seed; (iii) establishment of 13 types of demonstration plots; and (iv) capacity building training for farmers and local extension staff. 101. Twelve of the 13 types of demonstrations and the revolving funds were excluded. Together, these comprise over 40% of project investments. Green manure was the only demonstration that proceeded but the farmers did not adopt it. They considered it unsuitable as it was growing like weeds among their crops. Land use plans, machinery purchases, and irrigation

5 ADB. 2000. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Lao

People’s Democratic Republic for the Decentralized Irrigation Development and Management Sector Project, Manila


Vegetables

Area ha 12.2 12.2 12.2 12.2

Yield per crop* t/ha 5.0 0 61 61 61 61

Potenital crops** crop/yr 7.0 0 427 427 427 427

Cropping Intensity** 1.2

Production per year t 0 256 256 256 256

Average Price** KN/mt 15

Revenue KN 0 3,843 3,843 3,843 3,843

0.9 Production costs* KN/ha 18.5 0 2,627 2,627 2,627 2,627

Net Revenue 0 1,216 1,216 1,216 1,216

0.9 Investment cost 2,692 2,692 - - - -

Net Cash flow (2,692) 1,216 1,216 1,216 1,216

EIRR 44.9%

Year:

42 Appendix 2

repairs were implemented, and money was spent on seed multiplication and extension but without the revolving funds. The tractor that was purchased is shared only by group members of the two villages who provide fuel.

102. The two villages established production groups for rice and peanuts involving 138 households with 210 ha of irrigated land. The feasibility study estimated there would be670 households and the 150 ha of irrigated land. During the wet season, the whole area is planted with rice. In the 2016 dry season, 58% was unplanted, compared to 69% in the feasibility study – 29% planted with peanuts, 5% with tobacco (sold to Lao Tobacco), and 8% with maize and cucumber.

103. Wet season paddy yields increased from 3.0 t/ha to 3.2 t/ha before the project, to with project 4.1 t/ha. This is attributed to improved irrigation supply, increased peanut in the cropping pattern, improved seed quality, and better fertilizer use. Production costs in 2016 was KN3 million/ha compared to KN1.5 million/ha before the project, but this increase was mainly due to an increase in labor-day rates from KN25,000/day to KN50,000/day. The farm-gate price for paddy is KN1,900/kg.

104. Fresh peanut yields increased to 5 t/ha from 2.7 t/ha (1.6 t/ha dried). Production costs are about KN4.1 million/ha. Nuts are sold fresh at farm-gate prices of KN3,000/kg to KN5,000/kg.

105. Dried tobacco yields increased from 1.6 t/ha to 2.4 t/ha at an average price of KN20,000/kg and production cost of KN11 m/ha. Lao Tobacco collects from the farm.

106. Maize and cucumbers are sold by the farmers as retailers in local markets.

EIRR = economic internal rate of return, FW = please supply, FWO = please supply, Ha = hectare, t = metric ton. * 10 labor days/ha to harvest extra yield.


Paddy

Ha 53 105 158 210 210

Wet Season

FW Yield t/ha 4.1 215 431 646 861 861

FWO Yield t/ha 3.1 163 326 488 651 651

FW Revenue KN/mt 1.90 409 818 1,227 1,636 1,636

FWO Revenue KN/mt 1.90 309 618 928 1,237 1,237



Dry Deason

Peanuts

FW Ha ha 42% 22 44 66 88 88

FWO Ha ha 33% 17 35 52 69 69

FW Yield t/ha 5.0 110 221 331 441 441

FWO Yield t/ha 4.0 69 139 208 277 277

FW Revenue KN/t 4.0 441 882 1,323 1,764 1,764

FWO Revenue KN/t 4.0 277 554 832 1,109 1,109

FW Production Cost KNp/ha 3.7 81 163 244 325 325

FWO Production Cost KN/ha 2.8 48 97 145 193 193



Total Incremental Revenue 210 421 631 842 842

0.9 Investment cost 2,065 1,652 206 206 - -

Net Cash flow (1,441) 214 425 842 842

EIRR 39.6%

Year:

Appendix 2 43

107. The table above re-estimates the EIRR at 40% at completion, using peanut to represent dry season crops, compared to the feasibility study's 21%. This is due to the larger benefited area and high returns on investments (repairs and accumulated maintenance).

c. SVK/COM/08: Commercialization of integrated sugarcane farming in 28 villages of Xayboury District

Received by ADB 26 December 2011 ADB approval 1 March 2012

108. The revised feasibility study for this project took 66 days for ADB to approve. The revised study, which has no design and monitoring framework (DMF), has the objective to:Improve livelihood and reduce poverty for 6,805 households, with 35,336 persons in eight kum bans, 28 villages of Xayboury District namely: Ban Dong Phou, Ban Gnang Kham, Ban Keng Het, Ban NaoNeua, Ban Keua Kao Kat, Dong Phayvanh, Dongphoung, Tha Kham, Tonh Hene, Lao Fay, Kang, Kajou, Kengkabao Tai, Khamnolsoung, Manilat, Nadeng, Nang Heu Thong, Natheung, Namouang, Nongsaphang, NongKiet Leung, Phackaya, Savang, Sikay, Sivilay, Veune Neua, and Veune Tai. 109. The project also aims to demonstrate a desired tripartite farming arrangement among small farm holders, the private sector, and the government, which covers the following required conditions: (i) organize farmers into sugarcane production groups, (ii) improve farm mechanization, (iii) provide seeds, (iv) set up demonstration sites for new technology transfer, (v) provide credit support for sugarcane farmers, and (vi) build capacity. The ultimate goal is to alleviate the socioeconomic condition of participating farmers in the project site.

110. This project was not fully implemented. The number of project villages was reduced from 28 to 11 as 17 villages had a separate concession with the Thai-owned mill (Mitr Lao). The purchase of two tractors was going to cost $120,000. Instead, the project purchased five tractors for $350,000 from the approved total investment cost of $557,000 (including farmers’ contribution of $84,000). To offset this adverse variance, savings were made by cancelling or reducing other investments on sugar cane plantation, a center for cane procurement, and cane planting material production.

111. Given the cancelled/reduced activities and the investment on tractors, which is 74% of the grant fund (excluding the farmer contribution to the cancelled cane activity), the project changed from commercialization of cane farming to tractor hire.

112. Following normal practice, the mill works closely with farmers to support them, including land development on credit by deducting from payments for cane received. There is no market failure in the availability of equipment for land development and the provision of tractors to replace those of the mill's contractors will have no impact on either the quality or scale of the cane plantation. The economic analysis in the feasibility study is not relevant to the project as implemented.

113. The motivation for the grant-funded purchase of tractors appears to be the disputes between farmers and the mill's contractors over the area of land development charged to farmers. The mill's contractors appear to charge farmers groups the same rate of KN1.6 m/ha as non-group members for land preparation though the tractors were grant-funded. So, the financial

44 Appendix 2

benefit for the farmers is based on the land area measured by the group operation compared to the mill’s contractors' measurements.

114. Subsidizing one private competitor against others is an inappropriate use of grant funds – and is inconsistent with the objectives of the Sustainable Natural Resource Management and Productivity Enhancement Project.

Appendix 3 45

STATUS OF COMPLIANCE WITH GRANT COVENANTS

No. Covenants Grant Agreement

Status

Project Coordination Office

1 The Recipient shall ensure that a project coordination office shall be established to serve as the Project Coordination Office (“PCO”) for the Project and that such PCO shall oversee day-to-day operations of the Project, including in particular disbursement, accounting, logistics management, reporting, monitoring, supervision, organization of research activities, local training and study tours, and coordinating with MAF, relevant government departments, IFAD, development partners and the Provinces.

Schedule 4, Para. 4

Complied with - National Project Coordination Office (“NPCO”) and Provincial Project Coordination Office PPOs in 5 provinces have been established to oversee day-to-day operations of the Project.

2 The Recipient shall also ensure that (a) the PCO is managed and operated by a full-time Project director, acceptable to ADB; and (b) the Project director is supported by competent full-time personnel acceptable to ADB.

Schedule 4, para. 5

(a) Complied with - A full-time National Project Director has been appointed to provide leadership and manage the NPCO staff. (b) Complied with - The NPD is supported by qualified full-time personnel acceptable to ADB. Assistant to NPD (PhD holder) was assigned since September 2013.

Provincial Project Office

3 Except as set forth in paragraph 7 of this Schedule 4, the Recipient shall ensure that each Province establishes a provincial project office within its planning office or PAFO office (as agreed with ADB) to serve as the Provincial Project Office for such Province (each such office a "PPO").

Schedule 4, para. 6

Complied with - PPOs have been established in the PAFO in 5 provinces. Provincial Project Directors have been appointed in 5 provinces for management, coordination and day to day operation of the PPOs.

4 The Recipient shall ensure that the provincial project office established for the Rural Livelihoods Improvement Program shall be used as the PPO for the Project work to be conducted in Attapeu Province and for all purposes shall be considered a PPO.

Schedule 4, para. 7

Complied with - In Attapeu province the PPO is managed by the Director of RLIP but office is under the PAFO.

5 Each PPO shall (a) coordinate the Project’s work among the line-agencies in such Province and to support the PCO in Project implementation; (b) work with district and kumban staff to assist them identify and prioritize

Schedule 4, para. 8

Complied with - PPO coordinate the Project’s work among the line- agencies in province; (b) work with district and kumban staff to assist them identify and prioritize proposed subproject investments based on specified selection criteria; and (c) supervise the

46 Appendix 3


Status

proposed subproject investments based on specified selection criteria; and (c) supervise the implementation of Subprojects contracted by the MAF.

implementation of Subprojects contracted by the MAF.

6 The Recipient shall also ensure that (a) the PCO and each PPO are managed and directed by a full-time Project director, acceptable to ADB; and (b) each such Project director is supported by competent full-time personnel acceptable to ADB, including financial management and procurement staff.

Schedule 4, para. 9

Complied with - The PPOs are managed and directed by full-time coordinators acceptable to ADB, and supported by full-time personnel comprising administrative, financial, procurement and M&E. In each PPO, there are about 15-19 staffs in the following units: planning, administration, financial management, implementation, M&E/GIS/Land Use units.

National Project Steering Committee

7 Within 2 months of the Effective Date, the Recipient shall establish a National Project Steering Committee to ensure inter-agency coordination and provide direction to the Project Coordination Office. The National Project Steering Committee shall be chaired by the Vice-Minister of Agriculture and Forestry with representation from MOF, MAF’s Department of Planning, the National Agricultural and Forestry Extension Services, National Committee for Rural Development and Poverty Eradication, the National Agriculture and Forestry Research Institute, the National Land Management Authority, the Water Resources and Environmental Administration, the Ministry of Planning and Investment, a representative from each Province, and other relevant persons or agencies. The National Project Steering Committee shall first meet within two months of the Effective Date and shall meet at least semi-annually thereafter.

Schedule 4, para. 10

Complied with - The National Project Steering Committee (NPSC) was organized through Decree No. 1593 dated 28 July 2010. It comprises 17 members from different ministries and departments to ensure inter-agency coordination and provide direction to the Project Coordination Office. The National Project Steering Committee is chaired by the H.E. Dr. Ty Phommasak, Vice-Minister of Agriculture and Forestry with representation from MOF, MAF’s Department of Planning, the National Agricultural and Forestry Extension Services, National Committee for Rural Development and Poverty Eradication, the National Agriculture and Forestry Research Institute, the National Land Management Authority, the Water Resources and Environmental Administration, the Ministry of Planning and Investment, the Vice-Governor of each Province, and other relevant persons or agencies. Complied with – The NSC met within the 2 months of the Effective Date and semi-annually thereafter.

Provincial Coordination Committee

8 Within two months of the Effective Date, the Recipient shall establish or cause to be established a Provincial Coordination Committee in each Province to ensure inter-


Complied with - Instead of Provincial Coordination Committee, executing agency established five Provincial Project Steering Committees (PPSC) chaired by the Vice-Governor in each province with membership from

Appendix 3 47


Status

agency coordination and provide direction to the respective PPO. Each Provincial Coordination Committee will be chaired by the Vice-Governor of the relevant Province, Provincial Agriculture and Forestry PAFOs; Provincial Department of Planning, the Provincial Agricultural and Forestry Extension Services, the Provincial Land Management Authority, the Water Resources and Environmental Administration together with relevant district governors and other relevant persons or agencies. Each Provincial Coordination Committee shall first meet within two months of the effective date and shall meet at least semi-annually thereafter.

Agriculture and Forestry (PAFOs), Provincial Department of Planning, the Provincial Agricultural and Forestry Extension Services, the Provincial Land Management Authority, the Water Resources and Environmental Administration together with relevant district governors and other relevant persons or agencies. The PPSCs were formed through various provincial decrees as follows: Attapeu Decree 1275/14 Sept 2010; Sekong Decree 281/31 Aug 2010; Savannakhet Decree 911/ 28 Aug 2009; Champassak Decree 753/ 3 Sept 2009; Salavanh Decree 118 dated 29 April 2009. Complied with - PPSCs across five provinces also meet twice a year to address inter-agency coordination and attend to operations issues which affect project implementation in their areas. If the issues are policy-related, the Chairperson of the PPSC who also is a member of the NSPC usually elevates these issues for resolution and action of the NPSC.

Counterpart Funding

9 The recipient shall ensure and shall cause to ensure that (a) all local and foreign currency counterpart financing necessary for the Project shall be provided in time to enable completion of the Project activities; (b) additional counterpart financing shall be provided if necessary for any shortfall of funds of cost overruns; and (c) counterpart financing for compensation and entitlements under any Resettlement Plan are fully provided directly to affected people prior to their displacement from housing and land.


Complied with - the project has been provided all local and foreign currency counterpart necessary to ensure the completion of Project activities including compensation.

Operation and Maintenance

10 The recipient shall be responsible for the operation and maintenance of any subprojects and shall provide sufficient counterpart financing to ensure that such subprojects are operated and maintained.


Complied with - ADB has approved 71 subprojects and implementation is on-going. Recipient provincial governments are responsible for the operation and maintenance of all rural infrastructure including rural access roads and irrigation schemes constructed under the subprojects. Government allocate the funds from their provincial budget for

48 Appendix 3


Status

the operation and maintenance of the infrastructure created under subprojects.

Co-financing

11 The recipient and MAF shall (a) keep ADB informed of their discussions on any proposed financing arrangements with other public, commercial, bilateral, and multilateral financial institutions on the Project, and (b) provide ADB with an opportunity to comment on any resulting proposals. The Recipient shall consider ADB’s views before finalizing any such proposals.


Complied with - The executing agency discussed with ADB the plan for the financing arrangements with other public, commercial, bilateral, and multilateral donor institutions on the Projects such as ICRISAT, IRRI, AGPC, ACIAR, SWIFT, APMAS, CICCC and (b) provided ADB with an opportunity to comment on any resulting proposals.

Subproject Identification and Selection

12 The Recipient shall ensure that awareness and outreach campaigns will be conducted in all districts, particularly in Poor Districts, to generate awareness of the Project, in particular on (a) the rules and guidelines for Subproject formulation; (b) the application process; (c) the screening criteria and prioritization calculation; and (d) the implementation process.


Complied with - Awareness and outreach campaigns on (a) through (d) conducted in 42 Districts.

13 The Recipient shall ensure that MAF, through the PCO (a) prepare guidelines to assist proponents identify eligible Subprojects acceptable to ADB (the “Guidelines”); (b) widely disseminate such Guidelines throughout the Provinces; and (c) ensure that PPOs screen potential Subprojects to ensure such Subprojects conform to such Guidelines. At a minimum such Guidelines shall contain the selection criteria set forth in paragraph 17.


Complied with – (a) Guidelines was developed; (b) Guidelines were disseminated in 5 provinces; (c) PPO screened potential subprojects to ensure conforming to such Guidelines.

14 The Recipient shall, and shall cause the Project Executing Agency and each Province to, ensure that all Subprojects meet to ADB’s satisfaction, the selection criteria and other implementation arrangements set forth in this Schedule 4. The Recipient shall control and monitor Subprojects to ADB’s satisfaction. The Recipient


Complied with - 71 Sub-projects were prepared and screened in accordance with criteria set forth in para 17 of GA. The sub projects have been regrouped to 9 groups as recommended by the midterm review mission.

Appendix 3 49


Status

and ADB shall ensure that each Subproject meets the selection criteria set forth: (a) The Subproject has an economic internal rate of return (EIRR) greater than 10-12 percent; (b) The Subproject conforms to the Recipient’s Sixth Five-Year National Socio-Economic Development Plan (2006-2010) (and any subsequent national plan consistent with this Agreement) and provincial agricultural development strategies, acceptable to the Recipient and ADB; (c) The Subproject will be an agriculture project based upon proven technical parameters and implementation arrangements within the Province or in a location with a similar agricultural and ecological environment; (d) The Subproject will be identified and prioritized based on the Needs Assessment, and any updates thereto, and will be further selected and designed taking consultations with beneficiaries and affected persons into account. (e) The Subproject reflects the requirement for a reasonable balance of activities among communities and districts. (f) The Subproject will have a significant potential impact on poverty reduction and targets Poor Districts, Poor Households, ethnic groups, and women. (g) The Subproject’s Plans have been published in a form, manner and place that make them available to affected people, and public comments have been invited and comments, including objections, have been published; (h) The Subproject must be technically feasible and represent the least-cost alternative, taking into account the need to provide for a reasonable increase in demand in the future; (i) The Subproject is to be conducted within an institutional framework that demonstrates the likelihood that it will be financially and institutionally sustainable, including by covering operation and

50 Appendix 3


Status

maintenance costs; (j) The equipment, materials, and other resources can be acquired in, or transported to, the Subproject location without unreasonable obstruction or delay; (k) The subproject can be completed within the project implementation period. (l) The Subproject is in compliance with the laws of the Recipient including its environmental requirements, ADB’s Environment Policy (2002), ADB’s Forest Policy, and the environmental requirements set forth in paragraphs 30 to 35 of the Schedule 4. For Subprojects that require an environmental assessment, the environmental assessment is included in the Subproject proposal, and the government’s environmental clearance is obtained prior to the award of the Subproject contract; (m) The subproject will not have significant land acquisition or involuntary resettlement. If either land acquisition or involuntary resettlement or damage to assets is required for a Subproject, it will be conducted in conformity with ADB’s Involuntary Resettlement Policy (1995), the Resettlement Framework, and the provisions of paragraphs 36 to 37 of this Schedule 4; (n) The subproject complies with the conditions on indigenous people in Paragraph 38 of the Schedule 4; (o) The Subproject’s design, planning and implementation will promote equal access to resources, services and opportunities; (p) The Subproject does not overlap or duplicate the activities of the Greater Mekong Region’s Biodiversity Corridor or the activities of other development partners directed at agriculture and natural resource management; (q) The subproject does not finance kumban structure unless the express approval of ADB has been obtained.

Appendix 3 51


Status

15 The Recipient shall ensure that each PPO prepares a ranking mechanism, acceptable to ADB, to prioritize the selection of Subprojects in a manner consistent with the evaluation criteria set forth in Appendix 5 of the RRP (the “Ranking Mechanism”). In addition, the Recipient shall ensure that Subprojects are prioritized if they: (a) contribute to the Greater Mekong Regions East West Corridor or Biodiversity Conservation Initiative; or (b) are Subprojects that relate to climate change issues such as climate adaptation or the Climate Change Fund.


Complied with – a ranking system for subproject prioritization and selection was developed and adopted in accordance with criteria set forth in Appendix 5 of the RRP (the “Ranking Mechanism”). The screened subprojects have been approved and being implemented. Subprojects fall within the watersheds of the four main tributaries of Mekong (Xe bangfai, Xe bangheang, Xedon and Se Kong rivers. 6 NBCAs are located in the project target areas. (1) Phouxanghe NBCA (Savannakhet Province) (2) Dong Phouvieng NBCA (Savannakhet province and Salavanh Province) (3) Xe Ban Nuan NBCA (Champsak Province) (4) Xe Xap NBCA (Salavanh Province) (5) Dong Houasao NBCA (Champasak Province) (6) Xe Pian NBCA (Champsak Province and Attapeu Province)

16 The recipient shall ensure that the Provincial Coordination Committee applies the Ranking Mechanism to the selection of Subprojects. The National Project Steering Committee shall approve Subprojects based on the Provincial Grant Allocation.


Complied with - Provincial Project Steering Committees applied the ADB-approved ranking mechanism to the selection and prioritization of subprojects. - The National Project Steering Committee (NPSC) as recommended by the PPSC approved all 71 subprojects to get into the succeeding project implementation cycle e.g. design/ FS stage per the approved provincial grant allocation scheme.

Capacity Needs Assessment

17 Within six months of the Effective Date, MAF shall (a) conduct a capacity and institutional needs assessment that updates and provides details on the Needs Assessment and (b) thereafter develop a capacity and institutional needs program that addresses the update to the Needs Assessment.


Complied with – (a) TNA completed resulting in about 10-12 topics and 120 types of training courses. (b) Training budget approved by NPCO. Selection and ToT training for master trainers have been planned.

18 The recipient shall encourage Poor Households to join and participate in agricultural and water producer associations to strengthen their capacity to negotiate mutually beneficial arrangements with private sector investors.


Complied with - Awareness campaign has been organized in the villages to motivate the poor households to participate in agriculture producer and water user association. Poor hh represents of 60% of all producer groups.

52 Appendix 3


Status

19 The recipient shall ensure that each participating Agricultural Producer Group and Water User Group sets a quota of 40 percent of its membership from Poor Households.


Complied with - During subproject identification and design stage. The project is targeting more than 40% participation from poor and very poor farmers. As of March 2013, Poor hh represents 60% of producer / water user groups.

Governance and Anti-corruption

20 The recipient shall comply with and shall cause MAF to carry out the Project in accordance with ADB’s Anticorruption Policy (1998, as amended to date) and that relevant provisions of ADB’s Anticorruption Policy are included in all bidding documents for the Project. The Recipient acknowledges ADB’s right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project and shall ensure DGPC and MAF to cooperate fully with any such investigation and to extend all necessary assistance as may be necessary for successful completion of the investigation.


Complied with - relevant provisions of ADB’s Anticorruption Policy are included in all bidding documents. The executing agency acknowledges ADB’s right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project and shall ensure DGPC and MAF to cooperate fully with any such investigation and to extend all necessary assistance as may be necessary for successful completion of the investigation.

21 The recipient shall develop policy in areas related to land concessions, such as establishing a long-term land valuation framework, developing the policy framework to use the necessary special data tools, and convening meetings with Provinces to codify and confirm the process of awarding land concessions.


Complied with through MAF contributions to the work of Ministry of Planning and Investment which is now mandated for policies related to concessions.

22 The recipient shall record the commercial terms and conditions of individual concessions in a confidential database within MAF. The Recipient shall use such database to monitor the concessionaire’s compliance with the terms and conditions of its concession and to facilitate administration of the Recipient’s commitments under the concessions.


Complied with through MAF contributions to the work of Ministry of Planning and Investment which is now mandated for policies related to concessions and FDI.

23 Within six months of the effective date, the recipient shall initiate review of its existing regulations on Agricultural Producer Groups and Water User Groups to consider


Complied with - The PPOs have their own regulation in establishment of the Production groups and Forming of the Water User Groups based on the Documents and guidelines produced by

Appendix 3 53


Status

how Agricultural Producers Groups and Water Users Groups are established, promoted, and sustained. The Recipient shall issue new guidelines or regulations, including Ministerial Decisions, if necessary as a result of such review to improve the effectiveness and efficiency of regulations concerning Agricultural Producer Groups and Water User Groups.

the Departments under MAF (Department of Agriculture Extension and Cooperatives, Department of Irrigation, etc.). No new regulations are adopted.

Grievance Redress Mechanisms

24 Within six months of the effective date, MAF shall prepare a grievance redress mechanism, acceptable to ADB, to receive and resolve complaints and grievances relating to all matters relating to the Project including resettlement and environment (the “grievance redress mechanism”). The recipient shall (a) make public the existence of this Grievance Redress Mechanism, through public awareness campaigns in the provinces; (b) review and address grievances of stakeholders in relation to the project, any of the service providers, or any person responsible for carrying out any aspect of the project; and (c) proactively and constructively to respond to them.


Complied with – Grievance redress mechanism in on place under the MoNRE for all safeguards issues. General grievance redress mechanism is on place for all issue under the District Governor, Provincial Governor and Prime Minister Office. There is grievance redress mechanism at PPO, NPCO and SNRMPEP and at DPC at MAF to deal with the project implementation related issues.

Project Website

25 Within six months of the effective date, MAF shall create a project website as a part of their existing web-site to disclose information about various matters on the project, including procurement. With regard to procurement, the website shall include information on 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 and services procured.


Complied with - Project website already launched. It can be accessed at http://www.snrmpep.gov.la/

Transparency

26 The recipient shall ensure information regarding the Project is publicly available through publication of leaflets and their


Complied with - Leaflet and radio publicity campaign was done in June to September 2010. Leaflets are readily

54 Appendix 3


Status

availability in the provinces and districts, through publication in newspapers and information on the radio.

available to interested persons and parties.

Environmental Safeguards

27 The recipient and MAF shall each ensure that the project is implemented in accordance with all environmental safeguard measures. MAF shall adequately supervise the construction works carried out by private contractors to ensure compliance with these environmental safeguards measures.


Complied with – IEE and EMPs have been produced. Environmental safeguards measures have been implemented according to IEE and EMPs. EMP implementation and monitoring report has been produced.

28 The recipient and MAF shall each ensure that the proposed Project and any Subproject is undertaken and all facilities and associated equipment are assessed, operated and maintained in accordance with applicable laws and regulations of the Recipient, ADB's Environment Policy (2002), the environmental assessment and review framework, and environmental policies and safeguard operational rules of the recipient.


Complied with - IEE and EMPs have been produced for the subprojects under category B. The ADB safeguards policies and the safeguards guidelines of MoNRE are complied.

29 The recipient and MAF shall each ensure that before any Subproject is proposed for financing (a) the project is screened; and (b) if necessary, an environmental assessment is conducted and an environmental management plan (each an "EMP) is prepared in accordance with the environmental assessment and review framework and ADB's Environment Policy for such subproject and such environmental assessment and EMP are approved by ADB and relevant government agencies.


Complied with – IEE and EMPs have been approved by ADB, MAF and relevant provinces.

30 The recipient and each province shall implement and comply with the outcomes of the IEE, any environmental assessment for a subproject, and any mitigation measures identified in any EMP, during the design, construction and operation of the project. The recipient shall and shall cause MAF to monitor and audit the implementation of the EMP, and


Complied with – IEE and EMPs have been produced and implemented with monitoring report submitted to ADB in May 2015.

Appendix 3 55


Status

shall report to ADB twice a year on the implementation of the EMP.

31 The recipient and MAF shall each ensure that the outcomes of any environmental impact assessment and mitigation measures identified in any EMP are approved by ADB and relevant government agencies and are complied with during the design, construction and operation of the project. The recipient, shall, and shall cause MAF to, monitor and audit the implementation of the EMP, and report to ADB twice a year on the implementation of the EMP. Such reports may be included within the recipients regular progress reporting to ADB on the project.


Complied with – IEE and EMPs have been produced and implemented with monitoring report submitted to ADB in May 2015.

32 The recipient and MAF shall each ensure that construction (a) does not take place within national parks, wild and planted forests, and wildlife sanctuaries, without prior environmental clearances obtained from all relevant government agencies; and (b) avoids monuments of cultural or historical importance.


Complied with - MONRE and PONRE representatives are in the National and Provincial Technical Review Committees and Steering Committees.

Land Acquisition and Resettlement

33 The recipient and MAF shall ensure that all construction contracts under any subproject contain binding requirements for construction contractors to (a) fully reinstate pathways, other local infrastructure and agricultural land to at least their pre-project condition upon the completion of construction; and (b) adequately record the condition of roads, agricultural land and other infrastructure prior to transport of material and construction commencement.


Complied with. - responsibilities included in ToR of focal persons for social safeguards and environment assigned at NPCO and PPOs.

34 The recipient shall ensure, and shall cause MAF to ensure that (a) any land and rights-of-way required by the project are made available in a timely manner; and (b) the project and any subproject shall not require involuntary resettlement. If land acquisition and/or involuntary resettlement are required for any subproject, and/or damage to


Complied with. There were 2 affected families for IR which have been provided proper compensation as per ADB resettlement policy. Completed Land Acquisition Consent Forms provided to ADB. Project has produced Due Diligence Report (DDR) of IR and EGDP.

56 Appendix 3


Status

crops, trees, or any other asset are likely to occur under a Subproject, MAF shall prepare a resettlement plan (each such plan a "Resettlement Plan") for such subproject in accordance with (a) applicable laws and regulations; (b) the Resettlement Framework; and (c) ADB's Involuntary Resettlement Policy (1995) and related requirements. Such Resettlement Plan shall be submitted to ADB for review and approval, prior to the start of any land acquisition or activities likely to cause damage and no later than the award of the relevant civil works contract. Any such Resettlement Plan shall be prepared based on the final detailed design for such Subproject, and such resettlement plan shall be disclosed to affected people in accordance with ADB's application information disclosure requirements for resettlement.

IR safeguards were applied retroactively, with a DDR conducted to confirm compliance with the RF. No gaps against the RF were identified in the DDR. A corrective action plan was implemented for one subproject. There are no issues that remain outstanding.

Ethnic Groups

35 The recipient shall ensure that the project and all Subprojects are carried out in accordance with the specific measures on ethnic groups set forth in (a) the relevant Ethnic Group Development Plan and the agreed Ethnic Group Development Framework; (b) ADB's Policy on Indigenous Peoples (1998); and (c) the Recipient's laws and regulations on ethnic groups. In the case of any difference between the Recipient's laws and regulations and ADB's Policy on Indigenous Peoples, ADB's policy shall prevail. Based on the Ethnic Group Development Framework, an Ethnic Group Development Plan shall be prepared for any proposed Subproject involving ethnic groups (each such plan an "Ethnic Group Development Plan"). Such Ethnic Group Development Plan shall be submitted to ADB for review and approval prior to the start of any civil works for the specific section of the subproject that involves ethnic groups. No work shall start in an


Complied with. - documentation and procedures based on GIZ model and responsibilities included in ToR of focal persons for social safeguards and environment assigned at NPCO and PPOs. IP safeguards were applied retroactively and a due diligence review (DDR) was conducted on subprojects to determine compliance with the EMDPF. The DDR found that existing measures in the EMDPF were sufficient. All identified measures have been implemented by project closure.

Appendix 3 57


Status

area involving ethnic groups until such Ethnic Groups Development Plan has been approved.

Labor

36 The recipient, through MAF, shall ensure that (a) all civil works contracts require contractors employed under the project to incorporate minimum workplace occupational safety norms, including the core labor standards as identified by the fundamental International Labor Organization conventions; (b) provide timely payment of wages to all workers including male and female workers (with such requirements being included in civil works contract and monitored by construction supervision consultants); (c) provide women's employment, where appropriate, and pay equal wages to the women employees for equivalent work; (d) not employ child labor in project activities, in compliance with the relevant laws and regulations of the Recipient; and (e) monitor the implementation of these provisions including, the effects of the Project on women through collection and compilation of gender-disaggregated data, where relevant, including in the relevant Resettlement Plan, social development action plan, and PPMES and provide monitoring reports of these activities to ADB.


Complied with

Health

37 The recipient and MAF shall cause the contractors to disseminate information on the risks of socially and sexually transmitted diseases, including HIV/AIDS and malaria, to their employees during Project Implementation.


Compiled with - Official letters have been issued to all contractors to promote to cause the current contractors to disseminate information on the risks of socially and sexually transmitted diseases. Project also disseminated the CD for the awareness against the human trafficking and HIV/AIDS to provinces.

38 The recipient shall develop and fully implement the agreed HIV/AIDS Awareness and Prevention of Human Trafficking Program as described in Supplementary Appendix G in the construction camps, towns, and


Compiled with - Official letters have been issued to all contractors to promote to cause the current contractors to disseminate information on the risks of socially and sexually transmitted diseases. Project also disseminated the CD for the awareness

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Status

rural areas of the project area. Such program shall strengthen the capacity of the relevant agencies (through the Lao Women's Union at national, provincial and district levels) to effectively plan and implement its elements. The MAF's Gender Unit shall also be strengthened to facilitate these activities set out above. The Recipient shall monitor the Program.

against the human trafficking and HIV/AIDS to provinces.

Gender

39 The recipient shall ensure that the gender development measures provided in the agreed Summary Poverty Reduction and Social Strategy are undertaken in order to promote the participation of women in Project activities. The Recipient shall further ensure that district and village resettlement committees established according to the agreed Resettlement Plan include representatives from the district Women's Union, the village Women's Union, female representatives from affected households, including women from severely affected households, households headed by women, and from households of ethnic groups. The Recipient shall ensure that there are capacity building trainings for such female committee members.


Complied with – The executing agency has applied all efforts for the gender development measures provided in the agreed Summary Poverty Reduction and Social Strategy to promote the participation of women in Project activities. Gender focused targeting is being applied in the implementation of the subproject activities. Capacity building trainings for all female committee members have been organized.

40 The recipient shall (a) conduct gender sensitization training on gender and resettlement for its relevant staff, the district-level resettlement committees, and the Women's Union; and (b) ensure that women elders and youth from affected households of all major ethnic groups in the Project area and the Women's Union and Youth Union are included in the HIV/AIDS and Human Trafficking Awareness Program.


Complied with - The executing agency has conducted (a) gender sensitization training on gender and resettlement for relevant staff and the Women's Union. Project is educating the women elders and youth of all major ethnic groups in the Project area and the Women's Union and Youth Union for the HIV/AIDS and Human Trafficking. Project also organizing the Awareness Campaign against the human trafficking through a documentary “Little Bird In A Cruel Red Storm”.

Disbursements and Performance Checks

41 The recipient shall ensure that the PCO, reviews invoices from firms engaged in implementing the


Complied with – PCO ensures that contractors are paid on time, that the work of the contractor is acceptable and

Appendix 3 59


Status

Project, and makes payments within fifteen (15) working days of their receipt or inform the contractors of any shortfalls in its ability to make payment of the invoices.

follows the stipulations in the agreed contract.

42 The recipient shall allow and facilitate ADB’s representatives to conduct spot and random checks on (a) flow of funds and their use for the Project in accordance with the Grant Agreement; (b) work-in-progress; and (c) Project implementation.


Complied with – spot and random checks for (a) to (c) have been conducted mainly during grant review missions and any time as necessary with full support from the PCO.

Project Performance Monitoring and Evaluation System

43 During project implementation, the Recipient shall cause MAF, through the PCO, to develop a Project Performance Monitoring and Evaluation System (“PPMES”) including baseline performance monitoring and systematic Project performance monitoring, including benefits monitoring and evaluation acceptable to ADB and the other donors. MAF shall carry out surveys (a) at the start of project implementation to establish baseline data; (b) at project mid-term; (c) at the time of project completion; and (d) not later than six months after project completion, to evaluate the project benefits. Data to be compiled and analyzed Schedule 4 28 for the purpose of performance monitoring and evaluation shall be in a format acceptable to ADB. MAF shall propose key indicators which shall be acceptable to ADB.


Complied with - The PPMES has been developed and surveys conducted for baseline, mid-term and completion.

Annual Budget and Operating Plan

44 By 31 August of each year of project implementation, MAF shall cause each province to and each province shall provide ADB with an annual budget and operating plan for the following fiscal year.


Complied with - The executing agency has submitted the annual work plan and budget (AWPB) in a timely manner. To date, two AWPBs have been submitted and approved by ADB.

Semiannual Reviews

45 The recipient and ADB shall together carry out annual reviews of the project during the project implementation period. The annual reviews shall include an

Schedule 4, para.48

Complied with – To date, 10 review missions including Inception Mission and Special Project Administration Mission have been fielded.

60 Appendix 3


Status

examination of budgetary allocations for the project, operation and maintenance costs, staffing, implementation arrangements and achievements under the project. The review constraints, and determining ways to overcome them.

Midterm Review

46 The recipient and ADB shall jointly carry out a midterm review of the project during the third year of project implementation or at any other time as may be agreed upon by the recipient and ADB. The results of the midterm review shall be discussed by the recipient and ADB and if required, appropriate corrective measures shall be formulated to ensure successful project implementation and achievement of the project objectives by the grant closing date.

Schedule 4, para.49

Complied with – midterm review is conducted during 30 November 2012 to 9 January 2013.

Appendix 4 61

SUMMARY OF SOCIAL SAFEGUARD ISSUES

I. Subproject: SVK/PR/10, Sepone district, Savannakhet province

1. The construction of Huay Yon Irrigation in Labor-Phoxay village required the acquisition of productive land of four households. Two of these households lost more than 5% of their productive land and the other two households lost less than 5% of their productive land. The two households that lost less than 5% of their productive land donated their land to the project. The other two households were compensated by the district governor with one hectare (ha) of productive agriculture land each.

2. A corrective action plan was prepared and implemented for this case. The two affected households have been provided special support from the district governor to restore their livelihood such as: (i) clearing and leveling the land from non-farm land to cultivable paddy field, (ii) clearing of compensated land, and (iii) construction of a small irrigation (weir). In addition, the affected households were involved in agriculture training for goat raising and were provided four goats each to increase their incomes.

3. The affected households have also been compensated for the loss of rice production on the acquired land. The amount of compensation was calculated for production from the affected land over two rainy seasons at 2.5 tons per ha per year. Out of two affected households, Mr. Vongkeo, who lost 0.27 ha, was compensated KN2.16 million and Mr. Yodthong, who lost 0.79 ha, was compensated KN6.32 million.

4. The two affected households were satisfied with their compensations. Interviews with the other two households, Mr. Bountheung and Mr. Inpanh, who donated their land to the village at the end of 2011, also indicated they did not regret their voluntary donation.

II. Ethnic Groups

5. The project had no negative impacts on any ethnic groups’ cultural or socioeconomic aspects. Similarly, there are no adverse impacts on local customs, beliefs, languages, health or education practices. The construction of dam and irrigation systems and upgrading of earth canals to large concrete/brick canals required the acquisition of agricultural land from some ethnic group farmers. After completion of dam and irrigation systems, these facilities will supply sufficient water for rice and vegetable cultivation in dry season, even enabling farmers to double their area for cultivation.

6. The project adopted a strategy to ensure that all ethnic groups are consulted and be provided with appropriate opportunities to participate in the project and, with reference to ethnic groups, take appropriate steps so that (i) any adverse impacts on ethnic groups are mitigated, and (ii) there are no constraints preventing ethnic groups from benefiting from the project. Interviews were conducted with many local ethnic groups in affected villages, and village authorities in 43 subprojects in five provinces. In almost all subproject areas, villagers and village authorities were fully informed and consulted about the objectives, content, and investment items of each subproject. The beneficiaries also participated in the initial feasibility study, detailed survey, and designing of the irrigation schemes. The project provided training and equipment to assist ethnic groups to engage in more profitable farming practices.

62 Appendix 5

SUMMARY OF GENDER EQUALITY RESULTS AND ACHIEVEMENTS I. Project Description 1. The expected impact of the Sustainable Natural Resource Management and Productivity Enhancement Project is the achievement of a more efficient and sustainable natural resource management and improved sector productivity in five provinces comprising of 42 districts and a combined population of 2.08 million people. The outcome of the project is enhanced institutional capacity at provincial and national levels to manage natural resource utilization in a sustainable manner. This was to be achieved through three outputs: (i) capacity building for agriculture and natural sector management, (ii) investment in resource management and productivity enhancement (subproject investment), and (iii) efficient project management. The project was co-financed by ADB and IFAD and was implemented from February 2009 to December 2015. The project is categorized as Effective Gender Mainstreaming (EGM). II. Gender Analysis and Project Design Features

A. Gender Issues and Gender Action Plan Features 2. Rural women in the Lao PDR are primarily responsible for maintaining family food security, a role often underestimated. Prevailing cultural values tend to disadvantage women in terms of their participation in politics and decision-making processes, and they are underrepresented in village committees. Similarly, ethnic group women are not well presented in government, particularly extension workers, health care workers, and teachers. By their geographic location, they are isolated from resources and services. They are also the least able to participate in decision making, partly because of illiteracy and cultural traditions. Linguistic barriers and cultural attitudes toward education perpetuate low human development and the vicious cycle of poverty in which many ethnic groups find themselves.

3. The Government of the Lao People’s Democratic Republic has asked all its ministries to develop strategies and action plans to promote gender equality at national, provincial, district, and village levels. Line agencies have begun to mainstream gender concerns. However, the Ministry of Agriculture and Forestry (MAF) has not started integrating gender into its planning cycle; its main efforts are in donor-funded projects. MAF has a gender focal point and women advancement committee but its role and responsibilities are not clear, nor is it strong enough to integrate gender policies into practice. Constraints on gender mainstreaming in MAF include: a poor understanding of gender concept and strategies, lack of resource persons with gender professional knowledge, and no statistical information related to gender issues.

4. Land rights of women show a difference in the names and/or titles that appear on the land documents and the origin of the land. Only 16% of land is registered in the wife’s name, although 40% of the land came from the wife’s parents. Fifty-eight percent of land was registered in the husband’s name, although only 18% of the land came from the husband’s parents. Part of this situation can be attributed to the lack of knowledge on and difficulty in accessing information on women’s land rights. In addition, except for selected Mon-Khmer groups such as Brao, it is a generally held view that men are the head of households, so their names appear on administrative documents.

Appendix 5 63

5. In the Gender Action Plan (GAP), key gender targets include: (i) 45% of producer group members are women and that all women

beneficiaries access training and inputs related to their group; (ii) 40% women in leadership positions in producer groups; (iii) all female-headed households in project locations are beneficiaries of project support; (iv) 60% of beneficiaries targeted for livestock raising are women; (v) women are provided information on and access to markets; (vi) mechanisms to protect the rights and benefits of female farmers in contract farming transactions are established; (vii) 45% of credit recipients as well as management committee members of the revolving fund are women; (viii) sex disaggregated performance monitoring system is established and operational; and (ix) collection of data on women beneficiaries as well as data on material inputs

and services to women who are directly or indirectly engaged in the project activities.

B. Overall Assessment of Gender-Related Results/Achievements

6. The GAP was well integrated into project activities and loan covenants. The GAP includes 16 gender activities and 13 quantitative targets. At project completion, 15 (94%) activities were implemented and completed; 12 (92%) out of 13 gender-related targets were achieved. In the original Report and Recommendation of the President (RRP), the GAP did not include specific targets for women’s participation and access to project benefits. Therefore, during the midterm review, GAP had been revised to align with project activities and outputs. The GAP helps empower women by setting quotas for women’s participation in decision-making positions and supporting women to change their attitude towards women’s leadership roles and capacities; improving their knowledge and practices to start shifting from subsistence-based to market-oriented household economies; and creating an opportunity for women farmers to access technology which lead to increased family incomes. Overall, the GAP implementation is assessed successful.

7. Key achievements of GAP implementation included: (i) in the project areas of the five provinces including 42 districts, 100% of the Sub-Commission for the Advancement of Women (Sub-CAW) district representatives were designated as community development and gender focal points under the project (target is 30%); (ii) 6,192 (57.5%) out of 10,768 producer group members were women (target is 45%); (iii) 393 (52%) out 749 production groups were headed by women (target is 40%); (iv) 691 groups out of the 749 production groups received credit, benefiting 8,547 members, out of which 4,748 (56%) were women.; (v) 84 water user groups (WUGs) had been formed with 16,152 (68%) out of 23,785, household members registered jointly in the name of husband and wife (target is 50%); and (vi) 174 (39%) out of total 446 WUG committee members were women (target is 30%). Unfortunately, one of the weaknesses of the final impact survey is consistency in sex disaggregated data for relevant impact indicators and the increase in women’s average income in the project area cannot be reliably estimated. Nevertheless, the survey revealed average annual household incomes increased by 34%.

8. The progress of GAP implementation was regularly monitored and reported in the project quarterly progress reports. Sex-disaggregated data collection was integrated into the overall project’s monitoring and evaluation system. An international gender consultant (5 person-months)

64 Appendix 5

and a national gender consultant (31.5 person-months) were recruited through a firm on an intermittent basis to support implementation of the GAP over the six years of project implementation.

C. Gender Equality Results

i. Participation, Access to Project Resources, and Practical Benefits 9. The project ensured women’s meaningful participation in project meetings and consultations relating to land use, with 1,617 women out of a total of 4,127 (39%) participating, and 39 out of 78 meetings (50%) organized solely for women. Likewise, the project ensured women’s participation in trainings and other capacity building activities. In the 128 study tours for the Provincial Agriculture and Forestry Office (PAFO) and District Agriculture and Forestry Office (DAFO), 635 (49%) out of 1,307 participants were women; and trainings were held at times and locations convenient for women. The protection of women’s property rights on land is also guaranteed by the GAP, resulting in the registration of 4,557 (87%) out of 5,238 land certificates jointly in the name of husband and wife, and others were either in the name of single mothers or single fathers. A total of 1,616 female-headed households in the project area were included as beneficiaries of the project. Women benefited from the market information network established in five provinces to share market information on farm products, provide support, and facilitate contract farming transaction. 10. The membership of women in producer groups gave them the opportunity to participate in various relevant trainings offered by the project, which increased their knowledge and skills in their chosen trades. The story of Ms. Phet Khampone in Box C.1. illustrates the benefits of being a member of a producers group established under the project.

Box C.1. Project impact on a female participant who attended training on farmer production and marketing group formation

Ms. Phet Khamphone, one of the sweet potato producers group members who has participated in the project training on sweet potato planting technique and contract farming procedure said that her income from sweet potato had increased from KN30 million per year in 2011 to KN60 million in 2014. She also added that nowadays, it is easy to access the market and more traders come to buy their products. The farmers, especially the women who help their husbands, spend less time preparing the land for sweet potato plantation because of the new technology the project had provided and they are able to save 50% of their earning. Finally, Ms. Phet Khamphone expressed her willingness to learn about potato processing to add value to the potato and thanked the project for their meaningful assistance.

Box A8.2. Project impact on female beneficiaries

Five women’s groups comprising of 47 households in Khamao Phoumeo village of Khong district started processing of rice noodles using the rice they have produced. The project supported these women’s groups with sets of processing equipment, shade houses, and revolving funds, and provided noodle processing training. Before the project, about 10 households produced the rice noodles by purchasing rice from an adjoining town in Cambodia, with average processing of about 25 kilograms (kg) of noodles per household per day. Now, the number of households has increased to 47 and each household is producing 100 kg noodles per day. Each household is earning a net profit of KN10 million per month by processing and marketing of noodles. These noodles are being marketed to five southern provinces as well as to Siengteng Province, Cambodia.

Appendix 5 65

ii. Strategic Changes in Gender Relations 11. The project set a quota for participation by women in decision making level, which is one of the strategies for promoting women’s empowerment. The high proportion of women in leadership positions in the producer groups (52% against a target of 40%) and women in the WUG management positions (39% against a target 30%) illustrate a strategic change in gender relations, and are testaments to the change in the internal governance structure of leadership positions, which now involves women in decision-making levels.

12. Including women as members in the different groups was a starting point in changing their attitude, knowledge, and practices—shifting from subsistence-based to market-oriented household economies, particularly for the non-Lao-Tai ethnic women who have been previously limited by their cultural roles, limited Lao language, and lack technical skills and business experience. This shift has largely been the result of the different trainings and capacity-building activities in the GAP, including the study tours held with 49% women’s participation (against a target of 35%). The project-established marketing network created an opportunity for both men and women to gain knowledge and skills on production, marketing, and negotiation.

13. To help farmers, the project introduced a public-private and community partnership approach. The benefits of this initiative are illustrated by the story of Ms. Aphonesavan, a woman from Ban Non Nongva of Lamam district in Sekong province, in Box 2.1.

Box 2.1. Project impact on female beneficiaries

Ms. Aphonesavan is very thankful for the project’s support. Her farm’s capacity has significantly increased from only 300 piglets and 5,000–7,000 chicks and ducklings per year to 2,000 piglets, 40,000 chicks, and 40,000 ducklings per year. So far, her farm has produced 650 piglets, 2,600 chicks and 800 ducklings. Her breeding farm is becoming more effective and productive, and is now helping to create a sustainable supply chain for small livestock and meat production in Sekong. She is thus playing a critical role in supporting the livelihood improvement activities of 350 small livestock farmers in 25 villages of Lamam and Thateng districts. She is a role model for all aspiring women entrepreneurs in the Lao PDR. Ms. Aphonesavan learned techniques for raising pigs, chickens, and ducks from PAFO officers. The training was provided on a monthly basis and, in urgent situations, she is able to call PAFO officers. She indicated that learning by doing is the best way to advance. This was a good start for her business.

14. The active participation of women in the training and study tours has opened the doors to a new set of income generating opportunities for women, either through establishment of their own micro enterprises or managing the enterprises or projects as a group. Women are now able to initiate a shift from agricultural production on a subsistence basis to agricultural production as a market-orientated household economic activity. This increased the ability of women to access income channels and reduced their time poverty. 15. The knowledge and skills acquired by women during the project developed and nurtured their self-confidence, boosting their ability to participate effectively as development partners in the village, and facilitated commercialization of agriculture products.

iii. Contribution of Gender Equality Result to Overall Project Outcomes and Effectiveness

16. The GAP was eventually retrofitted well in subproject activities that addressed gender gaps in participation in decision making processes, and access to agricultural extension, markets,

66 Appendix 5

and financial services. Because of women’s meaningful participation as agents and beneficiaries of the project, the productivity of the agricultural and livestock sectors in the target areas has improved. 17. The Design and Monitoring Framework (DMF) did not include any gender-related indicators. The midterm review found that the original GAP had not been applied to the subproject implementation. In this case, the ADB Lao Resident Mission gender staff was vigorous in (i) improving the GAP and applying it appropriately to subproject design: (ii) following up on review missions to support the implementation of the subproject GAP, and (iii) closely monitoring and recording of outputs. Close involvement and support from the Lao Resident Mission gender staff resulted in the GAP being implemented successfully, even though the overall project is rated less than successful. III. Lessons and Recommendations 18. The following factors were considered significant in achieving GAP targets:

(i) the ADB social development officer (gender), strongly supported by ADB project officer, provided clear guidance and technical support on GAP implementation;

(ii) during midterm review, a more realistic GAP had been devised with targets that were easy to understand and monitor by project staff;

(iii) strong support from MAFs Sub-Commission for the Advancement of Women (Sub-CAW) at central, provincial, and district levels on dissemination of project gender requirements, and guidance provided on GAP implementation;

(iv) the national project coordinator (team leader) consistently championed the gender targets, reminding the project management team of these during the meetings; and

(v) the project management team at central, provincial, and district levels were aware of project gender requirements and actively collected information for reporting GAP implementation progress.

19. The project encountered the following difficulties during implementation:

(i) Culture, tradition, and language barriers of ethnic group members, especially

ethnic women. It takes a long time to change their attitudes and practices. Therefore, during project processing, the design team should consult with people from ethnic groups and identify the ways to appropriately address sensitive issues;

(ii) Remote geographical locations of some project areas had greatly impeded access to the poor beneficiaries in these areas. Training of local people to become trainers is important for successful extension work; and

(iii) The limited capacity of MAF’s Sub-CAW members regarding GAP implementation,1 which was unfamiliar to them. Training of trainers needs to be conducted for MAF’s Sub-CAW members.

1 MAF’s Sub-CAW members are members of the Division for the Advancement of Women under MAF’s Cabinet Office

and were not involved in the project management team. However, there is a network for women’s advancement at the central, provincial, and district levels.

Appendix 5 67

20. The following observations are made about sustainability:

(i) obvious positive gender benefits achieved to date, where both female and male farmers gained confidence, improved knowledge, reduced manual work through various technologies, and increased income;

(ii) the project collaboration with Sub-CAW members to involve them in monitoring GAP implementation yielded positive results. It is likely that this approach will contribute to sustained capacity on the ground in the project and other projects; and

(iii) establishment of producer groups provided a model to commercialize agriculture products with maximum participation of and benefits for women. As an example, the contract farming concluded between the coffee plantation groups and the traders has proven to work effectively in increasing coffee productivity. In addition, women’s supplemental income generating activities have significantly increased household incomes. Sustainability among these households is likely given the current levels of production.

21. The following recommendations will enhance impacts on women in future projects:

(i) the GAP requirements and gender targets should be clearly communicated at all levels of project implementation, in the early stage of project implementation if possible;

(ii) involving an ADB gender specialist in the midterm review is very helpful to revise GAP gender indicators and make it more closely aligned to the activities and outputs of the project;

(iii) to ensure effective and harmonious coordination, which is critical to achieving results, special supervision is needed when multiple agencies (Sub-CAW, PAFO, DAFO, and Lao Women’s Union) are accountable and report to different authorities; and

(iv) village-level community facilitators should assist trainers to ensure women can better absorb information, especially ethnic groups and those with low literacy levels.

68 Appendix 5

ACHIEVEMENT OF GENDER ACTION PLAN IMPLEMENTATION

G0144/0145: Sustainable Natural Resources Management and Productivity Enhancement Project

Gender Action Plan

(GAP Activities, Indicators and Targets, Time frame

and Responsibility)

Progress

Issues and recommendations"

Output 1: Capacity building for Agriculture and

natural Resource Sector Management implemented.

1. Ensure the participation of women and female-

headed households (FHHs) in the collection of data and

information relating to land use zoning through use of

women farmer focal group discussion meetings.

Activity 1

Achieved

A total of 78 meetings were conducted in five provinces to discuss land use zoning, with 1,402 FHHs out of 1,616 participating HHs consisting of 4,127 women participants (39%). A total of 39 focused group discussions were organized for women and FHHs.

2. Develop policy documents on food security in

uplands and sub-regional trade integration of gender

issues.

Activity 2

Achieved

Project is closely working with the Policy Facilitators Team of DPC MAF and other technical departments and institutions under MAF for policy development. Six policies were developed in relation to agricultural modernization, sugarcane contract growing, farmers’ land certificate issuance, PPCP, farm machinery operation guidelines, and integrated gender issues.

The issues being faced by women identified in the documents included the heavy burdens faced by women in agriculture, and health hazards brought about by chemicals used in farming. These issues were taken into consideration in formulating the proposed intervention measures.

3. Ensure gender balance in all training courses

provided to provincial and district staff (to be measured

as share of female participation vis-à-vis females in

those positions).

Target 1

Achieved

All TORs of the training courses have been checked before NPD approval to make sure that women staff are prioritized and that the targets are met. A total of137 training courses were organized for PAFO, DAFO, PPO, and CSP in five provinces. The number of participants was 11,930. All female staff in

Appendix 5 69

Gender Action Plan


and Responsibility)

Progress


related positions participated in these training courses (2,581 females or 22% of total participants).

4. Ensure gender balance in all study tours (to be

measured as share of female participation vis-à- vis

females in those positions).

Target 2

Achieved

The project conducted 128 study tours for PAFO and DAFO staff. A total of 635 (49%) out of 1,307 participants were women (exceeded MAF’s gender strategy target of 35%).

5. Ensure that all land titles/certificates are issued

jointly in the name of husband and wife. In the case of

FHHs, the certificates are to be issued in the woman’s

name.

Activity 3

Achieved

A total of 4,557 (87%) out of 5,238 land certificates were issued jointly in the name of husband and wife and the others were either in the name of single mothers or single fathers.

Output 2: Investment in Resource Management and Productivity Enhancement Completed

6. Ensure adequate criteria and procedures for producer

group formation as well as processes for including

excluded poor families.

Activity 4

Achieved

For field manual on group formation, PPO reviewed and improved criteria to ensure poor families and FHHs are encouraged to participate in the groups and that poor and minority group HHs and FHHs are prioritized as project beneficiaries. For instance, on group formation, the following are included: • Organizing meetings to establish the production group: the team should ensure that meetings are held at times and in locations convenient for women and that at least 5% of the participants are women. Invitation letters or announcements for the meeting should emphasize that women are encouraged and prioritized. • Proceedings during the meeting: the team should encourage all participants, including poor and ethnic women, to participate in the discussions and voice their views.

70 Appendix 5

Gender Action Plan


and Responsibility)

Progress


• Registration of members: Group members should register jointly in the name of husband and wife, if applicable, or in the woman’s name in case of FHHs.

•

7. Ensure 45% of producer group members are women.

Target 3

Achieved.

The project formed 749 production groups consisting of 10,768 HH members. Of these, 9,152 HHs (85%) were registered jointly under the name of husband and wife and 1,616 (15%) HHs were registered under the women’s names as FHHs.

8. Ensure all meetings and trainings are held at times

and in locations convenient for women.

Activity 5

Achieved

The timing and duration of trainings are adjusted for women’s convenience (e.g. during the months when women are not too busy). Trainings have short duration to avoid consuming too much of women’s time. All training locations are convenient for the women to travel and stay, close to their villages, with good and secure accommodations.

9. Ensure all female-headed households (FHHs) in a

community are included as beneficiaries of the project.

Brief executing agency and implementing agencies on

the definition of FHHs.

Target 4

Achieved

executing agency and implementing agencies were briefed on the definition of FHHs and instructed to include all FHHs in project benefits at the district Gender Workshop dated 29 September – 9 October 2013. Collected data on FHHs in the project areas. Total FHHs is 1,616. All of them were included as beneficiaries of the project. Sex-disaggregated data (including number of FHHs) have been integrated into M&E system.

10. Ensure a target of 40% women in leadership

positions in the producer groups. FHHs to be

encouraged and supported in leadership positions.

Achieved

A total of 393 (52%) out of 749 production groups were headed by women.

Appendix 5 71

Gender Action Plan


and Responsibility)

Progress


Consultations to be held with FHHs to ensure that work

burdens of women are not increased.

Target 5

To ensure that work burdens of women are not increased, the issues below were agreed to during consultation with women (members of male headed households and FHHs):

• The timing and duration of trainings are adjusted to times convenient for women.

• All training locations are convenient for women to travel and stay, close to their villages, and good and secure accommodations.

•

11. Ensure that all women members of the producer

groups are directly targeted to be included as

beneficiaries of all trainings, including crop

demonstrations and other inputs (seed, fertilizer, and

extension), related to their group.

Target 6

Achieved

To date, 611 sessions of capacity building trainings

have been organized for farmers’ production groups. A

total of10,151 (39%) out of 25,950 participants were

women.

12. Ensure women are 60% of beneficiaries targeted for

livestock raising and receive inputs and training

commensurate with this target.

Target 7

Partly achieved

The project established 228 livestock raising groups which received livestock raising inputs. A total of 1,436 (57%) out of 2,534 members are women, including 1,098 women jointly registered as members with their husbands and 338 women registered as FHHs.

In Lao context, group membership is HH based and both husband and wife register as members. Given the limited number of FHHs interested in livestock raising, the project fell short by 3% in reaching the 60% target female beneficiaries.

13. Ensure all women project beneficiaries are provided

information on markets and supported to access markets

for their produce.

Target 8

Achieved

The project organized 40 information boards within the project area to provide information about their products, set up market information network among the five provinces to share market information about farm products, and supported and facilitated contract farming transactions.

14. Ensure mechanisms to protect the rights and

benefits of female farmers in contract farming

transactions, including considerations for female farmers’

Partly achieved

PPO supported production groups in preparing contract farming transactions with 6 companies and 32 PPCP activities, in which supporting women is key

The project needs to conduct affirmative training for women on contract farming as well as marketing mechanisms to protect the rights and

72 Appendix 5

Gender Action Plan


and Responsibility)

Progress


produce, the provision of inputs at industry standards

and rates, and tailored dispute settlement mechanisms.

Activity 6

priority. However, the project did not have standards and rates and tailored dispute settlement mechanisms.

benefits of female farmers.

15. Ensure adequate procedures are set up for

managing the revolving fund.

Activity 7

Achieved

The project faced difficulty providing revolving fund in cash due to lack of human resources to manage the fund. Instead, the project provided animals or materials to be used as revolving capitals. For instance, the project provided 10 cows per HH to 14 HHs per single village in the first round of distribution. After seven years, the first-round cow recipients gave 10 cows to the second-round members. It is expected that this procedure will be continued. Another example is, instead of providing cash for buying materials, the project provided coffee milling machines to coffee groups who used it as group capital as they collected fee from milling coffee and used the income to cover operations and maintenance costs.

16. Ensure women are 45% of credit recipients as well

as management committee members of the revolving

fund and are provided training to manage the revolving

fund.

Target 9

Achieved

Out of 749 production groups, 691 production groups received credit. These groups comprised 8,547 members, of which 4,748 (56%) are women. The project provided training on managing revolving capital to all management committee members (all five committee members of each group).

17. Ensure that for any future civil works activities,

women’s employment as unskilled laborers is

encouraged and a target for their employment is

established. This is stipulated in contractor agreements

and that women receive equal pay for equal work.

Activity 8

Achieved

The project informed contractors of the requirement to employ/encourage women to be employed as unskilled laborers for civil work activities in all project areas where the project had civil works. Moreover, when the project conducted the consultations with villagers before construction, one of the priorities was

Appendix 5 73

Gender Action Plan


and Responsibility)

Progress


to inform women about job opportunities in civil works in their locations. However, women were not interested to work as unskilled laborers for civil work activities because they preferred to plant coffee, sweet potato, vegetables, and raise poultry or livestock. They think civil work is not appropriate for them as women are busy with housework and family care. This is a common scenario in the Lao PDR.

18. Ensure that no child labor is employed in any civil

works or project related activity.

Activity 9

Achieved

The project as well as the construction company have complied with the Lao PDR’s Constitution regarding child labor. The project has also issued special instruction not to engage child labor in any of the construction civil works.

19. Ensure WUGs include membership registrations

from husband and wife (50% target).

Target 10

Achieved

Of the 84 WUGs, 16,152 (68%) out of 23,785 HH members registered jointly in the name of husband and wife.

20. Ensure that a target of at least 30% is set for women

in WUG management positions and that women are

provided training on leadership and management and

are remunerated for their roles.

Target 11

Achieved

A total of 174 (39%) out of 446 WUG committee members were women. All of them received training on leadership and management.

21. Ensure mechanisms to resolve disputes.

Activity 10

Achieved

In consultation with villagers, the subprojects follow existing mechanisms to resolve disputes through village grievance redress system. Village grievance redress committees include women representatives.

22. Ensure that water provision, where feasible, will

include both irrigation and non-irrigation water needs of

Achieved

The project supported 80 irrigation schemes, all of

74 Appendix 5

Gender Action Plan


and Responsibility)

Progress


HHs.

Activity 11

which included both irrigation and non-irrigation water needs of HHs. Farmers were using water from irrigation for planting vegetable and chilly, and livestock raising.

23. Ensure that a session on gender or gender-related

briefing is provided to all project beneficiaries.

Activity 12

Achieved As trafficking and HIV/AIDS were identified issues in the project areas, the project conducted awareness raising sessions with women elders and youth of all major ethnic groups in the project areas, as well as with the Women’s Union and Youth Union, on HIV/AIDS and human trafficking. The documentary “Little Bird in a Cruel Red Storm” was used in the awareness raising campaigns.

Output 3: Efficient project management operation

24. Ensure that gender indicators are integrated in the

project M&E Framework

Activity 13

Achieved

All gender indicators have been integrated in the project M&E framework.

25. Ensure sex disaggregated performance monitoring

system is established and operational.

Activity 14

Achieved

Sex disaggregated performance monitoring system has been established and is operational. All reports incorporate sex- disaggregated data (including number of FHHs).

26. Ensure that all female project staff participate in

project-related trainings relevant for their positions (to be

measured as share of female participation vis-à-vis

females in those positions).

Activity 15

Achieved

A total of 85 training sessions for staff have been organized comprising of 1,275 participants. All the 172 female staff (13%) participated in their relevant trainings.

Appendix 5 75

Gender Action Plan


and Responsibility)

Progress


27. Ensure that all PPO staff are provided gender

training and roles and responsibility trainings on

implementing the GAP.

Target 12

Achieved

A two-day Workshop on Strengthening Capacity on Implementation and Monitoring of Project Gender Action Plan was organized for PPO level which consisted of project coordinators, gender focal points and representatives from PAFO’s Women Advancement Unit in Champasack Province on 30–31 May 2013. A total of 12 (50%) out of 24 participants were women. The project gender consultant, in collaboration with MAF’s Sub-CAW, conducted the following: three batches of workshops “Strengthening Capacity on Implementation and Monitoring of Project Gender Action Plan and gender awareness raising for district project coordinators between 29 September – 9 October 2013. The three batches of workshops were done using a live-out modality for two days in the provincial capitals of Champasak, Salavanh, and Savannakhet. A total of 53 (43%) out of 121 participants were women. All coordinators of the five provinces, together with project coordinators at district level, conducted meetings with the subprojects to explain.

28. Ensure participatory evaluations are conducted with

male and female farmers’ groups at midterm and end of

the project.

Activity 16

Achieved

During midterm review in December 2012, women’s discussion groups were organized in Attapeu and Sekong. Then, during the project completion mission in January 2017, the mission team discussed with women producers group members in Attapeu, Sekong, and Champasack. The other provinces had been consulted during the normal review missions.

29. Ensure that a mechanism for coordination and

collaboration between the project and Sub–CAW is

Achieved

In the five provinces project areas, including 42

76 Appendix 5

Gender Action Plan


and Responsibility)

Progress


established and operational in at least 30% of the total

project districts.

Target 13

districts, 100% Sub-CAW district representatives were assigned for CD & GFPs. A total of 42 CD & GFPs attended the workshop on “Strengthening Capacity on Implementation and Monitoring of Project Gender Action Plan for districts project coordinators conducted on 29 September to 9 October 2013.

CD = Community Development, CSP = Country Strategy and Program, DAFO = District Agriculture and Forestry Office, DPC= Department of Planning and Cooperation, FHH = female-headed households, GAP = Gender Action Plan, GFP = Gender Focal Point, HH = household, MAF = Ministry of Agriculture and Forestry, M&E = monitoring and evaluation, NPD = National Project Director, PAFO = Provincial Agriculture and Forestry Office, PPCP = public-private community participation, PPO = Provincial Project Office, Sub-CAW = Sub-Commission for the Advancement of Women, TOR = terms of reference, WUG = water usage group.

Appendix 6 77

TECHNICAL ASSISTANCE COMPLETION REPORT

TA Number, Country and Name: Amount Approved: $700,000

TA 7241-LAO: Sustainable Natural Resource Management and Productivity Enhancement Project

Revised Amount: Not Applicable

Executing Agency: Ministry of Agriculture and Forestry (MAF)

Source of Funding: Japan Special Fund (JSF)

Amount Undisbursed: $182,150.06

Amount Utilized: $517,849.94

TA Approval Date:

TA Signing Date:

Fielding of First Consultant:

TA Completion Date Original: 31 March 2011

Actual: 31 December 2013

23 February 2009 24 March 2009 1 September 2009 Account Closing Date Original: 31 March 2011

Actual: 27 May 2014

Description: This technical assistance (TA) was piggybacked to the Sustainable Natural Resource Management and Productivity Enhancement Project1 (the grant project). It aimed to develop training materials and provide on-the-job trainings to ensure that the subprojects funded by the Grant project were properly screened, prioritized, and evaluated. Given the high levels of investment in the agriculture sector (private domestic, foreign direct investment, and donor-funded initiatives), the Grant project focused on developing national and provincial capacities to manage this recent surge of investments, ensuring that full benefits are achieved and detrimental impacts minimized. There is increased recognition of the need to incorporate social and environmental safeguards and other social and gender compliance measures when preparing and implementing rural development projects. While this has been a requirement by donors for some time, appreciation of the benefits from their inclusion has not been fully recognized by the implementing agencies of the Government of the Lao People’s Democratic Republic. Current laws and decrees devolve responsibility for rural development to local administrations and assign to them responsibilities for safeguards regarding land acquisition, resettlement, environmental impact assessment and mitigation, and community participation in decision making. Similarly, ADB’s policies and safeguard compliance requirements need to be addressed in preparing subprojects. Under the TA, national and provincial staff were trained to ensure that social and environmental safeguards compliance requirements were incorporated into investment proposals of subprojects, and to monitor adherence of approved investments with specified covenants.

Expected Impact, Outcome and Outputs: The anticipated outcome of the TA was as follows: (i) increased awareness of the importance of social and environmental safeguards when allocating natural resources for investment proposals, (ii) subprojects incorporate safeguards to improve beneficiary ownership, (iii) a comprehensive set of training materials for use in subsequent agency training throughout the Lao People’s Democratic Republic; and (iv) a database containing relevant geographic information system (GIS) data, maps at various scales, and data pertaining to safeguards compliance available at the national, provincial, and district levels. The objective of the TA was capacity building support for the executing agency and implementing agencies which were required to design the detailed subproject activities, particularly at the initial stage of the Grant project. Terms of reference were prepared and the TA was formulated with the Grant project in consultation with government agencies and development partners.

Delivery of Inputs and Conduct of Activities: The TA engaged a total of 69 person-months of consulting services from individual consultants, including five international and six national consultants who had specialist knowledge in environment, involuntary resettlement, gender and indigenous people, project management, financial management, and information technology. The TA fund was utilized efficiently and the TA consultants were mobilized in coordination with the Grant project’s activities. The TA consultants worked with the implementation consultants of the Grant project to incorporate ADB’s policy on environment, involuntary resettlement, indigenous peoples, and financial management in subproject planning and development. During the planning and development of subprojects, consultants provided on-the-job training to the provincial project offices (PPOs) staff on the following: (i) participatory, gender, and ethnic minority sensitive project planning, (ii) comprehensive design of poverty reduction interventions, (iii) planning of subprojects for agricultural commercialization and sustainable natural resource management, and (iv) subproject financial, social, environmental, and technical appraisal. The overall performance of the TA consultants was less than satisfactory.

1 ADB 2009. Report and Recommendation of the President to the Board of Directors: Proposed Asian Development

Fund Grant and Administration of Grant Lao People’s Democratic Republic: Sustainable Natural Resources Management and Productivity Enhancement Project. Manila.

78 Appendix 6

The subproject feasibility studies did not meet ADB investment requirements. To complete the required activities and support for subproject formulation and implementation of the Grant project according to its progress, the TA completion date was extended three times for a total of 33 months without significant changes in scope.

The performance of the executing agency is rated satisfactory. It provided an office equipped with adequate facilities for consultants and assigned full-time counterpart staff to conduct planned activities. During implementation, the executing agency was actively involved in managing the consultants and organizing training activities in close coordination with the PPOs. Despite the four project review missions conducted by ADB, the subproject design still lacked the critical aspects that the TA was supposed to have incorporated. ADB’s overall performance was less than satisfactory.

Evaluation of Outputs and Achievement of Outcome: The TA outcome was partly achieved. The gender, environmental, and social safeguards analyses were inadequate in the feasibility study reports of all 71 subprojects. During the feasibility studies, the Grant project staff in the national project coordination office (NPCO), PPOs, and district agriculture and forestry offices (DAFOs) were provided hands-on training by the TA consultants to screen, prioritize, and evaluate subprojects in terms of gender, environmental, and social safeguards aspects. Safeguards training materials for subproject preparation and implementation were developed, both in English and in Lao, and disseminated to each PPO and DAFO. However, the NPCO found it hard to use these training materials effectively as these were bulky and complicated. The Grant project’s Geographic Information System (GIS) unit was established in the National Agriculture and Forestry Research Institute to promote natural resource mapping and generate data pertaining to safeguards for land use planning and zoning for agricultural purposes. The GIS equipment and database were set up in each PPO, and training was conducted on both GIS and safeguards. The TA consultants coordinated with the Grant project implementation consultants for efficient implementation of the Grant project. While gender, environmental, and social safeguards analyses were completed before starting the subprojects, support and capacity building on safeguards documentation for Grant project staff were incomplete. The required documents (i.e. assessment checklist and safeguards plan), based on the Grant project’s safeguards framework, were not incorporated in the feasibility study report of the subprojects, requiring follow up to conduct the documentation. In this regard, the TA is rated less effective.

Overall Assessment and Rating: The TA was conducted in close coordination with the Grant project implementation. The TA is assessed relevant in terms of TA design, performance of inputs, and efficiency in output delivery. The TA failed to contribute to effective implementation of the grant project, particularly for subproject preparation and implementation incorporating gender, environmental, and social safeguards analyses. The TA is considered less effective in terms of delivery of safeguards documentation. Overall, the TA is rated less than successful.

Major Lessons: The executing agency’s capacity was too weak to ensure successful implementation of the TA. The gender, environmental, and social safeguards requirements were not well incorporated into the feasibility studies, which were nonetheless approved by ADB. The importance of compliance with ADB requirements is not fully recognized by the executing and implementing agencies. Continuous, on-the-job, and understandable support for capacity building and enhancement of the project impacts and outcome with safeguards compliance are important to increase awareness and to provide incentive for mainstreaming safeguards for the government.

Recommendations and Follow-Up Actions: ADB needs to monitor the project’s progress and provide guidance on ADB’s safeguards policy and requirements, especially when dealing with a weak project management unit. Continuous support and capacity building for gender, environmental, and social safeguards at national and local levels are recommended. Improved capacity will enhance project planning and implementation.

Prepared by: David Salter Designation: Principal Natural Resources and Agriculture Specialist, SEER In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Appendix 7 79

MAIN TEXT OF THE SUBPROJECT PREPARATION MANUAL

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CALCULATION OF OVERALL PROJECT RATING

Criterion Weight (%) Rating

Relevance 25 1

Effectiveness 25 1

Efficiency 25 2

Sustainability 25 2

Weighted Average 1.5 (less than successful)

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