FOR OFFICIAL USE ONLY Report No: PAD3314...FM Financial Management GBAO Gorno-Badakhshan Autonomous...

FOR OFFICIAL USE ONLY Report No: PAD3314

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT

IN THE AMOUNT OF SDR 21,700,000

(or US$30,000,000 EQUIVALENT)

TO

THE REPUBLIC OF TAJIKISTAN

FOR A

RURAL ECONOMY DEVELOPMENT PROJECT

May 30, 2019

Finance, Competitiveness and Innovation Global Practice Europe And Central Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Exchange Rate Effective April 30, 2019

Currency Unit = SDR

1 USD = 0.72162568 SDR

FISCAL YEAR

January 1 - December 31

Regional Vice President: Cyril E. Muller

Country Director: Lilia Burunciuc

Global Practice Director: Alfonso Garcia Mora

Practice Manager: Marialisa Motta

Task Team Leader(s): Andrea Dall'Olio, Talaibek Torokulovich Koshmatov

ABBREVIATIONS AND ACRONYMS

ACP Agriculture Commercialization Project

ADB Asian Development Bank

AI Access to Information

CPF Country Partnership Framework

TDC Committee on Tourism Development

DA Designated Account

DCCT Donor Coordination Council of Tajikistan

DFID Department for International Development

DMO Destination Management Organizations

DRP Districts of Republican Subordination

EBRD European Bank for Reconstruction and Development

ESF Environmental and Social Framework

ESMF Environmental and Social Management Framework

ESRS Environmental and Social Review Summary

EU European Union

FCV Fragility, Conflict, and Violence

FM Financial Management

GBAO Gorno-Badakhshan Autonomous Oblast

GDP Gross Domestic Product

GHP Good Hygiene Practices

GMC Grant Management Company

GMP Good Manufacturing Practices

GPM Grants Program Manual

GRS Grievance Redress Service

GIZ German Agency for International Cooperation (Deutsche Gesellschaft für Internationale Zusammenarbeit)

GDP Gross Domestic Product

HACCP Hazard Analysis and Critical Control Points

IDA International Development Association

IFC International Finance Corporation

IFAD International Fund for Agricultural Development

IFR Interim Financial Report

IRR Internal rate of return

ISP Implementation Support Plan

JICA Japan International Cooperation Agency

M&E Monitoring and evaluation

MAS Manufacturing, Agribusiness, and Services

MoF Ministry of Finance

MSDSP Mountains Societies Development Support Program

MSMEs Micro, Small, and Medium Enterprises

NEET Not being in employment, education, or training

NPV Net present value

ODA Official development assistance

PDO Project Development Objective

PECTA Pamir Eco Cultural Tourism Association

PIG Project Implementation Group

PIU Project Implementation Unit

POM Project Operations Manual

PIU Project Implementation Unit

PPSD Project Procurement Strategy for Development

REDP Rural Economic Development Project

RMR Risk Mitigation Regime

RSP Resilience Strengthening Program

SCD Strategic Systematic Diagnostic

TA Technical Assistance

TDC Tourism Development Committee

TREP The Rural Electrification Project

UNESCO United Nations Educational, Scientific and Cultural Organization

UNWTO United Nations World Tourism Organization

USAID United States Agency for International Development

WBG World Bank Group

WFTGA World Federation of Tour Guides Associations

WTTC World Travel and Tourism Council

The World Bank Rural Economy Development Project (P168326)

TABLE OF CONTENTS

I. STRATEGIC CONTEXT ...................................................................................................... 7

A. Country Context................................................................................................................................ 7

B. Sectoral and Institutional Context .................................................................................................... 8

C. Relevance to Higher-Level Objectives ............................................................................................ 14

II. PROJECT DESCRIPTION .................................................................................................. 16

A. Project Development Objective ..................................................................................................... 16

B. Project Components ....................................................................................................................... 17

C. Project Beneficiaries ....................................................................................................................... 22

D. Results Chain .................................................................................................................................. 23

E. Rationale for Bank Involvement and Role of Partners ................................................................... 24

F. Lessons Learned and Reflected in the Project Design .................................................................... 25

III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 26

A. Institutional and Implementation Arrangements ....................................................................... 26

B. Results Monitoring and Evaluation Arrangements......................................................................... 27

C. Sustainability ................................................................................................................................... 27

IV. PROJECT APPRAISAL SUMMARY ................................................................................... 28

A. Technical, Economic and Financial Analysis (if applicable) ............................................................ 28

B. Fiduciary .......................................................................................................................................... 30

C. Legal Operational Policies ............................................................................................................... 32

D. Environmental and Social ............................................................................................................... 32

V. GRIEVANCE REDRESS SERVICES ..................................................................................... 32

VI. KEY RISKS ..................................................................................................................... 33

VII. RESULTS FRAMEWORK AND MONITORING ................................................................... 36

ANNEX 1. Implementation Arrangements and Support Plan ................................................. 46


Page 1 of 49

DATASHEET

BASIC INFORMATION BASIC_INFO_TABLE

Country(ies) Project Name

Tajikistan Rural Economy Development Project

Project ID Financing Instrument Environmental and Social Risk Classification

P168326 Investment Project Financing

Substantial

Financing & Implementation Modalities

[ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC)

[ ] Series of Projects (SOP) [ ] Fragile State(s)

[ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)

[ ] Financial Intermediaries (FI) [✓] Fragile within a non-fragile Country

[ ] Project-Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster

[ ] Alternate Procurement Arrangements (APA)

Expected Approval Date Expected Closing Date

20-Jun-2019 02-Dec-2024

Bank/IFC Collaboration

No

Proposed Development Objective(s)

Project Development Objective is to improve the sources of livelihood for local populations in GBAO and Khatlon through tourism and agribusiness.


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Components

Component Name Cost (US$, millions)

Component 1 - Improve public infrastructure for development of tourism, agribusiness and related sectors

12.00

Component 2 - Support to MSMEs and entrepreneurs in the tourism, agribusiness, and related sectors

8.20

Component 3 - Capacity building and business development services in tourism, agribusiness and related sectors

6.90

Component 4 - Project coordination, implementation and Grant Program Management and Administration

2.90

Organizations

Borrower: The Republic of Tajikistan

Implementing Agency: The Ministry of Finance

PROJECT FINANCING DATA (US$, Millions)

SUMMARY-NewFin1

Total Project Cost 30.00

Total Financing 30.00

of which IBRD/IDA 30.00

Financing Gap 0.00

DETAILS-NewFinEnh1

World Bank Group Financing

International Development Association (IDA) 30.00

IDA Grant 30.00

IDA Resources (in US$, Millions)

Credit Amount Grant Amount Guarantee Amount Total Amount

Regional 0.00 30.00 0.00 30.00


Page 3 of 49

Total 0.00 30.00 0.00 30.00

Expected Disbursements (in US$, Millions)

WB Fiscal Year 2019 2020 2021 2022 2023 2024 2025

Annual 0.00 2.74 7.09 8.30 8.26 3.60 0.01

Cumulative 0.00 2.74 9.83 18.13 26.39 29.99 30.00

INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice Areas

Finance, Competitiveness and Innovation Agriculture

Climate Change and Disaster Screening

This operation has been screened for short and long-term climate change and disaster risks

Gender Tag

Does the project plan to undertake any of the following?

a. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF

Yes

b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment

Yes

c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes

SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)

Risk Category Rating

1. Political and Governance ⚫ Substantial

2. Macroeconomic ⚫ Substantial

3. Sector Strategies and Policies ⚫ Substantial

4. Technical Design of Project or Program ⚫ Substantial


Page 4 of 49

5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial

6. Fiduciary ⚫ Substantial

7. Environment and Social ⚫ Substantial

8. Stakeholders ⚫ Substantial

9. Other ⚫ Substantial

10. Overall ⚫ Substantial

COMPLIANCE

Policy Does the project depart from the CPF in content or in other significant respects?

[ ] Yes [✓] No

Does the project require any waivers of Bank policies?

[ ] Yes [✓] No


Page 5 of 49

Environmental and Social Standards Relevance Given its Context at the Time of Appraisal

E & S Standards Relevance

Assessment and Management of Environmental and Social Risks and Impacts Relevant

Stakeholder Engagement and Information Disclosure Relevant

Labor and Working Conditions Relevant

Resource Efficiency and Pollution Prevention and Management Relevant

Community Health and Safety Relevant

Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Relevant

Biodiversity Conservation and Sustainable Management of Living Natural

Resources

Relevant

Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional

Local Communities

Not Currently Relevant

Cultural Heritage Relevant

Financial Intermediaries Not Currently Relevant

NOTE: For further information regarding the World Bank’s due diligence assessment of the Project’s potential environmental and social risks and impacts, please refer to the Project’s Appraisal Environmental and Social Review Summary (ESRS). Legal Covenants

Sections and Description The Recipient shall establish, not later than three (3) months after the Effective Date, a Grant Program Committee composed of public stakeholders and NGOs for purposes of evaluating the applications for the Grant Program and overseeing the implementation of the Sub-grants and matching Grants.

Sections and Description For the purposes of structuring and managing the operational and administrative activities under Parts 1.2 and Component 2 of the Project, the Recipient shall cause the PIU to hire not later than three (3) months after the Effective Date and in accordance with the requirements set forth in the Grant Program Manual: (i) a Grant Management Company; and (ii) two regional Project coordinators for Khatlon and GBAO regions.

Sections and Description The Recipient shall install, not later than 30 days after the Effective Date, an automated accounting information


Page 6 of 49

system, satisfactory to the Association, for recording Project records and generation of Project financial statements.

Sections and Description The Recipient shall establish not later than three (3) months after Effective Date and thereafter maintain, throughout the implementation of the Project, a steering committee (Steering Committee) at the national level, with adequate resources, composition, terms of reference, functions and mandate, satisfactory to the Association, as set forth in the POM, for purposes of providing guidance and coordination and overseeing Project implementation.

Sections and Description Without limitation on the provisions of paragraph 2 (a) immediately above, the Recipient shall, within thirty (30) days of the Effective Date, recruit to the PIU, a Project coordinator, a procurement specialist, a financial management specialist, an environmental safeguard specialist, and a social safeguard specialist, all in accordance with terms of reference acceptable to the Association.

Sections and Description For the purpose of implementation of tourism-related activities under Parts 1.1, 1.2 (a), 1.3, 2 (c), 3.1, 4.1 and 4.2 of the Project, the Recipient shall cause the Tourism Development Committee to establish not later than three (3) months after the Effective Date and thereafter maintain, throughout the implementation of the Project, a PIG with adequate staff and resources acceptable to the Association.

Conditions

Type Description

Effectiveness The PIU has adopted the Project Operational Manual, satisfactory to the Association. Type Description

Disbursement No withdrawal shall be made under Categories (2) and (3) of the Financing Agreement until

and unless the Recipient, through the PIU, has prepared and adopted the Grant Program

Manual in a form and substance satisfactory to the Association

Type Description

Disbursement No withdrawal shall be made under Categories (2) and (3) of the Financing Agreement until

and unless the Recipient, through the PIU, has hired a Grant Management Company, as

indicated in Section I.A.4 in Schedule 2 of the Financing Agreement.


Page 7 of 49

I. STRATEGIC CONTEXT

A. Country Context

1. Tajikistan—a transition country with a per-capita gross national income oscillating between low- and lower-middle-income—is one of the poorest countries in Central Asia. The country’s economic outcomes reflect: (i) the legacy of the 1992–97 civil war, (ii) a centralized, state-led approach to economic management, (iii) low domestic productivity, with wages that leave most households exposed to seasonal poverty risks, and (iv) the “low-level equilibrium” of a remittance-financed, import-reliant, indirect tax-based economic model that has provided little space for and support to the private sector. The post-conflict decline in poverty has been impressive, albeit at declining rates in recent years. Extreme poverty, measured by the international poverty line of US$1.90 per day, fell markedly from 54 percent in 1999 to 5 percent in 2015. According to the Government’s own calculations, using a national poverty line, poverty declined, over the same time horizon from 82 percent to 31 percent and further to 29.5 percent in 2017. There is substantial spatial and seasonal variation in poverty. Most rural areas are poorer than urban ones,1 and poverty and income insecurity are higher during winter and spring. Non-monetary aspects of poverty contribute to the hardship experienced by poor populations.

2. Tajikistan has yet to fulfill its potential for sustainable and inclusive development. A large share of its population depends on remittances and micro subsistence activities in low-productivity sectors because structural constraints limit the development of a dynamic private sector. Tajikistan’s economy is unsophisticated, with limited employment opportunities and a population not yet ready for an innovative, export-oriented economy. The main drivers of Tajikistan’s economy are remittance inflows (over one-third of GDP), cotton and aluminum exports, official development assistance (ODA) inflows, and in recent years, public investment. Structural economic challenges include a persistent trade deficit, reliance on remittances, a small and fragile financial sector, and limited internal labor mobility and employment. More than one million Tajiks, about one in ten, work abroad. Remittances vary with Russia’s business cycle because most Tajik migrants work in Russia. The local economy is dominated by state-owned enterprises, while the private sector has a limited role, contributing only 3 to 4 percent of GDP, and about 13 percent of formal employment.2 Poor governance practices and a business environment that constrains foreign and local investment hinder private sector development.

3. Employment in Tajikistan is low, and the country lacks economic opportunities, especially for youth, women, and returning migrants. The working-age population (those aged 15 to 64) rose from 3.3 million in 2000 to 5.2 million in 2015, of which only 43 percent are part of the labor force. More than one in three young people and almost nine in ten female youths are not in employment, education, or training (NEET). In 2013, the female labor force participation rate was just 27 percent compared to 63 percent among males. Considerable segments of the population, such as returning and deported migrants and abandoned wives, are largely excluded from local communities.3 Lack of employment is often reported as an impetus in joining extremist organizations. A large and growing number of unemployed and idle youth—including a rising share of returning and deported migrants—may be susceptible to extremism absent alternative opportunities.

4. Risks related to fragility, conflict, and violence (FCV) constrain Tajikistan’s development progress. Most cross-national indicators of fragility and conflict categorize Tajikistan’s risk as elevated. Risks include: (i) economic

1 According to the official poverty estimates for 2015, Dushanbe has the lowest poverty rate in Tajikistan (20.4 percent) followed by Sughd (22.3 percent). In other regions, the share of the poor population is much higher—35.8 percent in Khatlon, 37.3 percent in the Districts of Republican Subordination (DRS), and 39.4 percent in the Gorno-Badakhshan Autonomous Oblast (GBAO). 2 SOEs account for more than 40 percent of total value added. 3 World Bank Group. 2019. Tajikistan Country Partnership Framework 2019–23.


Page 8 of 49

risks, such as: (a) high rates of unemployment and underemployment, (b) the predominance of insecure, low-quality, low-wage jobs in the informal sector, and (c) numerous barriers to private sector development; (ii) socioeconomic exclusion of youth and women; (iii) regional and cross-border challenges, such as: (a) the existence of lagging regions, (b) heightened vulnerability in certain regions (reflecting the legacy of conflict and proximity to zones of insecurity), and (c) exposure to international drug trafficking routes; and (iv) challenges in service delivery, including limited scope for citizen participation, which reduces the effectiveness of service delivery and delays efforts in overcoming inequities in public resource allocation. Youth radicalization is gaining ground in parts of Central Asia, including in Tajikistan. Empirical evidence appears to indicate the coexistence of external and domestic drivers of radicalization, including: (i) the presence of a large cohort of young men with limited socioeconomic opportunities, rudimentary religious knowledge of Hanafi Central Asian Islam, and a lack of critical thinking skills; (ii) an increasing number of Tajik migrants deported from or banned from (re-)entering Russia, leaving them without livelihood options; and (iii) the vulnerability of young women to radicalization and recruitment through male relatives, prospective spouses, or the desire to protect an existing marriage. Against this backdrop, Tajikistan is one of four beneficiary countries under the IDA18 Risk Mitigation Regime (RMR).

5. Natural disasters and climate change threaten Tajikistan’s economic and social development.4 The country’s geological, climatologic, and topographic features make it vulnerable to many natural hazards, including earthquakes, floods, landslides, and avalanches. From 1992 to 2016, natural disasters affected 7 million people in Tajikistan—over 80 percent of the total population—and caused economic losses worth US$1.8 billion. In response to these risks, the Government of Tajikistan is gradually moving from disaster response to risk mitigation and has taken steps to include disaster risk mitigation in development planning, including adopting the Sendai Framework for Disaster Risk Reduction in 2015.

6. The constraints affecting Tajikistan’s economic and social development, including FCV and climate risks, are exacerbated in Khatlon and the Gorno-Badakhshan Autonomous Oblast (GBAO). Khatlon and GBAO, two lagging regions in the south of the country, are home to 3.2 million and 0.22 million people, respectively (39 percent of Tajikistan’s population in total). Khatlon is a fertile agricultural region with people homogeneously distributed across 25 districts around the regional center (Bokthar). GBAO is a mountainous region with a highly dispersed population. The average income in these two regions is lower than the national average, and unemployment is higher. Women and youth are particularly vulnerable. Khatlon and GBAO have the lowest level of access to basic services, with at least three-fourths of residents lacking a toilet inside the house or access to piped water and sewerage. Owing to its geographical remoteness, GBAO has low road density and therefore limited access to markets. FCV risks are exacerbated in these two regions because they share a porous 1,357 km (843 mile) border with Afghanistan.

B. Sectoral and Institutional Context

7. Agriculture and tourism are critical sectors for Tajikistan’s economic development. Agriculture accounts for a large share of the economy, and tourism has the potential to grow significantly. Agriculture accounts for about 21 percent of GDP and 51 percent of total employment in Tajikistan. Agriculture development is therefore critical to improving the livelihoods of the rural population, whose other major source of income is remittances from labor migrants. Sustainable, community-based tourism could provide another income-generation opportunity for households in rural areas, enhancing their resilience to economic shocks. Community-

4 World Bank, Reducing Multi-Hazard Risks Across Tajikistan: Protecting Communities Through Quality Infrastructure (Washington, DC: World Bank, 2017).


Page 9 of 49

based tourism is already showing an impact in GBAO, where the 15,000 yearly tourist arrivals represent a significant source of income for the 223,000 inhabitants.

8. Low wages in agriculture are a key driver of male migration to urban areas and abroad, and as a result, women comprise more than 60 percent of agricultural workers. The livelihoods of about 70 percent of Tajikistan’s total population depend directly or indirectly on agriculture. Yet, at an average monthly salary of 451 somoni, wages in the sector are the lowest in the economy. Agricultural workers earn half the salary of workers in the hotel and restaurant sectors and less than one-fifth the salary of construction workers (Figure 1). Khatlon’s economy depends more heavily on agriculture than other regions and faces the challenges that come with such dependence. Low wages in agriculture are the main driver of male labor migration to urban areas and abroad, which results in the “feminization” of agriculture, exposing women to high poverty levels. Subsistence agriculture and livestock activities are also an important source of livelihoods for a lot of the population in GBAO.

Figure 1: Average Monthly Wage by Sector (Somoni)

Source: Tajstat, WB Calculations.

9. Tajikistan’s agricultural sector increased and diversified its output, but agroprocessing capacity did not keep up. Tajikistan’s agriculture output suffered a sharp decline following the collapse of the Soviet Union in 1991 but has increased and diversified significantly since (Figure 2). The “freedom to farm” reform restructuring agricultural enterprises was effective in Khatlon,5 a region traditionally dominated by cotton monoculture. Cotton production has declined since 2007. Khatlon is now the leading region in Tajikistan for vegetable and fruit production (accounting for 55 percent of Tajikistan’s vegetable output and 43 percent of orchard output). Despite this growth, only 20 percent of Tajikistan’s fruits and vegetables are processed, and most agroprocessing capacity is concentrated in the Sughd region and Districts of Republican Subordination (DRS).6 Only 7 percent of canned vegetables and an even lower share of Tajikistan’s processed fruits originate from Khatlon.

5 Tajikistan began land reform with the Law on Dekhan Farms and the Law on Land Reform in 1992, but the full impact of the reform was only evident in the second half of 2000s. 6 Tajikistan Country Commercial Guide for US companies: https://www.export.gov/article?id=Tajikistan-Food-Processing-and-Packaging.

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foresty

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https://www.export.gov/article?id=Tajikistan-Food-Processing-and-Packaging


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Figure 2: Gross Agricultural Output in Tajikistan (Index 1992=100)

Source: FAOSTAT, WB calculations.

10. The lack of processing and storage facilities curtails farmers’ income opportunities and severely limits the commercialization potential of Tajikistan’s agricultural output in domestic and foreign markets. A large share of Tajikistan’s agricultural products is offered to the market immediately after harvesting. Given the short window of time during which non-refrigerated fruits and vegetables can be sold on the local market, price volatility7 and spoilage occur in most value chains. Despite excess production, Tajikistan imports fruits and vegetables from Pakistan and India to cover domestic market demand outside harvesting season. Local supermarkets sell mainly imported fruit juices, tomato cans, milk, and milk derivatives (such as cheese and yogurt), products that could be produced locally and for which the country has a revealed comparative advantage. Price volatility and spoilage are acute in Khatlon. Field interviews confirmed that approximately 30–40 percent of fruit and vegetable production is wasted because the market cannot absorb excess production at peak season when there are limited opportunities for storage and processing. As in Khatlon, GBAO8 has low processing capacity and, given the precarious nature of the roads in GBAO and the high cost of transportation, agricultural products produced in GBAO are generally sold only at local markets.

11. Developing agroprocessing is a key priority for the Government. Since launching reforms in the agriculture sector, the Government has refrained from direct state intervention. Instead, state policies have focused on providing support and incentives to producers and processors. These include value-added economic activities (such as processing and storage) to maximize gains from surplus production, as the National Strategy for Development 2030 (NSD 2030) states. The Socio-Economic Development Programs for 2016–2020 for the Khatlon and GBAO regions reflect central Government priorities and include support for agribusinesses, developing markets and storage solutions, and increased processing of fruits and vegetables through small facilities.

12. Three main bottlenecks prevent farmers in Khatlon and GBAO from commercializing their output:

i. The poor condition of local bazaars limits sales of fresh products. This constraint also affects selling to middlemen, who in turn sell in the bazaars. Bazaars have been the traditional sales channel for fresh products and will continue to play important roles in the trade of agricultural products in rural

7 Oversupply causes a reduction in price immediately after harvesting and a sharp increase in prices occurs after harvest. 8 Crop production accounts for 60 percent of GBAO’s agricultural output, consisting of potatoes, onions, berries, apricots, apples, cabbage, tomatoes, cucumbers, and medicinal herbs. The livestock sector (accounting for about 40 percent of GBAO’s agricultural output) is well-developed, especially in high-altitude pasture areas. It includes a variety of animals such as goats, cows, yaks, bees, fish, and poultry.

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areas. However, many do not meet modern requirements for hygiene, sanitation, convenience, and service. The bazaars need to supply enough clean trading areas, accessible sanitary toilets (especially for women), and adequate cold storage capacities to prevent fresh food products from contamination and spoilage.

ii. Obsolete technology and insufficient access to finance limit small-scale processing. In the absence of investment in agroprocessing and logistics, some farmers and individual entrepreneurs undertake small-scale processing, such as drying of fruits (apricots, apples, and grapes). However, their equipment is obsolete, and they cannot invest in modern technology and expertise because they do not have access to affordable finance of the right maturity. Commercial financial institutions consider agriculture a risky business, and interest rates are prohibitively high. (Borrowing rates are close to 30 percent per year with short-term maturities. Those are not attractive terms, especially for new businesses.) Financial institutions prefer to extend credit for short maturities to limit risk; short-term credit can finance working capital, but not investment.

iii. Constraints on medium-scale investment in agroprocessing and logistics limit smallholders’ sales to processors. Investment in agroprocessing is severely limited in Khatlon. There are three reasons. One is a poor investment climate (Tajikistan ranks 126th of 190 countries on the overall ease of doing business, according to the World Bank Group Doing Business report). Another is a lack of affordable financial resources for investment and working capital. The third factor is the fragmentation of production. It is extremely cumbersome for large processors to collect inputs from smallholders. Even if an investor had the financial means to set up a processing facility, the processor would face the challenge of sourcing inputs from small, uncoordinated suppliers. The logistics are costly, and the quality and quantity of inputs are uncertain. The challenges prevent large processors from developing a supply chain dependent on smallholders. In turn, they discourage investment. Dairy processing companies in Tajikistan face precisely this challenge, despite high demand on the local market. They received investment from IFC to expand their processing capacities but prefer to rely on an integrated supply chain (In the integrated supply chain, processors also own milk production facilities rather than sourcing milk from small farmers in Khatlon).

13. Despite a recent surge in tourism arrivals, Tajikistan’s potential for tourism is vastly underexploited. In 2018, the British Backpacker Society ranked Tajikistan the seventh-best adventure holiday destination,9 and the Daily Mail listed Tajikistan among the fastest-growing destinations in the world. Tourism arrivals in Tajikistan have increased significantly in recent years (from 28,000 in 2012 to 103,000 in 2017, counting only those who visit Tajikistan for leisure). Nevertheless, Tajikistan attracts fewer tourists than other countries. For example, 206,000 tourists visited Uzbekistan for holiday, leisure, and recreation purposes in 2017, while only 103,000 visited Tajikistan.

14. The tourism industry in Tajikistan is small but offers employment opportunities to vulnerable groups, especially women. Tourism contributes 1.2 percent of GDP and employs 20,000 people (about 1 percent of total employment)10 in Tajikistan. Some 60 percent of those employed in the sector are women (Figure 3). Despite the sector’s small size, tourism allows for a quick entry into the workforce. It could provide opportunities for vulnerable groups, particularly young people, who account for 70 percent of Tajikistan’s population.

9 Adventure tourism is any “trip that includes at least two of the following three elements: physical activity, natural environment, and cultural immersion.” See http://www.adventuretravel.biz/. 10 Below peer countries such as Georgia (18 percent), Azerbaijan (8 percent), Kyrgyzstan (7 percent), and Nepal (3.6 percent).

http://www.adventuretravel.biz/


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Figure 3: Share of Women and Youth in Tajikistan’s Tourism Value Chain

Source: Jobs in Value Chains Survey, 2017, IFC.

15. Tourism development is relevant not only from an economic standpoint but also as a means of reducing fragility. Tourism promotes pride in one’s culture and self-identify and facilitates social cohesion and tolerance.11 A recent report by the World Travel and Tourism Council revealed that tourism correlates with peace in both conflict-affected and non-conflict-affected countries.12 Development of the local culture encourages better self-awareness and cultural resilience.13 In turn, self-awareness and cultural resilience reinforce a sense of belonging and ownership that can deter extremism. Finally, preserving and promoting cultural assets strengthens pride and self-identity, which also mitigate FCV risks.

16. GBAO and Khatlon have important tourism assets—natural, historical, and cultural—that can attract more tourists and increase spending per tourist. GBAO has some of the most beautiful mountains in the world (part of the Pamir mountain range near its intersection with the Himalayas, with peaks such as Peak Somoni, at 7,495 meters—25,590 feet) It also boasts historical and cultural sites and pristine springs. Nepal, which has mountains like those in GBAO, attracts 733,000 tourists per year, compared to approximately 15,000 to GBAO. GBAO attracts both young adventure tourists and older professionals and retirees. The adventure tourists come mainly as backpackers and are interested in biking and mountaineering. The older professionals and retirees are largely interested in mountain itineraries. Khatlon also has significant unexploited tourism potential because it is along the ancient “silk road” and is home to historical assets that date as far back as the fourth century BCE, including archeological ruins, medieval fortresses, holy sites, and Buddhist sanctuaries. Some of them are on the tentative list for consideration as potential UNESCO World Heritage sites. According to a survey the World Bank conducted in preparing the Rural Economy Development Project (REDP) (hereafter, the “WB Survey”), 40 percent of visitors to Tajikistan would be interested in visiting historical sites and participating in local culture and activities if conditions at, around, and on the way to the sites were to improve.

17. The Government of Tajikistan has been paying increasing attention to tourism, and the industry has started to professionalize. The Government has supported important reforms in the tourism sector, including the introduction of electronic visas,14 which reduced the time required to obtain a visa to two days. Tajikistan’s

11 Smith, V. L., ed. 2012. Hosts and guests: The anthropology of tourism. University of Pennsylvania Press. 12 WTTC. 2016. “Tourism as a Driver of Peace,” https://zh.wttc.org/-/media/files/reports/special-and-periodic-reports/tourism-as-a-driver-of-peace--full-report-copyrighted.pdf 13 Theron, L.C., and Libenberg, L. 2015. Understanding culture contexts and their relationship to resilience processes. Youth Resilience and Culture Book Series, 23–36. 14 The need to obtain a visa used to be a critical constraint for foreign tourists willing to visit the country. Citizens of 121 countries can obtain the newly introduced e-visa online within 24-48 hours. The e-visa also allows obtaining the permit to visit GBAO, required since Soviet times. Its issuance was previously highly cumbersome and expensive because it required the support of a tour operator.

https://zh.wttc.org/-/media/files/reports/special-and-periodic-reports/tourism-as-a-driver-of-peace--full-report-copyrighted.pdf

https://zh.wttc.org/-/media/files/reports/special-and-periodic-reports/tourism-as-a-driver-of-peace--full-report-copyrighted.pdf


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improving relationship with Uzbekistan has contributed to tourism growth in the past two years. The importance that the country accords to tourism was heightened in 2018 through the adoption of the National Tourism Strategy 2030 and the President’s declaration that 2018 would be the “Year of Tourism and Folk Crafts,” a designation that has since been extended to 2021 as the “Year of Tourism, Folk Crafts and Rural Development”. The Committee for Tourism Development under the Government of the Republic of Tajikistan manages and promotes tourism in the country, while the Ministry of Culture manages the country’s historical sites. The private sector has become more organized as well: 170 tour operators are licensed in the country, several international hotels have opened in the capital, a network of 130 homestays cater to the needs of tourists outside Dushanbe—with many more surfacing independently15—and a number of organizations support tourism development.

18. Three main bottlenecks limit the growth of tourism in Khatlon and GBAO:

i. Insufficient investment in historical sites limits Tajikistan’s attractiveness for adventure tourists interested in culture in addition to natural sites. Unique historical and cultural sites in both Khatlon and GBAO need investment. These sites are not maintained, preserved, or commercialized to attract tourist spending. Khatlon is closer than GBAO to Dushanbe, Tajikistan’s main point of entry. (The drive from Dushanbe to GBAO can take up to 19 hours, the drive to Khatlon 2 to 4 hours.) Khatlon might attract visitors who are interested in exploring Tajikistan’s cultural sites but would rather not undertake the long drive from Dushanbe to GBAO. However, inattention to Khatlon’s sites and associated tourism services deters these tourists. At the same time, lack of investment in GBAO’s historical sites dissuades both adventure tourists who would like to combine nature-based activities with cultural tourism and tourists who may be strictly interested in cultural tourism.16

ii. Lack of tourism facilities discourages high-end visitors. According to the WB Survey, tourists are especially concerned about the lack of rest stops and sanitation facilities at the sites, access to services (such as first aid and emergency services in remote areas), and access to basic sanitation in homestays (Figures 4 and 5). These challenges make it difficult to increase tourism spending by attracting high-end tourists. The same challenges also discourage visits to sites in Khatlon and GBAO by tourists who may not be amenable to long drives without adequate rest stops along the way. (Because ground transportation is the most common way to reach Khatlon and GBAO, good rest stops along the way are critical for the long drives to these destinations.)

iii. Local entrepreneurs’ insufficient knowledge and access to finance limit the tourism service offering. Businesses in tourism and related services suffer from the same access to finance issues that all micro, small, and medium enterprises (MSMEs) in Tajikistan face (high borrowing costs and absence of medium-term finance for investment). The novelty of the sector compounds these constraints by causing banks and MFIs to use more conservative lending policies. Additionally, providers lack knowledge about the tourism sector and the specific needs of tourists. As a result, they do not address the aspects of their businesses that require the most immediate attention (such as providing enough sanitary toilets for visitors). With better knowledge of their target market, providers could undertake targeted investments to improve only those aspects of their businesses that are binding constraints on accessing an upscale tourist market.

15 More homestays exist around the country, including in Khatlon, but they are not part of an organized network. 16 The project will not focus on a geographic market segment, although most international tourists are likely to come from Europe.


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Figure 4: Average Tourist Satisfaction Ratings of Homestay Services in Tajikistan (on a scale of 1 to 5)

Figure 5: Average Tourist Satisfaction Ratings of In-Country Transportation Infrastructure (on a scale of 1

to 5)

Source: WB Survey, Team Analysis. Source: WB Survey, Team Analysis.

19. Agriculture and tourism are synergistic. When they are developed in tandem, economic benefits multiply, including for the most vulnerable segments of the population—women, youth, and migrants. Given the importance of agriculture in Khatlon and GBAO, there are several channels through which tourism and agriculture can reinforce each other to retain more tourist spending locally and contribute to development in rural areas.

Exploiting the links between the two sectors will have a positive impact on job creation and increase the incomes of local populations. Improving the quality of agricultural products and processing them would provide an additional attraction for tourists (for example, through “farm-to-table” dining experiences in tourism itineraries). Tourism offerings could also be diversified into agritourism, generating additional income opportunities for farmers.

C. Relevance to Higher-Level Objectives

20. Benefitting from top-up IDA financing for Tajikistan under the IDA18 RMR, the proposed REDP would contribute to Focus Area 1 (Human Capital and Resilience) and Focus Area 3 (Private-Sector Growth and Market Creation) of the World Bank Group (WBG) Country Partnership Framework for the Republic of Tajikistan for the period of FY2019–23. An RMR allocation of US$98.7 million will finance activities under a preventative approach, the Resilience Strengthening Program (RSP), which will address FCV risks and constraints on private sector development that limit overall development in Tajikistan. The RMR implementation note—integrated into the Country Partnership Framework—describes the RSP.

21. The RMR will be implemented in Tajikistan through three complementary investment lending projects that contribute to the WBG’s twin goals of ending extreme poverty and promoting shared prosperity. The three projects are: (i) the Socio-Economic Resilience Strengthening Project (SERSP), (ii) the Rural Electrification Project (TREP), and (iii) the REDP (Figure 6). All three projects contribute to eradicating poverty and increasing shared prosperity. SERSP provides access to social infrastructure and communal support systems, increasing basic life skills and reducing NEETs. TREP provides access to reliable electricity, which increases opportunities for employment and local exports. REDP increases economic opportunities, income, local exports, and employment in critical sectors of the Tajik economy (agriculture, tourism, and related services).. Complementarities among the three projects include SERSP youth beneficiaries receiving matching grants under REDP to become

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entrepreneurs in the agricultural or tourism sectors or—if they already have a business—to expand it and to better integrate into local value chains, such as tourism. In addition, households in communities that benefit from electrification under the TREP can access REDP matching grants to improve basic sanitation and kitchen services to transform their houses into bed and breakfasts for tourists. All three projects will have a special focus on women, youth, and migrants.

Figure 6. The RMR-Financed Resilience Strengthening Program

Source: World Bank. 2019. Tajikistan Country Partnership Framework 2019–23.

22. The RSP is consistent with the Government of Tajikistan’s strategies on preventing violent extremism. In 2011, Tajikistan adopted the Regional Joint Action Plan for the Implementation of the United Nations Global Counter-Terrorism Strategy in Central Asia. In November 2016, it enacted the National Strategy of the Republic of Tajikistan on Preventing Extremism and Terrorism for 2016–2020. To implement the strategy, 13 priority objectives were identified, including: (i) eliminating socioeconomic conditions conducive to radicalization and violent extremism that lead to terrorism; (ii) preventing extremism and radicalization among adolescents and youth; (iii) decreasing the vulnerability of women to extremist propaganda and ensuring their full participation in the development and implementation of policies to this end; (iv) facilitating the participation of civil society and the private sector in countering extremism and terrorism; and (v) reinforcing international and regional cooperation. Progress toward operationalizing this strategy has been achieved through the contributions of multiple ministries and Government agencies. Signature activities under the 2017 “Year of Youth” umbrella, which aimed at combating violent extremism, included measures to promote civic and economic participation, cultural and social inclusion, and empowerment of youth. The 2018 Dushanbe Declaration emphasized the importance of regional and international coordination and cooperation and the need to address and prevent the root causes of grievances and conflict, which could lead to violent extremism, radicalization, and terrorism, particularly among youth, and in close cooperation with civil society.

23. The REDP contributes to corporate commitments by supporting and scaling up climate actions, increasing the climate-related share of development financing and reducing gender gaps. The corporate priorities will be addressed through the following:

i. Climate co-benefits: The project will contribute to the efforts of Government of Tajikistan to fulfill their international commitments as stated in Tajikistan’s Nationally Determined Contributions. Tajikistan is a mountainous country with diverse topography and is especially vulnerable to climate hazards. It is prone


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to earthquakes, floods, drought, avalanches, landslides and mudslides. Aridity, high temperatures and significant inter-annual variability of almost all climatic elements are predominant characteristics of Tajikistan’s climate. Annual mean temperatures vary from 17°C in the south to -6°C in the lower Pamirs. Maximum temperatures are observed in July and minimum in January. Due to climate change, the mean annual temperatures are projected to be warmer by approximately 2°C by 2050. The periods of December-February and June-August are likely to see the warmest periods. Exposure of crops and livestock to climate variability is likely to increase the waste in horticulture and livestock production. By introducing cold storage and processing of agricultural products, the project will mitigate these risks.

ii. Gender gaps: The project will focus on reducing the gender gap in labor force participation in Tajikistan (in 2013, the female labor force participation rate was at 27 percent compared to 63 percent among males). Women comprise of approximately 60 percent of the workers in agriculture and tourism. By fostering the growth of these sectors, the project is expected to create job opportunities for women. Women will be given preference in accessing the trainings and matching grants. Furthermore, some of the interventions such as improvements of sanitary services in the bazaars are expected to be gender supportive since they will allow women to gain employment in public spaces. As a result of the project’s interventions, NEET rates for women are expected to decline.

24. The proposed project aligns with the Government’s tourism and agribusiness priorities. One of the key priorities of the Government’s National Strategy of the Republic of Tajikistan on Preventing Extremism and Terrorism for 2016–2020 is to reduce unemployment among youth and women. In addition, the Government declared 2018 “The Year of Tourism and Folk Crafts” and extended this declaration through 2021. The project aligns with the country’s tourism strategy, adopted in 2018 and extended to 2030, which aims to strengthen community-based tourism. Moreover, the socioeconomic development programs for Khatlon and GBAO for 2016–2020 aim to increase agricultural production more than fivefold by 2020 and to increase the value of agricultural products by providing support to small and medium enterprises in processing fruits and vegetables.

II. PROJECT DESCRIPTION

A. Project Development Objective

PDO Statement

The Project Development Objective is to improve the sources of livelihood for local populations in GBAO and Khatlon through tourism and agribusiness.

PDO Level Indicators

• Increased number of tourists in GBAO and Khatlon

• Increased tourism spending in GBAO and Khatlon

• Increased volume of processed agrifood products in GBAO and Khatlon

• Number of jobs created through project interventions in GBAO and Khatlon, of which 50 percent for women and youth

• Decreased NEET rate of 15-to-24-years-old men

• Decreased NEET rate of 15-to-24-years-old women

Intermediate Level Indicators:

Component 1: Improve public infrastructure for development of tourism, agribusiness, and related sectors


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• Number of bazaars and other agribusiness-related infrastructure improved

• Number of upgraded food safety laboratories

• Number of sites with tourism signage installed

• Number of sites rehabilitated under the project

Component 2: Support to MSMEs and entrepreneurs in the tourism, agribusiness, and related sectors

• Number of homestays, rest stops, and restaurants improved

• Number of small-scale post-harvest processing and cold storage facilities established

• Percentage of beneficiaries reporting improved satisfaction with the transparency and responsiveness of the beneficiaries’ feedback mechanism for the grant programs

• Number of collection points for agricultural products established

• Incremental increase in visits to the sites rehabilitated under the project Component 3: Capacity building and business development services in tourism, agribusiness, and related sectors in Khatlon and GBAO

• Number of people trained, of which 50 percent are women

• Number of familiarization tours organized for external tour operators to present Tajikistan’s offerings to tourists

• Number of local and international trade fairs attended by representatives of Tajik tourism and agribusiness sectors

Component 4: Project coordination, implementation and Grant Program Management and Administration

• Number of outreach campaigns for potential grant beneficiaries held under the project to ensure inclusiveness

• Number of proposals collected by the Grant Management Company (GMC) from enablers after each round of calls for proposals

B. Project Components

25. The REDP has four components, three of which finance activities to support agribusiness, community-based tourism, and related services, and one that finances project implementation. Component 1 funds public investment in infrastructure at cultural sites and grants to communities to improve small local agribusiness and tourism infrastructure. Component 2 funds matching grants to farmers and MSMEs in tourism, agribusiness, and related sectors. Component 3 funds technical assistance to public agencies, service providers, and operators in tourism, agriculture, and related sectors. Component 4 funds the project implementation unit (PIU) at the Ministry of Finance (MoF), a project implementation group (PIG) at the Tourism Development Committee (TDC) and a GMC that will design and implement all grants and matching grants funded by the project.

Component 1—Improve public infrastructure for the development of tourism, agribusiness, and related sectors (US$12,000,000)

26. Component 1 aims to improve public infrastructure for the development of tourism and agribusiness. Component 1 includes three subcomponents:

• Subcomponent 1.1: Public investments in historical and cultural tourism sites (US$9,300,000): This subcomponent will finance the rehabilitation, beautification, landscaping, and general improvement of four cultural and historical sites. One site is in GBAO, and three are in Khatlon (Figure 7). The project will finance


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investments, as well as technical design and commercialization plans, associated social and environmental assessments, and supervision of works. The investments will help to: (i) attract more visitors, (ii) encourage new economic activity at and around the sites, (iii) enhance the experience of visitors to the sites, thereby increasing their spending, and (iv) preserve local cultural assets. The construction works under this subcomponent will give jobs to youth and returning migrants,17 and will help to upskill them in preparation for more specialized occupations in the construction industry in the future. This subcomponent will include:

o Investment in the Yamchun Fortress in GBAO, leveraging the site as a tourism anchor in Tajikistan. The Yamchun Fortress is one of the most iconic historic landmarks in the Wakhan Corridor, along the southern branch of the ancient Silk Route. Tourists traveling the region visit the site and spend money locally. Site constraints prevent the site from being able to attract more tourists. These constraints include structural issues in the fortress, ineffective presentation to tourists, lack of visitors’ facilities, and suboptimal management. To address these constraints and unlock the site’s full potential, the project will finance, among other things: (i) a comprehensive diagnostic to assess the status of the fortress and determine all needed measures and interventions, with outputs to include a feasibility study, preliminary and detailed engineering designs, bill of quantities, and technical specifications; and (ii) implementation of conservation, presentation, and management measures as identified in the diagnostic. Based on current site knowledge, interventions may include structural stabilization, conservation of walls and towers, development of pedestrian access to the fortress, and other measures to enhance the site’s presentation to tourists. Yamchun Fortress and similar sites in Tajikistan have been on the UNESCO Tentative List for potential nomination as United Nations Educational, Scientific, and Cultural Organization (UNESCO) World Heritage Sites since 2013.18 As such, interventions financed by the project will aim to maintain the authenticity and integrity of the site.

o Investment in the three sites in Khatlon (Hulbuk Castle, Khoja Mashad Madrassa, and Chiluchorchashma) to develop a historical and religious circuit. These three sites are already part of itineraries that travel through this part of the country. The Government has performed major restoration work on the Hulbuk fort, and a grant from the United States Ambassadors’ Fund for Cultural Preservation financed the restoration of the Khoja Mashad Madrassa. The project will complement past and restoration by financing improvements to the landscape surrounding the three sites. The improvements will include landscape architecture, such as creating pathways, green areas, and lighting to and within the sites. Because Hulbuk Castle and Khoja Mashad Madrassa are UNESCO-nominated sites,19 and the UNESCO application for Hulbuk has been submitted, all works will be conducted under UNESCO guidelines.

17 Contractors to be selected for such works will be required during the tender process to fulfill targets for specific groups. 18 https://whc.unesco.org/en/tentativelists/5790/ 19 Hulbuk and Khoja Mashad Madrassa are under the supervision of the Ministry of Culture. Chiluchorchashma is under the supervision of State Committee for Investment and State Property Management of the Republic of Tajikistan.


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Figure 7: Map of Sites to be Rehabilitated under the Project in GBAO and Khatlon

• Subcomponent 1.2: Grants to communities, municipalities, and not-for-profit organizations to improve

tourism and agribusiness infrastructure and develop local tourism attractions (US$2,400,000). This subcomponent will finance grants for communities, municipalities, and not-for-profit organizations to develop local tourism attractions and to improve infrastructure in public agricultural markets. The objective of this subcomponent is to solicit local communities’ proposals to develop tourism and agribusiness in Khatlon and GBAO and to involve citizens in designing and implementing these proposals, ultimately increasing citizens’ engagement and opportunities for productive employment. Proposals that involve vulnerable citizens—youth, women, and returning migrants—will have priority. Grant enablers (“enablers”) will be hired under Subcomponent 3.2 to help applicants prepare proposals and implement those that are selected. The GMC, financed under Subcomponent 4.2, will administer the grants according to the principles and rules in the Grant Program Manual. The GMC will collect proposals and prepare submissions to the Grant Program Committee, which will be composed of public stakeholders and civil society organizations. Beneficiaries that submit winning proposals will receive the grant money to achieve the objectives in their proposals. Grants under this subcomponent will include:

o Grants for communities, municipalities, or not-for-profit organizations to improve tourism infrastructure or develop local tourism attractions. The GMC, PIU, and grant enablers will advertise the availability of grants in all districts in GBAO and Khatlon. The grants will be open to communities, municipalities, or not-for-profit organizations that are interested in promoting tourism. For example, the grants might fund the rehabilitation of local recreational sites (such as theaters, parks, and museums), the improvement of hiking or cultural trails, or the organization of local fairs.

o Grants for communities or municipalities to improve infrastructure in public agricultural markets (bazaars). The GMC, PIU, and enablers will advertise the availability of grants in all districts in GBAO and Khatlon for communities or municipalities that are interested in improving local bazaars by, for example:


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(i) building or improving trading areas (such as fixing the roofs of the bazaars), (ii) building or improving sanitary facilities (such as building public toilets), (iii) building or improving (cold) storage facilities, and (iv) repairing facilities or buying equipment for food safety control labs in the bazaars. In addition, any other needs identified during project implementation that pertain to public goods for the bazaars can be addressed and financed under this subcomponent.

• Subcomponent 1.3: Public investments in touristic signage (US$300,000). This subcomponent will fund the preparation, purchase, and installation of tourist signs across major travel routes and for key tourism sites in Khatlon and GBAO, including road signage, entrance signage, and interpretative signage. These interventions can cover—but will not be limited to—the sites financed under Subcomponents 1.1 and 1.2.

Component 2—Support to MSMEs and entrepreneurs in the tourism, agribusiness, and related sectors (US$8,200,000)

27. Component 2 aims to facilitate entrepreneurial activities and increase MSMEs’ growth and employment in the tourism, agribusiness, and related sectors. This subcomponent will finance matching grants to private sector actors (individual entrepreneurs, farmers or groups of farmers, and MSMEs) in agribusiness, tourism, and related sectors. The objective of this subcomponent is to facilitate investment in tangible and intangible assets (for example, quality certification) that would improve their productivity, expand their offerings, and produce opportunities to create jobs and add value. Proposals from vulnerable citizens—youth, women, and returning migrants—and proposals that involve vulnerable citizens will have priority in the selection process. Grant enablers will be hired under Subcomponent 3.2 to help applicants prepare proposals and implement selected ones. The GMC will administer the grants according to the principles and rules in the Grant Program Manual. The GMC will collect proposals and prepare submissions to the Grant Program Committee. Those who submit a winning proposal will receive and be entitled to spend the grant money to achieve the objectives spelled out in their proposals.

• Subcomponent 2.1: Matching grants to farmers and agribusiness MSMEs to support post-harvest storage and processing (US$2,600,000). Matching grants will be provided to formally registered individual farmers, farmers’ groups, or associations and MSMEs to finance goods (equipment) and services to facilitate small-scale post-harvesting activities. The matching grants can finance, for example: (i) drying or packaging machines, (ii) (cold) storage facilities, (iii) equipment for producing small, uniquely packaged products that can be sold on the local market or bought by tourists as souvenirs, or (iv) changes to production processes to obtain food safety and quality certifications such as HACCP and ISO 22000. The equipment financed by matching grants finance will contribute to reducing product waste, extending product life, adding value, and improving access to markets, including exports. The equipment will increase incomes and generate new jobs, particularly for smallholder farmers, women, and youth. Priority will be given to goods and services that reduce the country’s vulnerability to climate change, such as energy-efficient processing technologies and storage facilities, or environmental certifications of MSMEs’ production processes. This will reduce carbon emissions and pressure on natural resources.

• Subcomponent 2.2: Matching grants to farmers and processors in two agribusiness value chains (US$2,600,000). These matching grants will support the development of two value chains by removing demand and supply bottlenecks. For the first value chain—dairy—the project will provide:

o Matching grants to formally registered farmers or associations to buy milking equipment, milk containers, improved fodder, and high-productivity cows to improve the quantity and quality of their milk.


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o Matching grants to processors to establish or acquire collection points, including equipment (such as milk tanker trucks and quality control equipment). While grants will be provided to processors, they will benefit farmers by increasing opportunities to trade milk with processors continuously. These grants could be offered through a reverse auction scheme, whereby the requirements would be predetermined by the project and processors would be invited to submit proposals. In awarding the matching grants, principles of inclusion and climate change considerations will be taken into account to the extent possible.

• Subcomponent 2.3: Matching grants to tourism-related MSMEs to improve services and offerings (US$3,000,000). The project will provide matching grants to formally registered tourism entrepreneurs, MSMEs, and NGOs so that they can improve the quality of their products and services. The objective of this subcomponent is to attract more tourists and increase their spending, ultimately increasing employment and income opportunities for local populations. Homestays,20 restaurants, tour operators, activity and service providers, artists, and crafters could apply for the matching grants. The grants could fund a diverse set of initiatives, including: (i) improving access to basic sanitation services, (ii) upgrading kitchens to meet health standards, (iii) purchasing equipment that tourists want (such as mountain bikes), and (iv) offering public services (such as public bathrooms, benches, first aid, maps, and tourism information) in rest areas. Matching grants to develop and promote agritourism will support farmers willing to diversify their income through tourism.

Component 3 — Capacity building and business development services in tourism, agribusiness, and related sectors (US$6,900,000)

28. Component 3 aims to: (i) improve the capacity of tourism and agribusiness public agencies, operators, and service providers and (ii) help beneficiaries apply for and implement the grants and matching grants funded by the project. This component will finance capacity building and technical assistance to promote the tourism, agribusiness, and related sectors by improving the capacity of public institutions and enhancing individual skills. This component will also finance the provision of business support services for implementing the grant and matching grant programs. It includes two subcomponents:

• Subcomponent 3.1: Technical assistance and capacity building for tourism and agribusiness public agencies and skill development for tourism providers (US$4,500,000). This subcomponent will finance three specific activities, among others. The first is training and advisory services on tourism and agribusiness development for public institutions (for example, analysis of global trends, market analysis, and public-private partnership to develop the sectors). The training will be for stakeholders such as the TDC, the Ministry of Agriculture, the Ministry of Culture, and other project participants. The second activity is promoting tourism and agribusiness by organizing and taking part in trade fairs, familiarization or learning tours (for tour operators and agribusinesses), and media and marketing activities. Targeted marketing activities include designing and disseminating online, in-print, and visual materials. The third activity is providing training, retraining, and certification programs for skilled professionals, semi-skilled workers, and relevant entrepreneurs in the tourism sector.

• Subcomponent 3.2: Technical assistance to help beneficiaries of grants and matching grants to design, submit, and implement grant proposals (US$2,400,000). To maximize the outreach and impact of all grant

20 GBAO has an organized association of homestays (PECTA) financed by the Agha Khan Foundation. There is no similar association in Khatlon.


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and matching grant programs offered under the project (including Component 2 and Subcomponent 1.2), the project will competitively select grant enablers. The enablers could be local NGOs, consulting companies, destination management organizations (DMOs), or other providers of professional and knowledge services. The project will recruit three to five enablers21 to: (i) identify and train beneficiaries, particularly vulnerable groups, (ii) help beneficiaries prepare grant and matching grant proposals, and (iii) provide implementation support. To encourage proposals with positive impacts on the environment, the enablers will conduct climate change awareness raising and knowledge sharing activities among beneficiaries.

Component 4— Project coordination, implementation and Grant Program Management and Administration (US$2,900,000)

29. Component 4 will support overall project coordination, implementation, and hiring a GMC that will administer all grants and matching grants financed under the project. Component 4 finances costs pertaining to overall project implementation, including:

• Subcomponent 4.1: Project coordination and implementation (US$1,150,000). The implementation costs will cover (i) staff and experts at the PIU within the MoF, which will implement the entire project, (ii) tourism experts for the PIG at the TDC, and (iii) regional coordinators in the governors’ offices in Khatlon and GBAO. Component 4 will also cover operational costs related to implementation, such as office equipment, travel, communication, printing, and transportation. Finally, the costs covered under Component 4 will include monitoring and evaluation (M&E) and impact assessment activities to systematically track and measure the results of the project and to rigorously assess the impact of some pilot initiatives on incomes and jobs, with a focus on youth, women, and returning migrants.

• Subcomponent 4.2: Grant Management and Administration (US$1,750,000). A dedicated company financed under this component will manage the grants and matching grants. (See Section III on implementation arrangements).22

C. Project Beneficiaries

30. The direct beneficiaries of activities under the project are MSMEs and people living in Khatlon and GBAO, including the targeted vulnerable groups—women, youth, and migrant workers. Interventions under the project will create income-earning opportunities for the populations for Khatlon and GBAO, including vulnerable groups. Component 1 of the project will benefit public markets, museums, communities, and cultural fairs. Component 2 will benefit agri-related stakeholders (including farmers, farmers’ groups and associations, processors, and agri-MSMEs) and tourism-related stakeholders (such as homestays, craftspeople, artists, restaurants, and other service providers). Component 3 will benefit startups, tourism guides, tour operators, agriculture students, and low-skilled, semi-skilled, and high-skilled workers.

31. The sectoral interventions target the most at-risk groups, both directly and indirectly. Project interventions, identified in consultation with stakeholders, will directly target vulnerable groups—such as women, youth, and returning migrants—in multiple ways:

• Public works for rehabilitating public infrastructure (markets and tourist sites) will leverage returning migrants, the large majority of whom are employed in construction. The construction activities for rehabilitating tourism sites and improving agribusiness infrastructure will offer a labor-intensive source of

21 At a minimum, two to four enablers in total should ensure coverage of tourism and agribusiness beneficiaries in the 25 districts of Khatlon. Given the remoteness of GBAO, one facilitator should be dedicated to beneficiaries in those districts. 22 Annex 1 provides information on how the company will manage the grants.


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employment for migrant workers and youth. The proposed works will open up employment opportunities for construction workers from local communities, including labor migrants. The works could be implemented in parallel with a training program (including on-the-job training) related to the workers’ trade, conducted by a private company that would offer them a certificate.

• Youth will benefit from several types of grants. Community grants for organizing cultural events—particularly arts and music festivals—will benefit youth, who will find an outlet to showcase their skills. This will help keep them away from undesirable activities, such as drug trafficking and extremist groups. Similarly, skill-building programs for tour operators, cooks, drivers, cleaning staff, and waiters will target young people, who will have priority access to these programs. Finally, matching grants for musicians, artists, and craftspeople will offer additional income-earning opportunities for young people and will be provided preferential access to these grants.

• Women, including those heading a household, will benefit from the support provided through matching grants in agribusiness, tourism, and related services. Women (and youth) manage most tourism MSMEs (including homestays, restaurant, cafes, and craftspeople). The matching grants programs will give them preferential access. The project aims to narrow the gender gap by assisting female entrepreneurs in agribusiness and tourism who lack financing and training opportunities.

D. Results Chain

Figure 8: Theory of Change for the REDP


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E. Rationale for Bank Involvement and Role of Partners

32. The proposed components address multiple market and government failures. The infrastructure activities proposed under this project contain elements of public goods. The underlying sites and buildings are part of the natural and cultural assets of the country. They need preservation and protection for future generations. Considerable risk premiums are associated with private lending to the real sector. Public support is needed to kickstart the lending. Enhancing skills generates positive productivity externalities for the economy, justifying public support for building skills, training, and promulgating standards.

33. The WBG offers significant value to proposed project activities by providing financing and TA and by playing a catalytic role to crowd-in other donors. The WBG has successfully implemented cultural heritage and community-based tourism programs in Europe and Central Asia, and lessons learned from these experiences will be applied in this project. In addition, the WBG has long provided TA and financing for agricultural projects around the world, including the Tajikistan Agriculture Commercialization projects (P132652 and P158499). The WBG can mobilize stakeholders (such as UNESCO) and facilitate resource mobilization from additional donors (for example, in rehabilitating additional historical sites) and private investors (in attracting large agroprocessing investors).

34. Project activities complement the ongoing and recently completed ones of other donors. Donors have been involved in both tourism and agribusiness in Tajikistan:

• In tourism, most donors in the region are heavily involved in infrastructure-related development in areas such as transportation. The Asian Development Bank, the European Bank for Reconstruction and Development, and the Japan International Cooperation Agency (JICA) have financed both cross-border and local roads. The Agha Khan Foundation has financed the construction of hotels, such as the Serena Hotel, and public parks, including the Khorog Park project. Because road infrastructure is a critical challenge, this engagement by other donors is welcome. A project implemented by the United Kingdom’s Department for International Development (DFID) has supported improvements in border security, which is critical for perceptions of safety in the country and for cross-border tourism. JICA has been supporting the Tourism Committee with preparing the country’s tourism brand (Feel the Friendship) and training staff in destination management and other areas of tourism. The United States Agency for International Development (USAID) has a Central Asian regional project. It focuses on road signage and limited incubation support. The incubation support covers regional horticulture, tourism, transport, logistics, and learning events and training for tour operators and the public sector to learn about global trends, product development, and marketing. In Tajikistan, this initiative complements the REDP because it focuses on the Zerafshan region. Finally, the German Society for International Cooperation (GIZ) supported a project, which closed in 2015, that trained crafters specifically. The IFC is completing a market segmentation study, increasing the number of flights from selected market segments, and simplifying tourism licensing procedures for the private sector. The IFC is also looking for opportunities for investment attraction and facilitation.

• The agribusiness component has been designed with due consideration to complementarities and coordination with other donor interventions in the sector. These include activities funded by the Food and Agriculture Organization of the United Nations (FAO) and the European Union (EU) in policy work, including institutional restructuring support to the Ministry of Agriculture, support for developing food security strategy, assistance to veterinary services, small-project organic agriculture, and piloting small-scale drip irrigation systems. FAO is looking into piloting a matching grant scheme for investing the migrants’ remittances into agriculture. The International Fund for Agricultural Development (IFAD) is funding two projects in the rural development and livestock sectors, while the European Bank for Reconstruction and Development (EBRD) provides support to climate adaptation and green economy financing. The Agha Khan


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Foundation, through its Accelerate Prosperity program, is supporting some small-scale processing startups. The Asian Development Bank (ADB) has been considering a credit line project for the dairy value chain, but because of high interest rates in the lending market and lack of interest from participating financial institutions as lending intermediaries in the agriculture sector, the project has been scaled down and remains at the consideration phase. This has been accounted for in choosing the financing instrument under the REDP. The GIZ and the EU have projects in trade and value chain financing, but those are closing in 2019 and 2020 (for example, the Enhanced Competitiveness of Tajik Agribusiness Project). The REDP will pick up from where the IDA-funded Agriculture Commercialization Project (ACP) ends. Specifically, the ACP has set up several farmer groups, some of which have received matching grants for supporting pre-harvesting interventions, but the funding has fallen short of needs. The ACP groups can apply with their business proposals for REDP grant programs to grow to the next level of their development (for example, in processing). Finally, relevant donor projects include the Agribusiness Competitiveness Activity funded by USAID, which includes activities similar to those under the REDP and targets the 12 districts of Khatlon Oblast. However, these two projects will be complementary rather than duplicative. First, the REDP targets all 32 districts in Khatlon and GBAO, as compared to only 12 districts targeted by USAID. Second, the agribusiness and agri-processing investment needs in these regions are large compared to the available funds. To enhance coordination on agribusiness, the REDP will participate in the Donor Coordination Council’s23 working group on agriculture.

F. Lessons Learned and Reflected in the Project Design

35. Investment in tourism infrastructure and basic services has been an essential part of projects to increase tourism arrivals and expenditures. For instance, the Benin Cross Border Tourism and Competitiveness Project (P149117) and the Sierra Leone Sustainable Development Tourism Project (P164212) stressed infrastructure development in improving tourists’ satisfaction with the destination. Upgrading sites, tourist attractions, and public areas (such as hiking trails, rest stops, road signage, and visitor centers) were vital in making destinations more accessible to visitors and establishing a tourist-friendly environment. The REDP will invest in upgrading four sites in Khatlon and GBAO, including installing tourism signage in and around them.

36. Given the critical shortage of skilled workers and diversified tourism product offerings, tourism training has tremendously enhanced tourism service delivery. With lessons learned from the Sustainable Tourism Enhancement in Nepal’s Protected Areas project (P165130), the REDP will provide capacity building for public and private institutions to promote tourism and strengthen private sector skills.

37. Creating farmer groups helps include the most vulnerable farmers, with careful consideration for the flexibility of matching contribution. In many WBG projects, creating farmer groups has followed a robust and participatory approach. It has provided a much-needed sense of empowerment, especially for the smallest farmers, who are typically the most vulnerable. In the Tajikistan Agriculture Commercialization Project (P158499), most beneficiaries in the farmer groups (over 60 percent) were women. The same project allowed for flexibility in customizing the matching contribution depending on the size of the beneficiary to ensure equal treatment for grant recipients who could not contribute as much as bigger players. The REDP will give preference to forming farmer groups to access the matching grants. Creating farmer groups can also be difficult. The outcomes may be less efficient than operationalizing equipment. The project, therefore, retains the flexibility to consider individual entrepreneurs as target groups for matching grants.

23 The Donor Coordination Council of Tajikistan (DCCT) was established to improve cooperation and exchange of information among donors, as well as to identify, in consultation with the Tajik Government, priority sectors for development.


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38. Successful matching grants highlight the importance of choosing the right implementing arrangements. The World Bank’s experience with matching grants has been mixed. Government requirements have sometimes caused slow and low disbursement. For instance, a matching grants component under the Ethiopia Private Sector Development Capacity Building Project (P050272) was delayed for two years due to the implementing partner’s inadequate capacity. The project only moved forward after selecting a newly established semi-autonomous administration. To avoid such complications, this project will competitively recruit a GMC to implement all the grants and matching grants. This is in line with most WBG experience with matching grants, in that high-performing matching grants mechanisms tend to involve the agile promotion and selection of projects using an experienced firm or agency.

39. In addition, successful matching grants projects provide TA to beneficiaries. A recent WBG review of 106 projects24 showed that positive outcomes are most often associated with providing TA to prepare sound business plans, providing support for creating a pipeline of applicants, and providing TA continuously to support beneficiaries from application to implementation. Under the REDP, grants and matching grants will come with TA provided by “enablers” to ensure that as many applicants as possible receive information about the project and that the successful ones fully benefit from grant activities. The GMC will provide technical inputs (for example, regarding terms of reference and evaluation criteria) for the selection of the enablers to support public investment grants and agribusiness and tourism MSMEs grant recipients and startups. The enablers will be recognized international or local organizations that have experience in providing TA in the agribusiness and tourism fields in Tajikistan.

III. IMPLEMENTATION ARRANGEMENTS

A. Institutional and Implementation Arrangements

40. To leverage implementation capacity within Government, the existing PIU at the MoF25 will act as PIU for the REDP as well. To remain cost-efficient, avoid duplicating roles in different agencies, and use capacity already available in the country, the project will be managed by a single PIU with fiduciary responsibilities at the MoF.

41. The TDC will act as a PIG for tourism-related activities and endorse the PIU’s procurement selections for tourism work. The PIG under the TDC will be responsible for the technical work related to tourism under the REDP, but fiduciary, M&E, and safeguards responsibilities will rest with the PIU. The PIG will participate in preparing terms of reference and technical specifications, participate in tender committees on respective procurements, participate in contract negotiations, and take responsibility for contract execution as related to tourism activities under the project. A tourism specialist(s) will be hired, as needed, to sit at the PIG.

42. Decentralized project coordination will be set up in Khatlon and GBAO. The PIU will also hire two regional project coordinators, who will be located in the governors’ offices in Khatlon and GBAO, respectively. These specialists will coordinate with, and report directly to, the PIU and the PIG.

43. Given the variety of grants and matching grant schemes envisaged under the project, a professional grant management company will be competitively recruited to manage their rollout. To ensure the successful implementation of grant and matching grant components, the GMC will be responsible for the management and administration of grants and matching grants. The GMC will need to be familiar with the country context and have experience with and a successful record of managing these kinds of programs. The GMC will be responsible

24 See World Bank. 2016. “How to Make Grants a Better Match for Private Sector Development,” Review of World Bank Matching Grants Projects. 25 MoF PIU is currently implementing additional financing to the Agriculture Commercialization Project.


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for preparing the Grant Program Manual detailing implementation arrangements for each type of grant and beneficiary group. The GMC will not have decision-making authority but will collect applications from enablers, review the applications to verify completeness and compliance with eligibility criteria, and perform all the steps needed to submit them to a Grant Program Committee—composed of various stakeholders and NGOs—that will have decision-making authority. The GMC will be competitively selected.

44. A steering committee will supervise overall project implementation. The Government of Tajikistan will establish a national-level steering committee to oversee the three projects comprising the Tajikistan RSP within three months of project effectiveness. The steering committee will serve as the highest-level consultative and decision-making body, responsible for strategic guidance, coordination, implementation support, and links between the projects that form the World Bank’s RSP and the Government of Tajikistan’s strategic policy priorities and reforms. The steering committee will assist the Government of Tajikistan, the WBG, and other stakeholders to effectively implement the IDA18 RMR and achieve envisaged results. The steering committee will meet regularly to review progress under the RMR program. The steering committee will establish working groups to allow for more focused technical discussions on each individual RMR project, as needed.

45. The PIU will draft a Project Operations Manual (POM) which is a condition for the project to become effective. A draft POM is expected to be prepared by the PIU, together with the draft manual for community and matching grants. The final grant and matching grant program manuals will be finalized by the GMC hired to manage their rollout.

B. Results Monitoring and Evaluation Arrangements

46. The PIU will oversee data collection and reporting on M&E indicators. The PIU has M&E capacity, as demonstrated by its portfolio of three World Bank projects. The PIG will provide the PIU with data related to tourism activities under the REDP, per the PIU’s request. The PIU, with support from PIG for tourism-related activities, will prepare quarterly reports to assess progress on project activities and the need for any adjustments based on results framework data discussed during WBG implementation support missions. The steering committee will guide the high-level decision-making pertaining to the project, including the midterm review of project results. The project coordinator hired by the PIU will be responsible for data collection and reporting.

C. Sustainability

47. The project design incorporates several sustainability measures. Commercialization plans for the tourism sites will be prepared under project implementation. These plans will make recommendations and pave the way for ensuring the sustainability of investments in the sites, highlighting how the private sector could best engage in utilizing, promoting, preserving, and sustaining the sites. Private sector engagement in the project will create a path to sustainability through projected increases in tourism spending and sales in agribusiness, which will translate into income for the private sector, thereby ensuring the sustainability of project investments in MSMEs in both sectors. The sustainability of investments into the agribusiness sector will be based primarily on the drive and interest of the beneficiaries to keep their businesses running. This will be supported by training and capacity building activities during project implementation and subsequent support by business enablers such as Accelerate Prosperity, who look for promising businesses and facilitate linkages with investors to accelerate and sustain the growth of agribusinesses. The expectation is that project beneficiaries will reach a level of business maturity to allow them to avail themselves from access to finance from financial institutions.

48. Citizen engagement is embedded in the project design through several proactive, two-way mechanisms. First, participatory planning and decision-making activities will be conducted through semiannual focus group discussions and public forums with citizens and MSMEs, hosted by the “enablers.” These events will


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specifically ensure that vulnerable local citizens and socially vulnerable groups receive information about the grant programs and that dialogues are established to assess and improve grant programs). Second, joint monitoring through the Grant Program Committee will provide community representatives with an opportunity to engage constructively with public and private stakeholders to evaluate applications and oversee the implementation of the grant programs. Third, weekly “Open Door Days” for local citizens and MSMEs interested in implementing grant activities will be the responsibility of the consulting company. (The Open Door Days might, for example, provide guidance and information on the grant program, tailored to applicant needs.) Fourth, capacity building for local citizens and interested MSMEs will accompany every call for proposals and serve as a forum for applicants to improve the quality of their applications. Finally, a beneficiary feedback mechanism for all matching grant services will be actively promoted and established through sustainable institutional arrangements.

IV. PROJECT APPRAISAL SUMMARY

A. Technical, Economic and Financial Analysis (if applicable)

49. A financial analysis for the REDP was constructed as part of project preparation. The net present value (NPV), with a 12 percent discount rate, came to US$27.5 million, while the internal rate of return (IRR) came to approximately 32 percent.

50. The model assumes that changes in income for the project beneficiaries are revenue to the project, as if the project were a company. In this case, the net cash flow for the project in each year is additional profits estimated to result from the project, minus the project’s disbursement. Aggregating these yearly cash flows and applying the discount rate (12 percent) allows for the calculation of the NPV and IRR.

51. To calculate the NPV for the project, the net cash flows of MSMEs were calculated separately for tourism and agribusiness interventions across a 20-year period. For each year, the separately calculated net SME cashflows were aggregated, and a 12 percent discount rate applied to calculate the NPV for the time series. To keep the calculations conservative, the year-on-year growth rate is assumed to be flat and constant.

52. To measure net SME cashflows, a 50 percent cut was applied to the net cash flows (revenues) for each intervention (tourism and agribusiness) per year. This is to capture the costs of operation and better project the increased income for local businesses because of the project. Based on Enterprise Survey data from Tajikistan, the portion of revenues spent on the cost of goods sold is 50 percent.

53. To calculate the aggregate net cash flows, tourism interventions were combined in the analysis, whereas agribusiness interventions were analyzed separately. Due to the mutually reinforcing nature of the tourism components, a combined analysis was built for the financial analysis of these components. A component-by-component analysis was considered, but this would have ignored how project investments mutually support and interact with each other and address different constraints to local tourism markets. For example, both marketing and site rehabilitation investments will help increase overall tourism spending in Tajikistan. For agribusiness, the component on the dairy (milk) value chain was assessed separately and, for interventions supporting small- and medium-scale processing, apricots were used as a proxy to carry out the financial analysis for the component as a whole. Since the project will not be pre-selecting agricultural products to support under matching grant support for small- and medium-scale processing, the project took the approach of using two products (lemons and apples) as proxies for the financial analysis of the entire subcomponent.

54. Data for the financial analysis of tourism activities were drawn predominantly from the WB Survey, and assumptions used in models for agribusiness were gathered during preparatory missions through interviews with existing processors, farmers, and donors and consultants working in Tajikistan. This included


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information about crops, farmgate prices in and out of season, prices of processed products, and cost of technologies suitable for processing or storage. Conservative assumptions were made for both inputs and outputs.

55. For tourism, the analysis measures the NPV of the total increase in tourism spending less investments to measure the economic benefits of the project. The total increase in spending is derived from the following sources:

i. New tourists: Increase in spending on tour packages, out-of-pocket spending, and spending at tourism sites caused by new tourism arrivals; and

ii. Existing tourists: Increase in spending on tour packages, out-of-pocket spending, and spending at tourism sites from existing tourists caused by a longer duration of stay, and due to better services and offerings.

56. The analysis for tourism focuses on the direct impact of the REDP and applies an output multiplier of 2.5. This is the output multiplier for the Kyrgyz Republic, which has been used as a proxy for Tajikistan owing to the insufficient availability of data to construct an input-output model for Tajikistan.

57. For agribusiness, matching grants to the dairy (milk) value chain and to farmers for small- and medium-scale processing were analyzed separately:

i. For the milk processing model, it is assumed that the project will finance investment in collection points with a total daily capacity of 23 tons and support farmers with grants for improved milk output (for example, to buy cows or improve fodder). Given the project’s focus on smallholders, the economic benefits to the large-scale processors were ignored. The ultimate objective of the investment in collection points is to allow smallholders to sell their milk to the collection point, from which it is then sent for processing in the dairy factory. This will allow farmers to generate income based on the price that the processors will pay for the raw milk. To measure the net cash flow, the benefits to smallholders of increased demand for milk and the costs of investment under the project (in the form of matching grants) were taken into account. For this model, only 50 percent of the total installed capacity of 23 tons is conservatively assumed to be used. This means that farmers would benefit from selling approximatively 11.5 tons of milk daily starting in the third year of the project.

ii. For small- and medium-scale processing support, lemons and apples were used as proxies. It is assumed that the project will finance climate-controlled storage equipment (for lemons) and cutting, drying, and packaging machines (for apples). Only the benefits to farmers who will be storing or packaging and selling these fruits were considered. The benefits less the investments under the project determine the net cash flow for this intervention. It is assumed that all lemons stored and apples packaged by the farmers are sold:

a. For the lemon storage model, it is assumed that the project will finance a climate-controlled storage facility able to fit 30 tons of lemons. The storage facility allows farmers to store harvested lemons (or other fruits) for sale out of season. It is estimated that farmers would benefit from the yearly profit made from selling the 30 tons of lemons at a higher price out of season. The model assumes operational costs at 50 percent of total revenues. The investment in technology is made in the first year, installation takes place within the same year while technical assistance is provided during the first two years of the project. The farmers earn revenues starting in the second year of the project.


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b. For the model on the processing of dried apples, it is assumed that the project will finance a complete line of apple drying equipment, including technology for cutting apples and a drying chamber with 2.5-ton capacity per 24-hour cycle. It is estimated that the machine would run at full capacity based on the input of fruit. The project would target areas that produce approximately 1,000 tons of apples, of which at least 30 percent would be available for processing. This results in 300 tons of apples that could be dried in season. For one kilogram of dried apples, five kilograms of fresh apples are required. Given the machine’s capacity to process 2,500 kg of fresh fruit in a cycle, 500 kg of dried apples would be produced in 24 hours (or 15 tons in a month and 60 tons in a four-month season). The model assumes operational costs at 50 percent of total revenues from the sale of 60 tons of dried fruit. The investment in technology is made in the first year, installation takes place within the same year while technical assistance is given in the first three years of the project. The farmers earn revenues starting in the second year of the project.

B. Fiduciary

(i) Financial Management

58. The financial management (FM) responsibilities for the REDP will be placed with the PIU, which will act as a PIU for both the whole project and the PIU for agribusiness activities under the project. Given the PIU’s portfolio of three World Bank projects, the organizational structure is in place for implementing the REDP. The PIU houses FM and disbursement experts, hired under the ongoing ACP, and components of DRM and CAMHP4SB projects implemented by the PIU. The Chief Accountant of the PIU is responsible overall for FM functions under these projects, with support from FM and disbursement staff. The PIU has gained the required capacity to implement donor-funded projects, it is adequately staffed, and appropriate controls and procedures have been instituted. The PIU’s internal control system for projects continues to be acceptable overall to the World Bank. The Project Director approves all project expenditures and signs the payment orders, along with the Chief Accountant. The FM arrangements for the current World Bank projects, including accounting and reporting arrangements, internal control procedures, planning and budgeting, external audits, funds flow, organization, and staffing arrangements are assessed as moderately satisfactory. However, these actions to be implemented within 30 days after project effectiveness to strengthen the FM function of the project: (i) additional FM staff, acceptable to the Bank, shall be hired to support the Chief Accountant on daily basis, and (ii) the accounting system shall be updated and have inbuilt controls to ensure data security, integrity and reliability, and the functionality of automatic generation of interim un-audited financial reports.

59. Additionally, the PIU will develop the FM sections of the POM in a form acceptable to the Bank. Development and adoption of the Grant Program Manual (GPM) and hiring the GMC, will be disbursement conditions for grants under Subcomponents 1.2 and 2.1, 2.2, 2.3. The GPM will describe the FM arrangements specific to the Grants, including the flow of funds and controls over grants and matching grants under Subcomponents 1.2 and 2.1, 2.2, 2.3. The grant agreement model form will be included in the GPM, and each grant will be provided based on the conclusion of a grant agreement. The PIU’s internal audit function will play a significant role in reviewing the flow of funds and will exert substantial control over grants. An external auditor will also audit the grants and matching grants. Enablers involved in grant programs will provide support to MSMEs, communities, municipalities, entrepreneurs on FM related aspects (grants accounting, financial reporting, funds flow, and documentation). The project audit will also include a sample review of grant funds that were utilized via grant programs. Independent auditors acceptable to the World Bank and funded by the project will carry out the audit; the extended terms of reference for community and matching grants will be reagreed with the Bank.


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60. The PIU is recommended to open a Designated Account in a commercial bank, acceptable to the World Bank for the portion of grant funds allocated to it. The ceiling for the Designated Account and other disbursement details will be provided in the Disbursement and Financial Information Letter.

61. The PIU will submit quarterly IFRs generated by the respective accounting software based on formats agreed with the World Bank. The reports, to include the Statement of Sources and Uses of Funds, Uses of Funds by Project Activities (Components & Expenditure Categories), and Statement of DA, will be submitted to the World Bank within 45 days of the end of each quarter, with the first reports under the proposed project being submitted after the end of the first full quarter following initial disbursement.

62. The PIU will submit the annual audited project financial statements within six months of the end of each fiscal year of the client. Each such audit will include the project financial statements, statement of expenses (SOEs), and DA Statement. The cost of the audit will be financed from project funds. Following the World Bank’s formal receipt of the audited financial statements from the PIU, the World Bank will make them available to the public in accordance with the World Bank’s Access to Information (AI) Policy through its website. In addition, the PIU will publish the audit reports in a manner satisfactory to the World Bank.

63. The overall residual financial risk of the project is Substantial.

(ii) Procurement

64. Procurement under the project will be governed by the World Bank’s Procurement Regulations for IPF Borrowers (July 2016, revised November 2017 and August 2018) (Procurement Regulations), and will be subject to the Bank’s Anti-Corruption Guidelines (dated July 2016). The Project Procurement Strategy for Development (PPSD) has been developed by the PIU, in close collaboration with the World Bank. Based on the PPSD, the optimal procurement approaches have been determined. The Procurement Plan for the first 18 months of project implementation has been prepared and will be agreed upon by negotiations.

65. The PIU has experience in the procurement and execution of contracts for goods, civil works, and consulting services in different sectors over recent years. A PIG is to be established to support PIU with tourism-related activities. Both implementing agencies have no experience with new World Bank procurement procedures and have limited contract monitoring and management skills, and their existing capacity may not be sufficient to handle the increasing volume of procurement activities under multiple projects that will be implemented in parallel. This constitutes a capacity risk for project implementation that will need to be addressed adequately and in a timely manner, particularly through training of the MoF PIU and the PIG in the TDC on the World Bank’s procurement policy and regulations, as well as on standard procurement documents. The World Bank would closely support the agencies involved to help ensure contract management capacity.

66. The PPSD includes detailed analysis of the market, of procurement approaches, and of procurement risks, along with corresponding risk mitigation measures. Market analysis was conducted for key packages, including: (i) a technical feasibility study for the restoration of the Yamchun Fortress, (ii) design and advisory services for landscape beautification at the three sites in Khatlon, (iii) technical assistance for grant management, and (iv) renovation works. The market analysis has confirmed the availability of relevant and relatively competitive markets for key procurement packages in each of these areas, including a large number of qualified and specialized consulting services and renovation works providers. The PPSD and the Procurement Plan will be updated during project implementation to reflect any substantial changes in procurement approaches and methods to meet the actual project needs.

67. The overall procurement risk under the project is currently assessed as Substantial. Key issues and risks concerning procurement include: (i) insufficient interest among bidders due to the operational context and the


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small value of contracts envisaged, (ii) evaluated prices of bids that exceed the estimate and cost overrun, (iii) procurement and implementation delays, (iv) lack of skills and tools for contract monitoring and management, and (v) an environment characterized by high overall public procurement risk. Given the above risks, the following preliminary risk mitigation measures are proposed: (i) careful procurement planning and optimization of packages, (ii) intensive training for Information Architecture on the Procurement Regulations, (iii) preparation of the POM and the Grant Program Manual with a detailed description of procurement processes, and (iv) putting in place an efficient contract monitoring mechanism. Further details are provided in the PPSD.

68. Use of National Procurement Procedures. In accordance with paragraph 5.3. of the Procurement Regulations, when approaching the national market (as agreed in the Procurement Plan), the Tendering with Unlimited Participation procurement method and other national procurement arrangements such as tendering with limited participation, request for quotations, direct contracting set forth in the Law of the Republic of Tajikistan “Оn Public Procurement of Goods, Works and Services,” No. 168 dated March 3, 2006 (as amended by Law No. 815, the “Law of the Republic of Tajikistan on “Introduction of Amendments and Additions to the Law of the Republic of Tajikistan on ‘Public Procurement of Goods, Works and Services’” dated April 16, 2012) (“the PPL”) may be used, subject to the conditions referred to in the Procurement Plan.

C. Legal Operational Policies . .

Triggered?

Projects on International Waterways OP 7.50 No

Projects in Disputed Areas OP 7.60 No . D. Environmental and Social

. . The social risk is rated Substantial. The project is expected to result in positive impacts on employment and livelihoods. On farm and value chain activities as well as community-based tourism could herald new vistas for communities in the fragile and conflict-ridden regions. However, variety of risks are evident, some are external and others internal to the project. Key social risks relate to 'exclusion' which may happen due to geographical setting, socio economic setting, gender differentials. Once factors that aid/constrain 'inclusion' are identified, mitigatory measures will be drawn. On securing lands, while project would make use of the existing buildings or unused public lands, as a backup measure, an RPF has been prepared. The environmental risk is rated Substantial not because of the nature of proposed works and associated environmental risks, but because of remote and potentially fragile areas where the project activities are planned, the large number of expected small works (some involving culturally sensitive sites), and the limited capacity of the Ministry of Agriculture and the Ministry of Economic Development and Trade in the understanding and application of Bank's ESF, and relevant Standards. During preparation and implementation, planned activities in and around protected areas such as the Tajik National Park (UNESCO World Heritage Site) and other critical habitats or cultural landmarks will be carefully reviewed and the risk rating re-assessed as necessary. .

V. GRIEVANCE REDRESS SERVICES

69. Communities and individuals who believe that they are adversely affected by a World Bank-supported project may submit complaints to existing project-level grievance redress mechanisms or the World Bank’s


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Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project-affected communities and individuals may submit their complaint to the World Bank’s independent Inspection Panel, which determines whether harm occurred, or could occur, as a result of the World Bank’s non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention and World Bank management has been given an opportunity to respond. For information on how to submit complaints to the GRS, please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the Inspection Panel, please visit www.inspectionpanel.org.

VI. KEY RISKS

70. The overall project implementation risk is substantial. The main risk factors affecting the project include:

i. Political and governance risk. Substantial. In almost every sector, political and economic relations are based on highly personalized relationships, which eventually diminish chances for economic expansion and stability. Within the project, mitigation measures include the establishment of a PIU at a central Government agency (MoF) that will assume responsibility for the project as a whole and thus help to address potential governance challenges. The PIU will also help to set up a mechanism for transparent monitoring of project implementation.

ii. Macroeconomic risk. Substantial. Tajikistan is the poorest country in the former Soviet Union, with an economy highly dependent on remittances from migrants in Russia. The project will contribute to mitigating economic risks by supporting the real sectors (tourism and agribusiness). Overall, the activities envisaged under this project will strengthen macroeconomic stability over the medium term.

iii. Technical design of the project. Substantial. The project has four components involving several agencies and regional bodies whose individual mandates rarely require them to collaborate day-to-day. This risk will be mitigated through the steering committee chaired by a higher-level official. The steering committee will involve all the relevant agencies, ensuring a coordinated reporting mechanism for project implementation and monitoring.

iv. Stakeholder risk. Substantial. The choice of one location over others for attracting investment into market and storage infrastructure, large agroprocessing, or other facilities might lead to stakeholder dissatisfaction. Similarly, the choice of certain cultural heritage sites over others could engender resentment in some groups. However, the team has consulted widely with both public and private stakeholders on the selection of tourist assets to be rehabilitated. In addition, the team explored the use of existing free economic zones, markets, and cross-border markets for agricultural investments before settling on the design. Public consultations will be held throughout the project duration to ensure stakeholder engagement and ownership.

v. Fiduciary risks. Substantial. Fiduciary responsibility, including for the grant program, will lie with the PIU, an experienced implementing agency that has developed FM capacity and submits annual audits acceptable to the World Bank under existing Bank-funded projects. FM arrangements will need further improvement to meet the needs of this project, hence FM risk is assessed as substantial. Overall fiduciary risks remain substantial due to the overarching public sector governance risks in the country. Enhanced supervision by the World Bank will be provided to mitigate this risk. Moreover, the scope of the project’s procurement does not include large and complex contracts, and the proposed implementing entity is familiar with the World Bank’s procurement processes. However,

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.inspectionpanel.org/


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procurement risk is also assessed as substantial due to limitations in the capacity of the PIU and the overall governance risks.

vi. Environmental and social risk. Substantial. The project’s environmental risk is substantial due to four factors. First, project activities are planned in remote and potentially fragile areas. Second, the project focuses on tourism, which will require interacting with and protecting Tajikistan’s rich cultural heritage. Third, the project will involve many small works. Finally, the state stakeholders have limited capacity in understanding and applying the World Bank’s Environmental and Social Framework (ESF) and relevant Standards. The nature of the proposed works and associated environmental risks in themselves do not warrant a rating of substantial. The PIU has prepared the Environmental and Social Management Framework (ESMF), which provides mechanisms to mitigate environmental risks. Social risks are Substantial due to the fragility and conflict in the area. The fragility could make it difficult for the project to reach and work with beneficiaries, especially poor and vulnerable populations. Weak integration of youth and women and their participation in the institutions and limited prospects for employment compound the risks due to fragility. Further, because the project interventions will be based on competitive grants, it could be difficult for poor farmers in the interior rural areas and the remote Afghanistan border areas to participate and realize the benefits. Though measures to mitigate these risks are being developed, only time will show their efficacy. The proposed ESMF also suggests mitigation measures to address social risks.

vii. Sector strategies and policies risk. Substantial. Tourism remains a nascent sector in the country, and the stakeholders involved are still on a steep learning curve which may, at times, lead to a trial-and-error approach in developing policies. Likewise, agribusiness is still in early stages of development in Khatlon and GBAO with a lot of unexplored opportunities and obstacles that challenge policymakers. To mitigate these risks, the proposed interventions under the project have been designed to be in line with the Government’s laws, policies and development strategies. Moreover, the RMR steering committee will help to realize an authorizing environment and the reforms needed for the PIU to implement the project should obstacles appear along the way related to policies and strategies at a sectoral level.

viii. Institutional capacity risk. Substantial. The project involves different tiers of the government. While implementation relies on a single PIU, coordination among various government agencies, including with the CTD is critical for the success of the project. The PIU has prior experience implementing World Bank-financed projects but will require support to acquire technical expertise and skills needed to implement the activities. To mitigate these risks two specific measures are taken: (1) all grant programs under the project will be implemented by a grant management company to be hired by the PIU under the project with the requisite expertise in managing such programs; (2) tourism and agribusiness experts will be hired by the PIU to support project implementation in the appropriate agencies (tourism experts in the PIG and the Governor’s Office in GBAO and an agribusiness experts in the Khatlon Governor’s Office).

71. In addition, unpredictable security situation and cross-border risk are high. The project will support tourism and agribusiness in two regions that still suffer from security outbreaks and are exposed to recruitment by radical groups. In complementarity with other RMR interventions, the project, through its design, will provide the most vulnerable groups with employment opportunities and self-identity, mitigating some of these risks. In


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addition, the project design includes enhanced outreach and communications mechanisms and capacity building of project stakeholders.

.


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VII. RESULTS FRAMEWORK AND MONITORING

Results Framework

COUNTRY: Tajikistan Rural Economy Development Project

Project Development Objectives(s)

Project Development Objective is to improve the sources of livelihood for local populations in GBAO and Khatlon through tourism and agribusiness.

Project Development Objective Indicators

RESULT_FRAME_T BL_ PD O

Indicator Name DLI Baseline End Target

to improve the livelihood for local populations in GBAO and Khatlon through tourism and agribusiness

Increased number of tourists in GBAO and Khatllon (Number) 20,000.00 36,000.00

Increased tourism spending in GBAO and Khatlon (Amount(USD)) 10,000,000.00 18,000,000.00

Increase in the volume of processed agrifood products in GBAO and Khatlon (Tones/year)

0.00 18.00

Number of jobs created through the project interventions in GBAO and Khatlon, of which 50% for women and youth (Number)

0.00 7,000.00

Decreased NEET rate of 15-to-24-years-old men (Percentage) (Percentage)

7.20 5.00

Decreased NEET rate of 15-to-24-years-old women (percentage) (Percentage)

49.00 42.00

PDO Table SPACE


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Intermediate Results Indicators by Components

RESULT_FRAME_T BL_ IO


Component 1 - Improve public infrastructure for the development of tourism and agribusiness

Number of bazaars and other agribusiness related infrastructure improved under the project (Number) 0.00 10.00

Number of sites with tourism signage installed (Number) 0.00 7.00

Number of upgraded food safety laboratories (Number) 0.00 25.00

Number of tourist sites rehabilitated under the project (Number) 0.00 4.00

Component 2 - Support to MSMEs and entrepreneurs in the tourism, agribusiness, and related sectors

Number of homestays, rest stops and restaurants improved (Number) 0.00 54.00

Number of small scale post harvesting processing and cold storage facilities established (Number)

0.00 50.00

Percentage of beneficiaries reporting improved satisfaction with the transparency and responsiveness of the beneficiary feedback mechanism for the grants programs. (Percentage)

0.00 70.00

Number of collection points for agricultural products established (Number)

0.00 20.00

Incremental increase in visits to the sites after they are rehabilitated under the project (Number (Thousand))

0.00 15.00

Component 3 - Capacity building and business development services in tourism and agribusiness

Number of people trained, 50% of which are women (Number) 0.00 500.00

Number of familiarization tours organized for external tour operators to see what Tajikistan may offer to tourists (Number) 0.00 3.00

Number of local and international trade fairs attended by representatives of Tajik tourism and agribusiness sectors to promote their sectors (Number)

0.00 4.00

Component 4. Project coordination, implementation and Grant Program Management and Administration


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RESULT_FRAME_T BL_ IO


Number of outreach campaigns for potential grants beneficiaries held under the project to ensure inclusiveness (Number)

0.00 10.00

Number of proposals collected by the Grant Management Company from each facilitator after each round of Calls of Proposals (Number)

0.00 50.00

IO Table SPACE

UL Table SPACE

Monitoring & Evaluation Plan: PDO Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Increased number of tourists in GBAO and Khatllon

Currently, Khatlon and GBAO have 6.25 tourists per a thousand of their population. Tajikistan has11 tourists per a thousand of population. The objective is to bring the number of tourists per a thousand of population in Khatlon and GBAO to at least the national level, improving this indicator by 5.

every year

Number of tourism arrivals comes from permits issued and reporting by the GBAO Governor’s office for GBAO. For Khatlon, a ratio of number of tours going to GBAO

Information collected by the PIU, based on the number of permits issued in GBAO and by the data which the PIU will collect from homestay grant beneficiaries ssurvey

PIU and PIG


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versus Khatlon is used as reported in the Tourism Survey by the tour operators to apply to the arrivals coming to GBAO and approximate the number of arrivals to Khatlon.

Increased tourism spending in GBAO and Khatlon

16,000 additional tourists which will be brought to GBAO and Khatlon under the project will generate additional USD 8,000,000 by spending 5 days and paying USD 100 per day, based on the survey's results.

every year

Survey

The data will be collected through running the tour operator survey annually to compare data. The data will also be collected from grant beneficiaries at the beginning and end of the project and compare baseline and targets that way.

PIU and PIG as well as facilitators assisting grant beneficiaries

Increase in the volume of processed agrifood products in GBAO and Khatlon

This indicator was calculated based on the data available

every year

Grant beneficiaries'

Regional project coordinators

PIU, grants facilitators in coordination with


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for production/processing of apples, lemons, and milk as target groups of agricultural products under the project

survey

decentralized in Khatlon and GBAO will coordinate the survey with the facilitators of grants who will be working directly with grants beneficiaries

the regional project coordinators

Number of jobs created through the project interventions in GBAO and Khatlon, of which 50% for women and youth

Number of permanent and temporary jobs created as a result of (i) tourism and agribusiness activities funded by grants and matching grants provided under the project; (ii) number of jobs created for the rehabilitation of selected tourist sites and local tourism attractions: (iii) number of jobs created to facilitate the grants and matching grants scheme for grants beneficiaries; (iv) number of jobs created to provide technical assistance for public and private stakeholders involved in the project implementation. Preferential treatment will be given to the vulnerable groups (women and youth to ensure that up to 50% of

every year

Annual reports prepared by PIU in close coordination with the Monitoring and Evaluation specialist to be hired under the project to monitor and evaluate the resutls

PIU in close coordination with the M&E specialist will collect and evaluate the data from the Grant Management Company, regional project coordinators and facilitators of the grants and matching grants as well as the data from the vendors engaged in the rehabilitation of selected tourist sites.

PIU in close coordination with PIG


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jobs secured for them)

Decreased NEET rate of 15-to-24-years-old men (Percentage)

Access to educational and training programs of prime age population under the project

annual

targeted groups of trainees

survey


Decreased NEET rate of 15-to-24-years-old women (percentage)

Access to educational and training programs of prime age population under the project

annual

targeted groups of trainees

survey


ME PDO Table SPACE

Monitoring & Evaluation Plan: Intermediate Results Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Number of bazaars and other agribusiness related infrastructure improved under the project

Number of public markets identified under the program rehabilitated, including cold storages at the markets

every year

grant beneficiaries

Survey

PIU in close coordination with the regional project coordinators to collect the data on an annual basis

Number of sites with tourism signage installed

Touristic signs installed at selected tourist attractions/sites agreed with the relevant governmental authorities

every year

regional administration

survey/visits

PIG in close coordination with PIU

Number of upgraded food safety laboratories

Number of laboratories at the public market equipped with new technologies under the project

annually

grant beneficiaries

survey/visits

PIU in close coordination with the regional project coordinators and the Grant Management Company tasked with the


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grants and matching grants administration

Number of tourist sites rehabilitated under the project

Four selected tourist sites rehabilitated gradually in accordance with the timeline developed under the project

annually

Tourism Development Committee, Ministry of Culture, regional authorities

survey/visits


Number of homestays, rest stops and restaurants improved

Number of homestays, restaurants and rest stops improved/established with the contribution from matching grants provided under the program

every year

annual reports provided by the Grant Management Company responsible for administration of matching grants and facilitators working with matching grant beneficiaries

survey/reports


Number of small scale post harvesting processing and cold storage facilities established

Number of small scale post harvesting processing and cold storage facilities to also

annual

grant beneficiaries

survey/reports

PIU in close coordination with the regional project coordinators and Grant


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contribute into climate mitigation by reducing food spoilage in extreme heat

Management Company responsible for matching grants administration

Percentage of beneficiaries reporting improved satisfaction with the transparency and responsiveness of the beneficiary feedback mechanism for the grants programs.

Beneficiary feedback mechanism to be established by the Grant Management Company to ensure feedback and satisfaction with the the grants programs from grant beneficiaries.

annual

grant beneficiaries

survey/public consultations

PIU, PIG in close coordination with the Grant Management Company and enablers

Number of collection points for agricultural products established

Number of collection points established to bring together producers and processors

annual

grant beneficiaries

survey/reports

PIU in close coordination with the regional project coordinators, Grant Management Company responsible for matching grant administration

Incremental increase in visits to the sites after they are rehabilitated under the project

Visits to rehabilitated sites in accordance with the commercialization plans developed for each site

for two last years of the project

Tourism Development Committee, the Ministry of Culture, regional authorities

survey/visits


Number of people trained, 50% of which are women

Number of people trained under the program, including those who possess higher-level education (hotel/catering managers),

every year

Surveys of trainees

Reports prepared by the M&E Specialist to be hired at the MoF PIU

PIU and PIG


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semi-level education (tourist guides) and on-the-job training for low-skilled workers (waiters, cleaning staff, and landscaping crews, with preference given to individuals from vulnerable groups)

Number of familiarization tours organized for external tour operators to see what Tajikistan may offer to tourists

Number of familiarization tours organized to bring international tour operators into Tajikistan for their familiarization with the country and its offering to various segments of tourists

3 times throughout the project

Proceedings prepared for each familiarization tour in close coordination with the Tourism Development Committee

Survey


Number of local and international trade fairs attended by representatives of Tajik tourism and agribusiness sectors to promote their sectors

Trade fairs to be held for promotion of both tourism-related and agribusiness activities together and separately

four times throughout the project

Reports/proceedings

survey


Number of outreach campaigns for potential grants beneficiaries held under the project to ensure inclusiveness

Number of outreach campaigns designed and monitored by the Grant Management Company and held by facilitators of the grant programs for potential grant beneficiaries

annual

reports prepared by the Grant Management Company and facilitators

survey/participation



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Number of proposals collected by the Grant Management Company from each facilitator after each round of Calls of Proposals

Facilitators to work with each of 32 districts to outreach potential grant beneficiaries and help them develop proposals for the submission to the Grant Management Company

annual

Grant Management Company and facilitators

reports to be prepared by the GMC and facilitators

PIU in close coordination with PIG and regional project coordinators

ME IO Table SPACE


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ANNEX 1. Implementation Arrangements and Support Plan

Strategy and Approach for Implementation Support 1. This Implementation Support Plan (ISP) describes how the World Bank will aid the client in achieving the PDO for the REDP. The plan focuses on these objectives: (i) providing technical advice to the client and applying international experience and good practices to support project implementation; (ii) ensuring that public investment in the tourism and agriculture sectors stimulates economic opportunities for the most vulnerable parts of the population and that mobilizing private investments complements the project’s development objective; (iii) financing oversight and capacity building support for efficient implementation of the project to ensure high quality, ownership, accountability, and monitoring according to the project design; and (iv) ensuring appropriate targeting, high-quality services and activities, and monitoring to promote compliance, inclusivity, and outreach.

2. The project will be implemented over five years. This ISP includes support to the implementing agencies prior to project effectiveness to meet the project’s capacity building and design goals.

3. Technical implementation support will follow World Bank practices. During project implementation, the World Bank will ensure the engagement of experienced agriculture specialists, tourism specialists, and specialists in the areas of environment and social safeguards (including cultural heritage M&E) to support activities related to public investments in community-based tourism and agriculture processing. This will include hands-on capacity building support for all the state stakeholders involved in the project implementation. Supervision will focus on supporting the PIU at the MoF to detail modus operandi and capacity building activities in the POM; supporting the Tourism Development Committee in building their capacity as a technical group implementing community-based tourism activities; training and exchanges with regional and global experts; and closely supervising national, regional, and local implementation progress. Technical implementation support missions will be conducted three times a year during the first 18 months of project implementation, followed by semiannual supervision missions. The project team will conduct regular site visits to communities in the targeted districts during implementation.

4. Organizational Chart, Specifying the Implementation Activities under the REDP.

5. Financial management (FM) implementation support. This includes: (i) initial support to the PIU for developing flow of funds arrangements; (ii) technical support and oversight of the PIU in detailing these procedures in the POM and

Project Implementation Unit (PIU) at MoF

➢ PIU will perform fiduciary functions for the whole project

Steering Committee for all three Risk Mitigation Regime projects

Grant Management Company

Project Implementation Group (PIG) for Tourism

at TDC

• Tourism specialist/s

• Project manager• Grant administrator• Tourism specialist(s)• Agribusiness specialist(s)• Khatlon coordinator • GBAO coordinator

• Project Coordinator • FM Specialist• Social/Env Specialist• Procurement Specialist• M&E Specialist


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grant program manuals to be prepared by the GMC; (iii) desk review of the project’s quarterly interim financial reports and review of the project’s annual audited financial statements and management letter; and (iv) onsite supervision (twice annually) to review the continuous adequacy of the project’s FM and disbursement arrangements and to monitor and manage FM risks, including monitoring and reviewing any agreed actions, issues identified by the auditors, randomly selected transactions, or any other issues related to project accounting, reporting, budgeting, internal controls, or flow of funds.

6. Procurement supervision and implementation support. This will include initial support to the PIU for developing procurement arrangements; and technical support and oversight of the implementing agencies in detailing these procedures in the POM and Grant Program Manual. Besides routine reviews, the team’s missions will supervise procurement. Post reviews of procurement will be conducted once a year. Procurement implementation support will include training for PIU and other stakeholders involved in the project procurement processes.

7. Implementation support for environmental and social safeguards. Prior to effectiveness, social and environmental safeguard specialists will support PIU in developing social and environmental guidelines to include in the POM based on the ESMF, Resettlement Policy Framework, and Stakeholder Engagement Plan. As the project progresses, social and environmental safeguard specialists will be engaged to ensure that the project activities follow these guidelines and provide training and capacity building support to specialists in the PIU and in the PIG under the TDC. These specialists will join implementation support missions biannually to track compliance with safeguards policy.

8. The PIU will hire a professional GMC to manage the rollout of grants and matching grants. The GMC will provide technical support to PIU and PIG on grant and matching grants implementation. The GMC will prepare grant program manuals detailing implementation arrangements for each type of grant and beneficiary group. A Grant Program Committee comprising public and private sector stakeholders will oversee evaluating the applications and implementing the grants. The GMC will identify enablers who will be hired to provide all spectrum of business development services to potential beneficiaries, including after care. The GMC will also develop standard training modules for beneficiaries to be implemented by selected enablers and subsequent Training of Trainers.

9. A GMC recruited under the project will manage the competitive grants provided to beneficiaries. The matching and full grants offered on a competitive basis and totaling up to US$10.7 million will be awarded under the project for MSMEs, communities, municipalities during the entire life of the project under calls for grants. The size and variety of the grants require an independent professional management company with international experience in running such programs.

10. The GMC will be competitively selected. An open competition will be held to select an experienced company to manage all the grants under REDP. The GMC will report to the PIU. The company will be rewarded a contract for the first two-and-a-half years (for the first part of the project). After two-and-a-half years, the company’s performance will be evaluated, and the contract will be either extended for another two-and-a-half years or given to another company through competitive selection.

11. The GMC will implement the grant scheme and ensure the supervision and good disbursement of the grants to targeted beneficiaries. The role of the GMC will include (i) design, (ii) launch, and (iii) monitoring of the calls for grants. Additionally, the GMC will monitor grant program indicators, evaluate intermediary program results, and make recommendations for improving program implementation. The GMC will develop annual work plans and progress reports and monitor the implementation of these plans. The GMC will ensure that all deliverables submitted to the Government of Tajikistan are high quality and on time. Finally, the GMC will take part in regular field visits to the project areas to ensure


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progress toward activity objectives and goals.

12. Financial support in the form of grants and matching grants will be accompanied by technical assistance provided by “enablers” to ensure that as many applicants as possible receive information about the grant program and that the successful ones benefit from the grant activities. Enablers will provide potential applicants and beneficiaries with three types of business development services: (i) pre-application services: identification, mobilization, designs, feasibility studies, and support with registration, business plans, and grant applications; (ii) aftercare services: technical assistance will be provided to beneficiaries to implement the grant; and (iii) M&E of beneficiaries. These enablers can consist of recognized international or local organizations that have experience in providing technical assistance in the agribusiness and tourism fields in Tajikistan. Examples of such organizations include: DMOs, associations of retail and wholesale markets, the Pamir Eco Cultural Tourism Association (PECTA), the Mountains Societies Development Support Program (MSDSP), hotels (which can provide technical assistance to homestays, for instance), Accelerate Prosperity, universities, accelerators, and any local donor projects or other organizations that have proven experience in providing business development services. Enablers will receive a lump sum grant for the first stage of grant management, including an outreach campaign, collection of proposals, and presentation of proposals to the GMC and a technical assistance fee for each successful applicant they recruit and to whom they provide aftercare services.

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