Public Disclosure Authorized - World Bank€¦ · Specialist (consultant) AFTAR Errol George Graham Senior Economist AFTP4 Christopher Paul Jackson Senior Economist AFTAR Anders Jensen

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

OFFICIAL USE ONLYIDA/R2012-0137/1

May 15, 2012

Streamlined ProcedureFor meeting of

Board: Tuesday, June 5, 2012

FROM: The Acting Corporate Secretary

Liberia - Smallholder Tree Crop Revitalization Support Project

Project Appraisal Document

Attached is the Project Appraisal Document regarding a proposed credit to the Republic of Liberia for a Smallholder Tree Crop Revitalization Support Project (IDA/R2012-0137). This project will be taken up at a meeting of the Executive Directors on Tuesday, June 5, 2012 under the Streamlined Procedure.

Distribution:Executive Directors and AlternatesPresidentBank Group Senior ManagementVice Presidents, Bank, IFC and MIGADirectors and Department Heads, Bank, IFC and MIGA

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Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 68524-LR

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 9.7 MILLION

(US$15.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF LIBERIA

FOR A

SMALLHOLDER TREE CROP REVITALIZATION

SUPPORT PROJECT

MAY 9, 2012

Agriculture and Rural Development Unit

Sustainable Development Department

Country Department AFCW1

Africa 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.

ii

CURRENCY EQUIVALENTS

(Exchange Rate Effective February 29, 2012)

Currency Unit = Liberian $ (LD)

LD 71.5 = US$1

US$ 1.546 = SDR 1

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS

ACC Agricultural Coordination Committee

AfDB African Development Bank

ARAP Abbreviated Resettlement Action Plan

AWPB Annual Work Program and Budget

CAC County Agricultural Coordination Committees

CAO County Agricultural Offices

CARI Central Agriculture Research Institute

CAS Country Assistance Strategy

CBL Central Bank of Liberia

CDA Cooperative Development Authority

CNDRA Centre for National Documents, Records and Archives

CPO Crude Palm Oil

DA Designated Account

DTIS Diagnostic Trade Integrated study

EIRR Economic Internal Rate of Return

EPA Environmental Protection Agency

EPO Equatorial Palm Oil

ESMF Environmental and Social Management Framework

FAO Food and Agriculture Organization of the United Nations

FCPF Forest Carbon Partnership facility

FIRR Financial Internal Rate of Return

FFB Fresh fruit bunches

FFS Farmer Field Schools

FLO Fair Trade Labelling Organizations

FM Financial Management

FO Farmers‟ Organizations

GDP Gross Domestic Product

GoL Government of Liberia

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (German

Technical Cooperation)

GRM Grievance Redress Mechanism

Ha Hectare

HIPC Heavily Indebted Poor Countries

IDA International Development Association

iii

IFAD International Fund for Agricultural Development

IFC International Finance Corporation

IFRs Interim financial reports

IITA International Institute of Tropical Agriculture

IPSAS International Public Sector Accounting Standards

ISA International Standards on Auditing

ISP Implementation Support Plan

LASIP Liberia Agriculture Sector Investment Program

LC Land Commission

LPMC Liberia Produce Marketing Company

LT Long Term

MGs Matching Grants

MARCO Morris American Rubber Company

MoA Ministry of Agriculture

MoF Ministry of Finance

MFI Microfinance Institution

MLME Ministry of Land, Mines and Energy

MPEA Ministry of Planning and Economic Affairs

M&E Monitoring and Evaluation

NCB National Competitive Bidding

NGO Non Governmental Organization

NPV Net Present Value

NSC National Steering Committee

OP World Bank Operational Policy

ORAF Operational Risk Assessment Framework

PA Procurement Advisor

PCU Project Coordination Unit

PDO Project Development Objective

PEMFAR Public Expenditure Management and Financial Accountability Review

PFI Participating Financial Institution

PFM Public Financial Management

PFMU Project Financial Management Unit (at MoF)

PMU Program Management Unit (at MoA)

PP Procurement Plan

PPA Project Preparation Advance

PRS Poverty Reduction Strategy

QCBS Quality and Cost Based Selection Methods

REDD Reduction Emissions from Degradation and Deforestation

RPF Resettlement Policy Framework

RAP Resettlement Action Plan

RSPO Round Table on Sustainable Palm Oil

SIA Social Impact Assessment

SIDA Swedish International Development Cooperation Agency

SME Small & Medium Scale Enterprise

SRC Salala Rubber Corporation

STCP Sustainable Tree Crops Program

STCRSP Smallholder Tree Crop Revitalization Support Project

iv

ToT Training of Trainers

UN United Nations

WAAPP West Africa Agricultural Productivity Program

WP Working Paper

Regional Vice President: Makhtar Diop

Country Director: Yusupha B. Crookes

Sector Director: Jamal Saghir

Sector Manager: Karen Mcconnell Brooks

Task Team Leader: Oliver Braedt

v

REPUBLIC OF LIBERIA

Smallholder Tree Crop Revitalization Support Project

TABLE OF CONTENTS

Page

I. STRATEGIC CONTEXT .................................................................................................1

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

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

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

II. PROJECT DEVELOPMENT OBJECTIVES ................................................................4

A. PDO............................................................................................................................... 4

B. Project Beneficiaries ..................................................................................................... 4

C. PDO Level Results Indicators ....................................................................................... 4

III. PROJECT DESCRIPTION ..............................................................................................5

A. Project components ....................................................................................................... 5

B. Project Financing .......................................................................................................... 7

IV. IMPLEMENTATION .......................................................................................................8

A. Institutional and Implementation Arrangements .......................................................... 8

B. Results Monitoring and Evaluation .............................................................................. 9

C. Sustainability............................................................................................................... 10

V. KEY RISKS AND MITIGATION MEASURES ..........................................................11

VI. APPRAISAL SUMMARY ..............................................................................................11

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

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

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

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

E. Social (including safeguards) ...................................................................................... 14

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

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

Annex 2: Detailed Project Description .......................................................................................21

Annex 3: Implementation Arrangements ..................................................................................40

vi

Annex 4: Operational Risk Assessment Framework (ORAF) – Stage: Board ......................63

Annex 5: Implementation Support Plan ....................................................................................66

Annex 6: Team Composition.......................................................................................................69

Annex 7: Economic and Financial Analysis ..............................................................................70

Annex 8: Long-Term Credit Arrangements for Oil Palm & Rubber Out-Grower Schemes

and Compliance with Bank Policy on Financial Intermediary Lending (OP 8.30) ...............84

Annex 9: Map ...............................................................................................................................91

vii

PAD DATA SHEET

Republic of Liberia


PROJECT APPRAISAL DOCUMENT .

AFRICA

AFTAR

.

Basic Information

Date: May 9, 2012 Sectors: Crops (60%), Agricultural extension and research

(20%), General agriculture, fishing and forestry

sector (20%)

Country Director: Yusupha B. Crookes Themes: Theme(s): Rural services and infrastructure

(50%), Other rural development (50%)

Sector

Manager/Director:

Karen Mcconnell

Brooks/Jamal Saghir

EA

Category:

B, Partial Assessment

Project ID: P113273

Lending

Instrument:

Specific Investment

Loan

Team Leader(s): Oliver Braedt

Borrower: Republic of Liberia

Responsible Agency: Ministry of Agriculture

Contact: Hon. Florence Chenoweth Title: Minister of Agriculture

Telephone

No.:

Email:

.

Project Implementation

Period:

Start

Date:

June 5, 2012 End

Date:

Dec. 31, 2016

Expected Effectiveness

Date:

October 1, 2012

Expected Closing Date: December 31, 2016 .

Project Financing Data(US$M)

[ ] Loan [ ] Grant Term: Standard IDA terms, with a maturity of 40 years, including a

grace period of 10 years.

[X ] Credit [ ] Guarantee

viii

For Loans/Credits/Others

Total Project

Cost (US$M):

23.1 Total Bank

Financing

(US$M):

US$15 million

Total

Cofinancing:

8.1 Financing Gap: None

.

Financing Source Amount(US$M)

BORROWER/RECIPIENT 1.1

Beneficiaries 6.2

International Development Association (IDA): 15.0

Others 0.8

Total 23.1

.

Expected Disbursements (in USD Million)

Fiscal Year FY12 FY13 FY14 FY15 FY16 FY17

Annual 0.00 2.0 3.0 4.0 4.0 2.0

Cumulative 0.00 2.0 5.0 9.0 13.00 15.0

.

Project Development Objective(s)

To increase access to finance, inputs, technologies and markets for smallholder tree crop farmers in

Liberia, and to develop a long term development program for the tree crops sector.

Components

Component Name Cost (USD Millions)

Smallholder Tree Crops Revitalization 16.9

Institution Building and Preparation of Future Large

Scale Tree Crop Development Program

3.2

Project Coordination and Management 3.0 .

Compliance

Policy

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

respects?

Yes [ ] No [ x ]

.

ix

Does the project require any exceptions from Bank policies? Yes [ ] No [ x ]

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

Is approval for any policy exception sought from the Board? Yes [ ] No [ x ]

Does the project meet the Regional criteria for readiness for

implementation?

Yes [ x ] No [ ]

.

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 x

Natural Habitats OP/BP 4.04 x

Forests OP/BP 4.36 x

Pest Management OP 4.09 x

Physical Cultural Resources OP/BP 4.11 x

Indigenous Peoples OP/BP 4.10 x

Involuntary Resettlement OP/BP 4.12 x

Safety of Dams OP/BP 4.37 x

Projects on International Waters OP/BP 7.50 x

Projects in Disputed Areas OP/BP 7.60 x .

Legal Covenants

Name Recurrent Due Date Frequency

1.The National Steering Committee By Effectiveness

Description of Covenant: The National Steering Committee has been established with composition and

mandate satisfactory to the Association.

2. Project Coordination Unit By Effectiveness

Description of Covenant: The PCU has been established with a composition and mandate satisfactory to

the Association, including the appointment of personnel to the key positions, which shall include, at

minimum, the project coordinator, procurement specialist and financial management specialist, all with

qualifications and experience satisfactory to the Association, under terms of reference acceptable to the

Association.

3. Project Implementation Manual By Effectiveness

Description of Covenant: The Recipient has adopted the Project Implementation Manual in accordance

with the provisions of Section I.B of Schedule 2 to the FA.

4. Prior to Disbursement Prior to Disbursement

Description of Covenant: Notwithstanding the provisions of Part A of Section IV of Schedule 2 to the

Financing Agreement, no withdrawal shall be made:

x

1. under Category (4), in respect of Smallholder Sub-grants under Part 1 of the Project (cocoa,

coffee, oil palm and rubber sub-sectors), unless and until: (i) the corresponding Management

Contract has been entered into under terms and conditions satisfactory to the Association; and (ii)

the Smallholder Sub-grant, and the Sub-project in respect of which the Smallholder Sub-grant is

made, have been authorized or approved in accordance with the procedures set forth or referred to in

paragraph F of Section I of Schedule 2 of the Financing Agreement; and

2. under Category (5), in respect of Smallholder Sub-credits under Part 1 of the Project (oil palm and

rubber sub-sectors), unless and until: (i) the corresponding Management Contract has been entered

into under terms and conditions satisfactory to the Association; (ii) the Subsidiary Financing

Agreement has been executed on behalf of the Recipient and the CBL; (iii) the Recipient shall have

furnished evidence acceptable to the Association that the corresponding Subsidiary Credit Facility

Agreement has been executed, and is legally binding upon, the CBL and the PFI concerned, in

conformity with the provisions of paragraph 2 of Section I.D of this Schedule 2; and (iv) the

Smallholder Sub-credit, and the Sub-project in respect of which the Smallholder Sub-credit is made,

have been authorized or approved in accordance with the procedures set forth or referred to in

paragraph E of Section I of Schedule 2 of the Financing Agreement.

Team Composition

Bank Staff

Name Title Specialization Unit UPI

Beatrix Allah-Mensah Social Development

Specialist

AFTCS

Philippe Boyer Tree Crop Agronomist

(consultant)

AFTAR

Oliver Braedt TTL AFTAR

Maxwell Bruku Dapaah Financial Management

Specialist

AFTFM

Cary Anne Cadman Senior Forestry Specialist ASPEN

Winter Chinamale Procurement Specialist AFTPC

Arie Chupak Rural Finance and Credit

Specialist (consultant)

AFTAR

Errol George Graham Senior Economist AFTP4

Christopher Paul Jackson Senior Economist AFTAR

Anders Jensen M&E Specialist AFTDE

Sachiko Kondo Junior Professional Officer AFTCS

Yeyea Kehleay Nasser Project Team Assistant AFMLR

Alan Andrew Moody Lead Private Sector AFTFW

xi

Development Specialist

Jonathan David Pavluk Senior Counsel LEGAF

Louis Tian-Pierquin NRM Specialist (consultant) AFTEN

Thomas Walton Environmental Specialist

(consultant)

AFTAR

Germaine Ethy Program Assistant AFTAR

Non Bank Staff

Name Title Office Phone Unit

Francisco Chimuco Economist FAO/TCI

Marc Fantinet Senior Economist, FAO TTL FAO/TCI

Vincent Glaesener Economist FAO/TCI

Jan Van Gysel Agronomist FAO consultant

Frank Hollinger Rural Finance Specialist FAO/TCI

Ada Kibora Institution specialist FAO consultant

Franklin Philips National Agronomist FAO consultant

Julia Seevinck Associate Professional

Officer

FAO/TCI

Rym Ben Zyd Agronomist FAO/TCI

.

Locations

Country First

Administrative

Division

Location Planned Actual Comments

Liberia County Counties under project:

Montserrado, Bong,

Margibi, Grand bassa,

Nimba, Grand Gedeh

1

Republic of Liberia


PROJECT APPRAISAL DOCUMENT

I. STRATEGIC CONTEXT

A. Country Context

1. Despite abundant natural resources, governance issues and social inequality have

perennially engendered poverty, conflicts, and low human development in Liberia. The country

emerged from a long conflict period in 2003, when a global peace agreement was signed. A

15,000 soldiers UN peace force was stationed in the country to enforce the agreement. After a

transition period, democratic elections were held in 2006, and the Government of Liberia (GoL)

embarked on an ambitious social and economic recovery program. Presidential elections were

held peacefully in November 2011 and the elected Government took office in January 2012.

2. The country‟s economy1 has experienced steady real growth rates in recent years and real

GDP growth is forecasted at about 7 percent in 2011 and 2012. Inflation came down to about

7 percent in 2008/09 and is expected to lower to 5 percent as from 2013 onwards. Liberia‟s

medium-to-long-term macro-economic prospects are good. The GoL is committed to a

macroeconomic framework that is anchored in sound fiscal, monetary, trade and exchange

policies to foster competition, maintain price stability, and encourage private sector investment

for rapid and sustained growth. In June 2010, the country reached the completion point of the

HIPC initiative which provides the basis for substantial debt relief and new public and private

investments in all sectors.

3. Despite important progress made in recent years, poverty remains a challenge. It is

estimated that about 64 percent of Liberians live below the poverty line. In 2009, Liberia had a

human development index of 0.442, ranking the country 169th out of 182 in the world. Limited

access to modern health care services (41 percent) and high illiteracy rate (58 percent; 62 percent

for women and 29 percent for men) remain important social issues; such as do land use rights.

Liberia still faces many challenges in laying the foundation to transition from post-conflict

recovery to long-term development.

B. Sectoral and Institutional Context

4. Agriculture has been the backbone of the economy throughout the conflict and the post-

war period. It still accounted for 61 percent of the GDP in 2008 and provides employment and/or

income to about two thirds of the 4 million population. The Government is now preparing a

second phase Poverty Reduction Strategy (PRS) in which promotion of productive activities,

particularly agriculture and notably the tree crop sector, is one of the main pillars.

5. Rice and cassava are the main food crops, while rubber, oil palm, and cocoa are the

dominant export-oriented tree crops. Forest-based farming systems cover the largest proportion

of the country. Tree crop-based systems are found mostly in the central belt of the country, while

1 The Economist Intelligence Unit, Liberia Country Report, September 2011

2

root crop-based systems (with rice) are concentrated in the northern region. The main

characteristics of the Liberian tree crop sector are the old age of plantations and their low

productivity. There have been no significant replanting activities for the last twenty five years

due to the war, and a large proportion of the country‟s rubber and oil palm plantations are now at

the end of their productive life, necessitating replanting.

6. Rubber is the most important cash crop in Liberia in terms of production, exports and

employment generation. About 200,000 hectares (ha) are under rubber production, of which two

thirds are small and medium-size private farms (<40 ha). The sector faces a reduction in

production and rubber factories are operating below capacity. Large estates are sharply

competing to buy rubber from smallholders and supply their factories. There is much scope for

replanting and expanding the area under rubber. International demand for natural rubber is strong

and growing, and prices are favorable and expected to remain so in coming years.

7. Cocoa is Liberia‟s second most important export crop, involving around 40,000

households in the northern counties on 35,000 hectares. The large majority of cocoa/coffee

farmers hold less than two ha of old cocoa (and coffee) trees. Part of the production from remote

areas is not harvested due to the poor condition of rural roads and consequently the shortage of

buyers leads to low prices offered. Old, existing trees can be rehabilitated to resume production

rapidly. Enhancing market access through providing Farmers‟ Organizations (FOs) with equity

and capacity building should allow them to provide bulking and other marketing services. There

is much scope for new planting using hybrid varieties as world market demand and prices for

cocoa are on the high side.

8. Oil palm is an important food and cash crop for smallholders and is grown in every

county, with about half of the production coming from wild groves. Production of crude palm oil

(CPO) dramatically dropped because of the war. The country turned from an exporter (until the

late 1980s) into a net importer. There is much scope for assisting smallholders around industrial

estates in rehabilitating old trees and in replanting (through out grower models), as well as in

rehabilitating former state-owned plantations that were handed over to smallholders in the

1990‟s. There is much demand for CPO at national, regional, and international levels.

9. Coffee production sharply decreased during the war (only 104 tons were exported in

2008). Many coffee trees were felled and farmers turned to other crops as local purchasing prices

were low. In addition, labor requirements for coffee are high compared to cocoa. International

prices have increased since 2005. There is scope for rehabilitating the remaining farms and

promoting good quality coffee as well as supporting small scale coffee processing for the local

market.

10. The Ministry of Agriculture (MoA) is the central policy-making body of the GoL and is

responsible for promoting agriculture development, regulating the sector and implementing food

security policies and strategy. It faces many constraints, including: inadequate human resources

(both in terms of numbers and qualifications), insufficient equipment, and limited budget. Since

2008, the MoA has made strides to create County Agricultural Offices (CAOs) and to re-

organize. It has established a Program Management Unit (PMU) in charge of the preparation and

management of externally-funded programs2. Extension/advisory services are principally offered

by services providers (NGOs, concessionaires). One of the main responsibilities of MoA is to

2 The PMU is currently supported by various donors including World Bank, USAID, EC, AfDB, IFAD, etc., with

the aim of providing the Ministry with the capacity to manage and coordinate all donor funded projects.

3

ensure coordination amongst these various actors. Several institutions supporting the smallholder

tree crop sector operate under the MoA, notably the Cooperative Development Authority (CDA).

They also need support to efficiently exert their roles and assist smallholders.

11. Many informal farmer groups exist and are primarily focusing on farm labor exchange.

There are few formal FOs involved in marketing, quality promotion and providing linkages with

buyers and financial institutions. Strengthening their capacities would be of paramount

importance, particularly for the cocoa and coffee value chains where no strong private players

with processing capacity exist, as is the case in the rubber and oil palm sectors. Therefore the

project would put FOs‟ capacity building at the centre of its implementation strategy.

12. The financial sector in Liberia - mainly comprised of the Central Bank of Liberia (CBL),

nine commercial banks and one non-banking financial institutions - is still developing. Only four

financial institutions are timidly financing the agricultural sector, although only by offering short

term credit and starting mobile banking countrywide. Microfinance institutions (MFIs) are very

few and mainly located in urban and peri-urban areas. One recently-established commercial bank

is promoting rural MFIs. There is a strong need to facilitate tree crop smallholders‟ and FOs‟

access to adapted formal financial services, particularly for cocoa/coffee value chains.

C. Higher Level Objectives to which the Project contributes

13. The project fits into the Liberia Poverty Reduction Strategy (PRS), particularly its second

pillar “economic revitalization”, based on the promotion of export oriented economic growth,

through consolidating the role of the private sector, while also facilitating rural development,

increasing rural incomes, and contributing to poverty reduction. The project is fully in line with

the current Country Assistance Strategy (CAS)3 and would contribute to two out of its three

pillars: facilitating pro-poor growth and rehabilitating infrastructure to jump-start economic

growth. The proposed project is also fully aligned with the 2010-2020 Liberia Agriculture Sector

Investment Program (LASIP)4 developed by GoL in 2008/2009 after extensive stakeholders

consultation. It would contribute to three of the four programs of the LASIP and particularly to

sub-programs 1.3 (Smallholder tree crop development), 2.1 (Rehabilitation and expansion of

rural roads), 3.1 (Rebuilding the MoA and improved coordination & management), 3.4 (Capacity

building of farm based organizations), and 3.5 (Revitalizing agriculture research).

14. The project takes into account the potential complementarities with the current

International Finance Corporation (IFC) work in Liberia. The IFC support in the sector is

focusing on: (a) supporting MoA on outlining an outgrower strategy; (b) support MoA with the

Round Table on Sustainable Palm Oil (RSPO) certification of the oil palm sector; (c) the

establishment of a credit line for small and medium enterprises; (d) designing an agrifinance

program for Liberia (Africa AgriFinance Program); and (e) providing a credit line for the Salala

Rubber Company (SRC).

15. The project would be attentive to the ongoing REDD (Reduced Emissions from

Degradation and Deforestation) discussion and to the role the tree crops sector could play, as

well as the World Bank (WB) supported work under the proposed Forest Carbon Partnership

3 World Bank, Liberia Country Assistance Strategy for financial years (FY) 09-12, Report No. 4798-LR

4 The LASIP was adopted as the background document of the Compact that all stakeholders (government, donors,

the private sector, farmers‟ representatives, civil society) signed in October 2009 under the framework of the

Comprehensive Africa Agriculture Development Program (CAADP). The LASIP was further refined in 2010 and

reviewed at an ECOWAS Business Review meeting in Dakar in June 2010.

4

Facility (FCPF). The project was developed following the recommendations of the Diagnostic

Trade Integration Study (DTIS) for Liberia undertaken in 2007/08, which identified tree crops as

offering “the best opportunity for strong and shared growth and poverty alleviation both in the

short and the longer term”. It builds on the lessons learned from previous tree crops projects

financed by the WB in Liberia in the 1970‟s-1980‟s and in other West African countries (e.g.,

Nigeria, Cameroon), as well as the vast experience from several countries in East Asia.

II. PROJECT DEVELOPMENT OBJECTIVES

A. PDO

16. The Project development objective would be “to increase access to finance, inputs,

technologies and markets for smallholder tree crop farmers in Liberia, and to develop a long term

development program for the tree crops sector”.

B. Project Beneficiaries

17. Direct project beneficiaries are smallholder tree crop farmers and household members in

target sites who participate in the project. Smallholders are, for the purpose of this project,

defined as farmers, both male and female, who mainly derive their food and cash income from

farming (including from tree crops), mostly using their own family labour. Effective cultivated

acreage under tree crops and food crops vary between counties, according to existing production

systems.

18. An estimated total of 4,900 tree crop smallholders are expected to directly benefit from

the project, adding up to a total beneficiary population of around 26,000 (assuming 5.3 members

per household on average). In targeted counties, female-headed households holding cocoa,

coffee, oil palm and rubber represent in average 15% of agricultural households. Therefore it is

assumed that 15% of households benefiting from rehabilitation/replanting would be female-

headed. With regard to new plantings (only 18% of the targeted acreage), the project would take

a proactive role to install women and youth as "new" cocoa/rubber farmers: the larger share

(60%) of the new planting acreage would benefit primarily (min. 75%) to female-headed

households and youth, while the remaining (40%) would benefit households holding insufficient

tree crops in order to make their farm commercially viable. Based on these assumptions, the

number of female-headed households and youth directly benefiting from the project is estimated

at about 1,000 (20% of total direct beneficiaries).

C. PDO Level Results Indicators

19. The main PDO results indicators are as follows5:

5 Results of planting/replanting activities on yields and smallholders incomes cannot be measured during the project

implementation period due to the long gestation period of the targeted tree crops (2-3 years for cocoa planting; 3-4

years for oil palm replanting; 8 years for rubber (re)planting). This can only be done for rehabilitation activities

where increases in yields show during the year of rehabilitation or the following year. It is thus of paramount

importance to establish adequate tracking system of yield and smallholders income (see M&E section).

5

Area of smallholder tree crop farms rehabilitated, replanted or planted under the project

(ha) (disaggregated by Rehabilitation, Replanting, New planting);

Incremental yearly net cash flow in project area (US$/ha) (disaggregated by High input

rehabilitated cocoa, Medium input rehabilitated cocoa, Rehabilitated coffee,

Rehabilitated oil palm (farmer‟s run plantation), Rehabilitated oil palm (out growers

scheme);

Long term credit delivered to oil palm and rubber out growers (number, US$);

Farm access roads rehabilitated (km);

Direct project beneficiaries (number), of which are female (%); and

Long term large scale tree crop development program formulated and approved by the

MoA.

III. PROJECT DESCRIPTION

A. Project components

20. The project would be the pilot, learning phase of a longer term and larger scale tree crop

development program targeting smallholders. It would test different rehabilitation, replanting and

new planting models and associated implementation and financing mechanisms for revitalizing

the tree crop sector. These models would be implemented in partnerships with

concessionaires/large farms, specialized input suppliers, NGOs, Farmer Organizations (FOs) and

Participating Financial Institutions (PFIs). As such, the project includes a strong learning

component and successful activities would be expanded as part of the future nationwide tree

crops development program. The project design took into account lessons learned from past WB

operations and recent NGO experience (IITA, ACDI-VOCA, Winrock) in the tree crop sector in

Liberia.

21. Component 1: Smallholder Tree Crops Revitalization (US$ 16.9 million, including an

IDA contribution of US$ 9.5 million). This component aims at revitalizing the production and

marketing of major tree crops (cocoa, coffee, oil palm and rubber) in selected counties. The

strategy would consist of assisting smallholders to rapidly resume production through the

rehabilitation of existing farms, replanting/planting, capacity building of smallholders and their

organizations, and value chain enhancement. Smallholders would benefit from start-up grants

and long term credit to meet farm development costs. The organizational, technical and financial

capacity of Farmers‟ Organizations (FOs) would be strengthened in order to enhance their

functions in production support, marketing, post-harvest handling and processing. Farmers

would provide their own labor for rehabilitation and (re)planting activities.

22. Sub-Component 1.1: Cocoa/Coffee Revitalization (US$ 12.2 million, including an IDA

contribution of US$ 6.5 million). The sub-component would adopt a value chain approach with

investments in all steps of the cocoa and coffee value chains (production, storage, bulking,

processing, financial products development, etc.) that would facilitate cocoa and coffee FOs‟

certification (FLO, Rain forest, UTZ) and access to preferential markets. It would be

implemented in about six districts in three of the country‟s main cocoa/coffee producing counties

(Nimba, Bong, Grand Geddeh) and would target approximately 6,000 hectares of cocoa

(5,000 hectares of rehabilitation; 1,000 hectares of new planting) and 1,500 hectares of coffee

farms (rehabilitation). Cocoa would be rehabilitated according to two different models: medium

and high input. Both models encompass the use of pesticides, whereas the high input model also

provides for the use of specialized cocoa fertilizer to boost production. The project would

6

support: (i) selection of potential beneficiaries, including carrying out family/community land

use rights validation, and for new planting, assisting smallholders in boundary demarcation and

land surveying; (ii) co-financing agricultural inputs for farm development through start-up

grants; (iii) establishment and strengthening of FOs at section, clan and district levels and

enhancing their abilities to provide services to their members (quality promotion, storage,

bulking, and primary processing); (iv) the capitalization of cocoa/coffee FOs through equity

matching grants; (v) facilitating cocoa/coffee smallholders‟ and their FOs‟ access to adapted

financial services; and (vi) rehabilitation of feeder roads (indicatively, 50 km in total).

23. Sub-Component 1.2: Smallholder Oil Palm Revitalization (US$ 1.4 million, including

an IDA contribution of US$ 1 million). The sub-component would support the rehabilitation and

replanting of oil palm (1,200 hectares in total) under two different models: (i) re-launching

production and modern processing in one existing smallholder plantation (Dube) in Grand

Gedeh Country. The project would finance the cost of rehabilitation and replanting (600 ha), of

providing technical services and strengthening of the existing Cooperative, as well as the

establishment of small scale processing units owned and run by the Cooperative (or an SMEs on

their behalf); (ii) an out growers model (600 ha) around a concessionaire (EPO-LIBINCO) in

Grand Bassa County. Support to rehabilitating/replanting smallholders‟ farms would combine a

grant element to finance the small tools package (rehabilitation) and fast yielding seedlings

(replanting), and a long term credit to cover other inputs costs for replanting (fertilizers), while

the farmer would contribute his/her labor to restore production or replant trees. The credit would

be extended to smallholders by the concessionaire as in-kind, through the CBL and one or

several PFIs, in conformity with OP 8.30 (see Annex 8). The project would finance the technical

assistance provided by the concessionaire to smallholders as well as some farm access roads

development (estimated at 20 km).

24. Sub-Component 1.3: Smallholder Rubber Revitalization (US$ 3.2 million, including an

IDA contribution of US$ 2 million). The sub-component would be implemented in three counties

(Montserrado, Margibi and Bong) by one concessionaire (SRC) and one large Liberian farm

(MARCO) that each run a rubber factory, under out grower arrangements. It would support:

(i) replanting (1,600 ha) of existing smallholder rubber farms; (ii) new planting (1,000 ha) of

smallholder rubber farms after an environmental screening; (iii) the organization of rubber FOs

and the provision of training and technical advice to smallholders through the partner

concessionaire/large estate; and (iv) limited feeder road and farm track rehabilitation (75 km).

Similarly as above-described in the two subcomponents, beneficiaries‟ selection would include

land use rights validation and mapping at family/community level; and for new planting,

boundary demarcation and land surveying. As for the oil palm out grower scheme, (re)planting

costs would be financed through a combination of a grant and a long term credit delivered as in-

kind.

25. Component 2: Institution Building and Preparation of Future Large Scale Tree

Crop Development Program (US$ 3.3 million, including an IDA contribution of

US$ 3.1 million). The component comprises three subcomponents: (i) Institution Building

(US$ 1.5 million), aimed at strengthening the main public and private institutions involved in

project planning, coordination and implementation: (a) Capacity building of MoA and

Cooperative Development Authority (CDA) targeting technicians, both at headquarters and

county level, in a variety of subjects (including economic development and empowerment of

FOs, gender mainstreaming, environmental and social impact management); (b) Support to MoA

County Agricultural Offices (CAOs) to allow them to participate in project sensitization and

7

M&E; (c) Support to CDA: strengthening the operational capacity of CDA field offices to deliver

training and advice to FOs established or strengthened under the project, and elaboration and

validation of a National Policy/Strategy for FOs and Cooperatives development; (d) Securing

tree crop smallholders’ land use rights: assistance to the concerned institutions (i.e. Ministry of

Lands, Mine and Energy - MLME; Land commission - LC; Centre for National Documents,

Records and Archives - CNDRA) to develop the methodology and training modules for the

family/community land use rights validation and farm mapping methodologies, as well as

carrying out a review of land-related activities supported under the project; (e) Applied tree crop

research: support would be complementary to other ongoing initiatives (particularly the West

Africa Agricultural Productivity Program-WAAPP); (f) Strengthening the MoA’s Project

Management Unit (PMU): co-financing some of the PMU senior positions and associated

operating costs; and (g) Support to the Environmental Protection Agency (EPA): build the

capacity of the EPA, notably at county level, for environmental monitoring of tree crops;

(ii) Preparing a Future Large Scale Smallholder Tree Crop Development Program (US$ 0.5

million), including the preparation and validation of Master Plans for targeted tree crops, as a

follow-up, large scale operation to be proposed to IDA and other partners; and (iii)

(reimbursement of the) Project Preparation Advance (US$ 1.2 million) which has been made

available to the GoL in order to assist the project design and its efficient launch.

26. Component 3: Project Coordination and Management (US$ 3.0 million, including an

IDA contribution of US$ 2.5 million). The component aims at ensuring an effective

coordination, management and monitoring and evaluation (M&E) of the project. It comprises

two subcomponents: (i) Strategic Planning, Coordination, Management and Implementation

Support (US$ 2.3 million), including two main activities: (a) Support to Steering Bodies: project

launching workshops at county and national level; supporting regular coordination meetings at

county level assembling all stakeholders; and support to the National Steering Committee (NSC);

and (b) Support to the Project Coordination Unit (PCU) attached to the MoA‟s PMU that would

be in charge of the day-to-day project coordination; and (ii) M&E and Knowledge Sharing

(US$ 0.7 million). This sub-component would support the establishment and implementation of

the project‟s M&E system through annual participatory planning and evaluation workshops and

thematic evaluations (including annual producer and value chain surveys) that would feed into

the results framework and planning activities for the following year. A mid-term review and a

final evaluation would be undertaken to make sure lessons learned would be integrated in the

future larger scale program. Embedded with a strong learning objective, the project would

support the development of a communication strategy, as well as a range of

communication/knowledge sharing tools, using various media, and targeting different audiences.

B. Project Financing

Lending Instrument

27. The proposed Specific Investment Loan would be financed under an IDA Credit, over a

four-year implementation period, with an allocation of US$ 15 million equivalent.

Project Cost and Financing

28. Total project costs are estimated at US$ 23.1 million. It would be financed by: (i) an IDA

Credit of US$ 15 million equivalent; (ii) participating smallholders (purchase of agricultural

inputs and family labor estimated at US$ 6.2 million); (iii) participating financial institutions

(establishment of rural microfinance institutions in the project area, co-financing cocoa collateral

8

management costs, and small working capital loans for processing units, for a total

of US$ 0.8 million); and (iv) a contribution from the GoL to cover the tax content

(US$ 1.1 million).

Table 1: Summary of costs and financing by components

Component Total

costs (US$ '000)

IDA contribution

(US$'000) % of total

costs

A. Smallholder Tree Crops Revitalization 1. Cocoa & Coffee Revitalization 12,194 6,462 53.0 2. Smallholder Oil Palm Revitalization 1,427 1,013 71.0 3. Smallholder Rubber Revitalization 3,236 1,992 61.5 Subtotal Tree Crops Revitalization 16,857 9,467 56.2

B. Institution Building and Preparation of Future Large Scale Tree Crop Development Program

1. Institutional Capacity Building 1,498 1,327 88.6

2. Preparation of Large Scale Smallholder Tree Crop Development Program 528 503 95.3

3. STCRSP Project Preparation Facility 1,225 1,225 100.0 Subtotal Institutional Strengthening 3,251 3,056 94.0

C. Project Coordination and Management

1. Strategic Planning, Coordination and Implementation Support 2,273 1,844 81.1

2. Monitoring & Evaluation and Knowledge Production & Sharing 678 633 93.5

Subtotal Project Coordination & Management 2,951 2,477 83.9

Total PROJECT COSTS 23,059 15,000 65.1

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

29. The MoA would be the executing agency of the project. The project strategic

management would be anchored within the existing planning and steering committees at national

and district levels: (i) project activities, results, and implementation issues would be discussed at

the monthly meetings of the MoA-led Agricultural Coordination Committee (ACC) which

gathers the main donors and international NGOs involved in the agriculture sector at national

level, as well as at the County Agricultural Committees (CAC); and (ii) to the extent possible,

the project National Steering Committee (NSC) would use the ACC or other existing MoA-

chaired NSCs in charge of the oversight of other MoA-implemented projects, ensuring its

composition fits with the STCRSP needs and guarantying the participation of all stakeholders.

The NSC would provide conceptual and strategic guidance to the PMU, ensure conformity of

project activities with Government policies and strategies, review project progress, its annual

plans and budgets, and resolve any implementation problems or conflicts. Such arrangements

would enhance coordination, alignment, and synergy between donor-funded operations in the

tree crop sector (IFAD, GIZ, SIDA, IFC, etc.).

30. Overall project planning, coordination, implementation and monitoring and evaluation

(M&E) would be ensured by the MoA‟s PMU. The PCU looking after the day-to-day STCRSP

implementation would be inserted into the PMU. The PCU would include a limited number of

highly qualified and motivated staff selected on a competitive basis. It would benefit from the

9

support of senior PMU staff for core functions such as strategic guidance, financial management

and administration, procurement, and M&E. The project would contribute to the staffing costs of

such senior PMU staff. In order to address the shortcomings and identified risks with regards to

financial management, procurement and M&E, the project would include a number of training

activities, exchanges of experiences, and specialized short term international technical assistance

to build the capacity of the PMU/PCU in these key domains.

31. Support to cocoa/coffee revitalization would be coordinated and implemented by an

international operator who would sub-contract specialized service providers (trainers, collateral

manager, specialized input suppliers, etc.) on a competitive basis6. Support to the farmer-run oil

palm plantation would follow a similar arrangement but would be implemented by a national

service provider considering the small size of this sub-project. Rubber and oil palm out grower

schemes would be implemented through three identified concessionaires/large estates on a

negotiated basis.

32. Long term (LT) credit to oil palm and rubber out growers would be extended through one

or several PFIs using IDA and Ministry of Finance (MoF)/CBL funds. Credit recovery would be

made by the concessionaire on behalf of out growers through a deduction on the purchase of oil

palm fruit/rubber supplied by participating smallholders. An agreement would be signed between

the MoA, the CBL, the PFI(s) and each concessionaire/large estate that would define the roles

and responsibilities of each party in LT credit arrangements. Also, a Subsidiary Agreement

between the MoF and the CBL, and lending agreement(s) between CBL and each of the selected

PFI, would specify the terms and conditions for the loan between MoF and CBL and passing

funds to the PFI(s). Detailed arrangements are in line with OP 8.30 and are presented in Annex 8.

Draft agreements have been discussed with all concerned parties during Appraisal.

B. Results Monitoring and Evaluation

33. The overall objective of the M&E system would be to determine progress towards

achievement of the PDO. Measuring the implementation and impact of project activities would

be based on result-based monitoring. It would be the primary responsibility of participating

partners/service providers and FO/cooperatives. Contracts signed between the PMU and these

partners would detail progress and impact indicators to track and the frequency, formats and

methods for monitoring and reporting. The PCU would include a full time Planning and M&E

officer. The PMU senior staff and the NSC would analyze project financial and activity reports

throughout implementation to compare progress achieved against what was projected in the

project documentation (particularly the results framework) and in the project annual work

program and budgets (AWPBs). They would provide guidance and recommendations to the PCU

and to the main sub-component or sub-projects operators (concessionaires). Using data provided

by implementers/service providers, the PCU would undertake financial monitoring and control as

well as cost accounting reviews. Monitoring and evaluating the achievement of results would

integrate participatory processes such as district and county M&E workshops, in which direct

project beneficiaries would actively participate.

34. Impact evaluation on beneficiaries, notably increased yields and income derived from

cocoa, coffee and oil palm rehabilitation would be made during the project life. This would be

ensured by adequate reporting of participating FOs, input suppliers, and service providers as well

6 Service providers could include national consulting firms, NGOs, input suppliers, exporters, and collateral

managers/credit support companies, either as single entities or in association with other implementation partners.

10

as through annual producer and value chain surveys carried out by specialized consultants in

partnership with these actors. For planting/replanting activities, impact would occur after a long

period of time (minimum 2-3 years for cocoa and oil palm, 7 to 8 years for rubber). The project

would therefore make sure a sustainable and long term impact evaluation system would be

established within the PMU, integrating M&E information coming from the CAOs, participating

concessionaires and input suppliers and FOs.

35. Baseline studies for impact assessment would be a priority activity of the project in the

first year and would require careful design and involvement of a range of stakeholders. The

baseline studies and subsequent impact evaluations would lay-out benefits that accrue to both

direct and indirect beneficiaries, giving a special emphasis to the youth and women,

environmental issues, FO empowerment and land use rights aspects of the interventions.

36. The important focus on the project‟s results monitoring and lessons learning is expected

to provide useful guidance to formulate the future larger tree crop development program that

may become mainstreamed in MoA policies and implementation strategies. The WB would

therefore continue dialogue with MoA on the optimal approach to mainstream some of the

lessons and innovations of the project.

C. Sustainability

37. For cocoa/coffee revitalization, sustainability can only be achieved through strengthening

the professionalism and good governance of FOs/cooperatives and their technical, managerial

and financial capacity in marketing (bulking and linking with exporters), pre-financing their

members (through the equity matching grants and liaising with PFIs), nursery promotion, and

harvesting campaign organization. This is a core strategy and activity of the project.

38. The MoA and participating concessionaires/large estates have shown strong support and

ownership of the project, as evidenced by the number and detail of discussions during

preparation. It would obviously be in the interest of concessionaires to continue to support the

targeted out growers beyond the 4-year project implementation period as concessionaires intend

to buy the smallholders‟ crops to supply their plants and to maintain peace and social stability

around their plantations. They would thus finance the incremental costs after the project

implementation period, as specified in contracts they would sign with MoA. Likewise, PFIs

would have an interest in financing tree crop development until maturity in order to enable

farmers to repay their loans. Under out grower schemes, long term credit repayment would be

transferred by the concessionaire on behalf of smallholders through a deduction on the purchase

of Fresh Fruit Bunches (FFB) supplied by the participating smallholders.

39. The GoL would fund, from its own financial resources, the remaining long term credit

disbursements needed for the oil palm and rubber out grower schemes after the end of the 4-year

project implementation period, until trees reach maturity and farmers start repaying their loans

through the concessionaires (see Annex 8, para. 13). However it is expected that the follow-up

long term tree crop development program would be approved before the end of the STCRSP and

that it could extend the line of credit arrangement to cover these long term credit requirements.

40. Depending on the road type and location, maintenance of the rehabilitated feeder

roads/farm tracks could be financed from funds provided by the Ministry of Public Works or by

the participating concessionaires or communities. In rubber and oil palm out grower schemes, it

is likely that concessionaires would carry out regular farm access road maintenance with their

own mechanized machinery in order to ensure access to farms or raw material collecting points.

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V. KEY RISKS AND MITIGATION MEASURES

41. The overall project risks are rated as High but considered manageable with proposed

mitigation measures. Potential risks and mitigation measures are shown in the Operational Risk

Assessment Framework (ORAF) -see Annex 4- and summarized in Table 2 below.

Table 2: Summary of implementation risks

Project Stakeholder Risk High

Implementing Agency Risk

- Capacity High

- Governance Substantial

Project Risk

- Design High

- Social and Environmental Substantial

- Program and Donor Substantial

- Delivery Monitoring and Sustainability High

Overall Implementation Risk High

VI. APPRAISAL SUMMARY

A. Economic and Financial Analysis

42. Financial Analysis. A financial analysis has been carried out to assess whether: (a) the

targeted smallholders would get sufficient cash income to justify their adherence to and

participation in the project and allow them to service their debts; (b) the proposed financial

arrangements for farm development costs (mix of grant and credit) would be worth the risk to the

PFIs, concessionaires/large estates, and smallholders; (c) proposed models and investments

would be attractive to other potential private partners, particularly the specialized input suppliers

for cocoa and coffee rehabilitation. Eleven crop models have been developed after extensive

discussions with stakeholders and using sound technical and costs assumptions. They show good

profitability prospects that should attract the smallholders‟, the concessionaires‟, and the PFIs‟

participation in the project and in the subsequent long term tree crop program. Financial internal

rates of return and incremental incomes appear attractive in all situations. For crops with a long

gestation period (oil palm, rubber), total repayment of the long term credit (capital plus interest)

could be achieved after about 11 years. Intercropping as well as a phased replanting will be

encouraged to ensure that farmers continue to derive incomes from still producing tree crops and

intercropping, whenever possible (see Annex 7).

43. Economic Analysis. The project would generate direct and indirect economic benefits:

(i) increased incomes of tree crop smallholders, and therefore improved food security at

household level and reduction of vulnerability to external shocks, notably climate change and

rising food prices; (ii) reduced transaction costs and post harvest losses; (iii) increased value

added of tree crop production; (iv) enhanced market/business opportunities and economies of

scale benefiting all actors of the supply chains; (v) enhanced bargaining power, understanding of

markets and management capacity of smallholders/FOs; (vi) incremental on and off farm

employment; (vii) foreign exchange savings through increased cocoa and rubber exports and

12

reduction of palm oil imports; and (viii) improved social stability in the project areas. The project

would have a positive impact on participating women, youth and female headed households. A

cost-benefit analysis was conducted over a 25-year period, transforming financial prices, costs,

and benefit streams into economic values through calculating economic import/export parity

prices at farm gate, applying conversion factors for each category of costs, eliminating taxes and

taking into account incremental costs after the project implementation period (technical advisory

services to smallholders and infrastructure maintenance). Economic benefits considered in the

analysis are those derived from increased tree crop production. Without considering the project

and long term tree crop program preparation costs, the project would yield an Economic Internal

Rate of Return (EIRR) of 33 percent and a Net Present Value (NPV) of US$ 28 million (at a 10

percent discount rate). The project is therefore highly profitable from an economic stand point.

The EIRR would still be of 29 percent if all project costs are considered. The sensitivity analysis

indicates a solid resilience to increases in costs and reduction in benefits. The EIRR would yield

respectively 16 and 23 percent if benefits would be halved or lagged by two years (see Annex 7).

B. Technical

44. Assumed yields after rehabilitation or (re)planting have been conservatively estimated

and are consistent with sector and international standards in the industry as well as yields

observed by smallholders in similar soil and climatic conditions in the sub-region. Production in

the present situation has only been considered for old cocoa farms. Coffee farms are in most

cases not yet rehabilitated. Almost all rubber trees belonging to smallholders and located around

the large estates have been slaughter tapped and their production is rapidly declining: there is

only scope for replanting. New rubber planting would occur on uncultivated cleared lands due to

fallow (not on primary forest or recently cleared land) to consolidate land use and optimize the

utilization of farm to market roads. Without external incentives such as technical advice, support

to FOs and small scale processing, the present production on the existing farmer‟s run oil palm

plantation is considered negligible. Detailed assumptions are shown in Annex 7.

45. Proposed farm development costs financing arrangements encompass a mix of grant and

credit. The grant element would match the sweat equity provided by participating smallholders

and finance part of the first year (N0) rehabilitation or (re)planting costs. It would: a) cover the

small tools package and/or planting material in the cases of oil palm rehabilitation (US$50 per

ha) and cocoa planting (US$200 per ha); b) prime the pump to establish a sustainable

commercial relation between smallholders and specialized input suppliers in the cases of cocoa

and coffee rehabilitation (US$400 for high input cocoa rehabilitation and US$200 for medium

input cocoa rehabilitation and coffee rehabilitation, per ha); and c) cover up to about 30 per cent

of the investment costs in the cases of oil palm and rubber (re)planting in order to reduce the

long term debt burden and associated risks and make the out growers schemes more attractive to

farmers, concessionaires and PFIs (US$270 per ha for rubber, US$ 350 per ha for oil palm).

46. The CBL would use current staff or establish a special unit to manage the long term (LT)

line of credit. Credit disbursement to rubber and oil palm out growers would be in-kind (planting

material, fertilizers) provided by the concessionaires. The LT credit financed by IDA would

contribute to financing the farm development costs for the duration of the project, after which

MoF/CBL has committed to financing the remaining disbursements, until crops reach maturity

(using its own resources). Terms of LT loans (duration, grace period) extended to out growers

would vary according to the gestation period of the crop and cash flow generated, as well as the

situation of each individual smallholder (considering total income from the farm, notably derived

13

from existing yielding tree crops, food crops, intercropping, and off-farm activities). Compliance

with OP 8.30 has been ensured and agreed with GoL/MoF/CBL (see Annex 8).

C. Financial Management

47. The Financial Management (FM) arrangements under the project have been designed to

facilitate project implementation and support both fiduciary and developmental needs. As it does

for other donor funded projects implemented by the MoA, the PMU would be responsible for

implementing the project, including financial management (and procurement). The PMU was

created in 2009 as a centralized unit and is headed by a Director. It includes a FM division that is

staffed with qualified FM Specialist and Accountants. It has adopted the FM procedures manual

of the Project Financial Management Unit (PFMU) hosted in the MoF, which was reviewed and

assessed as adequate. The PMU has satisfactory budgeting, accounting, internal controls and

financial reporting processes in place. It has adequate capacity to manage the FM arrangements

of existing projects in its portfolio. One incremental FM position (and associated office

equipment and operational costs) would be funded under the project to boost the Unit‟s capacity

from the fiduciary angle. This additional staff member would be recruited before project

effectiveness. The PMU would need to consider setting up an internal audit unit if it is to take on

additional projects, as this would strengthen its internal control environment. The proposed FM

arrangements of the project satisfy the Bank‟s minimum requirements under OP/BP 10.02. The

FM risk has been assessed to moderateafter the proposed risk mitigation measures.

48. Two US$ denominated Designated Accounts (DA) would be established at a commercial

bank approved by IDA: (a) the first DA would be opened and managed by the PMU. Funds from

IDA would be disbursed into this account for all project expenditures except for smallholder

credit. The processing of eligible expenditure payments would be managed by the authorized

signatories of the PCU and supporting documents transferred to PMU for payment; and (b) the

second DA would be opened and managed by the CBL. Funds from IDA would be disbursed

into this account for smallholder credit. The project would disburse against statements of

expenditures. Forecast of the first 6 months expenditures would form the basis for the initial

withdrawals of funds from the Credit.

49. The project would follow a cash basis of accounting and financial reporting and would

submit, within 45 days of each GoL fiscal quarter, quarterly interim financial reports (IFRs) of

the project activities. At minimum, the IFRs would include: (a) Actual and Forecast Cash Flow

Statement according to Components, Sub-components and Activities; (b) Summary Statement of

Expenditures according to Categories; (c) Designated Account Reconciliation Statement; (d)

Physical Progress Report; and (e) Procurement Status Monitoring Report. The PMU would also

prepare annual financial statements which would be audited and submitted to IDA within 6

months of the end of each GoL fiscal year (i.e. by June 30 each year). The PMU would appoint

an external auditor with terms of reference agreed with IDA within four months of project

effectiveness.

D. Procurement

50. An assessment of procurement risks was carried out in December 2010 for the MoA as an

implementing agency. It reviewed the procurement procedures, organizational structures,

staffing, and skills for procurement management. The overall risk for procurement (prior to

mitigation measures) was considered High. The assessment recommended a number of actions to

mitigate the procurement risks. With implementation of these measures the procurement risk is

14

expected to be reduced to substantial. The main measures consist of hiring a Procurement

Advisor with international experience for at least 12 months within the PMU (already recruited)

and recruiting, for the PCU, one Procurement specialist with international experience for at least

24 months and one Procurement Assistant for the entire duration of the project. This has been

reflected in the project costs (under subcomponents 2.1 and 3.1).

51. Procurement of goods and works and selection of consultants under the proposed project

would be carried out in accordance with: (i) "Guidelines: Procurement of Goods, Works, and

non-Consulting Services Under IBRD Loans and IDA Credits & Grants by WB Borrowers" dated

January 2011; (ii) "Guidelines: Selection and Employment of Consultants Under IBRD Loans

and IDA Credits & Grants by WB Borrowers" dated January 2011; and (iii) “Guidelines on

Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA

Credits and Grants” dated October 15, 2006 and revised in January 2011; (iv) the provisions

stipulated in the Legal Agreements; and (iv) exceptions to National Competitive Bidding

Procedures (see Annex 3).

52. For each contract to be financed by the Credit, the different procurement methods or

consultant selection methods, the need for prequalification, estimated costs, prior review

requirements, and time frame would be agreed between the Borrower and IDA project team in

the Procurement Plan (PP). The PP would be updated at least annually or as required to reflect

the actual project implementation needs and improvements in institutional capacity.

E. Social (including safeguards)

53. The social issues of the project include: land use rights; FOs‟ governance (notably

transparency and accountability); benefit sharing and risk management; gender, vulnerability,

and targeting; consultation and participation; and establishment of grievance redress mechanism.

54. Land issues. Access to land and secured land use rights would be critical for the

successful take off and sustainability of the project. The Technical Note Working Paper 8 on

“securing smallholders land use rights” details action steps to streamline the land securization

process, working in close collaboration with GoL, land sector institutions (MLME, LC,

CNRDA) and traditional authorities. Measures including land use rights validation at

community/family level would be on the criteria for smallholders‟ participation in the project so

as to avoid any risks to the WB and the GoL as a whole. Since the land question relates to

possible social impacts, the Resettlement Policy Framework (RPF) gives guidance from OP 4.12

perspective.

55. Governance and FOs’ Capacity building. Most of the agricultural cooperatives -

created before the war to collect cocoa/coffee - have collapsed. A few have been audited and

have embarked on a process of revitalization with support from the CDA. The project would

support the strengthening of about ten existing FOs/cooperatives -after an organizational and

financial audit, as well as the establishment of about 30 smaller FOs starting from grass root

level. Capacity building of FOs would aim at improving their financial and institutional

performance and promoting inclusion of deprived groups, transparency and accountability.

Opportunities for the application of social accountability mechanisms, particularly community

score cards for both monitoring and participatory purposes, would be explored.

56. Benefit Sharing and Risk Management. FO benefit sharing and risk management

mechanisms would be set up to encourage active membership to progressively raise FO‟s equity

and credit worthiness and reward more active members. Efforts would be made to ensure that

15

there is no elite capture. Consultations through different channels would be a regular feature of

project implementation.

57. Gender and Social Targeting. Project preparation has been considerate of gender and

targeting issues. The Social Impact Assessment (SIA) and the Environment and Social

Management Framework (ESMF) pay particular attention to gender and vulnerable groups like

the elderly, disabled, youth, and widows/widowers. This is aimed at ensuring that the benefits

from the project will be fairly distributed between all participants especially those considered

vulnerable. Participation and consultative project activities, which started with project design,

would consider social targeting during planning and implementation. To facilitate this, the

project would put in place measures that would eliminate covert and overt actions that hinder the

effective engagement of vulnerable groups. Specifically for women, criteria for selection as

direct beneficiaries will be flexible and any specific criteria that will be considered as a hindering

factor for women will be re-examined and or relaxed in order to create the needed opportunity

for women, but ensuring that basic requirements are met. These measures would include criteria

for participation in all aspects of the project, including in traditional systems of farming, to

address labor concerns (e.g. the kuu system).

58. Grievance Redress Mechanism and Communication Strategy. The project would

establish a Grievance Redress Mechanism (GRM) for lodging and processing complaints related

to the project activities and especially safeguards. On land related grievances, the project would

work with existing community and GoL systems for grievance resolution. Efforts would be made

to avoid grievances where possible through different strategies notably organizing annual

participatory planning and evaluation workshops at district and county level, and implementation

of the project communication strategy.

59. Social Safeguards. The project triggered the WB policy on Involuntary Resettlement

(OP 4.12) because of land related issues that may lead to displacement, restriction of access to

land or access to assets, and livelihood impacts. The impact would be minimal and manageable.

Because the specific project sites were not known in detail at the design stage, the GoL has

prepared a Resettlement Policy Framework (RPF) through a consultative and participatory

process. The RPF outlines the policy, institutional and legal framework, eligibility criteria and

entitlement matrix, methods for valuing assets, organizational arrangements, budget and

monitoring issues. It also includes a grievance redress mechanism and a template for designing

Resettlement Action Plans (RAP). The PRPF also elaborates specific information on the land

tenure issues and notes that any future land acquisition for new plantings will be done in

conformity with the requirements of OP 4.12.

60. The RPF has been consulted upon and was disclosed in country and at the WB Infoshop

on 2 December and 5 December 2011 respectively. During implementation, when the specific

sites have been selected, a screening exercise would determine whether there would be a need for

the preparation of a RAP or an abbreviated RAP. Where these may be required, the appropriate

processes for reviews and clearances as per OP 4.12 would be adhered to.

F. Environment (including safeguards)

61. In addition to triggering OP 4.12 (Involuntary Resettlement), the project triggers OPs

4.01 (Environmental Assessment), 4.04 (Natural Habitats), 4.09 (Pest Management), 4.11

(Physical Cultural Resources), and 4.36 (Forests). Because the specific subprojects locations

have not been identified, the project is taking a framework approach to establish the procedures

16

and requirements for the site-specific studies and management plans that will mitigate potential

adverse impacts. A draft ESMF has been prepared and was disclosed in country and in the

InfoShop on December 2 and December 5, 2011 respectively. The potential adverse

environmental impacts that the ESMF identifies are: (i) soil erosion and stream sedimentation

when land is cleared of vegetative cover for replanting or new planting; (ii) damage to adjacent

habitat and sedimentation in streams caused by poor practices in feeder road rehabilitation or

new construction; (iii) air and water pollution from oil palm and rubber processing facilities; (iv)

water pollution from excessive fertilizer applications, particularly in cocoa rehabilitation and for

oil palm replanting; and (v) environmental and health impacts from pesticide storage, mixing,

application, and container disposal in cocoa rehabilitation. All of these impacts can be avoided or

adequately mitigated by Environmental and Social Impact Management Plans (ESMP) that will

be developed in accordance with the ESMF. The ESMF provides mitigation measures that would

be effective in managing the potential impacts, and ways to monitor the effectiveness of the

mitigation measures and to detect any unforeseen impacts. How they will be applied would be

determined by the screening procedure described in the ESMF, which takes into account both

WB safeguards policies, the Liberian Environmental Protection and Management Law adopted

in 2003, and the related procedures administered by the Liberia EPA. The implementation

arrangements and recommendations for capacity-building needed by the organizations involved

are specified in the ESMF (see Annex 3).

62. The key project stakeholders include farmers, concessionaires, input suppliers, FOs,

county council representatives, clan representatives, NGOs and church groups. In Monrovia the

stakeholders comprise „higher level‟ participants (e.g. relevant Government departments,

academic & research institutions, donors, NGOs, etc.). Fact-finding workshops were conducted

during the project design and at the inception of the ESMF so that it would address the concerns

of these stakeholders. Following disclosure of the draft ESMF, public meetings were held in

Monrovia and in Bong County to present the ESMF, respond to questions, and receive comments

and suggestions. This feedback will be integrated in the final ESMF before project effectiveness.

17

ANNEX 1: RESULTS FRAMEWORK AND MONITORING

REPUBLIC OF LIBERIA


Project Development Objective (PDO): to increase access to finance, inputs, technologies and markets for smallholder tree crop farmers in Liberia, and to

develop a long term development program for the tree crops sector.

PDO Level Results Indicators* C

ore

Unit of

Measure Baseline

Cumulative Target Values** Frequency Data Source/

Methodology

Responsibility

for Data

Collection

Description (indicator

definition etc.)

YR 1 YR 2 YR 3 YR 4

Indicator One: Area of smallholder tree crop farms rehabilitated,

replanted or planted under the project,

disaggregated - Rehabilitation

- Replanting

- New Planting

Ha

0

0

0

0

0

0

0

0

1,800

1,300

500

0

5,800

3,700

1,250

850

11,30

0

7,100

2,200

2,000

Annual

- Contracted

concessionair

es and service providers

reports

PMU/PCU

Indicator Two: Incremental yearly

net cash flow in project area:

- High input rehabilitated cocoa - Medium input rehabilitated cocoa

- Rehabilitated coffee

- Rehabilitated oil palm (farmers‟ run plantation)

- Rehabilitated oil palm (out growers

scheme)

US$/ha

120 120

0

0

0

0 0

0

0

0

580 230

0

50

90

660 130

140

400

560

760 180

200

500

700

Annual

- Annual producer and

value chain

surveys

PMU/PCU

- Annual targets

- Incremental yearly net

cash flow is defined as the increase in monetary cash

flow (incomes minus

expenses) per ha, after financing received from

the project (grants) and

from participating input suppliers (short term

credit)

- Baseline yields are negligible in the case of oil

palm and coffee in the

absence of marketing and processing facilities and

opportunities. Baseline

cash flow for high and medium cocoa is 120

USD.

Indicator Three: Long term credit delivered to oil palm and rubber out

growers under the project US$‟000 0

0

100

300

620 Annual

- Contracted

concessionaires reports

PMU/PCU

- Credit delivered as in-kind

through concessionaires

Indicator Four: Farm access roads rehabilitated

Km 0 0 60 115 145 Annual

- Concessionaires reports

- Cocoa main

operator

PMU/PCU

Farm access roads are tertiary unsurfaced roads

18

reports

Indicator Five: Direct project

beneficiaries, (of which are female)

Number (%)

0 0

750

(10%)

2,600

(15%

5,000

(20%) Annual

- Service

providers reports

- CAO

supervision reports

PMU/PCU

Indicator Six: Long term large scale

tree crop development program formulated and approved by Ministry

of Agriculture

Yes/No No No No No Yes Annual - Program

document PMU/PCU

INTERMEDIATE RESULTS

Intermediate Result (Component One): Tree Crop Revitalization

Intermediate Results Indicator One : Yield of high input rehabilitated

cocoa

Mt/ha 0.12 0 0.75 1.2 1.3

Annual

- Annual producer &

value chain surveys

PMU/PCU

- Dry beans - Baseline yield is the

average yield in the current

situation (un-rehabilitated trees) before project

intervention

Intermediate Results Indicator Two:

Yield of medium input rehabilitated cocoa

Mt/ha 0.12 0 0.37 0.45 0.5 Annual

- Annual producer &

value chain surveys -

PMU/PCU

- Dry beans

- Baseline yield is the average yield in the current

situation (un-rehabilitated

trees) before project intervention

Intermediate Results Indicator Three:

Yield of rehabilitated coffee

Mt/ha 0 0 0 0.4 0.5 Annual

- Annual producer &


PMU/PCU

- Dry cherries

- Baseline yield is the average yield in the current

situation (un-rehabilitated

trees) before project intervention

Intermediate Results Indicator Four:

Yield of rehabilitated oil palm Mt/ha 0 0 1.0 4.0 5.0 Annual

- Annual producer &


PMU/PCU

- Fresh Fruit Bunches (FFB)

Intermediate Results Indicator Five:

Cocoa Farmer Organizations (FOs)

strengthened

Number 0 0 25 43 43 Annual

- Report of service

providers

- CAO supervision reports

PMU/PCU

- Main areas of

strengthening are: cocoa&

coffee rehabilitation technologies, post harvest

handling, bulking,, storage,

collateral management, marketing, negotiation

skills, accounting and

financial management -

Intermediate Results Indicator Six: Number 0 0 1 1 1 Annual - Report of service PMU/PCU - Main areas of

19

Farmer‟s run Oil Palm Plantation

Cooperative strengthened

providers

- CAO supervision reports

strengthening are: oil palm

rehabilitation/replanting, seedlings production,

processing, marketing,

accounting and financial management

-

Intermediate Results Indicator Seven:

FOs strengthened in out grower schemes


- Report of service

providers - CAO supervision

reports

PMU/PCU

- Main areas strengthening:

high input oil palm & rubber replanting

technologies, , accounting,

acting as buying agents for concessionaires

-

Intermediate Results Indicator Eight: Volume of cocoa bulked by project-

supported FOs Mt 0 0 170 500 1,000 Annual

- Collateral manager

reports - FOs‟ activity and

financial reports

PMU/PCU

- Annual targets

- Volume is based on dry

beans

Intermediate Result (Component Two): Institutional Building and Preparation of Future Large Scale Tree Crop Development Program

Intermediate Result Indicator One:

Capacity building plan for MoA & CDA developed

Yes/No No Yes

Annual - Capacity building

plan - PMU/PCU

Intermediate Results Indicator Two:

Persons trained


- Training service

provider reports

- PMU/PCU - MoA, CDA, EPA staff

Intermediate Results Indicators

Three: Coaching of MoA & CDA staff

Person-

days 0 14 54 80 128 Annual - Coaches‟ reports

- PMU/PCU

- Coaching is follow-up to training provided

Intermediate Results Indicator Four:

County Agricultural Offices equipped

Number 0 5 5 5 5 Annual - CAO reports - PMU/PCU

- Computers, motorbikes, etc.

Intermediate Results Indicator Five:

CDA field offices equipped

Number 0 0 5 5 5 Annual - CDA reports - PMU/PCU

- Cumulative targets

- Computers, motorbikes, etc

Intermediate Results Indicator Six:

National Policy and Strategy for FO

and Cooperative development

formulated and validated with all

national stakeholders

Yes/No No No No Yes Yes Annual

- Regional and

National validation

workshops reports

- Participatory

evaluations reports

- PMU/PCU

Intermediate Results Indicator Seven: Methodology for community land use

rights validation agreed with

stakeholders

Yes/No No Yes Yes Yes Yes Annual - Validation workshops

reports - PMU/PCU

20

Intermediate Results Indicator Eight:

Tree crop master plans formulated in a participatory process under MoA

leadership

- Cocoa - Coffee

- Oil Palm

- Rubber

Yes/No

No

No

No No

No

No

No No

No

No

No No

Yes

Yes

Yes Yes

Annual

- Master plans

documents

- Reports of consultants on the

processes of

preparation & validation

- PMU/PCU

21

ANNEX 2: DETAILED PROJECT DESCRIPTION

REPUBLIC OF LIBERIA


1. The Project development objective would be “to increase access to finance, inputs,

technologies and markets for smallholder tree crop farmers in Liberia, and to prepare a long term

development program for the tree crops sector.”

2. To achieve such an objective, the project is structured around three components:

(i) Smallholder Tree Crops (cocoa/coffee, oil palm & rubber) Revitalization; (ii) Institutional

Building and Preparation of Future Large Scale Tree Crop Development Program; and

(iii) Project Coordination and Management.

Component 1: Smallholder Tree Crop Revitalization (US$ 16.9 million, including an IDA

contribution of US$ 9.5 million)

3. Sub-Component 1.1 – Cocoa and Coffee Revitalization (US$ 12.2 million, including an

IDA contribution of US$ 6.5 million). The sub-component would be implemented in three of the

country‟s main cocoa/coffee producing counties (Nimba, Bong, Grand Gedeh). Cocoa/coffee

revitalization activities would adopt a value chain approach, with investment at several steps of

the cocoa and coffee value chains:

(a) re-launching production and increasing quality during primary processing at farm

level and during primary assembling level of harvest;

(b) increasing bulking of harvest through building the technical and financial capacity

and the storage infrastructure of existing and newly established cocoa & coffee

Farmers‟ Organizations (FOs);

(c) linking farmers more directly to cocoa/coffee buyers and exporters through their FOs

thanks to capacity building, equity matching grants and collateral management

services;

(d) facilitating access of cocoa/coffee smallholders and their FOs to adapted financial

services to increase FOs‟ capacities to bulk produce from their members and safely

transfer money from buyers/exporters to producers;

(e) rehabilitating market access feeder roads, wherever critical, to provide access to

cocoa/coffee FOs at which first level of storage would be built (50 km in total); and

(f) promoting small scale primary processing (into cocoa butter, coffee powder, etc.)

targeting the national and regional food and cosmetics markets.

4. All activities would be centered on building the technical, financial, managerial and

marketing capacities of cocoa/coffee smallholders and their organizations.

5. Compared to rubber and oil palm, the cocoa sub-sector presents greater challenges for its

revitalization due to the absence of a strong private sector player with a commercial interest and

a strategic vision to develop the industry and establish backward linkages with farmers. Hence,

the main entry point for upgrading of the cocoa and coffee value chains would be the

establishment and strengthening of FOs which would allow smallholder cocoa/coffee farmers to

22

realize economies of scale in marketing and accessing finance and other support services. FOs

would initially be assisted to focus on grading and bulking of cocoa and coffee, negotiating with

buyers and marketing cocoa and coffee, either directly to exporters or to their agents. As their

organizational and management capacities and their business savviness grow, FOs would be

supported in establishing linkages with input suppliers and financial institutions on behalf of

their members. Technical and social support provided by the project will facilitate cocoa and

coffee FOs qualification to receive certification (FLO, Rain forest, UTZ) and access preferential

markets. The proposed medium and high input rehabilitation models (and new cocoa planting)

are fully compatible with these certification standards, as support provided would address equity

considerations, environment protection, FOs‟ empowerment, and child labor issues.

6. Restoring cocoa and coffee production. To restore production, the project would support:

(i) the rehabilitation of existing smallholder cocoa farms (5,000 ha), as there is much scope to

resume production of existing cocoa plantations; (ii) new plantings of cocoa (1,000 ha) as there

are good market prospects for cocoa, targeting both smallholders already having a small cocoa

farm (in average one hectare or less at present) and new comers in the cocoa sector, in particular

youth and women; (iii) on a smaller scale, the rehabilitation of existing smallholder coffee farms

(1,500 ha) as coffee plantations have been neglected (or even cut down) for the last twenty years

and rehabilitated coffee farms would generate much less income than cocoa.

7. To achieve this, the project would notably support: a) the development of cocoa (and

coffee) village nurseries and the maintenance of cocoa and coffee seed gardens complementarily

with other ongoing initiatives (IITA/STCP, EU-funded project, etc.). Costs of such activities

have been integrated into the crop models as seedlings costs; b) the provision of extension and

advisory services (technical, managerial and marketing training and coaching) to participating

farmers and their FOs using the Farmer Field School (FFS) and other participatory approaches.

Indicatively, an FFS would be formed by 25 participating cocoa/coffee farmers. These advisory

services would be delivered by a main cocoa operator (international service provider),

overseeing the overall implementation of the sub-component on behalf of the MoA, together

with specialized cocoa input suppliers and other national actors such as the Cooperative

Development Agency, individual trainers, local NGOs, and a collateral management agency.

8. Cocoa would be rehabilitated according to two different models:

(a) the medium input model, consisting of under brushing, reducing the shade (debarking

large trees), weeding and pruning cocoa trees, and applying fungicides to fight the

black pod disease and insecticides to control the myrid (capside) insects. Even 40 to

50 years old trees can be rejuvenated by such medium input rehabilitation, as was

very successfully tested in Ghana since 2002. Yield is expected to increase to 450 kg

(of dry beans) per hectare during the year of rehabilitation, peaking at a minimum of

600 kg per hectare two years after rehabilitation; and

(b) the high input model, consisting of the same operations combined with the

application of specialized cocoa fertilizers to boost production. This model has also

been very successfully tested in Ghana, in pretty similar climatic and soil conditions

to those prevailing in northern counties in Liberia. Yields achieved in Ghana under

such a cropping pattern are much higher (up to 2,500 kg of dry beans per ha). In

Liberia, they are assumed at 750 kg (of dry beans) per hectare during the year of

23

rehabilitation, progressively increasing to 1,800 kg per hectare five years after

rehabilitation.

9. Regarding new cocoa planting, pesticides are not needed in the early years after planting,

and in most cases (when planting on 7 to 8 year-old fallow) fertilizers are not needed either, as

produced ashes under a slash-and-burn system would provide soil nutrients to ensure the cocoa

tree growth. Therefore, the only external input cost to support is the production of quality

seedlings from high yielding varieties. In view of the limited financial resources of cocoa

smallholders (especially new cocoa farmers) and for equity concerns vis-à-vis the rubber and oil

palm farmers supported under the project, it is proposed that seedlings production costs would be

covered through a grant; therefore no medium term credit would be needed for cocoa new

planting.

10. The various crop models (rehabilitation with medium or high input, new planting) could be

implemented simultaneously or during subsequent years on the same farm. It would depend on

the available labor and financial resources of each farmer as well as on the condition of the trees.

This would allow participating farmers to compare yields and net returns generated by each

technology. Considering the limited labor requirement (16 to 30 days per ha), farmers would

provide their own labor for the cocoa rehabilitation or planting operation, or mobilize community

or family labor.

11. The indicative targets and pace of cocoa and coffee farms rehabilitation and planting, by

county, are shown in Tables 1 to 3 below:

Table 1: Proposed Scope of Cocoa/Coffee Revitalization (ha)

Crop Acreage (ha) (Nimba, Bong & Grand Gedeh counties)

Cocoa Rehabilitation a/

High input model

Medium input model

5,000

2,000

3,000

Cocoa New Planting 1,000

Sub-Total Cocoa 6,000

Coffee Rehabilitation 1,500

a/ 40% under high input, 60% under low input.

Table 2: Proposed pace for Cocoa Revitalization (ha), by county

Nimba, Bong and Grand Gedeh Counties Project Year

Y1 Y2 Y3 Y4 Total

Rehabilitation (high input) 0 300 700 1,000 2,000

Rehabilitation (medium input) 0 500 1,000 1,500 3,000

New planting (high input) 0 0 500 500 1,000

Total 0 800 2,200 3,000 6,000

Section FOs supported (new per year) 0 15 15 0 30

Clan FOs/Coops supported (new per year) 0 10 0 0 10

District Coops supported (new per year) 0 3 0 0 3

Direct beneficiaries 0 400 1,100 1,500 3,000

Total FO/cooperatives beneficiaries 0 2,250 2,250 0 4,500

24

Table 3: Proposed pace for Coffee Revitalization (ha), by county

County

Project Year

Y1 Y2 Y3 Y4 Total

Bong 0 100 200 200 500

Nimba 0 200 300 500 1,000

Total Coffee 0 300 500 700 1,500

12. Financing of inputs (tools package, fertilizers, fungicides, and insecticides) would require a

mix of grant and short term credit, to be repaid either in cash or in kind (cocoa)7:

(a) For the medium input cocoa rehabilitation model, the project would finance as a

grant (US$200 per ha) the small tool package and about half of the pesticides costs

for the first year of rehabilitation (N0), in order to overcome the initial cash

constraints; the remaining pesticides costs would be supported by the farmer, thanks

to an in-kind credit from the participating specialized cocoa input suppliers. In view

of the increased gross margins resulting from that rehabilitation, farmers would then

be expected to purchase pesticides in the following years from their own resources.

(b) For the high input cocoa rehabilitation model, the project would provide a higher

grant (US$400 per ha) that would equally cover about half of the fertilizer and

pesticides costs for the first year of rehabilitation (N0), the remaining 50 percent

being financed by the participating smallholder (through an in-kind credit from

participating input suppliers). The second year (N1), the input costs would be

financed by the farmers own resources (possibly also through an in-kind credit from

the input suppliers if the farmers and input suppliers agree upon such arrangements).

From the third year after rehabilitation, cash flow calculations show that, for both

cocoa rehabilitation models, input costs can easily be financed by the farmers‟

increased cocoa incomes.

(c) For cocoa new planting, as indicated above, the project would support the

establishment of village nurseries (possibly ran by the established FFS and section

FOs) that would produce high quality cocoa seedlings and distribute them to FFS/FO

members for planting (costs estimated at US$122 per ha); an additional small grant

would cover the fertilizer costs in case it would be needed.

(d) Concerning coffee rehabilitation, the project would finance, as a grant (US$200 per

ha), the procurement of small tools package and the pesticides costs for the

rehabilitation year (N0) during which no harvest is envisaged; pesticides costs during

the following year would be covered by the farmers‟ own resources (possibly

through an in-kind credit from input suppliers).

13. Proposed financing arrangements for cocoa and coffee farm development costs are

summarized in Table 4 below.

7 The leading input provider for high tech cocoa rehabilitation in Ghana has developed a farmer extension method

based on the formation and close supervision of small groups of farmers which are affiliated into a national

association. This group extension approach uses joint liability and peer pressure mechanisms to ensure farmers

repaying their loans to the input provider. Repayment rates are 98%, reportedly.

25

Table 4: Proposed cocoa & coffee farm development financing arrangements (US$ per ha)

Crop model

Rehabilitation

/

Development

Costs

Year

N0

Costs

Grant Credit and/or

Beneficiary contribution

Amount % of N0

costs

% of Inv.

Costs Amount

% of Inv.

Costs

Cocoa Rehabilitation (high input) 763 763 400 52% 52% 363 48%

Cocoa Rehabilitation (medium input) 366 225 200 89% 55% 166 45%

Cocoa New Planting (high input) 285 200 200 100% 70% 85 30%

Coffee Rehabilitation (low input) 334 200 200 100% 60% 134 40%

14. The in-kind credit provision by input suppliers seems feasible given the positive

experience in Ghana and the fact that at least one input supplier is interested and already started

operating under these arrangements in northern Liberia. This input supplier has recently entered

the Liberian market, replicating the model it has developed in Ghana, and targeting 5,000

farmers and 4,000 hectare of high input rehabilitated cocoa (0.9 hectare per farmer) over the next

five years. Once success in Liberia would have been demonstrated, it is likely that other input

suppliers would follow.

15. Securing cocoa and coffee smallholders land use rights. Securing land tenure is a key

issue for all smallholders, particularly for tree crop farmers (see sub-component 2.1). Before

embarking on supporting the rehabilitation/replanting of cocoa and coffee trees, the resolution of

potential land use conflicts and clarification of land use rights of participating cocoa/coffee

smallholders would be ensured through a land use rights validation process, undertaken by a

specialized NGO. Clear and undisputed land use rights would be a condition of participation in

the project for smallholders. The identification/selection process of participating cocoa/coffee

farmers, to be undertaken by the participating input suppliers and the main cocoa operator field

staff (see Annex 3), will include carrying out family/community land use rights validation and

mapping of cocoa and coffee farms/plots of potential participants using GPS technology and

under a participatory process involving traditional and local authorities. Capacity building and

community sensitization on land dimensions of the project would be supported, and mediation of

disputes affecting concerned land would be ensured. In addition, in the case of new plantings, the

project would also assist smallholders in boundary demarcation and land surveying and in

obtaining tribal certificates. The later would constitute a condition of participation in new

planting activities.

16. Support to cocoa and coffee Farmer Organizations. In parallel to forming groups of

cocoa/coffee smallholders (farmer field schools -FFS) to learn and apply cocoa and coffee

rehabilitation and replanting techniques, the project would support the establishment of new

cocoa/coffee FOs at section level (formed by two to four FFS) and the strengthening of selected

existing cocoa/coffee FOs (associations and cooperatives) at clan and district level. These FOs

will deal with bulking, quality promotion, and marketing and are at the centre of the project

strategy to upgrade the cocoa and coffee value chains. The initial focus would be at the section

level in order to foster bottom-up processes, democratic governance and accountability.

Eventually, section-level FOs would be assisted to federate into clan and district level FOs, if

they wished so. These FOs would have crucial functions: a) overseeing FFS of which their

members are part; b) promoting quality and best agricultural and post-harvest (fermentation)

practices; c) bulking the cocoa/coffee production from their members; d) storing and marketing it

to exporters and their agents; and e) pre-financing the cocoa/coffee harvest. It is assumed that

26

members would be willing to sell their cocoa/coffee to their FO provided they can be paid

promptly (cash basis) and at a fair price by the FO. FOs would also probably be involved in the

near future in procuring inputs in bulk in liaison with participating input suppliers.

17. Capacity building and organizational development of FOs would include a mix of training

and coaching covering a variety of subject areas. An initial organizational and financial audit of

existing FOs in the project area would be undertaken. For both the previously existing and newly

created FOs support would be provided in the following areas: (i) review/update or development

of FO statuses and by-laws; (ii) training in governance, accountability and democratic processes;

(iii) elaboration of business and organizational development plans; (iv) training and coaching in

basic accounting, record keeping and financial management; (v) on-the-job training and

backstopping in warehouse management including grading, storage and quality control, provided

by a specialized collateral manager service provider; and (vi) training and coaching in dealing

with commercial partners and financial institutions, provided by the collateral manager. The

organizational development of FOs would be supported through capacity building and mentoring

over a two to three-year period, in support to marketing enhancement activities (see below).

18. Cocoa and Coffee marketing enhancement. To enhance the FOs‟ bulking and marketing

functions, the project would: a) increase the storage capacity of established/strengthened FOs

through supporting the construction of: 30 small warehouses (20 tons capacity) for newly

established section FOs, 10 medium-sized warehouses at existing clan FO level, and 3 bigger

warehouses for 3 existing district cooperatives; b) provide these FOs with quality equipment

(moisture meter, solar dryers) to improve and guarantee product quality and consequently obtain

better prices; c) increase FO‟s financial resources to allow them to buy cocoa/coffee from their

members, through equity matching grants (MGs); d) linking FOs with cocoa exporters/buyers

and Participating financial institutions (PFIs) and building trusts of cocoa buyers in the

established/strengthened FOs through financing collateral management services, operated by a

specialized and independent internationally and nationally-recognized service provider (SGS,

ACE, etc.).

19. FOs‟ internal capital formation would be supported through equity MGs that would top up

the incremental share payments by FO members and retained earnings. The grant amount is

estimated at respectively US$ 3,200 per new section FO and US$ 3,800 per existing clan FO.

MGs would be disbursed over two years under a declining matching formula. They would be

instrumental for increasing the FO‟s ability to purchase more cocoa and coffee from their

members by paying in cash upon delivery. Immediate cash payment would attract increased

volumes as farmers are in need of cash at the beginning of the season and tend to sell to whoever

offers immediate cash, even at highly-discounted prices. Larger volumes will enable FOs to sell

in bulk at more attractive prices. Second, the bankability of the FO would be enhanced by

capacity building and coaching in the areas mentioned above, and by co-financing the services of

a collateral manager for the more mature FOs. The latter would enable FO to access additional

working capital through field warehousing arrangements whereby cocoa and coffee stored at the

FO‟s premises would be collateralized to obtain additional working capital finance.

20. Cocoa/coffee smallholders and FO’s access to adapted financial services. In addition to

strengthening the ability of farmers and their organization to absorb and repay credit, the project

would assist cocoa/coffee smallholders and their FOs to access adapted financial services (loans,

deposits and payment services) delivered by participating financial institutions (PFIs) and rural

microfinance institutions (MFIs). In particular, the project would finance:

27

(a) the establishment of rural MFIs in the districts of intervention, based on the MC2

model which has been successfully implemented by Afriland First Bank in

Cameroon, and is now being replicated in Liberia (Afriland would establish five MC2

per year countrywide from its own resources, as from 2011). The project would

support the establishment of an additional six MC2

in the estimated six districts of

project intervention within the targeted “cocoa and coffee” counties (Bong, Nimba,

Grand Gedeh). After future members of each MC2 would have raised the minimum

capital needed, the project would support the building construction/rehabilitation

(including the vault), the procurement of the office and computer equipment, and the

technical assistance and part of the operating costs during the first two years of

operation (total costs estimated at US$50,000 per MC2);

(b) the establishment of about 12 banking windows at section/clan level, to be opened by

participating commercial banks at merchant‟s shops. This encompasses some

building improvement and procurement of office and computer equipment

(US$10,000 per cashing window). Such banking windows would be linked to mobile

phone banking systems that are currently being developed by some PFIs (notably

Ecobank); and

(c) building the capacity of PFIs‟ executive and lending staff in key areas for agricultural

financial product development and delivery such as agricultural loan appraisal, cash-

flow based lending, value chain financing and commodity collateralization, and use

of innovative delivery methods such as mobile phone and affiliated banking

windows. Based on specific demands from PFIs/MFIs, the project would also finance

the post-training follow-up support delivered by international consultants to

introduce new products and procedures aimed at enhancing financial services for

cocoa and coffee FOs.

21. Piloting cocoa/coffee value addition (processing). One supported FO (probably a district

cooperative) would be supported in establishing a small scale cocoa and coffee processing unit

(using batch processing with a maximum capacity of 60 kg per hour) on a pilot basis. The project

would finance the design and feasibility study of the unit by an agro-processing regional

consultant and the procurement of the equipment. The required initial working capital (short term

loan) would be financed by a PFI. The unit might either be owned by the FO and run by

contracted professionals; or be set up as a joint venture with private investors.

22. Sub-Component 1.2: Smallholder Oil Palm Revitalization (US 1.4 million, including an

IDA contribution of US$ 1 million). The sub-component would be aimed at: (i) rehabilitating

old oil palm trees that are not too high through manual operations undertaken by the

smallholders themselves (using their own family labor), through the procurement and

distribution of a tools package (about US$ 50 per ha) to participating smallholders. It would

consist of: clearing the undergrowth (under brushing), weeding around the trees and between the

rows; (ii) supporting replanting of smallholder oil palm, under either: a low input cropping

pattern (use of high quality seedlings but without fertilizers, in the case of the farmers‟ run old

palm plantation) or a high input model (use of high quality seedlings and of fertilizers, as on the

concessionaires‟ estate) in the case of the out grower scheme. Under both models, participating

farmers would contribute their own family labor as sweat equity; (iii) supporting the

establishment and strengthening of oil palm farmer organizations (oil palm blocks associations,

cooperatives); (iv) provision of training and technical advice to small farmers; (v) limited

28

infrastructure rehabilitation (access roads and related small bridges and drainage structures)

wherever critical to provide access to groups of farms; and (vi) the establishment of small scale

processing facilities for the farmers‟ run plantation -where no modern mills are present. Contrary

to cocoa and coffee, quality differentiation for palm oil is not very relevant in current national

market conditions.

23. The sub-component would support two major models for smallholder oil palm

revitalization:

(a) re-launching production and processing of one existing farmers’ run plantation in

Grand Gedeh County: the Dube plantation in Konobo District; and

(b) testing a more classical out growers model around a concessionaire in Grand Bassa

County.

24. The indicative scope and pace of oil palm revitalization are shown in tables 5 and 6 below.

Table 5: Proposed Scope of Oil Palm Revitalization (ha)

Model Type Rehabilitation Replanting Total

Farmers‟ run Oil Palm plantation (Dube) in Grand Gedeh 300 300 600

Out growers Oil Palm model in Grand Bassa (with EPO-

LIBINCO) 300 300 600

Total Oil Palm Component 600 600 1,200

Table 6: Proposed pace of Oil Palm Revitalization (ha), by county

Model Type / County Project Year Total

Y1 Y2 Y3 Y4

Farmers' run plantation in Grand Gedeh

Rehabilitation 0 100 100 100 300

Replanting 0 100 100 100 300

sub-total 0 200 200 200 600

Out growers scheme with EPO/LIBINCO in Grand

Bassa


Replanting (high input) 0 100 100 100 300

sub-total 0 200 200 200 600

Total Oil palm 0 400 400 400 1,200


Replanting 0 200 200 200 600

Farmers' run plantations Block FOs supported

(new)

0 4 0 0 4

Farmers' run plantations - Cooperative (new) 0 1 0 0 1

Out growers FOs supported (new per year) 0 2 2 2 6

Direct beneficiaries 0 200 200 200 600

25. Support to the Dube Farmers’ run Oil Palm plantation. The project would support the

rehabilitation of one farmers‟ run plantation in Grand Gedeh County, the Dube plantation in

Konobo District. This plantation was developed in the 80‟s by the Liberia Produce Marketing

Company (LPMC) and was then handed over to a smallholders‟ Cooperative. The labor

component for the rehabilitation or replanting of trees would be covered by the farmers

29

themselves. The project would finance: (i) the sensitization and identification and selection of

beneficiaries, including the validation of land use rights (and mapping) at family/community

level; (ii) the development of nurseries by the Cooperative that would produce high and fast

yielding oil palm seedlings to be distributed to the participating smallholders (costs estimated at

US$ 350 per ha replanted, financed as a grant); (iii) the provision of small tools packages to

participating smallholders for rehabilitating old palms that are not overgrown and could still

yield for a few years (grant estimated at US$ 50 per ha rehabilitated); (iv) the technical support

and management advice to the smallholders and the Cooperative provided by a national

specialized service provider; (v) the reorganization and capacity building of the Cooperative with

support from the CDA, local NGOs and individual trainers; and (vi) the establishment of about

four small scale processing units on the plantation, at block level, in order to produce quality

palm oil for the local and national market. These units would use batch processing with

maximum throughput of one ton per hour of fresh fruit bunches (FFB). They would be owned

and operated by the Cooperative itself (the Cooperative may also decide to sub-contract the

operation of these units to professional operator/small & medium scale enterprises (SMEs) while

remaining the owner of the facilities). Another option would be to facilitate the involvement of a

private investor that would finance the processing unit from its own resources, under a joint

venture agreement with the Cooperative8; this may require a dedicated equity or guarantee

facility to be negotiated with the interested investor and PFI.

26. Smallholder Oil Palm out grower scheme. The project would test an out grower model

around LIBINCO/Equatorial Palm Oil (EPO), which is currently rehabilitating a large oil palm

plantation (Palm Bay plantation, around 4,000 ha) and has installed a very large nursery for its

own replanting needs as well as a modern mill (5 tons per hour) which started operations early

2011. As above, support to rehabilitating old oil palm farms would consist of a small grant

(US$ 50 per ha) covering the costs of procuring a tools package. Support to high input replanting

would consist of delivering high quality seedlings (produced on the concessionaires‟ nursery)

and fertilizers (procured by the concessionaire), together with the associated technical advice and

supervision of planting through a small team of about two field technicians (smallholder unit)

which would be an integral part of the concessionaires‟ staff.

27. Similarly to sub-component 1.1, clarifying and securing land use rights of oil palm

smallholders would be a preliminary activity during the sensitization, identification and selection

phase of smallholders. It would be ensured through a family/community land use rights

validation and mapping process, undertaken by the same specialized NGO. Clear and undisputed

land use rights would be a condition of participation in the project for oil palm smallholders.

During the identification/selection process of farmers, oil palm farms/plots of potential

participants would be mapped using GPS technology. Capacity building and community

sensitization on land issues and mediation of disputes affecting concerned land would also be

supported by the project.

28. In the out grower model, input costs would be charged to each participating oil palm

smallholder account and financed under a long term credit arrangement, thanks to a dedicated

8 For example, in the case of the Zleh Town Oil Palm plantation in Grand Gedeh, an American investor (Alternative

Enterprises International inc.) is already supporting farmers in rehabilitating their farms and has signed a joint

venture agreement with the Cooperative, which however is not favourable to farmers. In case the project would

support a joint venture agreement to run the processing facilities for the Dube plantation, it should ensure that such

agreement is fair under a win-win arrangement for both the cooperative members and the private investor.

30

line of credit negotiated between the MoA, the Central Bank of Liberia (CBL), one PFI and

EPO-LIBINCO. A grant of US$ 350 per ha, covering about 50 percent of the input costs in the

establishment year (N0) (and about 21 percent of total development costs until maturity,

excluding labor) would lower the credit requirement and associated credit risk and the repayment

burden for the participating farmers. The credit recovery from smallholders would be ensured by

EPO-LIBINCO through deductions on the purchase of FFB of targeted smallholders (30 percent,

until full repayment of the loan).

29. The establishment of oil palm FOs around the concessionaire‟s estate would be encouraged

in order to facilitate extension and distribution of inputs during the replanting period, and later

on, the bulking and transport of FFB to the EPO mill. As for the cocoa and coffee sub-

component, these established FOs would benefit from capacity building and organizational

development that would include a mix of training and coaching covering a variety of subjects.

An initial organizational and financial audit of existing FOs in the project area would be carried

out. For both existing and newly created FOs, the project would support: (i) the

review/update/development of FO statuses and by-laws; (ii) training in governance,

accountability and democratic processes; (iii) elaboration of business and organizational

development plans; (iv) training and coaching in basic accounting, record keeping and financial

management; (v) on-the-job training and backstopping in best agricultural practices and in

dealing with the concessionaire.

30. In the out grower model, the project would finance: (i) the initial community/family land

use validation process; (ii) the incremental costs of the concessionaire‟s smallholder unit (staff

salaries, procurement of motorbikes and office and field equipment, and associated operating

costs); (iii) the long term credit requirements to finance the farm development costs (input costs)

during the project implementation period, to be disbursed through the CBL and an agreed PFI

(see Annex 8), as an in-kind credit extended by EPO/LIBINCO. The remaining credit needs to

be disbursed after the 4-year implementation period would be financed by the MoF/CBL;

(iv) training and knowledge sharing activities benefiting the established oil palm FOs; and (v)

limited feeder roads development or rehabilitation, as may be needed, to link smallholder‟s plots

to the EPO mill (estimated at 30 km).

31. The management agreement signed between MoA and EPO will mention EPO‟s

commitment to maintain the smallholder unit staff and assume its associated operational costs

after the 4-year project implementation period, in order to ensure sustainability of the technical

support provided to participating smallholders.

32. The financing arrangements for rehabilitating/replanting oil palm farms, under both the

farmers‟ run plantation and the out growers models, are summarized in table 7 below.

31

Table 7: Proposed oil palm farm development financing arrangements (US$ per ha)

Crop model

Rehabilitation

/

Development

Costs

Year

N0

Costs

Grant Credit and/or


Amount % of N0

costs

% of Inv.

Costs Amount

% of Inv.

Costs

Oil palm Rehabilitation 50 50 50 100% 100% 0 0% Oil palm Replanting (farmers' run) 350 350 350 100% 100% 0 0% Oil palm Replanting (out growers) 1,703 672 350 52% 21% 1,006 79%

33. Sub-Component 1.3: Smallholder Rubber Revitalization (US$ 3.2 million, including an

IDA contribution of US$ 2.0 million). The sub-component would be aimed at: (i) replanting

existing smallholder rubber farms (1,600 ha), to replace old trees which are not yielding any

more; (ii) supporting new planting of smallholder rubber farms (1,000 ha) to extend acreage of

existing small farms9; such land extension would be done after environmental screening;

(iii) supporting the organization of farmers’ groups, and the provision of training and technical

advice to small farmers; and (iv) limited feeder road rehabilitation (access and feeder roads or

farm tracks and related small bridges and drainage structure; about 90 km in total), wherever

critical to provide road access to groups of farms. Compared to cocoa and coffee, marketing

enhancement and certification is not relevant for rubber as there is no latex price differentiation

according to quality: factories mainly produce Technically Specified Rubber (TSR) 20, which

price is determined at Asian and US commodity exchanges.

34. The sub-component would be implemented in two counties (Montserrado and Margibi)

through out grower type arrangements by: (i) one concessionaire, the Salala Rubber Corporation

(SRC) in Margibi county; and (ii) one large Liberian rubber estate, the Morris American Rubber

Company (MARCO) in Montserrado and Margibi counties. Each of them operates a rubber

factory. The indicative scope and pace of rubber revitalization is shown in Tables 8 and 9 below.

Table 8: Proposed Scope of Rubber Revitalization (ha)

County (Partner) Montserrado

& Margibi

(MARCO)

Margibi

(SRC)

Total

Rubber Replanting 500 1,100 1,600

Rubber New Planting 300 700 1,000

TOTAL Rubber 800 1,800 2,600

9 New planting would be limited to existing small farms under STCRSP, and to farmers already selling their rubber

to the processors, being able to pay interest charges during the immaturity period and therefore representing a lower

credit risk. Newcomers, notably youth and newcomers, would be considered under a possible follow up project.

32

Table 9: Proposed pace of Rubber Revitalization (ha), by county

County Project Year

Y1 Y2 Y3 Y4 Total

SRC sub-project

Replanting 0 200 400 500 1,100

New planting 0 0 250 450 700

sub-total 0 200 650 950 1,800

Direct beneficiaries (no.) 0 100 325 475 900

MARCO sub-project

Replanting 0 100 150 250 500

New planting 0 0 100 200 300

sub-total 0 100 250 450 800

Direct beneficiaries (no.) 0 50 125 225 400

Total Rubber 0 300 1,000 1,300 2,600

Replanting 0 300 550 750 1,600

New planting 0 0 350 650 1,000

FO/Coops supported (new per

year)

0 2 5 7 14

Direct beneficiaries 0 150 500 650 1,300

35. Only high input models would be promoted. Under such models, each participating rubber

farm would be developed according the same technical standards as the concessionaire/large

estate. While farmers would provide their own labor, replanting and new planting would require

the financing of inputs (high quality budded stumps, fertilizers) through a long term credit

(approximately 10 to 12-year duration with a 7 to 8-year grace period during the immature

period) and a start-up grant of US$ 270 per hectare covering about 30 percent of total

development costs until maturity, excluding labor. The grant would allow for reducing the credit

requirement and therefore the debt exposure and related risks, for both the borrower (the

participating farmer), the PFI and GoL. Land preparation costs could in some case be partially

offset by the selling of old rubber trees for charcoal10

production or through the intervention of

Buchanan Renewables (BR) ltd., which fells old rubber trees on behalf of

farmers/concessionaires and buys the stumps for producing rubber wood chips for export mainly

to European markets.

36. As for the oil palm out grower scheme, the long term credit line financed by IDA would

cover the planting/replanting input costs (exclusive of farm labor) for the duration of the project,

after which the MoF/CBL committed to finance the remaining disbursements from its own

resources. Credit disbursement to farmers would be in-kind through inputs provided by the

rubber concessionaires/large estate. Costs of inputs delivered to participating smallholders

(rubber stumps, fertilizers) would be built into each farmer account. Credit recovery would be

ensured through deductions at source, by the concessionaire, from the sales proceeds of the

rubber11

procured from smallholder borrowers, to be repaid progressively to the CBL (or the

10

A study will be financed as part of the project to identify the impact of charcoal on natural forests. There is

concern that the increased use of old rubber trees for the production of wood chips will have increased impact on the

natural forests. 11

A deduction of 30% on sales has been assumed, as is the case in most rubber out grower schemes world wide.

33

agreed PFI). The GoL would assume the foreign exchange risk and the larger share of the credit

risk, the PFI assuming the remaining credit risks (see Annex 8).

37. The financing arrangements for planting/replanting rubber, under the various cropping

patterns of participating concessionaires, are summarized in table 10 below.

Table 10: Proposed rubber farm development financing arrangements (US$ per ha)

Crop model

Rehabilitation

/

Development

Costs

Year

N0

Costs

Grant Credit and/or


Amount % of N0

costs

% of Inv.

Costs Amount

% of Inv.

Costs

Rubber (re)planting - SRC 885 281 270 96% 30% 615 70% Rubber (re)planting - MARCO 878 276 270 98% 31% 608 69%

38. The project would finance the technical assistance extended by the concessionaires/large

estate which would set-up (or strengthen) their smallholder development units, which size would

depend on each sub-project scope: (i) one senior field officer and eight field technicians in the

case of SRC (the smallholder unit manager is already on duty); and (iii) one smallholder unit

manager, four field technicians and one book keeper in the case of MARCO.

39. Staff of these units would be responsible for: (i) sensitizing smallholders and local

authorities about the project scope and modalities; (ii) identifying potential participants and

verifying they meet eligibility criteria to be enrolled in the out grower scheme, including having

land use rights validated at family/community level; (iii) carrying out a preliminary assessment

of the beneficiaries‟ credit worthiness through analyzing the household composition, economic

activities (on and of-farm), labor availability, sources of incomes, the size and status of their

trees crop farm; preparing with each out grower a rehabilitation/replanting schedule (to be

implemented in say 2 to 3 years) according to needs, labor availability and to financial capacity

of each out grower; assisting smallholders in filling their loan application forms provided by the

PFI; and passing on the loan application to the PFI for review and approval; (iv) checking in the

field that participating smallholders have carried the necessary operations (under brushing,

clearing, lining and pegging, digging holes, etc.) before distributing stumps to them;

(v) supervising planting and up keep of trees until maturity; (vi) checking in the field that

farmers follow the recommended cropping pattern (regular weeding and under brushing,

fertilizer application as scheduled, etc.); (vii) delivering on the spot training using group

methodologies (FFS or equivalent), including for tapping; (viii) organizing farmers into block

FOs; (ix) credit/grant financial reporting; and (x) implementation monitoring and impact

evaluation.

40. The participating concessionaires/large estate would maintain the necessary smallholder

units staff after the project implementation period (and assume the associated operating costs) in

order to ensure sustainability of the provision of technical services to participating smallholders,

until their trees reach full maturity and peak yield. This will be reflected in the management

agreement they will sign with MoA.

41. The project would also finance critical feeder roads and farm tracks re-opening or

rehabilitation, to better connect smallholders‟ blocks with the concessionaires and the rubber

factories. To the extent possible, labor intensive or labor based methods would be used.

34

42. Similarly to sub-components 1.1 and 1.2, securing land use rights of rubber smallholders

would be a preliminary activity during the sensitization, identification and selection phase of

beneficiaries. As for the cocoa and oil palm revitalization sub-components, it would be ensured

through carrying out a family/community land use rights validation and mapping process,

undertaken by the same specialized NGO. Clear and undisputed land use rights would be a

condition of participation in the rubber out grower schemes. During the identification/selection

process of farmers, to be undertaken by the concessionaire field staff, farms/plots of potential

participants would be mapped using GPS technology. Similarly to other sub-components,

capacity building and community sensitization on land issues and mediation of disputes affecting

concerned land would also be supported by the project.

43. The establishment of rubber FOs would be encouraged in order to facilitate extension and

distribution of inputs during the replanting period, and later on, the bulking and transport of wet

rubber to the concessionaires‟ rubber factories. As for other sub-components, these established

FOs would benefit from capacity building and organizational development that would include a

mix of training and coaching activities, implemented by the concessionaire/large estate

smallholder unit staff and/or subcontracted by the concessionaire/large estate to service providers

(including individual trainers), with a very close participation of the MoA and the CDA field

staff at County and District levels. The project would support: (i) an initial organizational and

financial audit of existing FOs in the areas of intervention; (ii) the review/update/development of

FO statuses and by-laws; (iii) training in governance, accountability and democratic processes;

(iv) elaboration of business and organizational development plans; (v) training and coaching in

basic accounting, record keeping and financial management; and (vi) on-the-job training and

backstopping in best agricultural practices and in dealing with the concessionaire.

44. All capacity building activities of FOs under the various subcomponents would be

conducted in close collaboration with the CDA and the MoA County Agricultural Offices

(CAOs). The emergence of new grass root FOs would be supported in priority, while selected

existing FOs would receive support only if the organizational, social and financial

diagnostics/audits carried out show prospect for further re-organization and support. The FOs

would be assisted to develop their business and organizational development plans, as well as to

revise/develop their respective status and by-laws under a participatory approach. According to

needs identified in such plans, training of FOs managers, elected officials and membership

would be organized tackling a large range of domains as mentioned above: organizational

management, project planning and costing, basic accounting and financial management,

reporting and monitoring, farming as a business, best agricultural and post-harvest practices,

warehouse management, dealing with traders/buyers and financial institutions, commercial

negotiation, etc. The training strategy would follow a Training of Trainers (ToT) approach and

ensure that a minimum number of members are trained in any single organization. Training

session would be followed by coaching (regular site visit) from the respective trainers (CDA

staff, individual consultants, resource persons, etc.) to ensure sustainability and proper

implementation of FOs/cooperatives projects and business plans.

Component 2: Institutional Building and Preparation of Future Large Scale Tree Crop

Development Program (US$ 3.3 million, of which an IDA contribution of US 3.1 million)

45. The component would aim at: (i) strengthening the main public and private institutions

involved in project planning, coordination and implementation, particularly: the MoA; the

Cooperative Development Authority (CDA); institutions in charge of securing access to land

35

(Ministry of Lands, Mine and Energy -MLME; Land commission -LC) and of agriculture

research; (ii) preparing a follow-up large scale smallholder tree crop development program; and

(iii) contributing to the strengthening and effective performance of the MoA‟s Programs

Management Unit (PMU) that serves all projects implemented by the MoA, and of which the

project coordination team would be part.

46. Sub-component 2.1: Institutional Capacity Building (US$ 1.5 million, including an IDA

contribution of US$ 1.35 million). Seven main groups of activities are envisaged under the sub-

component: (i) Capacity building of MoA and CDA staff; (ii) Support to MoA County offices;

(iii) Support to CDA; (iv) Securing smallholders‟ land use rights; (v) Support to applied tree crop

agricultural research; (vi) Support to the MoA‟s Program Management Unit (PMU); and

(vii) Capacity building of the Environment Protection Agency (EPA).

47. Capacity building of MoA and CDA staff would target technical staff involved in the

project planning, coordination and monitoring and evaluation (M&E), both at Headquarters (HQ)

and county level. A training of trainers (ToT) approach would be used. A rapid assessment of

staff skills and training needs would be carried out, complementary to organizational

assessments that have been recently done by the MoA. Based on the outcomes of the assessment,

staff training could tackle the following domains: role, organization, promotion and management

of FOs/cooperatives; economic development and empowerment of FOs/cooperatives; financial

management and procurement; policy and project design; agronomic issues related to tree crops;

computer literacy; ToT of FO facilitators. Initial training would be followed by a refresher

training the next year if needed, as well as through coaching of trainees by experienced

consultants. A tool box (training materials including numeric support) systemizing the capacity

building activities for FOs/cooperatives would be developed and distributed to trainees.

48. Support to MoA County offices. The project would contribute to the operating costs of the

seven targeted County Agricultural Offices (CAO) in order that these effectively exercise their

promotion, planning, coordination and M&E role of projects‟ activities in their respective

county. This would include: (a) a provision for field allowances in direction of the County

Agricultural Coordinators and some of their technical officers to carry out sensitization or

supervision activities; (b) a contribution to procuring the necessary field equipment or transport

means (motorbikes); and (c) associate operating costs of the CAO office.

49. Support to CDA. As the CDA has a key role to play in the promotion of FOs/cooperatives,

the project would strengthen CDA‟s operational capacity to deliver its services through its

current five offices at county level. This would include: (a) buying the necessary transport means

(about 3 vehicles and 12 motorbikes) and office equipment for field offices; (b) field allowances

for HQ and field offices staff in order to deliver training, business development and managerial

advice to FOs/ cooperatives; (c) associate operating costs of office equipment and transport

means; and d) the elaboration and validation of a National Policy/Strategy for Farmers

Organizations and Cooperatives development: this would comprise technical assistance from

specialized international consultants, setting up and support to a core country drafting team, and

organization of validation workshops.

50. Support to the MoA’s Program Management Unit (PMU). The project would contribute to

the strengthening and to an effective performance of the PMU12

(of which the STCRSP

12

The PMU is currently being established with the support of several donors (World Bank, AfDB, IFAD, EU) in

order to coordinate, manage and implement all projects under MoA‟s responsibility.

36

coordination team, the PCU, would be part). This would encompass a contribution to: (i) the

costs of its senior staff, in particular the PMU Director, the Finance Advisor/Controller and the

Procurement Advisor (3 person-months per year each, from year 2); and (ii) the operating costs

of the PMU (allowances for field visits, operation and maintenance costs for one vehicle and

miscellaneous costs).

51. Securing smallholders’ land use rights. Securing access to land is a key issue for all

smallholders, particularly for tree crop farmers. Most smallholders do not have deeds or land

titles; some of them hold tribal certificates. The GoL, through its Land Commission (LC), is

planning a country wide inventory and screening of the existing tribal certificates. Issuing of land

titles or deeds is a very long and cumbersome process (thirteen steps are needed) which involves:

land survey, carried out by land surveyors attached to County offices of the Ministry of Land,

Mines and Energy (MLME); verification of documents by traditional and clan/district/county

authorities; a vetting process requiring field missions of the Land Commission, which is costly

and slow; etc. before documents can be submitted to the Ministry of Justice. The STCRSP on its

own cannot solve all problems associated to securing land tenure of participating tree crop

farmers and would focus on measures necessary to project success, ensuring that project

participants will be secure in the land they use under the project. As explained earlier (see

component 1), the project would support, in each project area: the validation of participants land

use rights at family/community levels, using participatory methods; mapping farms/plots using

GPS technology; mediation of disputes affecting project land; capacity building and community

sensitization on land issues in direction to smallholders, theirs FOs and local actors (CAO, CDA

and MLME county offices); and in the case of new plantings, cadastral surveying and land

demarcation and assisting participating smallholders in obtaining tribal certificates.

52. Under sub-component 2.1, the project would support cross-cutting and support activities

related to land-related activities: (i) the elaboration of sensitization messages and land training

modules by specialized national consultants; (ii) a validation workshop to discuss with field

stakeholders the proposed family/community land use rights validation and farm mapping

methodologies; (iii) a training of trainers on land issues and project activities in direction to

partner concessionaires and services providers staff; (iv) the establishment of a GIS data base of

landholdings rehabilitated/(re)planted under the project assistance; and (v) a review of the project

land-related activities by specialized international and national consultants during the last year of

implementation, including a land issues stakeholders evaluation workshop.

53. Support to applied Tree Crop Agricultural Research. The project would support applied or

adaptive tree crop research and would be linked to project activities and complementary to other

ongoing initiatives (particularly the West Africa Agricultural Growth Productivity Programme -

WAAPP)13

. It would be implemented by NGOs or national institutions (including the Central

Agriculture Research Institute -CARI). Activities could cover: a) the establishment and

maintenance of seed gardens (cocoa & coffee), in collaboration with the IITA-implemented

Sustainable Tree Crops Program (STCP); b) refurbishing facilities (laboratories) for soil testing,

biological analyses, etc. in link with tree crop development activities financed under the project;

c) support to adaptive research on tree crops, including socio-economic issues: procurement of

13

The National Agriculture Research Institute (CARI) is currently going through a reconstruction phase; its

reconstruction needs (hiring and training new scientists, re-building and re-equipping offices, laboratories, research

fields, etc.) are huge and far beyond the capacity and scope of the STCRSP. STCRSP support to CARI, if any,

should be limited and focused on tree crop research.

37

transport means, allowances for field visits of researchers and other operating costs; d) exchange

visits to neighboring countries and regional agricultural research institutions, for example: the

Cocoa Research Institute of Ghana (CRIG), the Nigeria cocoa research institute, etc.; and

e) possibly, scientific coaching and organizational advice through national and international

consultants, and training of scientists up to Masters or Doctorate level, if needed.

54. Support to Liberia Environment Protection Agency (EPA). Training would be provided to

EPA field staff in targeted counties and to headquarters staff members to strengthen capacity to

monitor activities in the tree crops sector and enforce Liberian environmental requirements. The

training, delivered by specialized environmental specialists, would cover the institutional

arrangements for project implementation, the content of the ESMF and the requirements it places

on individual sub-project implementers, the typical environmental and social impacts of the

project, the typical mitigation and monitoring measures, and techniques for monitoring and

oversight by regulatory agency staff.

55. Sub-component 2.2: Preparing Future Large Scale Smallholder Tree Crop

Development Programs (US$ 0.5 million, including an IDA contribution of US$ 0.5 million).

This would include: (i) the preparation and validation of Master Plans for all targeted tree crops.

Plans would detail strategic options for development, scope, detailed activities, operational

modalities, costing, as well as phasing, building on existing plans whenever relevant. The plans

would build on existing ones; (ii) preparation of a large scale smallholder tree crop development

program (STCRSP phase II) encompassing the following activities: mid-term review of phase I

(i.e. the proposed STCRSP); detailed feasibility studies, notably building upon the strategic

options and conclusions of the adopted tree crops master plans; establishing the basics of

Integrated Pest Management in the tree crops sector will also be included.

56. Sub-component 2.3: Project Preparation Facility (US$ 1.2 million, fully financed by

IDA). This sub-component encompasses the reimbursement of the STCRSP Project Preparation

Facility (PPF) advance which has been approved by the Bank and the GoL in 2010 in order to:

(a) hire consultants to assist the project design and its efficient launch, notably the Project

Preparation Coordinator (PPC), and other specialists; (b) carry out several design studies in

particular the Environmental and Social Management Framework (ESMF) study and the Social

Impact Assessment (SIA) study; and (c) procure essential office equipment and transport means

for the national preparation team within the MOA‟s PMU.

Component 3: Project Coordination and Management (US$ 3.0 million, of which an IDA

contribution of US$ 2.5 million)

57. The objectives of this component would be to: (i) ensure an effective strategic and

operational planning and monitoring and implementation of the project; (ii) ensure an efficient

coordination amongst the two “technical” components of the project on one hand and the various

sources of funding and implementation partners within and outside MoA on the other hand; and

(iii) adequately monitor the project implementation progress and evaluate its final results and

impacts on smallholders.

58. This component has two main sub-components: (a) Strategic planning, coordination,

management and implementation support; and (b) Monitoring and Evaluation (M&E) and

Knowledge Production and Sharing.

38

59. Sub-component 3.1: Strategic Planning, Coordination, Management and

Implementation Support (US$ 2.3 million, including an IDA contribution of US$ 1.8 million)

This would comprise two main groups of activities: (i) support to Steering Bodies; and (ii)

support to the Project Coordination Unit (PCU) operating within the MoA‟s PMU.

60. The Support to Steering Bodies would include: (a) the organization of project launching

workshops at county and national level; (b) supporting regular coordination meetings at County

level (under the responsibility of the CAO) assembling representatives from line departments,

NGOs, FOs/cooperatives, research institution and private sector (concessionaires, service

providers) involved in the agricultural sector and particularly in tree crops development;

(c) operational support to the National Programs Steering Committee.

61. Support to the PCU. The PCU would be staffed with a limited number of highly qualified

and motivated long term consultants: (i) a Project Coordinator; (ii) a Planning, M&E,

Communication and Knowledge sharing Officer; (iii) a Procurement Officer (with international

experience) for 2 years, after which the procurement function would be taken over by the PMU

Procurement Advisor and the PCU Procurement Assistant; (iv) a Value Chain Development

Officer (with strong institutional building and social development skills); (v) a Tree Crop

Agronomist; (vi) an Environmental and Social Safeguards Officer; (vi) a Procurement Assistant;

(vii) an Accountant; (viii) an Administrative and Finance Assistant; and (ix) three logistics

support staff (drivers). The project would finance the following items: (a) long term PCU

consultant salaries and allowances for field visits; (b) procurement of transport means (four 4x4

vehicles) and of computer/office equipment; (c) associated office operating costs of the PMU;

(d) staff training activities including exchange visits in neighboring countries/tree crop

development projects, capacity building in the field of environmental impact

evaluation/safeguards, social assessment, participatory approaches, gender mainstreaming, etc.;

(e) installation of a project accounting and management software and management control tools;

(f) short term national and international assistance in key areas relevant to project

implementation, notably to develop and strengthen environmental & social capacity within the

PMU/PCU.

62. Sub-component 3.2: Monitoring and Evaluation (M&E) and Knowledge Sharing (US$ 0.7 million, including an IDA contribution of US$ 0.6 million). This sub-component would

support two main groups of activities: (i) Monitoring and Evaluation; and (ii) Knowledge

Production and Sharing.

63. Monitoring and Evaluation (M&E). An efficient M&E system that would contribute to an

adequate strategic planning and monitoring of the achievement of the PDO would be supported.

This would include setting up the project‟s M&E system and contributing to the improvement of

the overall PMU‟s M&E system with the assistance of specialized international and national

M&E consultants. Annual participatory planning and evaluations workshops with beneficiaries

and other stakeholders at county and district levels and annual producer and value chain surveys

would be undertaken and would feed into the results framework and planning activities for the

following year. It is also expected these would produce important results for understanding the

tree crop sector in Liberia and the opportunities and threats for its further development. Thematic

impact evaluations would also be carried out regularly by specialized consultants and would

contribute to assessing overall success of the project and to learning, accountability and

transparency. Baseline studies, including surveys per sub-project site and/or thematic area, would

be a priority activity in the first two years of implementation and would require careful design

39

and involvement of a range of actors and stakeholders. The project would also fund the Mid-

Term Review (in project-year 3) and the final evaluation of the STCRSP (in project-year 4) to

make sure lessons learned from the first phase would be integrated in the larger scale and long

term tree crop development program.

64. Knowledge Production and Sharing. The project would support the elaboration of a

communication and knowledge sharing strategy for the PMU as a whole and for the proposed

project, as well as the development of various communication and knowledge sharing tools using

various media (newspapers, radio, television, internet, etc.) and targeting different audiences

(smallholders, private sector, donors, general public, etc.).

40

ANNEX 3: IMPLEMENTATION ARRANGEMENTS

REPUBLIC OF LIBERIA


Project Administration Mechanisms

1. Executing Agency. The Ministry of Agriculture (MoA) would be the executing agency of

the project. The project coordination and management would be anchored within the existing

government structures, planning and steering committees at national and district levels. Overall

project coordination and implementation would be ensured by the central MoA‟s Program

Management Unit (PMU).

2. Donor Coordination, Alignment and Synergy. The project would enhance coordination,

alignment and synergy between donor-funded activities/operations in the tree crop sector. As

such, main project activities, results, and implementation issues would be discussed at the regular

monthly meetings of the MoA-led Agricultural Coordination Committee (ACC) which gathers

the main donors and international NGOs involved in the development of the agriculture sector.

3. National Steering Committee. To the extent possible, the project National Steering

Committee (NSC) would use an existing MoA-chaired NSC in charge of the oversight of other

MoA-implemented projects. Composition of this NSC would thus be adapted to fit the STCRSP

needs, ensuring the participation of representatives from: (a) concerned line Ministries (Ministry

of Land, Mines and Energy; Ministry of Finance; Ministry of Public Works; Ministry of

Commerce and Industry; Ministry of Planning and Economic Affairs) and Government Agencies

(National Investment Commission); (b) MoA‟s headquarter divisions and targeted County

Agricultural Offices (CAOs); (c) Farmers‟ Organizations (FOs) and cooperatives (Liberia

Federation of Farmers Associations, Liberia Federation of Cooperative Societies, Liberia Rubber

Farmers and Brokers Union); (d) the private sector (participating concessionaires, Chamber of

commerce and industry, Rubber Planters Association of Liberia); (e) financial institutions

(Central Bank of Liberia, Association of commercial banks, Association of microfinance

institutions); and (f) participating donors (World Bank -WB).

4. The NSC would have an advisory role and would meet twice a year. Its main

responsibilities would include: (i) providing conceptual, strategic and political guidance to the

PMU for the planning, implementation and coordination of project activities; (ii) ensuring

overall conformity with Government policies and strategies; (iii) reviewing project progress and

performance reports and Annual Work Program and Budget (AWPB), before there are sent to the

Minister of Agriculture‟s approval and forwarded by MoA to IDA for non-objection and/or

information; (iv) resolving any implementation problems or conflicts; and (v) assisting the PMU

in obtaining, whenever needed, Government assistance and financial contribution to the project.

5. Project Coordination Unit (PCU) within the MoA’s PMU. Overall project planning,

coordination, implementation, and monitoring and evaluation (M&E) would be ensured by the

MoA‟s PMU, as for all other projects implemented under the responsibility of the MoA. A

dedicated team looking after the STCRSP day-to-day implementation, the Project Coordination

41

Unit (PCU), would be inserted into the PMU. This team would benefit from the support of senior

PMU staff in core functions such as strategic guidance, insertion of the project activities within

the overall MoA investment plan (LASIP), financial management and administration,

procurement and M&E. The project would finance the establishment and operational costs of the

PCU and would contribute to the staffing costs of senior PMU staff (see Annex 2). In order to

address the shortcomings and identified risks with regards to financial management,

procurement, and M&E, the project includes a number of training activities, exchanges of

experiences, and specialized short term international technical assistance to build the capacity of

the PMU/PCU (see component 2.1 and 3.1 in Annex 2) in these key domains.

6. The main PCU functions could be summarized as follows: (i) ensure the overall

coordination of the project, make sure components activities complement each other and are

complementary to other ongoing projects implemented by the MoA; (ii) manage project funds on

behalf of the MoA, keep financial records according to international standards, implement

internal management control, and ensure regular external audit; (iii) prepare Annual Work Plans

and Budgets aggregating demand from beneficiary farmers/FOs, and work plans and budgets

proposed by implementing agencies/services providers; (iv) identify potential implementing

agencies/goods and service providers, organize their selection/hiring with MoA‟s PMU,

negotiate and sign contracts with selected implementation partners/goods & service providers,

and carry out all procurement work related to the project; (v) prepare quarterly, semi-annual and

annual project progress and monitoring and evaluation (M&E) reports and present them to the

NSC; (vi) organize NSC meetings, act as the NSC secretariat, and ensure that NSC

recommendations, as well as recommendations of supervision and implementation support

missions are duly implemented, and report adequately to the MoA, the WB and the NSC on their

follow-up; (viii) plan and organize all M&E activities, including baseline studies and thematic

impact assessment studies; (ix) ensure regular supervision of project activities in the field, and

ensure that MoA and CDA County offices participate in such supervision; (x) solve any problem

arising during project implementation.

7. The project would contribute to the staffing costs of such senior PMU staff (see Annex 2).

In order to address the shortcomings and identified risks with regards to financial management,

procurement, and M&E, the project includes a number of training activities, exchanges of

experiences, and specialized short term international technical assistance to build the capacity of

the PMU/PCU (see component 2.1 and 3.1 in Annex 2) in these key domains.

8. County Agricultural Coordination Committees (CAC). Through its decentralized

offices (CAOs), the MoA has established County Agricultural Coordination Committees (CAC)

in each county. Under the leadership of the County Agricultural Officer, CAC meetings are

organized monthly and gather all important stakeholders involved in the sector (other GoL

decentralized departments in charge of land, planning, forestry, etc., main NGOs, FAO field

staff, the private sector -for example BR in Grand Bassa). As farmers and cooperatives are not

yet fully organized at county level, they do not participate at present but should be encouraged to

do so in the future. The CAC‟s purpose is mainly to exchange information between participants

concerning the numerous emergency and development projects implemented in the county and

their progress. The STCRSP would provide funding to strengthen this excellent initiative in

targeted counties. Such funds could be used to carry out studies, field visits, organize knowledge

sharing events, develop a data base on projects‟ activities, etc., depending on the specific

proposals of each CAC.

42

Implementation arrangements by component

9. Main service providers/operators. One service provider/operator would be hired to

coordinate the implementation of each of the sub-projects. The PMU/PCU would be responsible

for contracting these main service providers/operators. This would include: the development of

Terms of Reference (ToRs); tender documentation and single-source Memorandum of

Understanding (MoU) in the case of oil palm and rubber out grower schemes; screening and

evaluation of technical and financial proposals under procurement procedures agreed with the

WB; and finalizing contractual arrangements. Although most of the sub-project activities would

be implemented by the main operator themselves, it is expected that they would sub-contract

other services providers14

to implement some specialized activities such as training of FOs,

collateral management services, etc. Particularly in the case of strengthening of FOs under

component 1, sub-contracting to specialized service providers including local NGOs and

individual trainers may be necessary.

10. Sub-component 1.1: Cocoa/coffee revitalization. Coordination and overall

implementation of the sub-component would be contracted out to one service provider/operator

(international NGO or consulting firm, input supplier, exporter, collateral manager and credit

support company, or a consortium of several service providers), with demonstrated technical and

financial capacity, to be hired on a competitive basis (limited international bidding after a pre-

qualifying stage). Given the range of activities to be covered, this main operator might need to

sub-contract several specialized service providers. Areas of support under the sub-component

include: a) technical advice and extension (implementation of FFS) to restore cocoa and coffee

production, to be implemented by the main contractor field staff and the participating input

suppliers field staff; b) linking with participating input suppliers and securing their long term

intervention with cocoa farmers to ensure a sustainable provision of pesticides and fertilizers;

c) training in post-harvest handling, primary processing and best agricultural practices; d) FO‟s

organizational development and marketing enhancement; e) improving commercial linking

betweens FOs and cocoa/coffee buyers; f) direct financial support to FOs (warehouse

building/rehabilitation, procurement of agricultural tools, of quality equipment, etc.);

g) warehouse collateral management and linking with PFIs; h) promotion of small scale cocoa

and coffee processing if feasible; and i) enhancing cocoa and coffee smallholders‟ access to

adapted financial services (sub-contracting PFIs to support the establishment of rural MFIS, of

banking windows, training of PFIs‟ staff). Especially the mentoring and on the job-training of

FOs on warehouse and financial management, internal reporting, marketing and dealing with

commercial and financial partners, as well as the collateral management services, are likely to

require a specialized service provider.

11. Staff of the main cocoa and coffee main operator would be responsible for: (i) identifying

the districts, clans and sections where there is a concentration of cocoa and coffee and other

favorable conditions for project implementation, and lead the sensitization process; (ii) on behalf

of the MoA‟s PMU, organize the selection of sub-contracted services providers (land use

validation NGO, input suppliers, collateral manager, civil works enterprises, trainers,

participating financial institutions (PFIs), etc.), prepare contracts to be signed with them by the

PMU, and then follow-up their work and authorize payment of their services by the PMU; (iii) in

14

Services providers could be: local or national NGOs, consulting firms, input suppliers, individual consultants,

resource persons from GoL agencies (MoA, CDA), etc.

43

partnership with the contracted input suppliers, identify potential beneficiaries, check their cocoa

and coffee farms in the field (mapping, status of trees), their land tenure and FO/cooperative

membership status, their household composition and income generating activities, the

availability of family labor, their motivation to participate in the project; in short, whether they

comply with beneficiary selection criteria; (iv) plan, organize and supervise the development of

an cocoa village nurseries together with the FOs/cooperatives and their members, including

selection and importation of high quality parent seeds in cooperation with the IITA/STCP and

with regional cocoa and coffee research institutes and/or projects; (v) together with the

contracted input suppliers, deliver practical technical training and advice in the field to groups of

beneficiaries, using the FFS methodology, tackling best agricultural practices and post-harvest

handling; (vi) for new cocoa planting, verify that participating smallholders have carried out the

necessary operations (under brushing, clearing, lining and pegging, digging holes, etc.) before

distributing seedlings; supervising planting and up keep of trees until maturity; (vii) plan and

follow-up on the implementation of FO capacity building of collateral management activities,

and extend marketing and management advice to established and strengthened FOs;

(viii) implement the marketing enhancement activities: warehouse building, procurement and

installation of quality equipment, allocation of equity matching grants to FOs, linking FOs to

exporters/buyers and PFIs, capacity building, etc. (ix) plan the feeder road rehabilitation

activities in liaison with actors of the cocoa and coffee value chains (FOs, buyers, transporters)

and the Ministry of Public Works, and prepare the recruitment of engineers and contractors, as

necessary, on behalf of the PMU; (x) ensure the overall monitoring and progress and financial

reporting to the PMU with regards to the implementation of the sub-component, making sure

that participating smallholders, FOs and sub-contracted service providers adequately report on

their activities, in a timely manner, as agreed in contracts signed with them; (xi) train/support

these actors to ensure they would actively and efficiently participate in M&E activities; (xii)

assist the district cooperative in managing the small scale cocoa/coffee processing unit (or the

sub-contracting of its operation to a professional partner); (xiii) assist the cooperative in liaising

with financial institutions; and (xiv) manage sub-project funds advance, keep records

accordingly, and produce activity and financial reports in a timely manner, as agreed with the

PMU/PCU.

12. Sub-component 1.2: Smallholder Oil Palm Revitalization. Implementation modalities

would vary according to the sub-project type, as described below.

13. Farmers’ run Oil Palm Plantation Sub-project. There are three existing farmers‟ run

plantations15

in the target counties. Due to the relative modest acreage to be revitalized (300 ha

of rehabilitation and 300 ha of replanting), the project would support one existing

plantation/cooperative in Grand Gedeh County: the Dube plantation in Konobo District16

. The

sub-component would be implemented preferably by a national service provider (NGO,

consulting firm) to be selected through a limited national competitive bidding process after a pre-

qualifying stage. Second option would be to include the sub-component in the package of

activities to be implemented by the main cocoa & coffee operator (see above).

15

Zleh Town and Konobo plantations in Grand Gedeh; and Patawee plantation in Nimba (currently supported by a

USAID-funded project). Foya plantation, in Lofa, is out of the project area. 16

The Zleh Town plantation already receives support from a private American investor, and the Kpatawee

plantation is supported through a USAID-funded project implemented by Winrock international.

44

14. Due to the small size of the project, it is estimated that one field technician equipped with a

motorbike (with some backstopping from the selected service provider headquarter staff) could

implement the proposed technical and management support activities. His/her role would be to:

(i) identify potential beneficiaries together with the oil palm cooperative and the CDA, check

their oil palm farms in the field, their land tenure and cooperative membership status, their

household composition and income generating activities, the availability of family labor, their

motivation to participate in the project; in short, whether they comply with beneficiary selection

criteria; (ii) plan, organize and supervise the development of an oil palm nursery together with

the cooperative and its member, including selection and importation of high quality parent seeds

in cooperation with the IITA/STCP and with national and regional oil palm research institutes

and/or projects; (iii) deliver practical technical training and advice in the field to groups of

beneficiaries, possibly using the FFS (or equivalent) methodology, tackling best agricultural

practices and post-harvest handling; (iv) coordinate, supervise and contribute to the

implementation of the capacity building activities of the oil palm cooperative in close relation

with the CDA and resource persons/consultants; (v) control the cropping operations (land

preparation) that farmers would agree to carry out before receiving seedlings, as well as

maintenance operations after planting to be carried by farmers; (vi) together with the PCU,

organize the procurement of tools to be distributed to participating farmers; (vii) participate in

the sub-project M&E activities and train/support the cooperative/beneficiaries to ensure they

would actively participate in M&E activities; (viii) liaise with potentially participating input

suppliers and securing their long term intervention with oil palm smallholders to ensure a

sustainable provision of fertilizers if needed; (ix) with the cooperative, organize the planning,

project preparation and implementation of the oil palm mills, and liaise with potential private

investors as may be necessary; (x) assist the cooperative in managing the small scale oil palm

mill (or the sub-contracting of its operation to a professional partner) as well as its (palm oil)

marketing activities; (xi) assist the cooperative in liaising with financial institutions; and

(xii) manage sub-project funds advance, keep records accordingly, and produce activity and

financial reports in a timely manner, as agreed with the PMU/PCU.

15. Equatorial Palm Oil (EPO)-LIBINCO Sub-project. Implementation of the component

would be under the responsibility of EPO-LIBINCO, under a negotiated agreement with the

MoA. Similarly to the above-described sub-project, it is estimated that a small team of two

technicians equipped with motorbikes could implement the proposed technical and management

support activities. Their role would be to: (i): identify potential beneficiaries together with the

CAO, check their farms in the field and other eligibility criteria (land tenure status, household

composition, ongoing farming activity and income generating activities, availability of family

labor, motivation to participate in the project, etc.); (ii) assist potential beneficiaries in preparing

their oil palm farm rehabilitation/replanting schedule and in filling their loan application; (iii)

pre-assessing their credit worthiness and transmit their loan applications to the PFIs; (iv) deliver

practical technical training and advice in the field to groups of beneficiaries, possibly using the

FFS (or equivalent) methodology, tackling best agricultural practices and post-harvest handling;

(v) coordinate, supervise and contribute to the implementation of the establishment of and

capacity building of oil palm farmers block groups; (vi) control the operations (land preparation)

that out growers would carry out before receiving seedlings and fertilizers, as well as the regular

maintenance (under brushing, weeding, fertilizer application, etc.) of their farms after planting;

(vii) under arrangements agreed with the PCU, procure the agricultural tools to be distributed to

participating out growers; (viii) carry out the sub-project M&E activities, and train/support

45

participating smallholders and their organizations to ensure they would actively participate in

M&E activities; (ix) manage sub-projects funds, keep records accordingly, and maintain

individual smallholder accounts (to which the value of delivered inputs would be charged and

from which deductions would be made from crop supplies to service each individual

smallholders long term loan); and (x) produce activity and financial reports in a timely manner,

as agreed with the PMU/PCU and CBL/PFIs.

16. Sub-component 1.3: Smallholder Rubber Revitalization. The component would be

implemented through: (i) one concessionaire, the Salala Rubber Corporation (SRC) in Margibi

and Bong counties; and (ii) one large Liberian estate, the Morris American Rubber Company

(MARCO) in Montserrado and Margibi counties. In each case, the concessionaire/large estate

would be supported by the project to establish or strengthen a technical team (smallholder unit)

in charge of smallholder promotion and training. Teams would be headed by a smallholder unit

manager and staffed with field technicians, some with land tenure competence, and with

minimum administrative assistance staff (particularly for keeping records of individual accounts

of smallholders with regard to credit delivery/repayment in liaison with the PFI). The size of

such teams will be proportionate to the sub-project size as measured by the acreage to

replant/plant and the estimated number of beneficiary smallholders.

17. The main roles of these teams would be to: (i) sensitize smallholders and local authorities

about the project scope and modalities; (ii) identify potential beneficiaries in collaboration with

the CAOs, checking their farms in the field and verifying they meet eligibility criteria to be

enrolled in the out grower scheme (land use rights, farm size, household composition,

availability of family labor, motivation to participate in the project, etc.); (iii) assist the

specialized NGOs carrying out the land use rights validation at community/family level;

(iv) prepare with each potential beneficiary a (re)planting schedule (to be implemented in say 2

to 3 years) according to the farm needs, labor availability and to financial capacity of each out

grower; (v) based on such schedules, prepare cash flow forecasts to notably check the feasibility

for each participant to pay interests during the immature period; (vi) carry out a preliminary

assessment of the beneficiaries‟ credit worthiness through analyzing the household composition,

economic activities (on and of-farm), labor availability, sources of incomes, the size and status of

their trees crop farm; (vii) assist smallholders in filling the loan application forms provided by

the PFIs and pass them on to the PFI for review and approval; (viii) once individual loan

agreements have been signed, establish and maintain individual smallholder accounts to which

the value of delivered inputs would be charged and from which deductions would be made from

crop supplies to service each individual smallholders long term loan; (ix) check in the field that

participating out growers have carried the necessary land preparation operations (under brushing,

clearing, lining and pegging, digging holes, etc.) before distributing planting material to them;

(x) procure agricultural tools and fertilizers to be distributed (as in-kind credit) to out growers,

under conditions and methods agreed with the MoA/PCU; (xi) control the regular maintenance

operation that out growers should carry out before receiving fertilizers after planting; (xii) check

in the field that out growers follow the recommended cropping pattern (plantation density,

regular weeding and under brushing, fertilizer application as scheduled, etc.), until trees reach

maturity; (xiii) deliver practical technical training and advice to groups of beneficiaries, possibly

using the FFS methodology (or equivalent), tackling best agricultural practices, tapping

techniques and post-harvest handling; (xiv) coordinate, supervise and contribute to the

establishment and capacity building of rubber farmers‟ associations that would oversee input

distribution, participate in the organization of field training and possibly act as rubber buying

46

agents in the future; (xv) carry out the sub-project M&E activities, and train/support participating

smallholders and their organizations to ensure they would actively participate in M&E activities;

(xvi) manage sub-projects funds, keep records accordingly, and produce activity and financial

reports in a timely manner, as agreed with the PMU/PCU and CBL/PFIs.

18. For the two sub-projects, participating rubber smallholders would provide their own labor

contribution for planting and maintenance operations up to maturity, while inputs (seedlings,

fertilizers) would be provided in kind by the concessionaire/large estate. These input costs would

be built into each individual long term loan to be repaid to the PFI through deductions on the sale

of wet rubber to the concessionaire/large estate. The long term credit line would be managed by

a dedicated unit to be established in CBL (see Annex 8).

19. Salala Rubber Corporation (SRC) Sub-project. SRC has a factory in Wyeala that is

currently mainly supplied by smallholders (at 80 percent) as the estate owned by SRC in Salala is

under replanting. SRC would work with targeted smallholders through a dedicated Smallholder

Technical Unit and with the rubber purchasers who are coming from the communities and well

known to the farmers. As a first phase, SRC would mainly target smallholders that are easily

reachable from the estate (radius of about 30-50 km), promoting a high input model and covering

an estimated 1,800 hectares of replanting/new planting.

20. MARCO Sub-project. MARCO is the largest rubber company fully Liberian owned. Its

estate (4,000 hectares) is only half developed and is being replanted. It operates a rubber factory

(2 tons per hour), largely with over capacity. As a first phase, the Board of the company is

willing to hand over about 300 hectares to smallholders that would plant rubber under a high

input model. Participating smallholders would be mainly current or former workers of the estate

or their close relatives or landless/smallholders coming from neighboring villages surrounding

the MARCO estate. They would receive contiguous plots (the area to be planted is already

identified and being surveyed). After full repayment of their long term debt, MARCO would be

willing to assist them in obtaining a full deed17

. Modalities of such land title issuance (or long

term lease) would be detailed in the Project Implementation Manual (PIM) and in the

management contract negotiated with MARCO.

21. For all four tree crops, activities aimed at enhancing participant security of tenure on their

tree crops land would be implemented by specialized service providers: (a) one NGO with

expertise in land use rights and local staff capacity validation and land dispute mediation; and (b)

for new plantings, one survey firm which would assist participants with boundary demarcation

and cadastral land surveying. The project would build capacity in both the PCU and the service

providers to deal with the land issues encountered by the project.

Financial Management

22. In accordance with the Financial Management (FM) Manual issued by the FM Sector

Board in March 1, 2010, an FM assessment was carried out to assess the adequacy or otherwise

of the arrangements for managing the project by the MoA. The objective of the assessment was

to determine whether MoA has acceptable FM arrangements, which will ensure: (i) the funds are

used only for the intended purposes in an efficient and economical way; (ii) the preparation of

accurate, reliable and timely periodic financial reports; (iii) safeguard the entity‟s assets; and

17

or alternatively to sign long term (25 to 30 years) lease agreement with participating smallholders bearing a

symbolic yearly lease fee (a few US$ per hectare and per year), although this is a least preferred option.

47

(iv) adequate fiduciary assurances are provided through an independent audit of the project. It is

proposed that the donor-funded PMU of the MoA would manage and coordinate the project

implementation, including carrying out the FM functions of the project. The FM risk has been

assessed as Medium-I with respect to MoA. But, with the articulated risk mitigation measures

through the use of PMU during implementation, this FM risk would residually fall to Medium-L.

23. Country and Sector Issues. A PEMFAR was conducted in 2007 that included an analysis

of Liberia‟s public financial management (PFM) systems‟ strengths and weaknesses. The

findings from the PEMFAR showed that the Government of Liberia (GoL) has taken

considerable actions to improve PFM since 2006. The GoL, in partnership with multilateral and

bilateral development partners, has implemented a wide range of PFM reforms covering aspects

of policy, legislation and institutional arrangements and systems. These reforms have sought to

restore working conditions of the PFM systems and to modernize them to enable the GoL

respond better to implementing its poverty reduction and development strategies. The most

critical of these reforms has been the passing of the PFM Act in August 2009 which has also

provided the foundation of other PFM reforms. Several institutional reforms have also been

implemented: a macro fiscal analysis unit has been created; the former Bureau of the Budget has

been merged into the Ministry of Finance (MoF), as a department; a Debt Management unit has

been strengthened and the accounting function has been unified by merging two department and

bringing them under the control of the General Comptroller. Other reforms have introduced a

new chart of accounts and International Public Sector Accounting Standards (IPSAS) for

reporting, improved revenue management and administration, and also restored in the external

audit function.

24. Moreover, the GoL has adopted Cash Basis IPSAS as the standard for government

accounting. The implementation of the Integrated Financial Management Information System

(IFMIS) has automated government accounting and preparation of budget and fiscal outturn

reports. Besides, the Cabinet approved the Internal Audit strategy in June 2008 that proposes the

establishment of an internal audit framework and a charter clarifying the roles and

responsibilities for internal controls. Notwithstanding these improvements, many challenges

remain. There is the critical need to expand and deepen the implementation of the PFM law and

to have its full effect on all aspects of Government PFM systems. Improving budget credibility

will be key, particularly as the GoL implements its second generation PRS over the period 2012-

2016; it will be of paramount importance to strengthen alignment of the budget during its

formulation and execution with GoL‟s policy commitments and extend its coverage to more

aspects of aid resources and other areas that have hitherto not been well captured. In the same

vein, improving accounting and reporting and the oversight functions of the General Audit

Commission and the Legislature would need to be addressed. Importantly, attention would need

to be paid to strengthen roles of key PFM units (MoF, Ministry of Planning and Economic

Affairs) to provide requisite leadership in the implementation of the reforms.

25. The majority of donor expenditure is project based and not executed through the

government budget. This is critical and needs to be addressed in accordance with the aspirations

of the Paris Declaration and Accra Agenda for Action on aid effectiveness and use of country

systems. Furthermore, the country lacks a sufficient number of qualified accountants to serve the

public and private sector. As an interim measure, a Project Financial Management Unit (PFMU)

hosted in the MoF has been providing centralized FM services for donor-funded projects. The

PFMU is staffed with qualified consultants with experience in managing donor-funded projects.

48

Fiduciary risks for donor-funded projects have been mitigated by the use of the PFMU, which

has internal controls and procedures and practices acceptable to IDA. However, in order to

ensure a better appropriation and facilitate the implementation of donor-funded projects, line

ministries are starting establishing their own PMUs embedded with procurement and FM

functions, as is the case for MoA.

26. Overview of Institutional Arrangements. Due to the weak FM capacity at MoA and the

need to ensure an effective and efficient management of resources, it is proposed that the MoA‟s

PMU be responsible for the FM functions of the project. Created in June 2009 with the

assistance of the African Development Bank (AfDB) and the International Fund for Agricultural

Development (IFAD), the MoA‟s PMU is staffed with competent professionals. It is headed by a

Director who is responsible for ensuring the overall direction of its work. It has a financial

management division that has been used as the centralized unit responsible for the FM functions

of donor-funded projects implemented by the MoA (notably the AfDB and IFAD-funded

Agricultural Sector Rehabilitation Project -ASRP). This division is headed by a FM Specialist

with a Masters Degree in Accounting and vast professional accounting experience. Moreover,

the unit has three qualified accountants with Bachelors degree in Accounting. The PMU has

adopted the WB-approved FM procedures of the MoF/PFMU.

27. Staffing. The current capacity of the PMU is adequate to manage the FM arrangements of

existing projects in their portfolio. In order to manage the STCRSP from the fiduciary angle, the

PMU would hire incremental staff (one Accountant and one Administrative and Finance

Assistant) located at the PCU level. These additional staff should be selected during project start-

up activities to ensure that there is ample readiness to commence the project‟s implementation as

soon as it becomes effective. The operational costs of maintaining these staff during the life of

the project, including computer hardware, stationery, mailing withdrawal applications, and

printing project FM reports form part of the project costs (see component 3.1). The PCU staff,

thanks to data provided by implementers/service providers, would undertake financial

monitoring and control and cost accounting (comparison of forecasted and actual unit costs by

activity, comparison of budget and actual expenses).The PMU senior staff (Director, FM

Advisor, Procurement Advisor) would also analyze project financial and activity reports

throughout implementation to compare progress achieved against what was projected in the

Annual Plans of Work and Budgets (AWPB) and in the project documentation (Project Appraisal

Document -PAD and Project Implementation Manual- PIM). They would provide guidance and

recommendations to the PCU Project Coordinator and Planning and M&E Officer (and to the

main sub-projects operators).

28. Budgeting. The PMU/PCU would prepare APWBs for the project based upon the agreed

activities to be implemented. Most of these activities are already known and would be included

in the APWBs. The APWBs would be reviewed by the WB, and No Objections would be issued

by the WB Task Team Leader (TTL).

29. Internal Controls and Audit. The PMU has laid down internal control procedures and

processes that ensure that transactions are approved by appropriate personnel and ensure

segregation of duties between approval, execution, accounting and reporting functions. These

procedures and processes that are documented in a FM Manual were assessed as adequate and

meet IDA requirements. The PMU would however need to consider setting up an internal audit

unit if it is to take on additional projects. The presence of such a unit will help strengthen its

internal control environment.

49

30. Accounting and maintenance of accounting records. Accounting for the use of the

project funds, using a cash basis of accounting, would be carried out by the PMU using the

Quick Books accounting software that provides for adequate recording of all accounting

transactions of the project. The system is also capable of producing accurate periodic financial

reports including Interim un-audited Financial Reports (IFR) and annual project financial

statements that are considered acceptable to IDA. A project Fixed Assets register would be

maintained at all times to correctly reflect assets acquired or created under the project.

31. Periodic Financial Reporting. The PMU would be responsible for preparing the quarterly

interim un-audited financial reports. The financial reports would be submitted to the WB within

45 days of each fiscal quarter after review by the PMU/PCU. The constituents of the quarterly

project IFRs, that would be submitted to the WB within 45 days of each calendar quarter, should

be as follows: (a) Actual and Forecast Cash Flow Statement according to project components,

sub-components and activities; (b) Summary Statement of Expenditures according to

disbursement categories; (c) Designated Account Reconciliation Statement; (d) Physical

Progress Report; and (e) Procurement Status Monitoring Report.

32. The project would also prepare annual financial statements at the end of each GoL fiscal

year in accordance with IPSAS-cash basis. The audited financial statements should be submitted

to the Bank within 6 months of the end of the fiscal year. The financial statements would

comprise, at a minimum, of: (a) Sources and uses of funds (summary of Expenditures shown

under the main program headings and by main categories of expenditures for the period);

(b) Notes to the financial statements, including background information on the project, the

accounting policies, detailed analysis and relevant explanation of the main accounts/major

balances, etc. In addition, the project should provide, as an annex to the financial statements, an

inventory of fixed assets acquired according to asset classes, dates of purchase, location, and

costs.

33. External Auditing Arrangements. Independent and qualified auditors, acceptable to IDA,

would be selected to carry out the annual audit of the project. The auditors would be selected on

competitive basis, in accordance with the Bank's procurement guidelines, within four months of

project effectiveness. The Terms of Reference (ToRs) of the auditors would be cleared by the

WB. The project financial statements including movements in the designated accounts would be

audited in accordance with International Standards on Auditing (ISA) and a single opinion would

be issued to cover the project financial statements in accordance with the Bank‟s audit policy.

The auditors‟ report and opinion with respect to the financial statements, including the

management letter, would be sent to the WB within six months of the close of each GoL fiscal

year.

34. Funds Flow and Disbursement Arrangements. Funds would be disbursed directly into

two Designated Accounts (DA) established in US$ at a commercial bank acceptable to IDA. One

DA would be set up and managed by the PMU for all project expenditures except smallholder

credit. The other DA would be set up and managed by the CBL for smallholder credit. Both the

PMU and the CBL would submit withdrawal applications for the initial deposit and subsequent

replenishment as per the Disbursement Letter. Banking and payment processing would be

managed by the PMU and the CBL respectively in order to ensure adequate control and financial

monitoring. All expenditure approvals and initiation of processing of payments would be done at

the PCU and supporting documents transferred to the PMU for effecting the payments to third

parties. In the case of smallholder credit, all expenditure approvals and processing of payments

50

would be done at the CBL. The project would disburse against statements of expenditures. The

project would provide for the use of advances, reimbursements, special commitments and direct

payments as applicable disbursement methods, and these would be specified in the disbursement

letter. Initial advances would be provided for the implementing entity, based on the forecasts of

eligible expenditures, linked to the appropriate disbursement category. These forecasts would be

premised on the AWPBs that would be provided to the WB and cleared by the WB TTL.

Replenishments would be made regularly, through fresh withdrawal applications to the WB, into

the designated account. Supporting documentation would be retained by the implementing

agencies for review by the IDA missions and external auditors. Any advances made for contracts

would be secured by a bank guarantee or performance-based bonds and a retention amount

withheld.

35. Summary Disbursement Table. The table below indicates the amounts allocated and the

percentage of project expenditures financed by IDA under disbursement categories.

Table 1: Allocation of IDA Credit Proceeds (US‟000)

Disbursement Category IDA Amount

allocated

(US$’000

equivalent)

Percentage financing by IDA

1. Civil Works 1,550 100%

2.Goods 775 100%

3. Consulting Services &

Training

6,800 100%

4. Smallholder Sub-grants 2,950 100%

5. Smallholder Sub-credits 300 100%

6. Incremental Operating Costs 600 100%

7. Refund of First and Second

Preparation Advances

1,225 Amount payable pursuant to Section 2.07 of

the General Conditions --

8. Unallocated 800 --

TOTAL 15,000

51

Procurement

36. Procurement of goods and works and selection of consultants would be carried out in

accordance with: (i) "Guidelines: Procurement of Goods, Works, and non-Consulting Services

Under IBRD Loans and IDA Credits & Grants by WB Borrowers" dated January 2011; (ii)

"Guidelines: Selection and Employment of Consultants Under IBRD Loans and IDA Credits &

Grants by WB Borrowers" dated January 2011; and (iii) “Guidelines on Preventing and

Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and

Grants”dated October 15, 2006 and revised in January 2011; (iv) introduction of Exceptions to

National Competitive Bidding Procedures; and (v) the provisions stipulated in the Legal

Agreements.

37. A Procurement Plan acceptable to the Bank covering the first eighteen months was

submitted prior to Negotiations. For each contract to be financed by the Credit, the different

procurement methods or consultant selection methods, the need for prequalification, estimated

costs, prior review requirements, and time frame would be agreed between the Borrower and

IDA WB task team in the Procurement Plan. The Procurement Plan would be updated at least

annually or as required to reflect the actual project implementation needs and improvements in

institutional capacity.

38. A General Procurement Notice (GPN) will be prepared and published in United Nations

Development Business (UNDB), on the Bank‟s external website and in at least one national

newspaper after the project is approved by the Bank Board, and/or before Project effectiveness.

Specific Procurement Notices for all goods and works to be procured under International

Competitive Bidding (ICB) and Expressions of Interest for all consulting services to cost the

equivalent of US$200,000 and above would also be published in the United Nations

Development Business (UNDB), Bank‟s external website and the national press. For works and

goods using NCB, the Specific Procurement Notice (SPN) will only be published nationally.

39. The general description of various items under different expenditure categories is presented

below. Civil works under the project (US$ 1.8 million) are expected to be procured mostly

through national competitive bidding (NCB) procedures (US$ 1.5 million) and some through

shopping for small works (US$ 0.4 million). Vehicles (US$ 0.3 million) are expected to be

procured using International Competitive Bidding (ICB) procedures. Office and other equipment

(US$ 1.1 million) would be procured partly through NCB and shopping procedures. Consultants‟

Services (US$ 7.2 millions) would generally be selected through quality-and-cost based selection

(QCBS) procedures and other appropriate selection methods including Single Source Selection

(SSS) for concessionaire services. Costs related to Training (US$ 0.7 million) including costs for

travel, indemnity of participants as well as costs of trainers cannot be grouped easily as training

services would be implemented progressively and in a much decentralized way: local shopping

procurement method would mainly apply. Agro-chemicals and tools (US$ 6 millions, of which

US$ 2.4 millions financed by IDA) would be procured using ICB (US$ 1.7 million), local

shopping (US$ 0.2 million) and Force Account (US$ 0.5 million). Planting materials

(US$ 0.9 million) would be procured through Force Account as they would be produced by the

concessionaires‟ or operators‟ own nurseries. Other procurement activities related to incremental

operating costs (US$ 0.7 million) would use finance and administrative procedures of the

MoA/PMU.

52

40. Procurement Risk Mitigation Measures. An assessment of procurement risks was

carried out in December 2010 for the MoA. The MoA is a procurement entity like all other

ministries in Liberia and, therefore, has an established a Procurement Unit and a Procurement

Committee in response to the Public Procurement and Concessions Act (PPCA), amended and

restated in September 2010. The Procurement Division of the MoA, taking the role of

Procurement Unit with respect to the PPCA, is currently headed by an Acting Director of

Procurement, supported by two Procurement Officers, although their job descriptions, in general,

do not have in-depth skills described for the procurement positions they occupy. The

procurement management system of MoA does not necessarily follow the clear and well-defined

cycle of procurement planning, preparation of bidding documents, management of bidding

process from advertisement to bid opening, bid evaluation, contract award, preparation and

signing of contract, contract management and the general management of the procurement cycle. There are challenges in the cycle steps. However, the Procurement Division has been procuring

goods and works successfully, through shopping, National Competitive Bidding (NCB) and

International Competitive Bidding (ICB), especially for vehicles. It has also procured through

direct contracting as approved by the Procurement Committee or the Public Procurement and

Concession Commission (PPCC) depending on the estimated costs. However, it has not been

involved in selection processes for the hiring of Consultants; neither has it also been involved in

contract management and administration.

41. The overall risk for procurement (prior to mitigation measures) was considered “High”

since (i) the current procurement management system of the MoA Procurement Division does

not follow the clear and well-defined procurement cycle, (ii) the staff of this Division has no

professional procurement training neither experience with selection of consultants; and

(iii) record keeping is poor. Table 2 below provides details of proposed mitigation measures.

Table 2: Procurement risks and proposed mitigation measures

No Key Risks Risk Mitigation Actions By Whom By When

1

Inadequate procurement

direction for projects within PMU

Recruit and maintain in place a Procurement

Advisor (PA) with international experience for at

least 24 months

The Ministry working

through the Assistant

Minister for Administration

Already recruited

as of Sept. 2011

2

Inadequate capacity to carry

out procurement planning and implementation

Recruit and maintain in place in PCU at least one

STCRSP project dedicated procurement specialist with international experience for at least 24

months


through the Assistant Minister of

Administration and the

office of PMU Director

Within 3 months

after project effectiveness –

3

The weak job descriptions of the staff of the MoA

Procurement Division, which

limits the inclination of the

staff to be motivated to meet

challenges and do more.

There is need for the Administration to prepare and distribute new and appropriate “Job

Descriptions” for the staff positions in the

Procurement Division to define their assignments

for accountability purposes, and in addition

recognize their services.

The Ministry working through the Assistant

Minister of

Administration

Within six months after the

Procurement

Specialist has been

recruited and has

settled down.

4

Lack of fuller involvement of the Procurement Division

staff in the management of

the MoA procurement cycle

There is need to ensure that the Procurement Division also has responsibility not only for goods

and works, but also for the hiring of Consultants.

Further, until a “technical office” is created for contract management, to monitor the deliveries

from service providers, i.e. contractors,

consultants and suppliers, the Procurement Division should also be staffed to cater for this

important function.

The Ministry working through the Assistant

Minister of

Administration and the office of the PMU

Director.

As soon as possible.

53

No Key Risks Risk Mitigation Actions By Whom By When

In the long term the establishment of a fully

staffed integrated and empowered MoA‟s PMU should address this issue.

5

The lack of adequate

professional training

opportunities for staff to train and, subsequently, have the

capacity to manage

procurement using donor guidelines, in addition to the

use PPCC guidelines for

public procurement.

For sustainability reasons, the training needs of

the staff should be undertaken. Following this, the

current staff, beginning with the Acting Procurement Director should be sent for scheduled

training to empower him to widen his knowledge

base in procurement of goods, works and services (GWS). Following this, the other two Procurement

Officers should also attend the relevant courses in

GWS, in turn; one after the other in order not to disrupt MoA plans. Funds can be drawn from the

procurement capacity building budgets of the

various donor funded projects in the MoA



Minister of Administration to

examine training

schedules at GIMPA in Accra, ESAMI in

Tanzania, IPAM in Sierra

Leone or in India, etc.

As soon as needs

assessments are

completed, and relevant discussions

on this are

completed by the Ministry

6

Need for the ensuring the

involvement of the

Procurement Division staff in the management of all

procurement activities within

the Ministry to promote sustainability after the hired

experts leave.

Transfer one of the trained Procurement

Specialists at the Procurement Division as soon as

possible to work as procurement assistant at the PCU, where an Procurement Specialist with

International experience will be hired. This will

promote the needed involvement and bring the required benefits in time.



Minister of Administration and the

office of the PMU

Director

Within one month

after the

Procurement Specialist with

international

experience has been recruited and

settled down.

7

Not identifying Procurement

champions within the system to provide support in

guidance, mentoring and coaching to trainee

Procurement Specialists, to

promote confidence, and efficiency in their

procurement deliveries

Identifying the internationally hired Procurement

Specialists in the PMU of MoA as the logical champions within the Ministry to play this role,

and expanding the TORs to include providing these services.

Within 3 months after the

Procurement Advisor has been recruited and settled

down

42. As mentioned above, the PMU has the overall planning, coordination, implementation and

monitoring and evaluation for all externally-funded projects implemented under the

responsibility of the MoA. It has established the position of Procurement Advisor (PA), with

international experience, who will advise the different projects in procurement matters. The

STCRSP would co-finance, along with other projects, the PA position. It would also recruit at

the PCU level, for a minimum of 24 months, a Procurement Specialist with international

experience. This staff would be responsible for the procurement of all goods, works, consulting

services and other services for the project and for supervision and oversight of contracts for the

supply of goods and services until the goods (or services) are delivered to their final destination

as specified in the respective contracts. One of the procurement specialists at the Procurement

Division will also be transferred to the PCU as soon as possible to work as a Procurement

Assistant. The project would fund an incentive for the seconded staff. Within the first two years

of project implementation, it is expected that the seconded staff would have been trained,

mentored and coached to be able to carry out the procurement activities until project completion.

43. Implementation Support for Procurement. Bank procurement specialists will regularly

participate in implementation support missions to assist in monitoring procurement procedures

and plans. The procurement plan indicates those contracts which are subject to prior review. All

other contracts are subject to post review. During the regular implementation support missions,

the procurement plans will be updated at least twice each year (or more often as required to

reflect the actual project implementation needs) and post procurement reviews will be carried out

at a minimum once annually.

54

44. Exceptions to National Competitive Bidding Procedures. The following provisions

would apply to the procurement of goods, works and non-consulting services under National

Competitive Bidding procedures: (i) foreign bidders shall be allowed to participate in National

Competitive Bidding procedures; (ii) bidders shall be given at least one month to submit bids

from the date of the invitation to bid or the date of availability of bidding documents, whichever

is later; (iii) no domestic preference shall be given for domestic bidders and for domestically

manufactured goods; and (iv) in accordance with paragraph 1.16 (e) of the Procurement

Guidelines, each bidding document and contract financed out of the proceeds of the credit shall

provide that: a) the bidders, suppliers, contractors and subcontractors shall permit the WB, at its

request, to inspect their accounts and records relating to the bid submission and performance of

the contract, and to have said accounts and records audited by auditors appointed by the WB; and

b) the deliberate and material violation by the bidder, supplier, contractor or subcontractor of

such provision may amount to an obstructive practice as defined in paragraph 1.16(a)(v) of the

Procurement Guidelines.

45. Table 3 below presents the procurement arrangements.

Table 3: Procurement Arrangements (US$‟ 000)

Environmental and Social (including safeguards)

46. Diligent and efficient implementation of the project‟s Environmental and Social

Management Framework (ESMF) would be an overarching responsibility of the PMU/PCU, with

leadership exerted by the PCU Coordinator. Regular monitoring and day-to-day activities related

to the ESMF implementation would be given to the Safeguards Officer of the PCU, who would

act as the ESMF Focal Point and receive assistance in that matter from the Tree Crop

Agronomist -who would have a scientific or agronomic background and experience- and the

55

Value Chain/Social Development Officer -who would have institution building, marketing and

social development skills including gender (see PCU staffing in Annex 2). The Safeguards

Officer would be the point of contact for all issues related to environmental and social impact

management of project initiatives and activities. He/she would be responsible for liaising with

the EPA and participating Line and other Agencies. Environmental focal points would be

designated in the Country Agricultural Offices (CAO) of each of the target counties. They would

be selected from existing CAO staff, and would be responsible for day to day issues arising from

project implementation, to assist with farmer training and awareness programs, liaise with the

county office of EPA, and to monitor compliance and progress. The designated officers would

receive adequate training in environment and social issues, specifically applied to tree crop

development, which delivery would be organized by the PCU. In addition, the service provider

for each sub-project (rubber and oil palm concessionaires/large estate, the main cocoa operator,

the service provider supporting the Dube oil palm plantation, etc.) would designate one of their

staff to act as the focal point with regards to any environmental or social issues; one of his/her

main functions will be to prepare or have prepared the Environment and Social management

Plans (ESMPs) for each individual sub-project.

47. Collectively, these officials would be the project‟s Environmental and Social Management

Team (ESMT). It is important that the ESMT meets regularly and as frequently as necessary to

coordinate prompt responses to arising issues, evaluate data from the monitoring program and

assure efficient implementation of the ESMP. A representative of the EPA should be invited to

attend these meetings as well as representatives of other supporting agencies (e.g. when specific

expertise is required). In addition to convening the ESMT, the PCU Safeguards Officer (with

assistance from the Tree Crop Agronomist and the Value Chain Development Officer) would be

responsible for organizing and assisting in training of personnel of both the PMU/PCU, the

CAOs and sub-project implementers in all aspects of the ESMP, creating a general awareness of

environmental management throughout the participating organizations, partner organizations and

the beneficiary communities.

48. The PCU would collaborate with relevant line agencies (e.g. MoA, EPA), NGO‟s and

International Agencies to: (i) provide expertise in planning, training and field implementation of

IPM, and contribute field staff to be trained as trainers; (ii) utilize members of participating FOs

and participating input suppliers and sub-project implementers staff to facilitate extension and

farmer training; (iii) prepare and produce field guides and other relevant information materials

with sub-projects implementers; (iv) review current policies and adjust/develop policy

guidance/oversight to support the implementation of the project; and (v) review sub-project

proposals submitted by service providers/partners for funding under STCRSP.

49. The screening procedure in the ESMF explains how the information on impacts and

management measures in the ESMF is to be used to produce the environmental and social

management plan (ESMP) for each sub-project. For a proposed sub-project involving

rehabilitation or replanting on an uncomplicated site, the ESMP would normally be simple: a

reiteration of the appropriate generic mitigation and monitoring measures in the ESMF, preceded

by a brief description of the sub-project and followed by identification of the responsible

implementing entities. On the other hand, preparing the ESMP for a sub-project involving new

planting on a site where significant clearing is needed or where sensitive features such as nearby

wetlands might be affected would involve environmental assessment of site characteristics and,

perhaps, development of special mitigation measures for that particular location. In the particular

56

case of palm oil or rubber processing by large-scale operators, the project‟s due diligence would

include confirming that each facility has in place and is implementing an environmental

management plan approved by EPA, that it is generally compliant with applicable standards, and

that the additional throughput that could result from project activities can be accommodated

within existing treatment facilities.

50. The ESMF contains checklists for screening proposed sub-projects, general operational

guidelines, and templates for preparing ESMPs. With respect to new plantings, the screening

procedure takes into account key provisions of OP 4.36 Forests that govern WB support to

plantations as well as OP 4.04 Natural Habitat: avoiding locations where project activities could

result in conversion or degradation of critical natural habitat, giving preference to sites on land

that is not in forest cover, and flagging sites with natural forest for further analysis prior to

approval for new planting. Because of type and scale, most of the sub-projects would not be

subject to Liberian environmental assessment requirements, but there may be some new planting

operations for which that law requires submission of a project brief to the Liberian EPA and the

MoA. Upon receipt of a project brief, the EPA determines what additional environmental studies

are necessary, if any.

51. Although it is not expected that the project would have impacts on physical cultural

resources, OP 4.11 (Physical Cultural Resources) has been triggered on a precautionary basis and

the screening checklist includes questions to ascertain whether there is any PCR present. ESMPs

for new plantations will include a chance-finds procedure. The ESMF also contains a Pest

Management Plan (PMP) which emphasizes Integrated Pest Management but also recognizes

that pesticides will be used during the project (in relatively small amounts) primarily to control

fungal and insect infestations of cocoa and coffee. The pesticides likely to be procured are in

WHO Class II. OP 4.09 permits Bank financing of Class II compounds provided that there are

restrictions on distribution and use in the country and access to and use of the pesticides will be

limited to trained personnel. EPA licenses importation of pesticides and enforces use of

hazardous substances under the Environmental Protection and Management Law, and MoA

maintains a list of approved pesticides against which imports are checked. The PMP provides for

training, and PCU and CAOs will enforce controls on use and access.

52. The project triggered the WB policy on Involuntary Resettlement (OP 4.12). The project

activities have implications for land acquisition, land tenure issues and potential restriction of

access and impacts on livelihood. Although these are likely to be minor and reversible or

manageable impacts typical of category B projects, the GoL, has prepared a Resettlement Policy

Framework (RPF) through a consultative and participatory process since the specific sites were

not known in detail at project design stage. The RPF details the policy, institutional and legal

framework, eligibility criteria and entitlement matrix, methods for valuing assets, organizational

arrangements, budget and monitoring issues. The RPF also includes a grievance redress

mechanism (GRM) and a template for designing a Resettlement Action Plan (RAP) and an

Abbreviated Resettlement Action Plan (ARAP). The RPF also considers that any future large-

scale land acquisition for new plantings will be done in conformity with the requirements of OP

4.12 and guidelines spelt out in the framework.

53. The RPF has been consulted upon and disclosed in country and at the WB Infoshop on 2

and 5 December, 2011 respectively. Among the issues raised during the disclosure and

consultation processes were challenges of youth employment, land disputes, women‟s access to

land, land acquisition by migrants, and land inventorying. In addition, it was noted that there are

57

very high and possibly unrealistic expectations from the project. During implementation, when

the specific sites have been selected a screening exercise would determine whether there would

be a need for a RAP or an ARAP including the rehabilitation of feeder roads, rehabilitation of

warehouses and other rehabilitation or possible construction works. Where RAPs/ARAPs may be

required, the appropriate processes for preparation, reviews and clearances as per OP 4.12 (and

spelt out in PIM) would be adhered to. The RPF also elaborates specific information on the land

tenure issues as outlined in the report on “securing smallholders land use rights”. Further details

can be found in the report included in the RPF Annex.

54. On land related grievances, in addition to the outlined grievance redress mechanism in the

RPF, the project will also employ existing GoL systems and locally respected methods for

grievance mechanism where desirable ensuring that the principles conform to OP 4.12. Since the

RPF also takes into consideration applicable GoL measures (consistent with OP 4.12), efforts

will be made to ensure that impacts are avoided, minimized or appropriately addressed.

55. Key stakeholders who were consulted as part of the preparation and disclosure activities

included MoA, members and representatives of FOs, farmers, community leaders and county

officials. Others include NGOs operating in the tree crops sector, Development Partners, and

other Government Ministries and agencies. The RPF also spells out capacity needs for

institutional strengthening on safeguards. Capacity of implementing partners and stakeholders at

community, county and national levels will be enhanced through training and workshops.

Monitoring & Evaluation

56. The project has a rather strong focus on Monitoring and Evaluation (M&E) of results and

various complementary instruments and approaches would be implemented. The important focus

on result monitoring and learning in the project is expected to provide useful lessons to formulate

the future larger tree crop development program to be mainstreamed in MoA policies and

investment strategy. The WB would therefore continue dialogue with MoA on the optimal

approach to mainstream some of the lessons and innovations of the project.

57. Monitoring and Evaluation are two distinct and complementary functions. Physical and

financial monitoring of the implementation of project activities, as planned in the Annual Work

Plan and Budgets (AWPB), is a management matter. As such it would be the overall

responsibility of the PMU/PCU and of primary responsibility of participating partners/service

providers and FO/cooperatives that would implement the various sub-projects and activities, as

well as County Agricultural Offices (CAO). Contracts signed between the PMU and these

partners/service providers would detail indicators to track, frequency, reporting methods, etc.

58. Project related M&E activities. Overall, the aims of the M&E activities is to strengthen

the capacity to adequately report progress of the project using valid and reliable data and based

on the results framework presented in Annex 1. Measuring the implementation of project

activities would be based on result-based monitoring. It would be the primary responsibility of

participating partners/service providers and FO/cooperatives. Contracts signed between the

PMU/PCU and these partners would detail indicators to track, frequency, reporting methods, etc.

Monitoring and evaluating the achievement of results, as detailed in the project annual work

plans and budgets, would integrate participatory processes such as district and county planning

and M&E workshops, in which direct project beneficiaries would actively participate.

58

59. The MoA‟s M&E capacity would be built up to gradually take over the M&E

responsibilities. This is important in terms of monitoring of the outcomes of the project and

adequate reporting to the MoA and to the national level. Annex 1 is in essence an M&E plan that

specifies, for each PDO level outcome indicator and intermediate level indicator, unit of

measurement, baseline value, targets, frequency, data source/methodology and responsibility for

data collection. The data would feed into the implementation support and supervision missions

Aide-Mémoires and could be used to track the progress that the project makes in terms of

outcomes. If deemed necessary, corrective measures and more in-depth data collection to reveal

underlying causes of failure or success could be designed to complement the thematic

evaluations studies and the annual producer and value chain surveys.

60. Monitoring and evaluating the achievement of results would integrate participatory

processes such as district and county planning and M&E workshops, in which direct project

beneficiaries would actively participate. The PCU would employ a full time Planning and M&E

Officer whose role would be to: a) compile data and reports received from operators/service

providers, other project stakeholders and other PCU professionals; b) provide guidance on how

to fulfill their respective M&E functions; c) ensure adherence of operators/stakeholders to agreed

formats, content, quality, agreed deadlines for M&E report submission; d) plan, draft terms of

reference, coordinate and facilitate thematic evaluations as necessary, including annual producer

and value chains surveys. These surveys and the thematic impact evaluations would be carried

out by consultants in close coordination with contracted concessionaires/services providers,

supported FOs and CAOs.; e) organize, with the involvement of operators/service providers,

annual participatory planning and evaluation workshops; f) produce synthetic project M& E

reports and notes as may be necessary; g) work closely with other PCU staff (particularly the

Coordinator, the Accountant and the Administration and Finance Assistant) to perform

management control and cost accounting functions, making sure that physical progress data

coming from the M&E system is matched with financial data.

61. Impact evaluation. Impact evaluation would be carried out by specialized consultants and

would be an important tool to assess the overall success of the project and for learning,

accountability and transparency. Evaluation of the impact on beneficiaries‟ outcomes -notably

increased yields and incomes derived from tree crop production- would in particular be

undertaken for rehabilitation activities that would rapidly generate financial returns. For

planting/replanting activities, such impacts would only occur after a long period of time

(minimum 2-3 years for cocoa and oil palm, 7 to 8 years for rubber). It would thus be necessary

to establish a sustainable and long term impact evaluation system within the PMU, integrating

M&E information from the CAOs, supported FOs and participating concessionaires/large estate.

62. Annual producer and value chains surveys. The objective of the surveys would be to

monitor the participation of tree crops smallholder in the value chains and the impacts on yields

and incomes derived from rehabilitated tree crops under the project. It would involve key staff

from the MoA, contracted service providers (input suppliers, main cocoa operator, collateral

manager, etc.) and participating concessionaires. Results from the surveys will feed into the

project‟s results framework. In addition, such surveys are considered important for

understanding the tree crop sector in Liberia and the opportunities and threats for further

development. Data collection would concentrate on key indicators i.e. yields (for rehabilitation

activities) and harvested volumes, farm gate and mill or FO gate prices (particularly for cocoa,

coffee and oil palm), and would allow to calculate net incremental cash flow per ha of

59

rehabilitated crop, on a sample basis. The surveys would also discuss the uncertainties along

investments and fluctuations in prices, yields and volumes harvested and traded. They would

combine semi-structured interviews and focus group meetings and individual questionnaires.

Quantitative data permits a more objective assessment and facilitates an assessment of larger-

scale patterns, trends and relationships among different value chain actors. Questionnaires

focusing on what value chain actors are doing and qualitative research tools would provide

means to check the reliability of data from questionnaires, but could also give more insight into

why actors are behaving in a certain way and how they make their decisions. Key areas for data

collection are: input supplies (planting materials, fertilizers, pesticides, etc.); market information

(prices, trends, buyers, suppliers); financial services (grants and credit received and savings);

transport services (cost, market access); storage services (storage). Cash flow, net margins and

other income and livelihood-related economic data would be calculated from the above.

63. Carrying out baseline studies would be a priority activity in the first year of project

implementation. It would require careful design and involvement of a range of actors and

stakeholders. The overall objective would be to provide insight of the current situation to be able

to later monitor progress towards achievement of the project development objectives and of the

main results indicators (see Annex 1). The impact assessments should clearly lay out the

progress at the point of assessment and identify intended and unintended benefits produced and

assess internal and external factors that influenced project implementation, including technical,

managerial, organizational, institutional, socio-economic and political factors, and determine

post-phase sustainability and recommend which interventions may need to be added or

emphasized to build sustainability. The impact assessments would also detail and discuss

benefits, intended and unintended, that would accrue to direct and indirect beneficiaries. They

would give special emphasis to the youth and gender aspects of the interventions and whether

women and youth have been empowered and have increased their tree crop-derived income and

employment. Also, the environmental aspects would be assessed, both those relate to use of input

(for instance insecticide, fertilizer, pesticide) and to planting, re-stocking and replanting tree

crops and links to the climate change agenda and carbon sequestration. Other important issues

and probably confounding negatively the project progress, such as securing smallholders‟ land

use rights, would also be assessed.

64. The impact assessments would probably involve review of secondary information,

informed selection of locations and groups for data collection, semi-structured interviews with

key stakeholders involved in project implementation, and interviewing farmers and managers of

FOs for relevant information on the project progress as well as internal/external factors

influencing the achievement of results. Open interviews would be held with key stakeholders

from governmental, parastatals and NGOs to gain understanding of planning, policy support and

sustainability. The interviews of smallholders would combine focus group discussions, buzz

group discussions and individual interviews and should enable all participants to voice their

opinions and concerns without intimidation nor influence from opinion leaders, chiefs, etc.

65. Provisions have been made under sub-component 3.2 to finance: (i) the setting-up of the

project M&E system, including a Geographic information system (GIS), using short term

technical assistance support (specialized international and national M&E consultants). The

process would start with revising/enriching the results framework with stakeholders, particularly

those expecting to contribute to data collection and activity monitoring, under an iterative and

participatory process that would allow to precise indicators and the ways to measure them;

60

(ii) carrying out necessary baseline studies per project site and/or per thematic area. These

studies would build on the results of the various surveys conducted during the elaboration of the

Environmental and Social Management Framework (ESMF) and of the Social Assessment (SA);

(iii) organizing annual participatory planning and evaluation workshops with beneficiaries and

other stakeholders at county and district levels. In addition, provision has been made to develop

the project communication strategy and adapted knowledge sharing tools to disseminate project

results and lessons learned to different audiences.

Role of Partners

66. Government agencies. The MoA County Agricultural Offices (CAO) are expected to play

an important role in project supervision at county/district level, notably verifying that activities

implemented by contracted services providers/concessionaires are: (i) respecting signed

contracts/MoUs; (ii) in conformity with national policies and strategies; and (iii) complement

other ongoing MoA activities in their respective counties/districts. The CDA would have primary

responsibility for the review/update of FO statuses and by-laws and would be associated in the

planning, monitoring and evaluation of FO capacity building activities. The MLME and LC

would have key roles in securing the land tenure of targeted smallholders. The Ministry of Public

Works (MoPW) would be closely associated in the identification and selection of feeder roads to

be re-opened or rehabilitated with project assistance, as the MoPW would be expected to include

the rehabilitated roads in their regular road maintenance program.

67. Input suppliers. The initial grant to cover the costs of pesticides and fertilizers in the

cocoa and coffee rehabilitation models would act as strong incentives to the various national and

foreign-based input suppliers to intervene in the cocoa and coffee value chains. The project

would make sure that these key partners are associated right from the beginning of the project in

the cocoa and coffee rehabilitation including FFS implementation. Commercial and financial

trust would progressively develop between participating cocoa/coffee farmers and their FOs and

the participating input suppliers. The objective being to develop a sustainable commercial

relation under which input suppliers would continue to provide the required inputs to farmers

every season, possibly via their FFS/FOs that would aggregate farmers demand and may provide

some guarantee. It is also expected that input suppliers would extend farmers (and their FOs) in-

kind credit, drawing from their own resources (profit margin of previous seasons) and possibly

from draft facilities or commercial credit lines from PFIs. The cocoa and coffee sub-project

operator would ensure that this key aspect of the project is achieved.

68. Input suppliers currently in the Liberian market are either: a) large companies dealing with

various kinds of imports and distribution within the country that have sufficient access to finance

outside of Liberia; b) small but specialized agricultural input suppliers that have limited financial

resources but knowledge of rural areas/smallholders and of the chemicals products they sell

(some run small scale extension schemes); or c) newcomers (specialized international

agricultural input supply companies) that are currently expanding their activities to Liberia to

develop this promising - and largely undeveloped - cocoa and coffee inputs market segment.

69. Concessionaires/large estates. Participating concessionaires (EPO-LIBINCO, SRC) and

large estate (MARCO) would not directly contribute to project costs. However, they would

contribute to the incremental costs after the four year-implementation period as they would be

required to maintain the technical staff (and to finance the associated operating costs) for the

technical advisory services to participating smallholders that they would provide. A Management

61

Contracts would be signed between the MoA and each concessionaire/large estate, defining the

roles of the latter in implementing their respective sub-project, including M&E and reporting

requirements. Each contract would reflect the concessionaire‟s commitment to maintain its

smallholder technical unit after the project-implementation period.

70. Financial institutions. The Central Bank of Liberia (CBL), through one or several

selected PFI(s) that would be agreeable to IDA, would provide credit to smallholders using IDA

funds in order to finance part of the input costs (planting material, fertilizers) for the

planting/replanting of oil palm and rubber under the out grower schemes, the other part being

financed by a grant. An Agreement would be signed between the MoA, the CBL, the PFIs and

each concessionaire/large estate that would define the roles and responsibilities of each party in

identifying potential beneficiaries/borrowers, assessing their credit worthiness, delivering the in-

kind credit (as farm inputs), extending technical advice and organizational advice services to

smallholders and their FOs, monitoring the credit, maintaining technical and financial records for

each participating smallholder/borrower, loan repayment arrangements, etc. Also, a Subsidiary

Agreement between the MoF and the CBL, and lending agreement(s) between CBL and each of

the selected PFI, would specify the terms and conditions for the loan between MoF and CBL and

passing funds to the PFI(s), including duration, foreign exchange and risk sharing arrangements,

interest structure, reporting and auditing requirements, flow of funds and operational modalities.

The MoF/CBL would use its own resources to cover the remaining long term credit

disbursements needed after the end of the 4-year project implementation period, until trees reach

maturity and farmers start repaying their loans. However it is expected that the follow-up long

term tree crop development program would be approved before the end of the STCRSP and that

it could extend the line of credit arrangement to cover these long term credit requirements.

71. Cooperatives/FOs. The project would support existing FOs (cooperatives and farmers‟

associations) where feasible and establish new ones where needed, building on previous

experiences and ongoing activities aimed at strengthening the organizational, marketing and

financial capacity of FOs, such as the ACDI-VOCA LIFE project. FOs would have critical

functions in bulking and buying cocoa and coffee production from farmers, storing it safely,

marketing it with due diligence and creating economies of scale, linking with PFIs, overseeing

the provision of extension services for production and post-harvest handling, organizing the

procurement and distribution of inputs with participating input suppliers. FOs would initially be

assisted to focus on grading and bulking of cocoa and coffee, negotiating with buyers and

marketing cocoa, either directly to exporters or to their agents. As their organizational and

management capacities and their business expertise grow, FOs would be supported in

establishing linkages with input suppliers and PFIs on behalf of their members. In the case of

cocoa, as soon as a minimum number of farmers would have paid their membership

contributions (shares) to the FO, the project would finance, for each FO, the construction of a

warehouse, the procurement of quality enhancement equipment (moisture meter, solar dryer) and

equity matching grants to foster the bulking activities of the FOs.

72. IFAD. IFAD is funding a parallel, complementary project that focuses on cocoa

revitalization in Lofa County (the STCRSP would not intervene in Lofa). The IFAD funded

project largely draws on the STCRSP project design, except that it supports cocoa rehabilitation

under a low input model (without use of pesticides and fertilizers).

62

73. The table below shows the financing plan by component.

Table 4: Financing Plan by Component (US$‟000)

The Government

Amount % Amount % Amount % Amount % Amount %

A. Smallholder Tree Crops Revitalization

1. Cocoa & Coffee Revitalization 295 2.4 6,462 53.0 732 6.0 4,704 38.6 12,194 52.9

2. Smallholder Oil Palm Revitalization 36 2.5 1,013 71.0 81 5.7 298 20.8 1,427 6.2

3. Smallholder Rubber Revitalization 78 2.4 1,992 61.5 - - 1,166 36.0 3,236 14.0

Subtotal 409 2.4 9,467 56.2 813 4.8 6,168 36.6 16,857 73.1

1. Institutional Capacity Building 171 11.4 1,327 88.6 - - - - 1,498 6.5

2. Preparation of Large Scale Smallholder Tree Crop Development Program 25 4.7 503 95.3 - - - - 528 2.3

3. STCRSP Project Preparation Advance - - 1,225 100.0 - - - - 1,225 5.3

Subtotal 195 6.0 3,056 94.0 - - - - 3,251 14.1

C. Project Coordination and Management

1. Strategic Planning, Coordination and Implementation Support 430 18.9 1,844 81.1 - - - - 2,273 9.9

2. Monitoring & Evaluation and Knowledge Production & Sharing 44 6.5 633 93.5 - - - - 678 2.9

Subtotal 474 16.1 2,477 83.9 - - - - 2,951 12.8

Total PROJECT COSTS 1,078 4.7 15,000 65.1 813 3.5 6,168 26.7 23,059 100.0

Total

B. Institution Building and Preparation of Future Large Scale Tree Crop

Development Program

BeneficiariesPFIsIDA (WB)of Liberia

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ANNEX 4: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF) – STAGE: BOARD

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1. Project Stakeholder Risks Rating High

Description:

Weak capacity of MoA

Weak capacity of Farmers‟ Organizations (FOs) and

Cooperatives and CDA

Unconfirmed commitment of potentially participating

concessionaires

Risk Management: The project will strengthen the PMU

Resp:

Client Stage:

Effectiveness

Due Date:

10/01/2012 Status: Not yet due

Risk Management: The project will strengthen the participating FOs/Cooperatives and Cooperative

Development Agency (CDA)

Resp:

Client Stage:

Implementation Due Date: MTR Status: Not yet due

Risk Management: Negotiation of Agreement between MoA, concessionaires, CBL and PFI(s) for LT

credit and of Management Contracts between each participating concessionaire and MoA

Resp:

Client Stage: PY1

Due Date:


2. Implementing Agency Risks (including fiduciary)

Capacity Rating: High

Description:

Weak capacity of PMU in project coordination and

management

Little experience of PMU in World Bank (WB)

financial management and procurement procedures.

Risk Management: The project will support the strengthening of the PMU.

Resp:

Client Stage: PY1

Due Date:


Governance Rating: Substantial

Description:

Unclear responsibilities of the PMU within MoA

Untimely provision of counterpart funds

Risk Management: Donors including WB currently supporting the establishment of the PMU.

Resp:

Client Stage: PY1

Due Date:

12/31/2012 Status: Ongoing

Risk Management: Counterpart funds needed are limited.

Resp:

Client Stage: PY1

Due Date:


3. Project Risks

Design Rating: High

Description:

Lack of experience in Liberia for the proposed

farming models & value chain arrangements for cocoa

Risk Management: Use of qualified operator for the cocoa/coffee sub-component.

Resp:

Client Stage: PY1

Due Date:


64

Complexity of implementation arrangements

Reluctance of PFIs to provide credit to smallholders

Risk Management: The project will support the establishment of a strong PCU within the PMU.

Resp:

Client Stage: PY1

Due Date:


Risk Management: The project provides several incentives to CBL/PFIs to extend credit to

smallholders.

Resp:

Client Stage:

Implementation Due Date: EOP Status: Not yet due

Social & Environmental Rating: Substantial

Description:

Land access and tenure issues: potential land disputes

Social targeting: risk of elite capture and difficulty to

include youth, women and other deprived groups

Potential adverse environmental impacts of new

planting.

New plantings would involve land clearing that might

affect forested land and other natural habitat.

Risk Management: The project would support the validation of participating smallholders‟ land use

rights (and mapping) at family/community level under a participatory process, in close coordination

with local authorities and the concerned Government Ministries/Agencies. Proof of

unchallenged/validated land use rights would be a condition for participation. The Borrower has

prepared a resettlement policy framework which will guide any resettlement and land acquisition issues

for consistency with OP 4.12 regarding land related impacts. An ESMF and PMP have been prepared to

address other environmental and social impacts, including pest management.

Resp:

Client Stage:


Risk Management: A clear and transparent process would be followed for selecting participating

smallholders. The criteria and the process would be described in the project implementation manual,

including criteria for targeting and inclusion of youth, women and other deprived groups. Participatory

land use rights validation and mapping at community level will be used amongst other tools

Resp:

Client Stage:


Risk Management: The ESMF requires ESMPs for all sub-projects, and the screening process will

require that the ESMP for a new planting is more extensive than for rehabilitation. The ESMF

screening procedure will ensure that requirements of OP 4.04 and OP 4.36 are met, namely that no

plantations will be supported that would convert or degrade critical natural habitat, that preference will

be given to sites on land that is not forested, and that proposals to site plantations in or near forest,

wetland, or other natural habitat will be flagged for special review and only approved if consistent with

OP 4.04.

Resp:

Client Stage:


Program & Donor Rating: Substantial

Description:

Lack of MoA strategies/policies for tree crop

development

Risk Management: The project would support the MoA in the participative elaboration of Tree crop

Master plans.

Resp:

Client Stage:


Delivery, Monitoring & Sustainability Rating: High

Description:

Non continuation of support to smallholders after the

Risk Management: Formalized commitment of participating concessionaires and GoL/PFIs to provide

required technical and financial support after project end.

65

end of the project

Non performing main operator for the cocoa/coffee

sub-component

Resp:

Client Stage: PY1

Due Date:


Risk Management: Selecting the operator based on quality and experience.

Resp:

Client Stage: PY1

Due Date:


4. Overall Risk Following Review

4.1. Preparation Risk Rating: High

Implementation Risk Rating: High

Comments: Comments:

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ANNEX 5: IMPLEMENTATION SUPPORT PLAN

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Strategy and approach for Implementation Support

1. The strategy for implementation support (IS) has been developed based on the nature of the

project and its risk profile. It will aim at making implementation support to the client more

flexible and efficient, and will focus on implementation of the risk mitigation measures defined

in the ORAF.

Procurement. Implementation support will include: (a) providing training to members of

the procurement related staff of the MoA; (b) reviewing procurement documents and

providing timely feedback to the procurement staff of the MoA‟s PMU; (c) providing

detailed guidance on the Bank‟s Procurement Guidelines to the Procurement Committee;

and (d) monitoring procurement progress against the detailed Procurement Plan.

Financial Management. Supervision will review the project‟s financial management

system, including but not limited to, accounting, reporting and internal controls.

Supervision will also cover sub- projects on a random sample basis. The Bank team will

work with MoA‟s PMU to assist in improving coordination among different departments

and units for financial management and reporting.

Environmental and Social Safeguards. The task team will supervise the implementation of

the agreed Environmental and Social Management Framework / RPF and provide guidance

to the PCU to address any issues, in collaboration with the EPA.

Anti-Corruption. The Bank team will supervise the implementation of the “Guidelines on

Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and

IDA Credits and Grants” dated October 15, 2006 and revised in January 2011 and provide

guidance in resolving any issues identified. Monitoring and risk mitigation of the project

will include Accountability and Grievance Redress Mechanisms. The project will support

the development of internal control within the MoA‟s PMU.

Other Issues. Country context (security) and Sector level risks such as long term financing

and credit risks, foreign exchange risk, partners commitment will be addressed at the

portfolio level through policy dialogue with the government and the MoA‟s PMU and

stakeholders. The team will monitor sector risks during project implementation.

Overall Project Management. The Bank team will work in close cooperation with the

MoA‟s PMU Managing Director whose cost is currently covered by a WB project. The

Task Team Leader will provide regular supervision of all operational aspects, as well as

coordination with the client and among Bank team members.

Implementation Support Plan

2. Some task team members will be based in the Liberia country office and other country

offices in the region to ensure timely, efficient and effective implementation support to the client.

Formal supervision and field visits will be carried out semi-annually. Detailed inputs from the

Bank team are outlined below:

67

Technical inputs. Technical inputs are required to review bid documents to ensure fair

competition through proper technical specifications and fair assessment of the technical

aspects of bids. During implementation, technical supervision is required to ensure

technical contractual obligations are met. The team will require an agro-economist and tree

crop specialist to conduct site visits on a semi-annual basis throughout project

implementation.

Finance and credit requirements and inputs. Input is required from a specialist in rural

finance and credit for regular review of PFIs, committed concessionaires, and beneficiaries

FOs and farmers‟ financial status to verify compliance of financial covenants and

agreements. The team‟s economist and rural finance and credit specialist will conduct site

visits on a semi-annual basis throughout project implementation.

Fiduciary requirements and inputs. Training will be provided by the Bank‟s financial

management specialist and procurement specialist during project implementation. The

team will also help MoA‟s PMU identify capacity building needs to strengthen its financial

management capacity and to improve procurement management efficiency. Both the

financial management and the procurement specialist will be based in the country office to

provide timely support. Formal supervision of financial management will be carried out

semi-annually, while procurement supervision will be carried out on a timely basis as

required by the client.

Safeguards. Inputs from an environment specialist and a social specialist are required.

Training is required on environment monitoring and reporting. Supervision will focus on

the ESMF. Field visits are required on a semi-annual basis.

Operation. An operations officer, based in the country office, would provide regular

supervision of all operational aspects, as well as coordination with the client and among

Bank team members.

3. The main focus of implementation support is summarized below.

Time Focus Skills Needed Resource

Estimate First

twelve

months

Technical Economist 4 SWs Tree Crops Specialist 4 SWs

Procurement training and supervision Procurement Specialist 4 SWs Financial Management Training and

supervision Financial Management Specialist 4 SWs Credit / Rural Finance Specialist 4 SWs

Land acquisition and Social monitoring Social Development Specialist 3 SWs Environmental training and supervision Environment Specialist 3 SWs

Institutional arrangement and project

supervision Operations Officer 8 SWs Institution Specialist 3 SWs

Team leadership Task Team Leader 8 SWs 13-48

months Technical Tree Crops Specialist 12 SWs

Economist 12 SWs

Procurement training and supervision Procurement Specialist 12 SWs Financial management disbursement Financial Management Specialist 12 SWs

68

and reporting Credit / Rural Finance Specialist 12 SWs Institutional arrangement and project

supervision Operations Officer 24 SWs Institution Specialist 12 SWs

Environmental and Social monitoring

and reporting Environment Specialist 9 SWs Social Development Specialist 9 SWs

Task leadership Task Team Leader 24 SWs Note: SW = Staff Week

4. Staff skill mix required is summarized below, over the four (4) years of the project.

Skills Needed Number of Staff Weeks Number of Trips Comments Procurement Specialist 16 SWs Fields trips as required CO Based Financial Management

Specialist 16 SWs Fields trips as required CO Based

Tree Crops Specialist 16 SWs As required Economist 16 SWs As required Credit / Rural Finance Specialist 16 SWs As required Social Development Specialist 12 SWs As required Environment Specialist 12 SWs As required Operations Officer 32 SWs Fields trips as required CO Based Institution Development

Specialist 15 SWs As required

Task Team Leader 32 SWs As required Note: SW = Staff Week

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ANNEX 6: TEAM COMPOSITION

REPUBLIC OF LIBERIA


World Bank staff and consultants who worked on the project

Name Title Unit

Beatrix Allah-Mensah Social Development Specialist AFTCS

Philippe Boyer Tree Crop Agronomist (consultant) AFTAR

Oliver Braedt TTL AFTAR

Maxwell Bruku Dapaah Financial Management Specialist AFTFM

Cary Anne Cadman Senior Forestry Specialist ASPEN

Winter Chinamale Procurement Specialist AFTPC

Arie Chupak Rural Finance and Credit Specialist (consultant) AFTAR

Errol George Graham Senior Economist AFTP4

Christopher Paul Jackson Senior Economist AFTAR

Anders Jensen M&E Specialist AFTDE

Sachiko Kondo Junior Professional Officer AFTCS

Yeyea Kehleay Nasser Project Team Assistant AFMLR

Alan Andrew Moody Lead Private Sector Development Specialist AFTFW

Jonathan David Pavluk Senior Counsel LEGAF

Louis Tian-Pierquin NRM Specialist (consultant) AFTEN

Thomas Walton Environmental Specialist (consultant) AFTAR

Germaine Ethy Program Assistant AFTAR

Francisco Chimuco Economist FAO/TCI

Marc Fantinet Senior Economist, FAO TTL FAO/TCI

Vincent Glaesener Economist FAO/TCI

Jan Van Gysel Agronomist FAO consultant

Frank Hollinger Rural Finance Specialist FAO/TCI

Ada Kibora Institution specialist FAO consultant

Franklin Philips National Agronomist FAO consultant

Julia Seevinck Associate Professional Officer FAO/TCI

Rym Ben Zyd Agronomist FAO/TCI

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ANNEX 7: ECONOMIC AND FINANCIAL ANALYSIS

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1. This Annex describes the assumptions and results of the economic and financial analyses

of the project. The first section describes the overall assumptions which are relevant to economic

and financial analyses. The second chapter presents the results of the financial analysis, while the

third one presents those of the economic analysis.

A. OVERALL ASSUMPTIONS

Yields and Crop models

2. Cropping patterns and evolution of yearly yields after rehabilitation/replanting/planting,

for each targeted tree crop, are discussed in the Working Papers (WPs) attached to the Technical

Note (see WP 3, 4 and 5). Table 1 blow summarizes the assumptions regarding the yields

achieved at peak production stage.

Table 1: Yields at peak production (kg/hectare)

Crop Model type Unit Yield (kg/ha) Year of peak yield

Cocoa Rehabilitation (medium input) Dry beans 600 N2

Rehabilitation (high input) Dry beans 1,800 N5

Old plantation Dry beans 120

New planting (medium input) Dry beans 2,000 N10

New planting (high input) Dry beans 1,500 N10

Coffee Rehabilitation Dried cherries 600 N3

Oil palm Replanting (low input) FFB 8,000 N12

Replanting (high input) FFB 13,000 N10

Rehabilitation FFB 3,500 N1

Rubber Replanting/Planting (high input) Dry rubber 1,300 N11-12

3. The assumed yields after rehabilitation, planting or replanting have been conservatively

estimated. They are consistent with sector and international standards in the tree crop industry as

well as with yields achieved by smallholders in similar soil and climatic conditions in the sub-

region. According to Ghanaian cocoa operators the peak yield of the high input cocoa

rehabilitation model is around 2 to 2.5 tons per hectare while a peak yield of 1.8 tons per hectare

(five years after rehabilitation) has been considered in the Liberia case, progressively decreasing

as from year 14 after rehabilitation. Peak yield for new cocoa planting using fast and high

yielding hybrids could be as high as 2.5 to 3 tons per hectare, while peak yields of respectively

1.5 and 2 tons per hectare have been considered in the analysis for the medium and high input

planting18

. With regards to oil palm replanting, a peak yield of 13 tons per hectare is achievable

by smallholders. EPO targets a minimum yield of 18 tons per hectare at full development on its

18

While both models encompass the use of pesticides when the tree start bearing substantial fruit (as from year N4),

the high input planting model also accounts for the use of a limited quantity of fertilizers during the first three years

to boost tree growth. However, cocoa specialists (IITA) indicated that the need for fertilizer for new plantings would

probably be marginal if cocoa is planted on 7-8 years + fallow. Therefore there won‟t probably be any need for

credit as seedlings are provided as grant and no pesticides would be required at the early stages of cocoa tree

development.

71

own estate. Yield of rehabilitated oil palms (3.5 tons per hectare) is based on the recent

experience of EPO in rehabilitating its plantation. For rubber, a peak yield of 1.3 ton of dry

rubber per hectare can be achieved by out growers; in some countries (including Ghana) well

trained smallholders reach 1.5 ton of dry rubber per hectare.

4. Without project situation. A production in the present situation (without project) has only

been considered for old cocoa plantations (average yield of 120 kg per hectare). Coffee

plantations are in most cases not yet rehabilitated and not harvested. For rubber, almost all old

trees belonging to smallholders and located around the large estates have been rehabilitated (i.e.

re-equipped with cups and spouts) or slaughter taped; consequently their production is rapidly

declining. There is no scope for rehabilitating these old rubber trees, but only for replanting. New

rubber planting would occur on uncultivated cleared lands due to fallow (not on primary forest or

recently cleared land) in between scattered tree crop smallholdings so as to consolidate land use

and also optimize the utilization of farm to market roads. Thus no present production has to be

valued on these lands. Without external incentives such as technical advice, support to oil palm

FOs/cooperatives and small scale processing, it is considered that the present production on

existing smallholder oil palm plantations is negligible.

Commodity prices

5. Assumptions made for targeted commodity prices (cocoa, cocoa, oil palm fruit, rubber) at

farm gate are determinant to analyze the profitability and risks associated to each crop model and

the financial arrangements (combination of credit and grant) under which each targeted tree crop

could be rehabilitated and (re)planted.

6. Targeted commodities are either exported (rubber, cocoa, coffee) or imported (palm oil)

in Liberia. As such, prices paid to farmers are directly linked to international prices. International

prices of the targeted commodities have been quite volatile over the last ten years. There has

been a clear rising price trend over the last two years as the world demand for all these

commodities is rapidly increasing (impact of population and economic growth in Asia, notably in

China and India) while world production doesn‟t progress at the same pace. Cocoa, rubber and

palm oil international prices are currently very high. Historical prices and world production are

described in the Technical Note (see WPs 3, 4 and 5) and summarized below.

7. Cocoa. Cocoa is Liberia‟s second most important export crop, with about 40,000

households engaged in its production in northern counties on more than 35,000 hectares (mainly

Lofa, Bong, Nimba, and Grand Gedeh). Its expansion was notably supported by the Lofa, Bong

and Nimba County Agricultural Development Projects (ADPs) financed by the World Bank, the

African Development Bank and the European Union from the late 1970‟s to 1990, and by the

Liberia Produce Marketing Company (LPMC), a state-owned enterprise under the MoA, and its

subsidiary the Liberia Cocoa and Coffee Corporation (LCC). Generally, participating farmers

received quality seedlings to plant up to two acres of cocoa and one acre of coffee. About 35,000

ha of cocoa were planted with the support of the three ADPs between 1978 and 1990 (29,500 ha

in Nimba; 3,100 ha in Lofa; and 2,100 ha in Bong). Official cocoa exports were about 9,500 tons

in 2010-11 and are growing every year, reflecting the somehow timid efforts made so far to

rehabilitate old cocoa trees. However, Liberia would remain a small exporter country as

compared to Ivory Coast (about 1.5 millions tons of exports per year) and Ghana (750,000 tons

of exports per year). A share of the national production is informally exported via Sierra Leone

and Guinea while the country also re-exports beans coming from Ivory Coast. Part of the

72

production from remote areas is currently not harvested due to the poor condition of rural roads

and consequently the shortage of buyers or low prices offered.

8. The cocoa marketing situation has improved in recent years with the rehabilitation of

feeder roads in main cocoa producing countries, the adopted cocoa marketing reforms and the

activities implemented by several projects (ACDI-VOCA, IITA, GIZ) over the last four years,

favoring cocoa trees rehabilitation and training of farmers in proper cocoa fermentation and post-

harvest handling to enhance quality. Minimum buying prices are agreed at the beginning of each

harvesting season between licensed exporters and the LPMC which regulates the cocoa sector

(for example US$ 1.7 per kg for grade I cocoa in 2010-11). Farmers met in Nimba county during

project design reported substantial increases in prices after primary processing and tree

rehabilitation training they received: observed farm gate prices started at LD 100 per kg

(US$ 1.4) at the beginning of the 2010 harvesting season and peaked at LD 210 per kg (about

US 3 per kg) for grade I cocoa.

9. Ensuring adequate cocoa fermentation, drying, storage and transport are key features to

maintain cocoa beans quality. Support provided so far demonstrated that farmers can produce a

large share (over 90 per cent) of grade I cocoa when applying proper fermentation and using

solar drying. However, quality deterioration often arises in later steps of the value chain,

particularly at storage (inadequate warehouses) and during transport (when cocoa bags are not

well protected against rain). Moreover, Liberian cocoa beans have long been discounted for

lower quality on the international market (discount of GBP 100 per ton) or were sold as Fair

Average Quality (FAQ). This situation is slowly changing. Some exporters are making efforts to

promote quality. As a result of training and international prices awareness, calculations show that

farmers supported by the above-mentioned projects or NGOs receive about 60% of the cocoa

international price, which is quite standard in the industry. The project will pursue and expand

these efforts and substantially upgrade the cocoa value chain and make sure that participating

smallholders receive a fair share of the international price through: (a) strengthening and/or

supporting the establishment of a total of 40 FOs involved in cocoa (and coffee) bulking/storage

and possibly processing; (b) assisting farmers/FOs to increase beans quality and securing their

business relation with exporters and participating financial institutions (PFIs) thanks to collateral

management services; (c) promoting access to certification (FLO, UTZ, Rain Forest) and higher

value markets; and (d) financing some feeder road rehabilitation, wherever critically needed.

10. Coffee. Together with cocoa, coffee experienced a large expansion in production between

the 1960s and the 1980s in northern counties (Bong, Lofa, Nimba, Grand Gedeh) with the three

County ADPs and support from the LPMC and the LCC. About 31,000 ha of coffee are reported

to have been planted with the support from the ADPs between 1978 and 1990 (17,000 ha in

Nimba; 11,900 ha in Lofa; and 1,800 ha in Bong) before the war stroke. Most varieties planted

were Liberica and Robusta. Coffee production, as cocoa, sharply decreased during the war. Only

104 tons were reported to have been exported in 2008. In fact, many coffee trees were felled and

farmers turned to other crops during the war as local purchasing prices were very low (as low as

LD 30-50 per kg i.e. US$ 0.5-0.7 per kg) and less buyers were materializing than for cocoa,

while labor requirements for coffee are high as compared to cocoa. However, international prices

increased since 2005 and there is interest again in restoring coffee production. There is scope for

rehabilitating some of the remaining farms and promoting good quality coffee as well as small

scale coffee processing for the local market. One local NGO started producing roasted coffee and

coffee powder in Lofa that is sold on the local market and in supermarkets in Monrovia. As for

73

cocoa, the project will strengthen the technical, organizational, financial and marketing

capacities of coffees farmers/FOs and promote access to certification and preferential markets.

11. Rubber. Rubber is the most important cash crop in Liberia in terms of production, exports

and employment generation. It accounted for more than 20 percent of the country‟s GDP and 90

percent of its total exports in 2005. In 2008 an estimated 81,000 tons were exported19

. About

200,000 hectares are under rubber production in Liberia, of which one third (65,000 ha) are

industrial estates and two thirds (130,000 ha) are small and medium-size private farms20

. As trees

were badly exploited and could not be replanted during the conflict and are now getting old, the

sector faces a reduction in production and rubber factories are operating below capacity.

Concessionaires/large rubber estates operating rubber factories are sharply competing to buy wet

rubber from smallholders and supply their factories. Currently, buying prices of wet rubber are

set every month by the larger concessionaire, Firestone plantation (over 40,000 ha) located in

Montserrado county, close to Monrovia, which started operating in Liberia in 1926. Prices

offered by Firestone are directly linked to the average price for Technically Specified Rubber

(TSR) 20 observed at the Singapore International Commodity Exchange (SICOM) in the

previous month, applying a standard 62 per cent dry rubber content (DRC) conversion factor.

Other concessionaires/factories offer the same price dictated by Firestone, with deductions for

transport according to the distance to the Firestone factory. They have to as competition to buy

wet rubber is very fierce as mentioned above: Firestone operates buying points up to Lofa, Bong

Nimba and even far east in River Gee and Maryland counties. This situation is likely to remain

so in the next ten years, at least until Firestone and larger concessionaires start benefiting from

their ongoing replantation programs they have embarked on a few years back and thus reduce

their dependence from smallholders‟ supply.

12. Calculations made (see WP2, Appendix 1) show that rubber farmers receive 68 to 73 per

cent of the international rubber price, which is in conformity with standards in the rubber

industry and even high, probably reflecting the competition between concessionaires.

International demand for natural rubber is strong and growing and prices are on the high side and

expected to remain so in coming years. International prices of TSR20 peaked at 6,400 per ton in

February 2011 and were about US$ 4,500 per ton in September 2011, as compared to US$ 3,380

per ton in 2010, US$ 1,386 in 2005 and US$ 629 per ton in 2000 (source: WB Commodity

Prices). This translated into very high prices for wet rubber paid to farmers (up to US$ 2,000 per

ton) and contributed to a renewed interest in rubber production from very small farmers. Prices

offered to smallholders in December 2011 were still very high: US$ 1,580 per ton of wet rubber.

13. Palm oil. Oil palm is an important tree crop for smallholders and is grown in every

county. Palm nuts are both food items and cash crops. About half of the total production comes

from wild groves. Liberia‟s production of crude palm oil (CPO) dramatically dropped because of

the war. The country turned from an exporter of palm oil until the late 1980s into a net importer

of edible oils (for about 20 percent of a total domestic demand). However, similarly to cocoa, a

significant volume of locally-produced palm oil is exported to neighboring countries through

informal border trade. Some former state-owned plantations (17,000 ha) have been privatized

while smallholder farms represent 75,000 ha. There is much scope for assisting smallholders

around industrial estates/processing units (out grower model) in rehabilitating the trees that can

19

FAO Stat. 20

According to the definition of the Rubber Planter Association of Liberia (RPAL), rubber farmers are considered

“small” or “smallholders” if they have up to 100 acres (40 ha).

74

still be harvested for a few years and in replanting. There is also potential for rehabilitating the

four formerly state-owned plantations that were developed in the 1980‟s by the LPMC (and its

subsidiary the Liberia Palm Oil Corporation) and were then handed over to smallholders in the

1990‟s (Zleh Town and Dube plantations in Grand Gedeh, Kpatawee plantation in Bong, and

Foya plantation in Lofa). There is much demand for CPO at national, regional, and international

levels. Red palm oil produced with traditional means (and very low extraction rate of 14 percent)

was sold in 2010 in local markets/farm gate in Grand Bassa at LD 600 to 1,000 per 5-gallon tin

(US$ 0.44 to 0.73 per liter), depending on the season. This corresponded to US$ 74 to 124 per

ton of oil palm fresh fruit bunches (FFB) and an average farm gate price of about US$ 100 per

ton of FFB.

14. There are a number of large scale oil palm operations starting in Liberia: (i) two large oil

palm concessions (around 200,000 ha) were allocated to Asian oil palm companies (Sime Darby

and VerOleum). However, neither of the two companies has yet started to produce CPO; (ii) the

Decoris plantation in Maryland county has been leased to the SIFCA group who is running the

Cavalla Rubber Corporation (CRC); it just started rehabilitating the estate; and (iii) the

LIBINCO oil palm plantation in Grand Bassa county (13,700 ha) has been leased on a

concession agreement to Equatorial Palm Oil (EPO) in 2009, that started rehabilitating and

replanting the estate in 2010 and has installed a modern processing mill early 2011. The project

is proposing to support oil palm smallholders around this concessionaire‟s plantation under an

out grower scheme. EPO has not yet started buying oil palm fruit (FFB) from smallholders. The

company is managed by staff who have experience of nucleus and out grower schemes in East

Asia (Malaysia, Indonesia, Papua New Guinea) including delivering in-kind credit to out

growers for replanting, repaying credit on behalf of smallholders through deductions on FFB

supply, and applying fair and transparent price formula to determine the mill gate and farm gate

buying prices. The project will work with EPO to enforce the application of a fair price formula

in the medium term.

15. Price calculations made, based on the projected CPO prices in 2020 (expressed in 2011

constant US$), show that farm gate prices would be: (i) US$ 140 per ton of FFB when applying

import parity price (in the medium term, palm oil production from the above-mentioned large

operations would probably exceed national demand and would call for export to regional and

other markets); and (ii) US$ 80 per ton if applying export parity pricing (see WP2, Appendix 1).

As buying prices that oil palm concessionaires would apply are not yet known, it has been

estimated that the average price observed on local market in 2010 (US$ 100 per ton FFB) could

be applied on both the out grower scheme (around EPO) and the farmers‟ run plantation (Dube in

Grand Gedeh). This price level has been discussed and agreed in principle with EPO.

16. International commodity prices trends. While international prices of targeted

commodities have sharply increased over the past years, the World Bank (WB) foresees a

downward trend till 2020, although some market analysts find it too conservative. As shown in

Table 2 and Figure 1 below, the expected price trend is a reduction in prices for all targeted

commodities. Decreases in price from 2010 to 2020 (expressed in constant 2011 US$) vary from

-18% for coffee, -25% for crude palm oil, -39% for cocoa and -43% for rubber.

75

Table 2: WB commodity price forecasts (per ton)

Figure 1: WB price forecasts of targeted commodities

17. Assumed farm gate prices in the financial and economic analyses. Forecasting prices for

the targeted commodities over the next twenty five years, the chosen period to carry out the

financial and economic analyses of the project, is not easy. Financial prices used in the crop

models are based on the latest (October 2011) WB commodity prices forecasts in 2020,

expressed at constant 2011 US$ price. Using current (very high) prices would yield very high

incomes which are probably not sustainable in the long run. Since the production derived from

project activities would reach full development after several years (3-4 for cocoa and coffee

rehabilitation, 7-8 years for cocoa planting and oil palm replanting, and up to over 14 years for

rubber replanting/new planting), the 2020 price forecasts are the most accurate ones for carrying

out the financial and economic analyses of the project. Farm gate prices21

have been derived

from these international forecasts calculating export prices (rubber, cocoa) or import parity

prices (case of palm oil as the country is currently importing palm oil), deducting international

freight and insurance costs, internal port handling, transport, bulking and marketing costs, and

processing costs where applicable (oil palm and rubber), as discussed with value chain actors in

Liberia. For the oil palm out grower scheme, an industry-standard price formula has been applied

as above-mentioned, assuming a farmer pay out ration of 60 percent22

. Coffee would be mainly

sold in the local market and would not substitute imports of coffee which are of different quality

and in any case quite small; therefore a conversion factor of 1 has been applied to coffee

financial prices. Locally hand made red palm oil has a different quality than the internationally

21

Given the context of Liberia‟s agriculture and economy and the short project implementation period, the project is

not expected to be initiating radical changes in the current tree crop pricing and market chain system at this stage.

But on the long term, it is foreseen that the long term tree crop development program would build up on the

experience gained and promote innovative pricing and producers-traders arrangements. 22

Oil palm out growers would receive 60% on the CPO international price after deducting the transport, taxes and

handling costs from the international end-market to the concessionaires‟ mill.

Commodity price forecast a/ 2010 2011 2015 2020 2020/2010

Cocoa (grade I) 3,287 3,100 2,243 1,989 -39%

Coffee (robusta) 1,821 2,300 1,632 1,492 -18%

Crude Palm Oil (CPO) 945 1,100 816 711 -25%

Dry Rubber 3,833 4,800 2,447 2,188 -43%

a/ in constant 2011 US$.

WB price forecasts, Constant 2011 US$/Ton

-

1,000

2,000

3,000

4,000

5,000

6,000

2010 2011 2015 2020

Cocoa(grade I)

Coffee(robusta)

CrudePalm Oil(CPO)Dry Rubber

76

traded CPO; therefore, FFB price for the smallholder farmers‟ run plantation has been adjusted

accordingly. Detailed calculations are presented in the Technical Note (WP 2, Appendix 1) and

summarized in the Table 3 below.

Table 3: Summary of farm gate prices (financial and economic values)

Crop model outputs (farm gate price) Unit Financial price

(US$)

Economic price

(US$)

Conversion

Factor

Cocoa (export parity) Ton (dry beans) 1,000 1,430 1.43

Coffee (local market) Ton (dry cherries) 690 690 1.00

Oil palm (out grower scheme) Ton of FFB 100 125 1.25

Oil palm (small scale processing) Ton of FFB 100 125 1.25

Dry Rubber (export parity) - SRC & MARCO Ton (dry rubber) 1,400 920 0.68

Dry Rubber (export parity) - CRC Ton (dry rubber) 1,307 893 0.68

Farm development financing assumptions

18. Generally speaking, proposed farm development costs (seedlings, fertilizers, chemicals,

tools) would be financed through a combination of start-up grant and credit. The grant element

would match the sweat equity provided by participating smallholders (who would contribute

their family labor for rehabilitation and (re)planting activities) and finance part of the input costs

during the rehabilitation or (re)planting year (year N0). It would:

(a) overcome the initial cash constraints and prime the pump to establish a sustainable

commercial relation between smallholders and specialized input suppliers in the cases of

cocoa and coffee rehabilitation (US$400 per ha for high input cocoa rehabilitation, and

US$200 per ha for medium input cocoa rehabilitation and coffee rehabilitation), the

remaining input costs in N0 being covered by the beneficiaries, thanks to an in-kind

credit provided by the participating input suppliers. In view of the increased net margins

during the year of rehabilitation (for cocoa), the cash flow after financing suggests that

cocoa farmers would be able to purchase inputs in the following years from their own

resources (possibly also through further in-kind credit from the input suppliers);

(b) cover the small tools package in the case of oil palm rehabilitation (US$50 per ha);

(c) cover the planting material costs for cocoa planting (US$200 per ha); and

(d) cover most of the input costs in year N0 in the cases of oil palm and rubber replanting

and new planting, in order to reduce the long term debt burden and associated risks and

make the out growers schemes more attractive to farmers, concessionaires and PFIs

(US$270 per ha for rubber, US$ 350 per ha for oil palm). In these cases, the grant

element would correspond to about 21 to 30 per cent of the investment costs incurred

during the immature period.

19. Proposed financing patterns per crop model are summarized in Table 4 below.

77

Table 4: Summary of farm development costs financing patterns (US$/hectare)

Crop model

Rehabilitation

or

Development

Costs

Year

N0

Costs

Grant Credit and/or


Amount % of N0

costs % of Inv.

Costs Amount % of Inv. Costs

Cocoa Rehabilitation (high input) 763 763 400 52% 52% 363 48%

Cocoa Rehabilitation (medium input) 366 225 200 89% 55% 166 45%

Cocoa New Planting (high input) 285 200 200 100% 70% 85 30%

Coffee Rehabilitation (low input) 334 200 200 100% 60% 134 40%

Oil palm Rehabilitation 50 50 50 100% 100% 0 0%

Oil palm Replanting (farmers' run) 350 350 350 100% 100% 0 0%

Oil palm Replanting (out growers) 1,703 672 350 52% 21% 1,353 79%

Rubber (re)planting - SRC 885 281 270 96% 30% 615 70%

Rubber (re)planting - MARCO 878 276 270 98% 31% 608 69%

20. Long term credit disbursement to oil palm and rubber out growers would be in-kind, in

the form of seedlings and fertilizers provided by the concessionaires. Delivered input costs

would be built into the accounts of each individual farmer by the participating

concessionaires/large estate and participating financial institutions (PFI). The credit line financed

by IDA would cover the (re)planting costs during the project implementation period, after which

the MoF/CBL would finance the remaining disbursements, until crops reach maturity, from its

own resources23

. The long term credit recovery from smallholders would be ensured by the

participating concessionaires which would repay, on behalf of participating out growers, their

debt through a deduction (30 percent) on the purchase of wet rubber or oil palm FFB supplied to

them by targeted smallholders.

21. Terms of long term loans (duration, grace period) extended to out growers would vary for

each crop according to the gestation period and income pattern generated, as well as the situation

of each individual smallholder (considering total income from the farm, notably derived from

existing yielding tree crops or food crops or intercropping or off-farm income generating

activities, etc.). An interest rate of 8 percent, as agreed with the MoA, MoF and CBL, has been

used in the crops models for the short and long term loans.

Family labor and agricultural inputs costs

22. Family labor. The project would target tree crop smallholders who have enough

available family labor to dedicate to the required manual operations for tree crop rehabilitation,

(re)planting and then maintenance until maturity and production. Therefore crop models have

assumed that no external labor would be hired.

23. Cocoa and coffee rehabilitation require small amount of family labor (around 30 days per

hectare under the high input model) that can easily be met by tree crop smallholders without

compromising food crop production. Labor requirements for rubber planting/replanting are much

higher (about 160-170 days per hectare in year N0) however they could be met by using the

proceedings from the sale of old rubber trees to partly hire some labor (including inside the

family). Labor requirement for replanting/planting oil palm trees are slightly lower than for

rubber (respectively 105 and 140 days per ha) and it was considered they could reasonably be

met by the participating beneficiaries. Labor availability would be discussed between farmers

23

In the likely case of a long term follow up tree crop development program, the credit line financed by IDA might

be extended to cover the remaining disbursements.

78

and sub-projects implementers field staff when elaborating realistic rehabilitation/(re)planting

schedule (over two to three years) adapted to each participating smallholder individual situation.

24. Agricultural inputs. Agricultural inputs (including tools) costs considered in the crop

models are based on current prices at farm level, as collected from discussions with farmers,

input suppliers and concessionaires during the preparation and pre-appraisal missions. A key

factor will be the costs of fertilizers (and chemicals for cocoa and coffee rehabilitation models)

which have been pretty instable and on rising trend over the last years. Rubber and oil palm crop

models assume a future farm gate price of US$ 760 per ton of NPK, a slightly lower price that

the current retail price, as it is estimated that the direct import of fertilizers by participating

concessionaires would allow economies of scale and for a substantial reduction in fertilizer

prices in Liberia. Specialized cocoa fertilizers and pesticides prices are based on those prevailing

in Ghana (without the subsidy element provided in Ghana) and are on a rather high side. They

probably could be reduced encouraging competition amongst various authorized input suppliers

who would be willing to invest in cocoa farmer training and input supply in partnership with the

project.

25. Detailed physical and financial assumptions parameters for crop models budgets are

presented in the Technical Note (WP 2, Appendices 2 to 4; and in WP 3, 4 and 5).

Farm development schedule

26. The progression of farm development (rehabilitation, replanting, new planting) per year

on the different project sites is presented in Annex 2. There would no farm development activity

in year 1 as the first year of project implementation would focus on: setting up the project

coordination unit, selecting the main operators/service providers and signing contracts with

them, and preparing nurseries in the case of out grower schemes for which potential

implementing partners are well identified and would anyway develop nurseries for their own

plantation needs. During the second year, farm development would start at a very low pace and

would accelerate in years 3 and 4. New planting would only occur from year 3, after on-site

environmental screening.

B. FINANCIAL ANALYSIS

27. The financial analysis aimed at assessing whether: (i) the targeted smallholders will get

financial benefits (cash incomes) that justify their adherence to and participation in the project

and enable them to serve the associated development debts; (ii) the proposed financial

arrangements to meet farm development costs under the out growers models (mixed use of credit

and grant to finance farm development costs) would be worth the risk to the CBL, PFIs,

concessionaires/large estates and smallholders; and (iii) proposed financial models and

investments make sense for the other potential private partners, particularly the specialized input

suppliers for cocoa and coffee rehabilitation and the small and medium scale enterprises (SMEs)

for oil palm processing activities at the farmers‟ run oil palm plantation.

28. Eleven different crop models (with variants for planting or replanting) have been

developed after several sets of discussions with stakeholders and using sound technical and costs

assumptions. They all show good profitability prospects that should attract smallholders‟ and

PFIs‟ participation in the project. Financial internal rates of return (FIRR) and, more importantly,

incremental cash incomes after financing appear attractive in all situations.

79

29. Detailed financial results (before and after financing through grant and credit) for the

various crop models are presented in the Technical Note WP 2. Table 5 below presents a

summary of the financial analysis, using the following criteria:

(a) the financial internal rate of return (FIRR);

(b) the investment costs per hectare (until maturity, e.g. before start of production);

(c) the average yearly gross margin, calculated over 25 years (that includes the

investment costs);

(d) the acreage per beneficiary, as foreseen in the project;

(e) the resulting net margin per beneficiary (number of hectares/beneficiary x gross

margin/ha);

(f) the year of start of production (first yield) after rehabilitation/(re)planting;

(g) the year (after rehabilitation/(re)planting) during which peak yield is achieved;

(h) the associated margin (after financing) at peak production stage;

(i) the number of person-days of work at peak production stage;

(j) the yearly remuneration per person-day of family labor at peak production stage; and

(k) the average remuneration per person-day of family labor over the 25 years, including

those required for the initial investment works (rehabilitation, planting, replanting).

Table 5: Summary of Crop Models and Financial Analysis

30. As it is assumed that participating smallholders don‟t receive any income from tree crops

in the current situation (without project) - except for cocoa, most figures above are both total and

incremental results. As mentioned in para. 4, some income has been considered in the without

project situation only in the case of cocoa rehabilitation.

a. b. c. d. e. f1. f2. g. h. i. j. k.

Financial

Rate of

Return

(FRR) a/

Investment

costs (US$

per ha)

(immature

years)

Average

yearly net

margin

(US$) per

ha a/

Acreage

per

beneficiar

y (ha)

Average

yearly

margin (US$)

per

beneficiary*

Year of

start of

production

Years of

negative

cash flow

b/

First peak

production

year

Peak

margin over

production

cycle

(US$/ha)

Person-days

of family

labour

involved at

peak yield

stage

Gross

margin /

person-day

at peak

yield year

(US$)

Gross

margin /

person-

day over

25 years

(US$) a/

Total man-

days over

25 years

(US$)*

Gross

margin over

25 years

(US$)*

Old plantation - 65 130 - - - 100 9 11 7 225 1,625

Rehabilitation - medium input incremental 537% 366 95 189 1 1 4 146 5 29 23 102 2,364

- high input incremental 346% 763 625 1,249 1 1 6 949 20 47 39 397 15,613

1 Rehabilitation - medium input absolute nd 366 160 319 1 1 4 246 14 18 12 327 3,989

2 - high input absolute 3401% 763 690 1,379 1 1 6 1,049 29 36 28 622 17,238

3a New planting - medium input 74% 147 753 1,506 3 1 11 1,139 29 39 26 720 18,831

3b - high input 54% 292 720 1,441 3 2 11 1,167 34 34 21 858 18,012

4 Coffee Rehabilitation 95% 200 195 0.5 97 2 1 4 279 85 3 2 2,094 4,873

5a low input 39% 350 554 1,108 5 1 10 800 133 6 5 2,796 13,850

6a high input 26% 1,703 873 1,747 4 5 11 1,413 116 12 8 2,613 21,833

5b low input 39% 350 554 1,108 5 1 10 800 133 6 5 2,763 13,850

6b high input 26% 1,703 873 1,747 4 5 11 1,413 116 12 8 2,579 21,833

7 Rehabilitation (farmers'run) over 10 years - - 405 810 1 - 3 500 99 5 4 1,116 4,050

8 Rehabilitation (outgrowers) over 10 years - - 569 1,138 1 - 3 700 99 7 5 1,116 5,690

9a replanting 30% 769 980 1,960 8 7 1,640 139 12 8 3,056 24,506

9b new planting 30% 769 980 1,960 8 7 1,640 139 12 8 3,043 24,506

10a replanting 37% 724 1,106 2,212 7 5 1,732 126 14 10 2,700 27,651

10b new planting 37% 724 1,106 2,212 7 5 1,732 126 14 10 2,687 27,651

11a replanting 34% 733 1,056 2,111 8 7 1,761 139 13 9 3,056 26,389

11b new planting 34% 733 1,056 2,111 8 7 1,761 139 13 9 3,043 26,389

b/ should be offset by promoting intercroping (plantain, cassava, yam, etc. for cocoa; maize or vegetables for rubber), at least in the first 2-3 years after planting

New planting

in Montserrado with MARCO

Rubber

(high

input)

2

Replanting

a/ over 25 years (over 11 years for oil palm rehabilitation, as the yield is assumed to be nil after such a period).

in Maryland with CRC

in Margibi with SRC

Cocoa 2

Oil palm 2

Crop / Model type

13

80

31. Financial Internal Rate of Return (FIRR) (column a) appear very high in all situations24

but do not necessarily represent the best investment criteria for smallholders (at low investment

costs, even limited returns yield a very high FIRR).

32. The average yearly net margins (columns c to e) calculated over 25 years are also quite

satisfactory. The best returns are achieved with cocoa, above all high input rehabilitation and

new planting, and with rubber. The oil palm out grower model (high input) shows a moderate

profitability (notably due to the high costs of fertilizers), while oil palm rehabilitation and coffee

rehabilitation seem to be the least profitable models.

33. Cocoa rehabilitation is highly profitable under high input models (average gross margin

of US$690 per hectare over 25 years, with a peak at US$1,050 per ha) but much less under

medium input (average gross margin of US$250 per ha). Cocoa planting also seems a very

interesting option as the time-lag between planting and the first production is short (see column

f), and production reaches maturity in the fourth year after establishment. On the contrary rubber

(re)planting requires waiting seven to eight years before the first harvest and thirteen years until

the peak harvest, which is a serious constraint for smallholders and calls for long term funding

arrangements, as well as intercropping and alternative sources of income during the immature

period. However, it would yield a rather high net margin at maturity (US$1,100 par ha).

Replanting costs for high input oil palm are high (US$1,703 per ha) as compared to rubber

(re)planting (US$ 720-730 per ha), whilst the oil palm net margin (US$ 870 per ha) would be

lower than for rubber. However, oil palm trees bear fruit and generate cash income only four

years after planting (see column f). The oil palm models suggest that income generated from

rehabilitated oil palms on a given farm could cover the negative cash flow generated by oil palm

replanting under the high input model (and thus allow for the payment of interests during the

immature period).

34. Considering that labor wage paid by rubber estates is currently US$ 3 per day, rubber

provides more than four times that value at peak production (US$ 12 to 14 per person-day), and

about three times that level over a 25-year period (US$ 8 to 10 per person-day). Cocoa also

appears extremely profitable from that point of view, as requiring limited labor, while absolute

net margins per ha are quite good. Rehabilitation of coffee plantations has a limited return on

labor (US$ 3 per person-day) but in the range of current labor wages. Rehabilitation of oil palm

would generate a slightly higher return per day of labor than current wages (US$ 4 to 5 per

person-day). Oil palm replanting would yield a good return on labor (US$ 5 to 7 per person-day).

35. Cash flow after financing. Cash flow after financing (through the combination of grant

and credit as above-described) calculations have been developed over 25 years for the models

requiring medium to long term financing, particularly high input cocoa, oil palm and rubber (see

WP 2, Appendices 2 to 4). Assumptions made in crop models, taking into account a 8 percent

interest rate (see above), show that repayment of the long term credit could be achieved after:

(a) 12 years for oil palm, assuming a grace period for capital repayment only during the

immature period (i.e. assuming that interests are paid during that period, notably from the

income derived from rehabilitated palms; yearly interest peak at about US$110 per ha in

N3-N5 while yearly net income from rehabilitated palms is estimated at US$350); and

24

For oil palm rehabilitation, the investment costs are low and inferior to the income derived from rehabilitated trees thus the

net income in the year N0 is positive and therefore the FIRR cannot be calculated.

81

(b) 9 to 10 years for rubber with a grace period for capital only, i.e. with interest repayment

during the immature period (estimated at about US$ 40 per ha per year); in case of

interest capitalization during the immature period, rubber out growers could repay their

debt in about 11 to 12 years.

36. Intercropping as well as a phased replanting will be encouraged to ensure that farmers

continue to derive incomes from still producing tree crops and intercropping, whenever possible.

These results are rather sound and enable the analysis to foresee a likely interest from financial

institutions and concessionaires to finance the long term credit requirements for oil palm and

rubber replanting/planting, as promoted by the project.

C. ECONOMIC ANALYSIS

37. The economic analysis has been carried out to assess the economic viability of the project

as a whole from the perspective of the country‟s economy and of the general interest.

Beneficiaries

38. Direct beneficiaries. Direct project beneficiaries are smallholder farmers and household

members in target sites that who would participate in the project, with particular attention given

to the participation of women and youth. An estimated 4,900 tree crop farmers, both male and

female, are expected to directly benefit from the project. Assuming these farmers would belong

to different households and an average household size of 5.3 in the project area (see Technical

Note WP 2, Appendix 6), this adds up to about 26,000 household members. Direct beneficiaries

per crop as well as the estimated number of strengthened farmers‟ organizations (FOs) are

detailed in Table 6 below.

Table 6: Estimated direct beneficiaries

Crop Number

Cocoa/coffee revitalization

Targeted farmers/households 3,000

Section FOs supported 30

Clan FOs supported 10

District Coops supported 3

Oil palm revitalization

Targeted farmers/households 600

Farmers' run plantation Block FOs 4

Farmers' run plantation Cooperative 1

Oil palm out growers FOs 6

Rubber revitalization

Targeted farmers/households 1,300

Rubber FO/Coops supported 14

Total targeted tree crop smallholders 4,900

Total direct beneficiaries (HH members) 26,000

39. Indirect beneficiaries. Indirect beneficiaries would include: (i) the general population in

and around the target sites, who would benefit from the opportunities provided by the improved

rural infrastructure, in particular access feeder roads; (ii) supply and value chain stakeholders

who would benefit from increased supplies and business opportunities generated by the

expanded tree crops area and improved partnerships with concessionaires.

82

Economic benefits

40. The project is expected to lead to a tree crop production increase and to increases in the

value of tree crop output as a result of: (a) rehabilitation of old plantations (cocoa, coffee, oil

palm); (b) replanting of new trees on existing plantations (mainly rubber and oil palm); (c) new

plantations on previously unexploited areas (rubber and cocoa); (d) higher yields at smallholder

farmers level thanks to improved production practices promoted through dedicated extension

systems (partly based on out grower schemes); and (e) higher value of tree crop outputs as a

result of improved post-harvest handling, marketing and processing.

41. The project would have both direct and indirect economic benefits. Improved livelihoods

for the participating smallholders will be the main direct benefit, stemming from increased

sustainable tree crop production and incomes. The economic benefits generated by the project

would be as follows: (i) increased tree crop production in the targeted value chains (cocoa,

coffee, palm oil, rubber); (ii) reduced transaction costs -notably transport and credit costs- and

post harvest losses thanks to the rehabilitation of feeder roads, marketing enhancement and

facilitated access to rural financial services; (iii) increased value added of tree crop production,

particularly cocoa, coffee and palm oil, thanks to the promotion of professional small and

medium scale processing, organization of marketing and FO/cooperatives strengthening; (iv)

increased incomes of tree crop smallholders and therefore improved food security at household

level and reduction of vulnerability to external shocks, notably those related to climate change

and rising food prices; (v) enhanced market/business opportunities and economies of scale

benefiting actors of the supply chains (smallholders, transporters, marketers, agro-industries)

under win-win arrangements and the promotion of public-private partnerships; (vi) enhanced

bargaining power, understanding of markets and management capacity of smallholders and their

organizations (FOs and cooperatives); (vii) incremental on and off-farm employment generated

through extension of area under tree crops and increased tree crop production; (viii) foreign

exchange savings through increased national production and exports (cocoa, rubber) and

reduction of imports (palm oil); and (ix) improved social stability in the project areas. The

project would also have a positive impact on women and female headed households and

vulnerable households in general.

Cost-benefit analysis

42. Assumptions. A cost-benefit analysis was carried out to assess the economic viability of

the proposed project. The analysis was conducted over a 25-year period and in constant 2011

prices. Economic benefits considered in the analysis are only those derived from increased tree

crop production. Benefits generated by increased value added of targeted tree crops thanks to

small and medium scale agro-processing could not be calculated and have not been taken into

account. Similarly, economic benefits derived from improved farm to market access (feeder road

rehabilitation) and strengthened FOs/cooperatives and capacity building of other public or

private institutions could not be estimated.

43. Financial prices and costs and benefit streams derived from crop models have been

transformed into economic values through calculating economic farm gate prices, applying

individual conversion factors for each category of inputs and eliminating taxes and duties and

transfers (notably interest charges from credit in crop models). Economic farm gate prices have

been calculated using the financial forecasted prices in 2020, expressed in constant 2011 US$,

and eliminating as well the taxes and credit costs and applying relevant conversion factors to

83

transport and other intermediary costs from the world market to farm gate. The conversion

factors were derived from the level of taxes and duties as presented in the hypotheses regarding

project costs (see WP 1, Appendix 1) and also estimating the likely prevailing market

inefficiencies. The economic cost of family labor has been valued at US$ 2.08 per person-day in

the economic analysis, applying a conversion factor of 0.7 to the LD 150 per person-day hired

wage prevailing in rural areas and an LD/US$ exchange rate of 71.5. The detailed calculations of

import/export parity prices and of the various conversion factors applied in the analysis are

presented in the Technical Note (WP 2, Appendix 1). Import parity prices have been calculated

in the cases of palm oil which would primarily target the local and regional consumption (import

substitution). For rubber and cocoa which are pure export products, the economic prices were

derived from the export parity calculations.

44. Quantified economic benefits are mainly derived from the increased incomes derived

from: (i) cocoa production through the rehabilitation of old cocoa trees and extension of cocoa

farms (which represents 74 percent of total economic benefits); (ii) rubber production

(17 percent of total benefits); (iii) to a lesser extent, from oil palm and coffee production (which

respectively account for 8 and 2 percent of total benefits). Detailed calculations are presented in

the Technical Note (WP 2, Appendix 7).

45. All project costs have been considered in the economic analysis including those of

components 2 and 3 for which no benefits have been accounted for. Economic costs of the cocoa

technical and marketing support structure (staff of the cocoa main service provider that might be

retained by the cocoa FO network), of the collateral manager, of the various smallholder oil palm

and rubber smallholder units operated by concessionaires/large farms, and of market access

roads maintenance have been taken into account after the project implementation period (years 5

to 25).

46. Economic rate of return. Without considering the STCRSP and the future large scale

tree crop program preparation costs, the project would yield an Economic Internal Rate of Return

(EIRR) of 33 percent and a Net Present Value (NPV) of US$ 28 million (at a 10 percent discount

rate). The project is therefore highly profitable from an economic stand point. The ERR would

be 29 percent if all project costs are considered.

47. Sensitivity analysis. The sensitivity analysis indicates a solid resilience to increases in

costs and reduction or delays in benefits, as shown in Table 6 below. The EIRR would still be

respectively 16 and 24 percent if benefits would be halved or lagged by two years.

Table 6: Sensitivity Analysis Summary

10% 20% 50% 10% 20% 30% -10% -30% -50% 1 year 2 years

33% 29% 30% 29% 24% 35% 37% 39% 30% 24% 16% 27% 24%27.9 26.4 26.7 25.6 22.2 31.8 35.7 39.6 23.9 13.1 5.2 19.2 20.1NPV (US$ Million)

EIRR

Base

case

Decrease in benefits Delay of benefitsIncrease in benefitsVariant

Increase in project costs

84

ANNEX 8: LONG-TERM CREDIT ARRANGEMENTS FOR OIL PALM & RUBBER

OUT-GROWER SCHEMES AND COMPLIANCE WITH BANK POLICY ON

FINANCIAL INTERMEDIARY LENDING (OP 8.30)

REPUBLIC OF LIBERIA


A. General

1. The project design is in compliance with the Bank operations policy on financial

intermediary lending, as contained in OP and BP 8.30. The STCRSP is fully in line with the

Country Assistance Strategy (CAS) Report No. 4798-LR for the period FY09 to FY12 (April

2009-June 2011). The project, like the CAS, is aligned with the GOL‟s Poverty Reduction

Strategy (PRS) and is part of the CAS objective to revitalize the Liberian economy. The

proposed project is fitting well with two of the three CAS themes: facilitating pro-poor growth,

and rehabilitating infrastructure to jump-start economic growth. The proposed project would

finance the needed rural roads in the project areas and would initiate the revitalization of

smallholder tree crop farms, consisting of the rehabilitation, replanting, and new planting of

rubber, oil palm, cocoa and coffee in 6 counties. This is in line with paragraph 1 of OP 8.30.

2. The STCRSP is supporting the revitalization of the tree crop sector through the financing

of replanting and planting oil palm and rubber trees (financing real sector investment needs) to

be carried out by eligible smallholders (promotes private sector development and poverty

reduction objective). This is in line with paragraphs 2(b), 2(c), and 2(f) of OP 8.30. The

STCRSP is clearly not aiming at reforming the Liberian financial sector and therefore paragraphs

4, 5, and 12 of the OP 8.30 are not applicable. However, consultation with IFC regarding the

project‟s long-term scheme was undertaken in line with paragraph 3 of OP 8.30.

B. The Liberian Banking system

3. The Banking System in Liberia is relatively small and consists of 9 banks25

(Afriland

Bank started to operate in 2011). Financial assets of the banking system represent about 95% of

the total financial assets of the financial sector, with about US$485 million equivalent (L$35.4

billion) at the end of October 2010. The balance of about 5% comprises of the social security

system, insurance companies, credit unions, and two registered micro-finance institutions. Most

of the commercial banks are quite small in terms of total assets, deposit mobilization, and

lending volume.

4. During the first 10 months of 2010, the operation of the Liberian banking system was

substantially expanded. Total financial assets increased by about 32% compared to the same

period of 2009. Likewise, total deposit mobilization was increased by about 36%, outstanding

loans balance was expanded by about 38%, and total equity (net of provisions) grew up by about

26% nominally, and about 17% in real terms. The banking system as a whole is solvent with

Capital Adequacy Ratio (CAR)26

of about 24%, much higher than the CBL minimum ratio of

25

This includes: (i) the Liberian Bank for Development and Investment (LBDI); (ii) International Bank Liberia

Limited (IBLL); (iii) Ecobank Liberia Limited (EBLL); (iv) First International Bank Liberia Limited (FIBL);

(v) Global Bank Liberia Limited (GBLL); (vi) United Bank for Africa Liberia Limited (UBAL); (vii) Guarantee

Trust Liberia Limited (GTBLL); (viii) Access Bank Liberia Limited (ABLL); and (ix) Afriland First Bank Liberia

Limited 26

Equity over weighted risk assets.

85

10%. Also, the system is very liquid with a liquidity ratio of about 39%. Overall profitability

was during the reported period negative (nominal losses). Return on Assets (ROA) and Return

on Equity (ROE) were -0.2% and -1.1%, respectively. According to the 2010 Central Bank

(CBL) report, these losses are largely due to extra loan loss provisions27

on Non-Performing

Loans (NPLs) and high pre-operating expenses recorded by new banks. Taking into account the

prevailing inflation rate of about 7.5% in 2010, the Liberian banking system, as a whole, had to

make a profit of at least US$5.0 million equivalent in order to avoid any erosion of their equity

due to the inflation rate.

5. Most of the earnings of the Liberian banking system, about 57% in 2010, came from fee-

based activities. Only about 43% of the revenue came from the banks‟ lending operation. To

improve its profitability the lending volume of the Liberia banking system should be further

increased. Considering the liquidity level of about 40% and a CAR of 24% such an expansion, if

is done prudently, can take place without risking banks‟ solvency and liquidity positions.

6. Quality of Assets. During the period under review, the quality of the banking sector

assets slightly improved, although it remains quite problematic, with a high level of NPLs. The

ratio of NPLs to total outstanding loans was on October 31, 2010 10.3% compared to 13.4% a

year ago. In absolute terms, however, NPLs increased by about 6.5% from about US$17.4

million equivalent as of October 2009 to about US$18.6 million equivalent as of October 2010.

The key reasons for the relatively high NPLs level, as indicated by the CBL in its 2010 annual

report, are the weak credit administration within a few banks, and the poor country credit culture.

C. Proposed Smallholder Financing Arrangements.

7. As shown below, the total direct farm development costs (planting material, fertilizers,

agro-chemicals, and tools) to carry out the proposed rubber and oil palm rehabilitation,

replanting and new planting program is estimated at about US$2.8 million and would be

financed through grant28

(about US$0.8 million) and credit (about US$2.0 million). Participating

smallholders would contribute their own family labor to rehabilitate and replant their tree crops

and/or establish new planting area. The oil palm and rubber models to be supported by the

proposed STCRSP are quite profitable and attractive29

. IDA would finance the grant element and

part of the credit requirements, for a total of about US$1.1 million or 39% of the total

requirements over the 4-year project implementation period. The balance of about US$1.7

million would be provided by the GoL or other sources (see paragraph 13 below).

Table 1: Rubber/Oil Palm Out Growers Farm Development Financing Requirements (US$„000)

Crop IDA Other Sources

of Credit

Total Financing

Requirements

Grant Long Term Credit Sub-Total

Oil Palm 120 160 280 245 525

Rubber 700 150 850 1,445 2,295

Total 820 310 1,130 1,690 2,820

27

The amount of provisions for loan losses was in 2010 larger than the outstanding NPLs by about 12%. 28

The proposed grant element would cover about 20% to 30% of the replanting/planting costs (costs incurred during

the immature period). 29

Financial Internal Rates of Return of 26% for oil palm replanting and of 34% to 37% for rubber replanting (see

Annex 7).

86

8. Grant. The grant, which would be managed by the Program Management Unit (PMU)

of the Ministry of Agriculture (MoA), would reduce the long term debt burden and associated

risks and make the out growers schemes more attractive to farmers, concessionaires and

participating financial institutions (PFIs) and make them more familiar with the benefits and the

issues associated with such a program, so they would be taking a more active role in future large

scale tree crop development programs. The grant30

would cover part of the establishment costs,

and would represent up to 30% of the total development costs incurred during the immature

period.

9. Credit. Long term credit would be provided to smallholders through the PFIs to finance

the establishment and maintenance of rubber and oil palm smallholder farms. At present, no

formal credit, whether short, medium, and long term, is available to farmers, particularly tree

crop smallholders. Credit to eligible smallholder beneficiaries would be in kind with loan

duration of 10 to 12 years. Due to the long gestation period (7 to 8 years for rubber, and 3 to 4

years for oil palm), these small farmers are unable to establish and maintain their farms without

adequate credit to get the needed planting materials, fertilizer, and chemicals. Therefore, credit

under the STCRSP would be a directed one to enable rubber, oil palm, farmers to replant old

plantations and carry out new planting. This is in line with paragraph 7 (a) and (b) of OP 8.30.

10. Considered and Rejected Design Options. Three main options were considered for the

design of the credit arrangements: (i) the MoF would lend to a Wholesale Apex Bank/Institution

who would accredit one or more PFIs to participate in the delivery of the project‟s credit

program; (ii) the MoF would lend directly to one or several pre-determined PFIs; (iii) the MoF

would pass on the funds to the PMU of the MoA for on lending to beneficiaries. The advantages

and disadvantages of these options are summarized below:

(a) Wholesale Banking Operation: this option would (i) allow more PFIs to participate in the

project, thus increasing competition in the rural areas; and (ii) better fit the basic concept

of a demand driven operation, as it would allow potential PFIs to join the project at a

suitable time. Except from appraising the Apex Bank/Institution, there would be no need,

at the project preparation stage, to fully appraise other financial institutions. This option,

however, is not suitable to Liberia at this stage, as the number of PFIs is limited, all are

engaged in retail banking activities, and no financial institution presently operating in

Liberia is capable of acting as a Wholesale Apex Bank/ Institution. However, this

function could be carried out by the Central Bank of Liberia (CBL) for the time being,

and could be transferred to a PFI in the future once such an institution is willing to do so

and is found to perform satisfactorily.

(b) Direct Lending from MoF to Single or Several PFIs: this option is not considered to be

suitable as experience in other countries has shown that MoF(s) are not good

implementers of lines of credit both in terms of monitoring PFIs as well as administering

the disbursement of the loans.

(c) Establishment of a Credit Unit within the PMU in the MoA to carry out the credit

program of the project: this option is considered unsuitable as the establishment of such

unit: (i) would undermine the development of banking sector activities in the rural areas;

and (ii) would not be sustainable after the project ends.

30

US$350 per hectare for oil palm and US$270 per hectare for rubber.

87

11. The missions met with all the nine commercial banks and one non-banking financial

institution that are currently operating in Liberia. At least two commercial banks with large

retail networks in the countryside (the Liberian Bank for Development and Investment (LBDI)

and Ecobank) and a recently established commercial bank (Afriland First Bank Liberia Limited)

expressed interest in participating in the project. Based on a preliminary review of the

performance of these banks, the two banks which expressed interest seem to meet the

eligibility/accreditation criteria.

D. Proposed Credit Arrangements and Procedures

12. Based on the above analysis, the option of a Wholesale Banking Operation to be managed

by the CBL using one or more PFIs would be adopted under the project. This option would

contribute to the strengthening of the PFIs, involve them in the sector, in preparation for a future

large scale tree crop program, and would be more cost effective than the other options. The CBL

would be responsible for the credit implementation under the project. The MoF would lend the

IDA funds to the CBL under the same conditions as applied by IDA to the GOL, while the CBL

would fully assume the GOL share of the credit risk associated with lending to the PFIs.

13. Following the end of the four year project, funding by the PFI(s) would be required to

finance the maintenance of the tree crop farms established under the project until they reach

maturity. Such credit requirements, estimated at about US$1.7 million, might be financed under

a future follow-up tree crop program. However, to ensure that the full financing of the

participating smallholders is secure in the absence of a follow-up program, the MoF would

commit to provide the funding to the CBL for lending to the PFI(s), under a Subsidiary

Financing Agreement between the MoF and the CBL.

14. Credit Management. The CBL would assign staff to manage the project‟s long term

credit activities either in an existing department or would create a special unit, the Credit

Management Unit (CMU), with the following duties: (i) select the PFI(s); (ii) carry out the

accounting of project‟s long term credit activities, record collection of revenue and expenses, and

prepare the funds financial statement; and (iii) monitor the implementation of the project‟s long

term credit component, and prepare reports.

15. The CMU would operationally be independent, it would handle day-to-day matters

related to the implementation of the project‟s credit component and would maintain a separate

account (or accounts) for all project‟s credit activities which would be audited annually. The

CMU would have the following three main duties:

(a) Accreditation of PFIs

Appraisal and accreditation of PFIs through the application of an agreed set of

accreditation criteria.

Assigning a line of credit to each of the PFIs. The size of the line of credit would be

based on the respective PFI financial strength (solvency, liquidity, profitability, and

quality of management and staff) and its rural outreach capacity.

Monitoring PFIs financial performance, at least semi-annually.

(b) Accounting and Disbursement

Carry out the accounting of all project‟s credit activities, including bookkeeping,

disbursement to PFIs, record collection and revenue and expenses, etc.

Preparing the Fund‟s financial statement.

88

(c) Monitoring and Evaluation

Monitoring the implementation of the project‟s credit component and preparing

reports, implementation plans as required. This is in line of paragraphs 13 and 17 of

OP 8.30.

16. Credit Operating Policies and Procedures. The long-term credit facility for the

replanting and planting of rubber and oil palm would be carried out on the basis of policies and

procedures established in the Project Implementation Manual (PIM) to be approved by the GOL,

and agreed with IDA. The adoption and implementation of the PIM, satisfactory to IDA would

be a condition of Credit disbursement. The PIM would be periodically updated to reflect

necessary policy changes. Policies to be incorporated under this credit scheme are outlined

below and would be incorporated in the PIM: (i) eligibility criteria for Fund resources; (ii) risk

sharing arrangements; (iii) interest rate structure and foreign exchange risk coverage; (iv) PFIs

accreditation criteria; (v) supervision and disbursements; (vi) sub-loan rescheduling; (vii) sub-

loan maturities; and (viii) accounting and audit arrangements. The PIM would not be revised

without prior consultation with and approval of IDA.

17. Eligibility Criteria. Beneficiaries (sub-borrowers) would be selected among smallholder

farmers and household members involved in the production of rubber, and oil palm, in the target

counties, based on eligibility criteria detailed in the PIM, including, but not limited to land use

rights validated at community level, farm size, family labor availability, participation in a

farmers‟ organization, and credit worthiness as determined by the PFI(s).

18. Risk Sharing Arrangements. As can be seen from the above, the IDA credit would

promote the participation of the Liberian PFIs in financing this important sector. To encourage

the PFIs to get involved in medium and long term financing of tree crop small farmers, a credit

risk sharing arrangement would be introduced. The PFIs would carry a small portion of the

credit risk, not less than 10%, while GoL would carry the balance. Without such risk sharing

arrangements, commercial banks are not likely to participate in this credit scheme and as a result,

smallholders would have to get their credit from GOL or a GOL‟s entity to be established which

would be much more costly than the use of PFIs and would not be sustainable. This is in line

with paragraph 8 of OP 8.30.

19. To further reduce the credit risk and total lending exposure, participating farmers would

be encouraged to pay the annual interests during the crop gestation period, when feasible.

20. Foreign Exchange Risk Coverage. The GOL is likely to on-lend the IDA funds in

Liberian $ or US$. In any case a foreign exchange risk would exist (as IDA credit is in SDR)

and would be borne by the GOL. This is because the project‟s smallholders would not be

capable of managing the related foreign exchange risk. Consequently, the PFIs would not be

able to pass on this risk to the eligible sub-borrowers, and therefore would be unable to

undertake this risk themselves. Also, the foreign currency would remain and likely to be used by

the GOL. This is in line with paragraph 16 of OP 8.30.

21. GOL on-lending Rate to PFIs. To ensure that project‟s funds do not undermine the

banks‟ saving mobilization efforts, on-lending rate to PFIs would not be less than the prevailing

cost of funds mobilization in the Liberian banking system, adjusted to the prevailing CBL

reserve requirement plus a fee to cover the GOL related operating cost, its risk sharing

arrangement, and the coverage of the foreign exchange risk. Currently, this interest rate is

estimated to be around 3%.

89

22. PFIs’ Interest Rate to Project’s Farmers. Currently, there is no sizeable medium and

long term lending facility in Liberia and therefore no significant reference rate for such lending

exist. Under the prevailing circumstances, it is proposed to cap the PFI lending rate at 8% to the

eligible farmers, which is positive in real terms (inflation is forecasted at about 7% in 2012 and

to 5% as from 2013 onwards). This is in line with paragraph 15 (a), (b), and (c) of OP 8.30.

23. PFI Accreditation Process. The CBL would select the PFI(s) based on criteria, aimed at

ensuring that the PFI(s) would pass generally accepted tests of solvency, liquidity, profitability,

quality of ownership, lending performance, management and systems, as shown below. Criteria

should be credible, transparent, unequivocal, and compatible with sound and generally accepted

financial principles and with the CBL regulations. IDA would review the performance of the

proposed PFI(s) and give its no-objection. While accessory factors could be taken into account

for fine tuning purposes, care should be exercised to avoid deviation from the main criteria.

These are in line with paragraphs 9 and 10 of OP 8.30.

24. Accreditation criteria would include the following:

(a) CBL Banking Regulations: eligible PFIs should comply with all CBL regulations,

particularly those related to the review of loan portfolio and other risk assets, definition of

past due loan accounts, loan classifications, and adequate provision for expected loan

losses.

(b) Solvency Requirements: eligible PFIs should comply with a minimum net equity base of at

least 10% of their risk assets (Capital Adequacy Ratio - CAR). The net equity base would

be computed applying the criteria established by the CBL, at the time of accreditation.

Some other financial ratios to determine the solvency state of the PFIs would be used. This

would include, but not limited to, past due rate, and net past due to equity ratio.

(c) Liquidity: eligible PFIs should comply with minimum of liquidity ratio (liquid assets over

short-term savings, deposits and bills payable) of (say) 30%.

(d) Profitability Requirements: eligible PFIs should demonstrate their profitability in real terms

during the life of the project. If their adjusted31

profit obtained is positive, then it would be

considered that the real profitability criteria has been met.

(e) Ownership and Management Quality Requirement: ownership and management quality

should be satisfactory. This would include qualified management team of good reputation,

presence of adequate and qualified staff, sound operation policies and procedures,

compliance with all relevant laws, decrees and regulations.

(f) Conditional Accreditation: a PFI could be given a conditional accredited even if it does not

meet all the accreditation criteria, provided that an Action Plan (AP) acceptable to the

project‟s credit manager, is produced (a possible concurrence with IDA should be

considered). This action plan would include a detailed time table for meeting all of the

agreed accreditation criteria. Continued participation in the program would be conditional

on meeting agreed targets in the action plan. This is in line with para.10 of OP 8.30.

31

The adjustments proposed to the nominal profits would be: the equity at the beginning of the year, multiplied by the

inflation rate between the beginning and the ending of the accounting period dates; this figure would be deducted from

the nominal profits. If the resulting number is positive then it would be accepted that the real profitability has been

positive.

90

(g) In the event that an accredited PFI loses its accreditation status (having fail to meet one or

more of the accreditation criteria), the CMU would: (i) cancel the uncommitted portion of

the line of credit granted to the PFI; (ii) take the necessary actions to safeguard the

committed portion extended to the PFI; and (iii) notify IDA on actions taken. This is in

line with paragraph 11 of OP 8.30.

25. Flow of Funds. IDA Credit of about US$15 million would be lent to the GOL. A portion

of this amount (US$0.3 million) would be allocated to the long-term credit component. This

amount would be on-lend by the GOL/CBL to the selected/accredited PPFIs to carry out the

financing of the eligible project‟s smallholders. These loans to the PFIs would be made under

terms and conditions to be agreed upon between the GOL/CBL and the related PFIs and shared

with IDA. The PFIs would be relending these funds directly to project‟s smallholder

beneficiaries under terms and conditions to be agreed upon between each of the selected PFIs

and its sub-borrowers beneficiaries. Loan recovery would be carried out through the processing

of outputs by the concessionaires.

26. Disbursement. Credit would be provided by the Concessionaires to eligible project‟s

smallholders in kind (planting materials, fertilizers, and other needed farm inputs). Their

financial value less the grant portion would be the credit in kind that would be charged by the

PFIs to the smallholder sub-loan account. The concessionaire accounts would be credited by the

related PFI with the cash equivalent of the credit in kind. The PFI would then withdraw the

same credit amount from its line of credit with the CBL. The PFIs would have to submit to the

CMU/CBL a list of smallholder borrowers, the amount borrowed, loans maturities, and the

related lending rate within an agreed time frame, say within 30 to 45 days. Also, the PFIs should

report regularly to the CMU/CBL of any defaulted case.

27. Supervision & Reporting. Apart from the regular and timely supervision of the PMU,

the CMU/CBL would have to periodically supervise the PFIs‟ performance in general, and in

particular, review the status of project‟s credit fund and sub-loans to smallholders.

28. Rescheduling. The CBL/CMU may, on a case to case basis, approve PFIs‟ request for

rescheduling of an outstanding loan. The PFI would need to submit a specific proposal say at

least 30 calendar days prior to the due date of the subsidiary loan (loan from CBL to a PFI). It

should likewise submit proof of its approval of the restructuring of its related sub-loan (loan

from the PFI to project‟s beneficiary). The restructuring of a sub-loan may be justified whenever

loss or damage results from fortuitous event to force majeure, i.e. flood, fire, or other causes

beyond the control of the sub-borrower and only when there is a good chance of recovery and

projected profitability based on PFI sub-project appraisal. Such restructuring would consist of a

revision in the repayment terms of the outstanding sub-loan.

29. Auditing. The PFIs would be required to submit to the CMU/CBL their audited financial

statement at least annually and interim financial statements as the need arises. The CBL would

be required to submit quarterly progress reports that would include details regarding loan

disbursement to farmers, loan terms and conditions, loan repayments, loan rescheduling, if

applicable, and loan default, if any.

Fish Town

Zwedru

Harper

Barclayville

Greenville

Cestos City

Buchanan

Kakata

Robertsport

Senniquellie

GbarngaBopolu

Voinjama

Tubmanburg

MONROVIA

L O F A

G B A R P O L U

B O M I

MONTSERRADO

M A R G I B I

B O N G

N I M B A

G R A N DB A S S A

R I V E RC E S S

G R A N D G E D E H

R I V E R G E ES I N O E

G R A N DK R U

GRANDCAPE

MOUNT

MARYLAND

S I E R R A

L E O N E

C Ô T E

D ’ I V O I R E

G U I N E A

Fish Town

Zwedru

Harper

Barclayville

Greenville

Cestos City

Buchanan

Kakata

Robertsport

Senniquellie

GbarngaBopolu

Voinjama

Tubmanburg

MONROVIA

Op

R

R

Cc CfCc RCf

Cc OpCf

L O F A

G B A R P O L U

B O M I

MONTSERRADO

M A R G I B I

B O N G

N I M B A

G R A N DB A S S A

R I V E RC E S S

G R A N D G E D E H

R I V E R G E ES I N O E

G R A N DK R U

GRANDCAPE

MOUNT

MARYLAND

S I E R R A

L E O N E

C Ô T E

D ’ I V O I R E

G U I N E A

ATLANTIC OCEAN

ToBuedu

ToIrié

ToZimmi

ToKenema

ToPendembu

ToNzérékoré

ToLola

To Danané

ToToulépleu

To Tabou

LIBERIA

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

IBRD 38898

DECEMBER 2011

L I B E R I ASMALLHOLDER TREE CROP REVITALIZATION SUPPORT PROJECT

POTENTIAL COUNTIES TARGETEDBY THE PROJECT

COUNTY CAPITALS

NATIONAL CAPITAL

MAIN ROADS

COUNTY BOUNDARIES

INTERNATIONAL BOUNDARIES

Cc

Op

R

Cf

POTENTIAL TREE CROPSTARGETED BY THE PROJECT: COCOA

COFFEE

OIL PALM

RUBBER