Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 34744-YE

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT IN THE AMOUNT OF SDR 14 MILLION

(US$20.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF YEMEN

FOR A

RAINFED AGRICULTURE AND LIVESTOCK PROJECT

May 3 1,2006

Water, Environment, Social and Rural Development Department Middle East and North Africa Region

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective April 30,2005)

AFPPF ARA ASMSP CAHW CAS CPPR CPAR CQ CSA EA EMP FA0 FM FMR FMS FU GDAR GDP GOY GPN GSCP GSMC GTZ ICARDA ICB IDA IFC LCS MA1 M&E MFI MOF MOPIC NCB

Currency Unit = Yemeni Rial (YR) YR187 = US$1

US$1.48 = SDR 1

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS

Agriculture and Fisheries Production Promotion Fund Agriculture Research Authority Agricultural Sector Management Support Project Community Animal Health Worker Country Assistance Strategy Country Portfolio Performance Review Country Procurement Assessment Report Consultants’ Qualification Country Social Analysis Environmental Assessment Environmental Management Plan Food and Agriculture Organization Financial Management Financial Monitoring Reports Financial Management Specialist Field Units General Directorate o f Animal Resources Gross Domestic Product Government o f Yemen General Procurement Notice Groundwater and Soil Conservation Project General Seed Multiplication Corporation Gesellschafi for Technische Zusammenarbeit International Center for Agricultural Research in the Dry Areas International Competitive Bidding International Development Association International Finance Corporation Least Cost Selection Ministry o f Agriculture and Irrigation Monitoring and Evaluation Micro-Finance Institutions Ministry o f Finance Ministry o f Planning and International Cooperation National Competitive Bidding

NGO PAD PFS PSU QCBS RALP RFP SASP SFD S A SPN SOE ss TDA TOR UNDP YVMA

Non-governmental Organization Project Appraisal Document Project Financial Statements Project Support Unit Quality and Cost-Based Selection Rainfed Agriculture and Livestock Project Request for Proposals '

Seeds and Agricultural Services Project Social Fund for Development Special Account Specific Procurement Notice Statement o f Expenditures Single Source Tihama Development Authority Terms o f Reference United Nations Development Programme Yemeni Veterinary Medicine Association

Vice President: Christiaan J. Poortman Country ManagerDirector: Emmanuel Mbi

Sector Director/Sector Manager: Inger AndersedLuis Constantino Task Team Leader: Marie-Hkltne Collion

YEMEN. REPUBLIC OF Rainfed Agriculture and Livestock Project

CONTENTS

Page

STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 A . 1 . 2 . 3 .

Country and sector issues .................................................................................................... 1

Rationale for Bank involvement ......................................................................................... 2

Higher level objectives to which the project contributes .................................................... 3

B . PROJECT DESCRIPTION ................................................................................................. 3

Lending instrument: a Sector Investment Loan over 5 years ............................................. 3

Project development objectives and key indicators ............................................................ 3

Lessons learned and reflected in the project design ............................................................ 9

1 . 2 . 3 Project components 4

4 . 5 .

. .............................................................................................................

Alternatives considered and reasons for rejection ............................................................ 11

C . IMPLEMENTATION ........................................................................................................ 12 Institutional and implementation arrangements ................................................................ 12 1 .

2 . Monitoring and evaluation o f outcomes/results ................................................................ 13

3 . Sustamability ..................................................................................................................... 14

Critical risks and possible controversial aspects ............................................................... 14

Credit conditions and covenants ....................................................................................... 15

. . .

4 . 5 .

D . APPRAISAL SUMMARY ................................................................................................. 15

1 . 2 . Technical ........................................................................................................................... 16

3 . Fiduciary ........................................................................................................................... 17

4 . Social ................................................................................................................................. 18 5 . Environment ...................................................................................................................... 19

6 . Safeguard policies ............................................................................................................. 19

7 . Policy exceptions and readiness ........................................................................................ 20

Economic and financial analyses (see Annex 9) ............................................................... 15

Annex 1: Country and Sector or Program Background ......................................................... 21

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 25

Annex 3: Results Framework and Monitoring ........................................................................ 26

Annex 4: Detailed Project Description ...................................................................................... 31

Annex 5: Project Costs ............................................................................................................... 47

Annex 6: Implementation Arrangements ................................................................................. 49

Annex 7: Financial Management and Disbursement Arrangements ..................................... 59

Annex 8: Procurement Arrangements ...................................................................................... 69

Annex 9: Economic and Financial Analysis ............................................................................. 75

Annex 10: Safeguard Policy Issues ............................................................................................ 82

Annex 11: Summary of Social Assessment ............................................................................... 90

Annex 12: Project Preparation and Supervision ..................................................................... 94

Annex 13: Documents in the Project File ................................................................................. 96

Annex 14: Statement o f Loans and Credits .............................................................................. 97

Annex 15: Country at a Glance ................................................................................................. 99

Annex 16: IBRD M a p No . 34325 ............................................................................................. 101

YEMEN, REPUBLIC OF

YEMEN RAINFED AGRICULTURE AND LIVESTOCK

PROJECT APPRAISAL DOCUMENT

MIDDLE EAST AND NORTH AFRICA

MNSRE

Date: May 3 1,2006 Country Director: Emmanuel Mbi Sector ManagerDirector: Luis F. Constantino

Team Leader: Marie-Helene Collion Sectors: Animal production (4O%);Crops (30%);Agricultural extension and research (20%);Agricultural marketing and trade (1 0%) Themes: Other rural development (P);Land administration and management (S); Water resource management (S) Environmental screening category: Partial Assessment

Project ID: PO89259

Lending Instrument: Specific Investment Loan

[ ]Loan [XI Credit [ ]Grant [ ]Guarantee [ 3 Other: For Loans/Credits/Others: Total Bank financing (US$m.): 20.00

Borrower:

Responsible Agency: Social Fund for Development Fij Attan, P.O. Box 15485 Yemen, Republic of Tel: 9671-449671 Ministry o f Agriculture and Irrigation Sana'a Republic o f Yemen Yemen, Republic of Tel: 967-1-282445 Fax: 967-1-289509

Project implementation period: Start January 1,2007 End: December 3 1,201 1 Expected effectiveness date: January 1, 2007 Expected closing date: June 30,2012 Does the project depart from the CAS in content or other significant respects? Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7

I s approval for any policy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3 The three-pronged Project Development Objective contributes to the higher development objectives o f reducing poverty in rural areas and improving natural resources management. The project would enable poor rural producers in rainfed areas to:

[ No

[ ]Yes [XINO

[ ]Yes [XINO

[XIYes [ ] N o

[XIYes [ No

Have these been approved by Bank management? [ ]Yes [ IN0

(a) (b) (c)

improve their production, processing and marketing systems; protect their assets: soil, water, rangeland, seeds and animals; and get organized for the purpose o f (a) and (b) above.

Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4 Component 1 : Farmer-based system o f seed improvement and management. This component will promote the use of appropriate crop landraces and seed technology practices to increase crop productivity and secure agricultural production in rainfed areas.

Component 2: Livestock husbandry and health services. This component will increase General Directorate for Animal Resources’ (GDAR) capacity to fulfill its core h c t i o n s and to improve livestock owners’ access to quality services and goods to enhance the health and productivity o f their animals.

Component 3: Productive rural development. This component i s expected to: (a) enhance the organizational capacity o f producers at the community and inter-community levels to improve their access to public and private services as well as input and output markets; (b) help producers upgrade and diversify their agriculture and livestock production, processing and marketing systems, and better conserve soil and harvest water in the Uplands; and (c) Improve market information dissemination. The Support Unit established in SFD will manage Component 3 and the proposed project wil l provide overhead costs to cover the increased volume o f work.

Component 4: Project Support Unit. A project support unit will be established and financed for

the management of Components 1 and 2, in particular with regard to procurement, financial management, reporting and monitoring and evaluation.

Which safeguard policies are triggered, if any? Re$ PAD 0.6, Technical Annex 10 Environmental Assessment Category B

Significant, non-standard conditions, if any, for: Re$ PAD C.7 Board presentation: NONE

Loadcredit effectiveness: Recruitment o f a firm responsible for: (i) putting in place an accounting software capable of producing a full set o f FMRs acceptable to the Bank; (ii) training PSU staff for i t s use; and (iii) providing backstopping during the first year o f implementation.

Covenants applicable to project implementation:

NONE

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

Poverty. With 42 percent o f the people living in poverty, Yemen i s one o f the poorest countries in the world. I t i s also essentially a rural country, with 77 percent o f the population living in rural areas in over 41,800 scattered hamlets. Poverty i s largely a rural phenomenon: almost half of the population living in rural areas i s classified as poor; 83 percent o f the poor live in rural areas.’ and they derive a large share o f their income from agriculture or agriculture-related activities.

Agriculture and broad-based powth. During the period 1996-2001, economic growth was driven mostly by agriculture2-which grew at 5.4 percent a year, and contributed to Gross Domestic Project (GDP) growth more than its relative share. Agriculture exports represent approximately one-third o f the non-oil merchandise exports. The present 1 5 percent contribution of agriculture to GDP underestimates the importance o f agriculture in the economy: many secondary and tertiary activities are agriculture-related. The agricultural sector has also a huge indirect impact on the economy as a whole, as it provides employment and income for about 55 percent o f the active population. The discrepancy between the low contribution o f agriculture to GDP and the percentage o f those employed in the sector reflects seasonal employment, underemployment and low productivity o f the factors o f production, which result in low incomes and poor standards o f living for those relying on the sector. The low productivity o f the Yemeni agriculture is underscored by the current yields which are well below actual farmer yields in countries with comparable agro-ecologies.

Agriculture potential and Government obiectives. The Government o f Yemen’s (GOY’S) Second Five-Year Plan (2001-2005) i s targeting agriculture as one o f the leading sectors for employment-generating economic growth, aiming at a 5.8 percent rate o f growth per annum in order to achieve: (i) a better level o f food security and diversification o f agricultural exports by raising productivity; and (ii) to improve farmers’ income. The productivity gap as well as the extent o f post harvest losses point to a substantial potential for agricultural development. However, Yemeni agriculture also faces severe constraints to development; in particular the on- going depletion o f groundwater resources means that the expansion o f irrigated agriculture from deep wells is doomed. On the other hand, for rainfed production systems which represent about half o f the cultivated area, there i s potential to improve productivity and sustainability of sorghum, millet, barley, wheat, leguminous crops, and livestock, including h~ney-bee.~

In spite of the potential for development, traditional rainfed and livestock production systems have been neglected for a number o f reasons: (i) GOY policies in supporting irrigated agriculture during the past three decades; (ii) the Ministry o f Agriculture and Irrigation’s (MAI) limited capacity to provide services (research and extension) for these systems; (iii) lack o f farmers’ leverage to access services, in particular financial services, as well as input and output markets; and (iv) the economic boom in the Gulf countries in the 1980’s which provided employment

’ Republic of Yemen, Povertv Update. December 2002. Another source o f economic growth was the o i l sector. FA0 (2002) Economic Incentives and Comparative Advantage o f Strategic Crops in the Highlands: A Policy Note on Yemen.

1

opportunities to thousands o f Yemeni men, mostly from rural areas, who le f t fanning. However, the situation is changing: (i) GOY i s acknowledging that expanding, or even maintaining existing irrigated agriculture based on groundwater mining i s not sustainable; and (ii) the aftermath o f the first Gulf War, which was earmarked by the return from upwards o f 800,000 migrant workers and the end o f remittances for the rural areas. As a result, there is now less cash available at the local level for community self-help projects and investment in agriculture while the rural economy has to absorb the returning laborers into the market place.

Land and water management. Agricultural activities in the Highlands and the wadis o f Tihama and the Eastern Plateau are based on soil conservation and water harvesting through terracing, dikes and small dams. Given the positive impact o f terraces on water harvesting, groundwater recharge and soil erosion control, their maintenance is key not only for the upper watershed areas but also for the downstream irrigation along the wadis, as well as flood management. However, their maintenance i s highly labor intensive. The meager income derived f iom these low productivity systems, compounded by male out-migration, has led to insufficient maintenance and abandonment o f terraces. Th is has resulted in an increase in erosion and uncontrolled flooding downstream.

Traditional rainfed production svstems and poverty. Most o f the poorest people in Yemen are farmers subjected to rainfed production conditions while trying to maintain their livelihood. Livestock represents at a minimum 20 percent o f farm production in the Highlands and Tihama and is a major source o f cash income for households with inadequate landholdings. Indeed, livestock promotion i s an effective way to target the rural poor (they have easier access to livestock than to land or water rights) as well as women, since livestock activities are mostly women’s activities.

GOY envisages the proposed Rainfed Agriculture an Livestock Project (the proposed project) as a vehicle to implement the Povertv Reduction Stratem Promam in rural areas. Investing in rainfed agriculture and livestock production systems would directly contribute to poverty alleviation and to natural resource management, and benefit rural women, one o f the most “at r i sk ” segments o f the population. In addition, through backward and forward linkages, a boost to farming activities would trigger growth in agriculture-related activities, as well as in other aspects o f the rural economy as farmers spend most o f their incomes on non-tradable goods and services. Finally, helping farmers rehabilitate their terraces would also inject much needed cash into the rural economy.

2. Rationale for Bank involvement

The proposed project i s conceived as a complement to other Bank-assisted operations aimed at improving basic services for the rural areas (education) and infrastructure (rural roads, water supply and sanitation, water and soil conservation infrastructure), such as the Social Fund for Development I11 Project, the Public Works Project, the Rural Water Supply and Sanitation Project, and the Groundwater and Soil Conservation Project (GSCP). These projects bring much needed infrastructure and services in rural areas. The missing link i s to help rural people develop viable economic activities to improve their incomes and finance infrastructure maintenance and recurrent costs o f services.

2

A new CAS for the period 2006-2009 i s being prepared to be presented to the Board early in FY 2007. I t s objectives are similar to the 2002-2005 CAS objectives focusing on building human capital and ensuring environmental sustainability. The main focus areas o f the 2006-09-CAS now under preparation are also in l ine with the Second Poverty Reduction Strategy being prepared by the GOY. Whi le the GOY PRSP i s s t i l l under preparation its pillars are already known. The proposed project wil l be o f significance for at least three o f these pillars: (i) stimulating economic growth; (ii) improving human capital; and (iii) supporting local and rural development through decentralization.

The proposed project would help MAI improve the services to i t s fanners and one o f i t s components is a follow up to the Seeds and Agricultural Services Project, but targeting rainfed areas only. It also builds upon the lessons learned and fbrthers the progress made in the domain o f seed supply under that project.

Finally, the proposed project would be complemented by a GEF-financed project, the objective of which i s to conserve the agro-biodiversity o f mountainous ecosystems o f Yemen and address vulnerability and adaptation to climate change on the basis o f improving agriculture’s adaptive capacity.

3. Higher level objectives to which the project contributes

In five governorates, the proposed project would contribute to poverty alleviation in predominantly rainfed areas through promoting rural producers’ incomes from sustainable agriculture, livestock and off-farm activities as wel l as improving natural resources management.

B. PROJECT DESCRIPTION

1. Lending instrument: a Sector Investment Loan over 5 years

2. Project development objectives and key indicators

The three-pronged Proi ect Development Obiective contributes to the higher development objectives o f reducing poverty in rural areas and improving natural resources management. The proposed project would enable poor rural producers in rainfed areas to:

(a) (b) (c)

improve their production, processing and marketing systems; protect their assets: soil, water, rangeland, seeds and animals; and get organized for the purpose o f (a) and (b) above.

The target population is poor rural producers, especially women operating under rainfed conditions (including small spate irrigation systems) in the five governorates o f Al-Mahweet, Hajjah, Hodeidah, Lahej and Sana’a.

3

K e y indicators

0 Poor rural producers, in rainfed areas o f five governorates:

(a) adopt improved crop varieties (local and from other regions o f Yemen) and improved seed technology practices;

(b) use more livestock services and inputs, and adopt improved animal health and husbandry techniques;

(c) organize at community and inter-community levels; (d) diversify their production systems; and (e) increase their marketed output or their self consumption.

The cultivable area protected against soil erosion and with improved water harvesting structures i s increased.

3. Project components

The proposed project would have four components; the fourth component would finance a Project Support Unit (PSU) and Social Fund for Development (SFD) overhead management costs.

Component 1 : Farmer-based system o f seed improvement and management Component 2: Livestock husbandry and health services Component 3 : Productive rural development Component 4: Project Support Unit

3.1. Component 1: Farmer- based system of seed improvement and management

Development objective

To promote the use of appropriate crop landraces and seed technology practices to increase crop productivity and secure agricultural production in rainfed areas.

Specific objectives

(a) Promote ex-situ and on-farm conservation and participatory improvement o f prominent landraces; and

(b) Create a sustainable farmer-based system for seed multiplication and distribution of landraces in rainfed areas by encouraging farmer groups to establish themselves as seed producer groups and ultimately marketing associations.

4

Expected resultdperformance indicators

Development Indicators:

(a) Five hundred eighty tons of improved seeds o f prominent landraces will be produced and supplied annually to farmers by the fifth year o f project implementation. This will allow coverage o f 24,000 ha with improved landraces; and

(b) One seed growers’ association or network o f seed producer groups wil l be established in each governorate.

Intermediate performance indicators:

(a) Number of landraces collected and evaluated;

(b) Volume of basic seeds of the most prominent varieties provided to seed producers groups; and

(c) Number o f seed producer groups formed and trained to handle seed production, processing and storage activities at the district level.

Component description

Component 1 will finance research and development activities to characterize, conserve and improve landraces and ensure seed quality by national mandated institutions, in close collaboration with local communities. Farmer groups will be involved in on-farm trials for variety screening and evaluation. The component will cover landraces o f ten cereals and pulses. The component will introduce technological innovations with farmer groups involved in seed production, processing and storage and promote the creation of seed producer groups to produce quality landrace seeds at the farm level. For each governorate, a network o f seed producer groups or associations will be encouraged to take on the task o f seed marketing and distribution. The component wil l also finance the rehabilitation o f Agricultural District Offices to enhance their capacity to participate in the implementation o f demonstrations and on-farm seed production activities. The bulk of the finding will be directed to support the establishment of a farmer-based seed production system.

3.2 Component 2: Livestock husbandry and health services

Development objective

To increase General Directorate for Animal Resources’ (GDAR) capacity to hlfill i t s core functions and to improve livestock owners’ access to quality services and goods to enhance the health and productivity o f their animals.

5

Specific objectives

(a) To increase the capacity o f the GDAR to fhlfill its core h c t i o n s regarding animal health and production through: (i) the design and adoption o f livestock strategies, policies and regulations; and (ii) the development o f a national epidemio-surveillance network based on improved diagnostic and analysis (laboratories), and quarantine facilities; and

(b) To establish a public-private partnership based on a sanitary mandate contracting system for more accessible delivery o f proximity veterinary and animal husbandry services and goods to livestock owners.

Expected resultdperformance indicators

A more effective GDAR in the fields o f disease control (especially for such epizooties as the Avian Flu) through policy making, staff training, refurbishing o f three disease diagnostic laboratories and provision o f new laboratory equipment;

L i ve animal quarantine holding grounds rehabilitated at A1 Mokha Port and the design of a similar quarantine holding ground at A1 Mukalla;

An assessment o f whether additional quarantine stations are needed at Haradh and Dhobab;

A menu of tested recommendations for enhancing livestock health and productivity;

About 70 veterinary technicians and 200 Community Animal Health Workers (CAHWs) trained, equipped and employed by veterinarians in the 5 governorates who will be expected to provide livestock owners with better access to basic inputs and services; and

The creation and establishment o f sanitary mandate conditions to contract out the public services functions to private veterinarians.

Component description

Component 2 will finance activities to: (i) help GDAR improve i ts capacity to fulfill i ts core h c t i o n s (technical and legal advice, training, specific surveys and research programs), (ii) rehabilitate/construct and equip the Central Veterinary Laboratory and three regional veterinary laboratories (Hodeidah, Taiz and Abs); (iii) rehabilitate and equip a l ive animal quarantine holding ground in A1 Mokha and prepare the survey for a similar quarantine station around A1 Mukalla; (iv) promote the training, employment and establishment o f about 270 veterinary technicians and CAHWs; (v) support 300 sanitary mandates per year (600 in the first year) to carry out vaccination campaigns and epidemio-surveillance; and (vi) carry out research to identify a menu o f tested livestock improvement interventions.

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3.3 Component 3: Productive rural development

Development objective

Component 3 i s expected to help producers upgrade and diversify their agriculture and livestock production, processing and marketing systems, and better conserve soil and harvest water in the Uplands.

Specific objectives

(a) Enhance the organizational capacity o f producers at the community and inter- community levels to improve their access to public and private services as wel l as input and output markets;

(b) Provide funding and technical assistance to rural producers to upgrade and diversify their agriculture and livestock production, processing and marketing systems, and better conserve soil and harvest water in the Uplands; and

(c) Improve market information dissemination.

Expected results

(a) Village rural producer committees and rural producers’ interest group organized at community and inter-community level;

(b) Producer groups’ initiatives at community or inter-community levels are completed;

(c) Rural producers have regular access to information on prices and quality o f products required on distant markets; and

(d) National traders and exporters have regular updated information on products (quality and quantity) available f i om specific rainfed areas.

Approach

Rural producers’ capacity building is at the core o f this component. Capacity building will be achieved either directly through: (i) the provision o f facilitators and technical advice to farmer groups (male, female, youth) to help them get organized; and (ii) indirectly through farmer groups implementing sub-projects o f their choice, with technical and financial support f rom the project.

Sub-projects

Sub-projects to be fhded under Component 3 could relate to the enhancement of: (i) rainfed cereals and legumes production and post-harvest handling, including seed production and management; (ii) livestock raising, bee-keeping and marketing, livestock product processing

7

(cheese, ghee); (iii) small vegetable gardens; (iv) fmit production and post-harvest handlingmarketing; (v) coffee production, post-harvest handling and marketing; (vi) handicraft production and marketing, and (vii) soil conservation, water harvesting, agro-forestry.

The activities funded would include:

Seed money for on-farm testing o f improved technologies and small equipment related to improved productivity and production;

Start-up investments to establish agricultural and livestock input outlets at the village or district level or seed storagehank;

Financing o f labor-saving devices, especially for women, such as biogas stoves;

Financing o f small agro-processing equipment, in particular for milk collection, storage and processing (ghee and cheese);

Support for post-harvest handling and marketing activities;

Technical advice and training;

Organizational and managerial capacity building for existing and/or newly-formed farmer groups/organizations; and

Rehabilitatiodconstruction o f soil and water-harvesting structures; shrub and tree plantation.

Funding arrangements

The component would finance sub-projects on a cost-sharing basis. The cost-sharing procedures already established by the Social Fund for Development (SFD) will be followed and adjusted as needed, building upon lessons learned as implementation progresses. The cost-sharing ratio will depend on the type o f activities: more for activities with a direct benefit, less for activities such as soil and water conservation, training or capacity building.

For some of these activities, micro-finance institutions (MFIs) may be able to play a role. SFD micro-finance team will assess the feasibility o f extending micro-finance activities in some of the project areas. Depending upon the results o f these feasibility studies and for sub-projects that are suited for micro-finance, SFD may subcontract their financing to existing M F I s which are willing to extend their activities in the project area.

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3.4 Component 4: Project Support Unit

A Project Support Unit (PSU) wil l be established for the management o f Components 1 and 2, in particular with regard to procurement, financial management (FM), reporting and monitoring and evaluation (M&E). The proposed project will finance the operating costs o f this PSU (the salaries of a project manager, financial management specialist, accountant, procurement specialist and a bilingual secretary) as wel l as the purchase o f computers and office equipment and the recruitment o f consulting services as required.

For Component 3, the proposed project wil l rely upon the support un i ts established in SFD. They wil l be financed through the provision o f overhead costs as the increased volume o f work will impose the recruitment o f additional staff and will result in additional operating costs for SFD.

4. Lessons learned and reflected in the project design

As mentioned above, rainfed agriculture has been largely neglected by government services, in spite of its potential and the impact that improved productivity in rainfed areas could have o n rural poverty. The need to be proactive to achieve the Mil lennium Development Goals, as wel l as the alarming depletion o f groundwater resources, has led GOY to shift i ts attention to rainfed agriculture and livestock development, hence the proposed focus on rainfed areas.

In terms o f design, four World Bank-financed projects are particularly relevant to the proposed operation: the Agricultural Sector Management Support Project (ASMSP) which closed on June 30,2000, the Seeds and Agricultural Services Project which closed on June 30 2004, the Soil and Water Conservation Project and the Social Fund I11 (ongoing). ASMSP supported the MAI ’s services, i.e. the supply side o f services, but these projects that the Bank promoted in the. 1980s and 1990s have shown their limits. In Yemen, as wel l as in other parts o f the World, public service agents demonstrated more accountability to their hierarchies than to the users o f their services, the farmers. Small unorganized farmers have had little leverage, if any, over Ministry services o r the Agriculture Research Authority (ARA). In addition, under the participatory on-farm research and extension methods o f ASMSP, farmers were asked to react to technologies proposed by researchers and extension agents, rather than to offer their own ideas about potential research and extension themes, or bring their indigenous knowledge to shape research methodologies and extension programs. As a result, ASMSP financed many ineffective activities, with l imi ted results for the farmers.

Thus their responsiveness to farmers’ needs was limited.

The proposed project therefore purports to support the demand side o f services as we l l as the supply side. In particular, i t aims at strengthening the capacity o f f m e r s to organize themselves to demand services. It gives them access to financial and technical resources to implement the development activities o f their choice. Hence, there will be two f lows o f funding: one addressing the need o f the rural producers (Component 3), the other one supporting the MI’S regulatory functions and the capacity o f service providers to serve farmers. Ultimately, i t i s hoped that farmers, through an organization o f their own, will be better equipped to make their voices heard and have access to services which would otherwise be unattainable.

9

In order to ensure accountability to the rural producers, the proposed project i s introducing contracting of services to them, through a tripartite contractual arrangement: the rural producer group, the project and the service provider. The service provider, in the case o f agriculture and livestock, may b e mostly the staff from the District Agricultural Offices or Development Agencies (such as the Tihama Development Agency) because the capacity o f Non-governmental Organizations (NGOs) or the private sector to provide agricultural advice remains limited. However, i t i s expected that the contractual arrangements wil l give the rural producers the leverage that they cannot have with bulk funding o f the M A I ’ s extension services.

Finally, the proposed project aims at empowering rural producer groups and their representatives. To this end, a committee o f rural producers’ representatives will be established to review proposed sub-projects. The criteria for sub-project selection will be agreed with the rural producer representatives; there wil l be a menu o f activities that the project can finance, but ultimately the selection process rests with the farmers. This mechanism, especially if the rural producer committees know the budget they have available (which would be the case), i s an effective empowering instrument.

Another major lesson learned from the ASMSP, as wel l as f rom many projects o f this type, i s that investing in technologies to increase productivity without helping farmers access input and output markets, yields disappointing results. A s a farmer once said, “it i s l ike learning h o w to read and write without having access to paper and pen”. Hence, under Component 3, rural producers’ access to input and output markets wil l be addressed. Component 3 will also inject much needed money into the rural economy through its sub-projects (financed o n a cost-sharing basis), in particular the labor-intensive rehabilitation o f terraces and other erosion control structures, which should enable rural producers to earn income that they can reinvest in their production systems.

The Seeds and Agricultural Services Project (SASP) proved to be very successful with regard to putting in place a system to improve the quality o f seeds. However, the involvement o f SASP in rainfed areas was limited. The proposed project is building upon the lessons from SASP, especially with regard to involving farmers at an early stage in the choice o f landraces, and setting up farmer-managed production, storage and distribution system. SASP pioneered work under contract with eligible consulting firms and seed companies to enhance the efficiency of resources used. A s mentioned above, the successhl contractual arrangements will continue and will involve rural producer groups under Component 3.

Through the Social Fund I, I1 and the ongoing Social Fund 111, a very effective structure has been put in place to reach marginal communities, respond to their needs on a demand basis and empower them to improve their living conditions through various capacity-building channels. The experience of four SFD units are particularly relevant for the project: (i) the Training and Organizational Support; (ii) Water & Environment; (iii) Integrated Community Development; and (iv) Small Enterprise Development and Micro-Finance. The project will benefit from these experiences.

Experience gained from projects h d e d by other donors was also taken into consideration, in particular the UNDP-financed Community-based Regional Development Project, GTZ-funded

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I D A S I, I1 and 111, and CARE project in Al-Mahweet Governorate. In the districts where the Community-based Regional Development Project was implemented, the capacity o f the farmers to organize themselves increased substantially, but the project design was too resource intensive to be easily replicable. Also, UNDP’s project required farmers to form an association, officially registered, before financing any activities with them, which resulted in a long period of only capacity building. In the proposed project, the requirement i s only to have the farmer group registered with the District local council.

I D A S project (GTZ) has been concentrating only on capacity building, assuming that rural producer groups, once capacitated, would go to SFD, or other NGOs to get their initiatives funded. Whi le this principle is good, in practice, however, the newly formed farmer groups experience delays and frustration before they receive funding, as donors m a y have other priorities. Finally, CARE project i s typical o f NGO work: intensive capacity building and support to local communities, in collaboration with the Al-Mahweet Agricultural Office, but focused on few villages and too resource intensive to be easily up scaled.

5. Alternatives considered and reasons for rejection

During the Review o f the Project Concept Note, the option o f financing only the supply side of services (i.e. Components 1 and 2) was considered. This was rejected for the reasons highlighted above.

Under the supply side o f services, a component to upgrade the plant protection and crop quality control system was proposed. However, the advice to the project team was to limit the areas of interventions with MA1 to two (seeds and livestock), given the l ow level o f implementing capacity o f MA1 and the fact that fanners under rainfed condition do not use chemicals.

For Component 3, three implementation arrangements were examined during the preparation mission, taking into account the strengths and comparative advantages o f existing key institutions: (i) direct implementation by the Agricultural Offices or Development Authorities of MAI; (ii) implementation through contracts with NGOs or projects already operating in specific governorates (e.g., CARE in Al-Mahweet or I D A S I11 (GTZ) in Lahej); and (iii) SFD.

The Agricultural Offices or the Development Authorities do not have expertise in community development, social mobilization and organization strengthening, but they have technical expertise in agriculture and livestock production. NGOs intervening in the selected governorates have the expertise in community development but they rely on MAI for the technical expertise. In addition, they are following extremely resource intensive, micro approaches that cannot be scaled up to a large number o f farmer groups or cover whole districts. SFD has the expertise required in community development, but l ike the NGOs, i s relying on expertise f rom sectoral ministries for project implementation. SFD has also demonstrated a reliable institutional capacity for project planning and implementation at the community level, through a network of wel l qualified consultants. They are also operating with a stringent amount o f human and financial resources that allow for scaling up. In disadvantaged rainfed areas, they have the capacity to mobilize complementary funding to satisfy other basic needs that the proposed project would not be able to finance, e.g., for health, education or drinking water.

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For soi l and water conservation and harvesting activities, two implementation mechanisms were envisioned: through SFD, or through the existing teams o f the Groundwater and Soil Conservation Project (GSCP), i.e. the Field Units which are already established and functioning to implement such activities. Initially, the team thought that with some additional resources the Field Units could do the work better than SFD. However, the Field Units already experience difficulties with the implementation o f the GSCP and therefore could no t take on additional work. In a recent study o f the various entities involved in the implementation o f soil conservation and water harvesting facilities in Yemen, SFD came out as the best implementing entity. On that basis, i t was decided to work with SFD to implement al l o f Component 3, including soil conservation and water harvesting activities.

NGOs or associations would st i l l be involved in the implementation o f Component 3: they may be subcontracted by SFD to implement certain activities such as women capacity building. SFD would implement the support to small businesses for ago-processing activities as wel l as the capacity building o f farmer groups.

C. IMPLEMENTATION

1. Institutional and implementation arrangements

MAI will implement Components 1 and 2. SFD will implement Component 3.

A Project Support Unit (PSU) to manage MA1 components. To ensure efficient and timely procurement and financial management, MA1 will create a PSU. I t will be headed by a manager, and include a procurement officer, a financial management specialist, an accountant and one bilingual secretary. Consultants will be recruited under IDA guidelines and financed from the proceeds o f the Credit.

The PSU will be responsible for:

Preparing, advertising, evaluating tenders and awarding contracts for the procurement o f goods and services for the various entities involved in the project;

Obtaining relevant clearances, including customs, and transporting equipment to the project site;

Preparing the Financial Monitoring Reports (FMRs) as we l l as the withdrawal and replenishment applications;

Maintaining project accounts on a regular basis within sound auditing procedures acceptable to IDA;

Consolidating and submitting to IDA bi-annual project progress reports, mid-tern an annual reports;

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(f) Serve as a liaison between the MAI, SFD, the Ministry o f Planning and International Cooperation (MOPIC), the Ministry o f Finance (MOF) and International Development Association (IDA); and

(g) Monitor progress on implementation and have baseline surveys, mid-term and final evaluation studies carried out, in collaboration with relevant staff o f GDAR.

Specific implementation arrangements for each component

Component 1: Farmer-based svstem of seed improvement and management. The General Seed Multiplication Corporation (GSMC) wil l have overall technical responsibility for carrying out Component 1 wh ich wil l be implemented through contracts awarded on a competitive basis with eligible consulting f i rms and service providers.

Component 2: Livestock husbandrv and health services. GDAR will have overall technical responsibility for carrying out Component 2 and GDAR may collaborate with the Yemeni Veterinary Medicine Association (YVMA) to ensure, under contractual arrangements, the training o f C A H W s and supervise the training o f veterinary technicians. YVMA will also promote the employment o f paraprofessionals by veterinarians active in the provision of veterinary services and manage the contracting o f GDAR core functions to veterinarians actively engaged in the private services in the framework o f a sanitary mandate system. The livestock improvement survey and research programs wil l be supervised by GDAR, but contracted to qualified institutions, consulting companies or individuals, through competitive bidding. GDAR’s capacity to inform farmers and other stakeholders o f activities developed and recommendations proposed will be enhanced through technical assistance and fimding o f mass media campaigns.

Component 3: Productive rural development: The Agricultural and Rural Development Unit of SFD will be responsible for implementing this component. They would manage a separate Special Account (SA), and follow its own procurement and financial management procedures which have already been agreed upon with the World Bank under previous and ongoing projects.

The Agricultural and Rural Development Unit o f SFD wil l implement the project through i ts project officers: 1 coordinator based in Sana’a and 5 regional coordinators working from SFD branches in Sana’a, Aden, and Amran. The Agricultural and Rural Development Unit wil l benefit from the support from SFD units as needed, in particular, the Training and Organizational Support Unit, the Community Contracting Project, the Water and Environment Unit, the Microfinance Unit, the Administration and Finance Unit and the M&E Unit.

2. Monitoring and evaluation o f outcomes/results

A Management Information System will be put in place within the PSU to serve as a management and monitoring tool. I t Wil l cover the management side o f the components: FM, procurement, disbursement, budget implementation, contract management as wel l as project intermediate outcomes. The intermediate outcome indicators which will be monitored are presented in Annex 3.

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As to Component 3, SFD has an M&E Unit. The already established M&E system based on a computerized management information system wi l l be used under this component. A baseline survey will be established during the f i rst year o f the project to provide a reference against which project outcome will be assessed at mid-term review and project completion.

3. Sustainability

The key feature o f the proposed project to ensure sustainability o f the activities i s the capacity building o f the main economic actors, the rural producers as well as the agricultural service suppliers. The proposed project wil l help rural producers become organized to: (i) access input and output markets; (ii) produce and store their own seeds through seed producer groups and seed grower associations; (iii) identify and support members o f their communities to become community animal heath workers; and (iv) form networks o f rural producer groups which in the long run may have their voice heard in various decision-making instances. In addition, the project will encourage MA1 technical livestock staff to become agricultural service providers and set up their own shop. Together with rural producer organizations, these private sector initiatives are intended to become the backbone o f a more vibrant rural economy.

4. Critical risks and possible controversial aspects

Lack of implementing capacity in MAI. Mitigating measure: MAI capabilities will be complemented with capacity from other entities through contractual arrangements;

Sustainability o f the proposed investments, laboratories and equipment, especially for the infrastructure outside Sana’a. Mitigating measure: Only carefi l ly selected and absolutely essential laboratory equipment and infrastructure are targeted. Therefore the added recurrent costs should be minimal; and

Lack of complementary productive and social infrastructure necessary for the sub- projects selected by the rural producer groups to be successful. Mitigating measure. Access has been one o f the criteria for selection o f the districts. Complementarities with other projects wil l be sought (Public Works 111, Rural Access and Social Fund) to provide the basic productive and social infrastructure, such as rural roads. This will be more likely facilitated by the fact that SFD would be the implementing agency for the “Productive Rural Development” component as it has access to other sources o f funding for infrastructure.

Controversial aspects:

(a) Only one directorate, GDAR, will receive financial support leaving the rest o f MA1 desperately hungry for resources in order for them to operate. Therefore, GDAR will be under a lot o f pressure. Mitigating measure: there will be no funding o f operating expenses, unless it is part o f a contract with an independent entity. In addition, neither

14

GDAR nor General Seed Multiplication Corporation (GSMC) will manage finds. The PSU, set up as an independent entity from MA1 directorates, wil l manage the funds.

(b) Implementation difficulties in working across two agencies: MA1 and SFD. Mitigating measure. There wil l be two SAs and separate implementation and reporting mechanisms for the two entities.

5. Credit conditions and covenants

The following conditions o f negotiations have been met:

(a) The recruitment of PSU staff with a project manager, a financial management specialist and a procurement specialist, all o f whom acceptable to IDA;

(b) Draft Financial Policies and Procedures Manual acceptable to IDA;

(c) Production o f a set o f FMRs acceptable to IDA; and

(d) Procurement plan for the first 18 months.

Condition o f effectiveness

Recruitment o f a firm responsible for: (i) putting in place an accounting software capable of producing a full set o f FMRs acceptable to the Bank; (ii) training PSU staff for i t s use; and (iii) providing backstopping during the first year o f implementation.

D. APPRAISAL SUMMARY

1. Economic and financial analyses (see Annex 9)

Economic

The economic analysis estimates the benefit stream from incremental net annual revenue in the proposed project area using a “with” versus “without” project approach. Economic benefits, using shadow prices, were calculated on the basis o f a gradual increase in crop and livestock productivity in the project area. Crop budgets were developed for the main crops targeted by the project, taking into account the potential cropping areas and typical characteristics o f farms encountered in the project governorates. The overall benefits are aggregated over the project area and net value o f incremental benefits derived from project investment costs.

Possible off-farm incomes induced by the project are not considered in the analysis. Furthermore, investments in small-scale demand-based projects (Component 3) are also not included in the economic assessment.

The overall economic rater o f return (ERR) for the proposed project i s about 17.7 percent while the lowest ERR o f 10.7 percent is observed in Sana’a Governorate compared to 23.7 percent in Hodeidah Governorate. To assess the robustness o f ERRS o f the overall project and individual

15

schemes, a sensitivity analysis was carried out assuming three different r i sk scenarios: (i) increased investment costs due to implementation inefficiencies or cost under-estimation; (ii) benefits decrease due to poor services delivery, lower than expected crop yields or lesser decrease in animal mortality rate; and (iii) delays in implementation possibly due to problems with procurement or counterpart hnding. The results o f the sensitivity analysis show that the project returns are robust for all project areas. The overall ERR decreases to 15.4 percent, 15.0 percent and 14.7 percent in the three respective scenarios.

Financial

Project financia2 impact at farm level. The financial viability o f small farms under the expectations o f the proposed project was also assessed using financial farm-gate prices. On the basis of the framework on the most common and identifiable production systems in the project areas and farm size in each ecological zone o f the project governorates, typical farm models were constructed and evaluated. Results show positive incremental returns per hectare o f farm area in all project areas. Expected increases in farmers’ income, as a result o f project-financed investment, range from 16.7 percent to 18.8 percent.

Fiscal Impact. Total counterpart funding i s estimated at approximately US$1.9 mill ion over the project’s lifetime. GOY i s particularly committed to this project and decided to increase i ts contribution to US$3 million, an amount which does not represent a significant burden on the national budget. In addition, the expected gain in foreign exchange as a result o f increased livestock and crop production, wheat and maize in particular, represents a positive fiscal impact at the national level. At the governorate level, the project i s also expected to have a positive fiscal impact as GOY’S contribution will be in the form o f central government expenditures and i s not expected to result in a direct fiscal impact for the governorates. On the other hand, project support to demand-based small-scale projects will reduce the pressure on local municipality, district and governorate investment budgets.

2. Technical

Under Component 1, variety maintenance o f the most preferred landraces will be conducted according to scientific principles so that the characteristics o f the varieties are preserved from physical, genetic or physiological deterioration. Recognized techniques for production, conservation and quality control o f seeds will be applied. Similarly, the technologies which will be introduced to improve livestock production will have been tested according to international research standards. Small spate structure, open pits during spate and water harvesting terraces are technologies which have been known and proven sustainable for centuries. With regard to implementing the farmer capacity-building and investment component, SFD follows best practices of social funds around the world, in both i ts organizational and operational aspects. Working through NGOs and local communities has proven to be more cost-effective, sustainable and reflective o f local needs than any other approaches.

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3. Fiduciary

Financial management. An assessment o f the FM arrangements for the proposed project was undertaken during the pre-appraisal and appraisal missions to determine whether these arrangements are acceptable to IDA. As detailed in the implementation arrangements section of this Project Appraisal Document (PAD), the proposed project wil l be implemented by two separate entities: the PSU in MA1 for Components 1 and 2, and SFD for Component 3. SFD will implement Component 3 through i ts branches in the different governorates as well as through subcontracting NGOs.

The initial FM r isk assessment identified for each PSU and SFD i s High and Moderate respectively. During the pre-appraisal phase and later during appraisal, an FM action plan was agreed upon with officials from MA1 by which the PSU was required to: (i) appoint FM staff to handle the FM function in the PSU; (ii) draft a financial policies and procedures manual; and (iii) procure an accounting software, before negotiations (condition o f negotiations). I t was W h e r agreed that any condition not fully met prior to negotiations wil l be set as a condition of effectiveness. Prior to negotiations, the said action plan, except for the procurement o f the software, was successfully implemented which reflects the positive level o f commitment and seriousness o f MAI. Accordingly, the maintenance o f the existing FM arrangements, in addition to other mitigating measures which will be closely monitored during the project’s life, i s expected to bring the residual FM risk for each entity to Moderate and Low respectively.

The procurement, installation and implementation o f an accounting software, including training of staff for i t s use and backstopping, i s considered to be a condition o f effectiveness. The software will have to capture, summarize, record and analyze financial information, and produce a full set o f FMRs in accordance with Bank guidelines. The Terms o f Reference (TORS) and software should be acceptable to IDA.

The proposed disbursement arrangements agreed upon during the appraisal mission are that PSU and SFD would each open, maintain and operate a SA at the Central Bank o f Yemen (or a commercial bank). Deposits into, and payments from the SAs, will be made in accordance with the provisions stated in the Credit Agreement. Disbursement for PSU will be made according to the traditional disbursement procedures that include withdrawal applications for direct payment, reimbursement and requests for the issuance o f special commitments. Since SFD i s currently using the report-based disbursement method under an ongoing IDA-funded project, disbursements will be made according to the report- based method, using quarterly FMRs.

Procurement. The PSU i s staffed with a procurement specialist with qualifications to manage IDA-funded procurement who has been recruited on a competitive basis under IDA guidelines. In order to strengthen the procurement capabilities o f the PSU, on-the-job training will be provided under the project by recruiting short-term procurement specialists and conducting training workshops on procurement.

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4. Social

Critical social issues were assessed during project preparation through a SocidGender Assessment and through the Governorate Preparation Reports conducted in selected districts o f the five project governorates. During project preparation, consultations were held with key stakeholders including female agricultural extension workers, local council representatives, members o f various women’s organizations (e.g., the Abs Women’s Association) and female and male farmers. In addition, the findings o f the recently completed Yemen Country Social Analysis (CSA) (World Bank 2005) were highly relevant. These studies used a variety o f methods including key informant interviews, household interviews, focus group discussions, stakeholder analyses and secondary data collection. The following key social issues, o f relevance to the project were identified:

0 Gender: Women play a significant role in rural livelihoods and female farmers contribute to over 85 percent o f plant production and 95 percent o f animal management (Governorate Preparation Report, 2004). Shifts in the agricultural system o f production from subsistence to cash cropping, coupled with continuing male out-migration, i s leading to the feminization o f subsistence agriculture and puts rural women at a significant disadvantage. Women’s social and economic status in Yemen i s l o w and women have limited decision-making powers and generally restricted mobility. There are l imited opportunities for decision-making and mobilization o f rural Yemeni women at the village, uzla, district or governorate levels and more female farmers have l imited access to credit.

0 Access to land and water: A mixture o f traditional and modern rights and responsibilities characterize the management and use o f land and water in Yemen. Land ownership i s based on the principles o f Islamic law and regional differences in land ownership exist. In general, the more effective the tribal organization, the more l ikely it i s for land to be distributed equitably. Overall, women’s access to land ownership i s limited and traditional inheritance practices as wel l as customary law favors males. Water i s scarce and inequitably distributed across regions and across social groups. Water rights are based o n a combination o f customary law and practice. The cost o f water i s progressively increasing and both women and children pay the price for the increasing scarcity and high cost o f water, especially for domestic consumption (Yemen CSA).

0 Vulnerable groups: Increasing poverty i s weakening traditional systems o f social solidarity making particular groups, such as the elderly (especially widows), vulnerable. Other socially marginalized groups include the Akhdam.

Out-migration: As rural poverty deepens, a common feature o f rural coping strategies i s male out migration. This contributes to the feminization o f agriculture as women who are left behind continue to work in subsistence-based agriculture. In addition, terraces are deteriorating due to the lack o f male labor (Yemen CSA).

These social and gender-specific issues have implications for the proposed project and will be addressed through a set o f gender sensitive implementation arrangements to ensure that female

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farmers, and other vulnerable groups such as poor farmers with limited access to water and land, access project benefits. For example: (i) the project will work through SFD, with expertise in community mobil izat ion and capacity building; SFD wil l manage the funds for farmer-demanded investments; (ii) a percentage o f sub-project funding will be allocated to female farmers and livestock producers for on- and o f f - f m activities; (iii) attention wil l be paid to the hiring of both male and female project staff, including members o f the social mobilization team who wil l develop strategies appropriate for female and male farmers respectively; (iv) the services of a gender specialist will be secured to advise SFD’s technical team to develop gender sensitive and technically and economically feasible options for the various farming systems; and (v) the project wil l identify and partner with existing women’s associations (both formal and informal) for example, the Abs Women’s Association, Hodeidah Governorate, and wil l work to build their capacity.

5. Environment

The Environmental Assessment (EA) concluded that the project represents a major advance in Yemen in that i t i s supporting rainfed agricultural systems (as opposed to groundwater withdrawal systems) and improved animal husbandry in the five governorates. The environmental benefits o f the project in terms o f improved water and soil conservation and management outweigh any potential adverse environmental or social impacts. In addition, any potential adverse impact can be prevented or minimized by preventive actions and mit igation measures.

The Environmental Management Plan (EMP) addresses potential adverse environmental and social impacts, particularly those raised by the rehabilitation o f the veterinary laboratories, the rehabilitation o f the quarantine facility at A1 Mokha and the small-scale infrastructure projects for markets. It proposes: (i) a process and criteria for screening the small-scale infrastructure projects; (ii) an M&E program for tracking project environmental impacts; and (iii) an environmental traininghapacity-buildindawareness program for the range o f public/private sector institutions and local populations involved in the project.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.0 1) [X 1 [I Natural Habitats (OPBP 4.04) [I [X 1 Pest Management (OP 4.09) [I [ XI Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) [I [X 1 Involuntary Resettlement (OP/BP 4.12) [I [ XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I [X 1 Forests (OP/BP 4.36) [I [ XI Safety o f Dams (OPBP 4.37) [I [ XI Projects in Disputed Areas (OPBP/GP 7.60) [I [ XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI

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The EA confirmed the "Category B" classification o f the project under World Bank safeguard policies, finding no significant, cumulative or irreversible environmental impacts from the project. Furthermore, no other safeguard policies apply. However, capacity building o f farmers and MA1 staff in integrated pest management i s recommended to address any pest management concerns, as well as management and conservation o f natural areas to address natural habitat considerations.

7. Policy exceptions and readiness

There are no policy exceptions.

Readiness. The project i s ready to begin implementation. The PSU director, procurement and financial management specialists have been selected according to Bank guidelines and their recruitment has been finalized. The procurement plan was prepared prior to negotiations and was finalized and approved. A procurement consultant has been recruited to work with the procurement specialist to review the procurement plan and the process and documentation of the various procurement methods. The financial management specialist prepared a draft Financial Policies and Procedures Manual, and the FMR templates which were found acceptable to IDA. In addition, SFD proposed to pilot the implementation o f Component 3 prior to effectiveness in order to get a head start, using its own funds.

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Annex 1: Country and Sector or Program Background

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

Poverty in Yemen. With 42 percent o f the people living in poverty, Yemen i s one o f the poorest countries in the world. I t i s also essentially a rural country, with 77 percent o f the population living in rural areas. Poverty i s largely a rural phenomenon: almost half o f the population living in rural areas i s classified as poor, and 83 percent o f the poor live in rural areas.4 and derive a large share o f their income from agriculture or agriculture-related activities.

Agriculture and broad-based aowth. During the post reform period o f 1996-2001, economic growth was driven mostly by-agriculture5 which grew at 5.4 percent a year, and contributed to GDP growth more than i ts relative share. However, the relative importance o f the agricultural sector declined from one-fifth (1995) to about one-sixth o f GDP by year 2000. Agriculture also contributes to approximately one-third o f the non-oil merchandise exports.

The 15 percent contribution o f agriculture to GDP underestimates the importance o f agriculture in the economy: as a result o f forward and backward linkages, many secondary and tertiary activities are agriculture-related. The agricultural sector has also a huge indirect impact on the economy as a whole, as it provides employment and income for about 55 percent o f the active population, thereby generating a large demand for non-tradable goods, and further stimulating the local economy. The discrepancy between the low contribution o f agriculture to GDP and the percentage o f those employed in the sector reflects seasonal employment, underemployment and low productivity o f the factors o f production, which result in low incomes and poor standards o f living for those relying on the sector.

Agriculture within the obiective o f Yemen’s Second Five-Year Plan. Rapid and sustained broad- based growth (in excess o f 5 percent per annum) i s critical for sustained poverty reduction. Yemen’s Second-Five Year Plan (2001-2005) i s targeting agriculture as one o f the lead sector for employment-generating economic growth. The main agricultural objectives o f the Second Five- Year Plan are: (i) to increase agricultural production by 5.8 percent to achieve a better level o f food security and diversify agricultural exports by raising yields and productivity, and (ii) improve farmers’ income. The plan has adopted the following strategies to achieve the objectives: (i) promote new farming techniques for crop and animal production; (ii) provide agricultural inputs; (iii) introduce new irrigation techniques; (iv) construct small dams, reservoirs and irrigation channels; (v) promote women’s activities; (vi) strengthen cooperation between agriculture, food industry and agricultural markets; (vii) enhance private investment in the sector; (viii) promote agricultural marketing; and (ix) ensure sustainable agricultural development.

Agriculture potential and constraints. The low productivity o f Yemeni agriculture is underscored by the current yields, well below actual farmer yields in countries with comparable agro- ecologies. For example, the cereal yield (maize, millet, sorghum, wheat) for the period 2001- 2003 was 2 tonsha in Middle Eastern countries compared to 0.96 tonsha in Yemen during the

Republic o f Yemen, Povertv UDdate. December 2002. Another source o f economic growth was the oil sector.

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same years. In addition, post harvest losses are high: 20 percent for cereals, 45 percent for tomatoes, 60 percent for papayas and 38 percent for bananas. The productivity gap as well as the extent of post harvest losses point to a substantial potential for agricultural development. However, Yemeni agriculture also faces severe constraints to development such as: (i) water shortages due to rapid depletion o f groundwater; (ii) expansion o f qat cultivation, a major water user; (iii) lack o f poor infrastructure, in particular rural roads, which makes market access difficult and results in high cost o f transportation o f inputs and outputs; and (iv) lack o f services, in particular for quality control, which hampers export competitiveness. The supply of, and access to agricultural inputs o f farmers as well as to agro-processing and marketing have been identified as key constraints to increase agricultural production, with particular significance in rainfed areas.6

Limited water resources constitute the major constraint for the expansion o f agricultural production. With the depletion o f groundwater resources which began to occur, one can soon expect a decrease in irrigated farming from deep wells. On the other hand, the productivity and sustainability o f rainfed production systems (sorghum, millet, barley, wheat, leguminous crops, and livestock, including honey-bee rai~ing)~, which represents at the moment about ha l f of the cultivated area, could be improved.

In spite of the potential for development, traditional rainfed and livestock production systems have been neglected so far for a number o f reasons, which have to do in part with: (i) GOY policies in supporting imgated agriculture during the past three decades; (ii) MA1 limited capacity to provide services (research and extension) for these systems; (iii) lack of fanners’ leverage to access services, in particular financial services, as well as input and output markets; and (iv) economic boom in Gulf countries in the 1980’s which provided employment opportunities to thousands of Yemeni men, mostly from rural areas. Today, the situation i s changing, with the fact that: (i) the GOY i s acknowledging that expanding, or even maintaining existing imgated agriculture based on groundwater mining i s doomed; and (ii) the aftermath of the first Gulf War, which was earmarked by the return from migrant workers to the Gulf countries and the end o f remittances for the rural areas.

Brief overview o f Yemeni amiculture. Four agro-ecological zones should be considered when reviewing agriculture potential in Yemen (see Table 1 below): the Highlands, including the Intermountain Plains (44 percent o f cultivated area and 61 percent o f the farms), the Eastern Plateau (26 percent of the area, 19 percent o f the farms), the Tihama, part o f which are the Western Highlands, (26 percent o f the area, 10 percent o f the farms), and the Coastal Area (Gulf of Aden) (4 percent o f the area, 10 percent o f the farms).

Cereals (mainly sorghum, providing food and fodder), with some maize and barley represent 60 percent o f the land under cultivation. Qat, cultivated on 15 percent o f the land, i s the major cash crop and the main user o f groundwater. Pulses, vegetables and fruit trees (also under imgated conditions) account for 5 percent o f the cultivated land. Coffee is grown on 4 percent o f the cultivated land. The remainder o f the land i s used for fodder. A majority o f households own a

Republic o f Yemen, Agricultural Strategy Note, WB 1999, F A 0 2004. ’ F A 0 (2002) Economic Incentives and Comparative Advantage of Strategic Crops in the Highlands: A Policy Note on Yemen.

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cow, usually hand-fed by women and girls. Sheep and goats graze on hillsides. About hal f o f the cultivated land is under some form o f irrigation (spate, tube wells or spring).

Land and water management. Agricultural activities in the Highlands and the wadis o f Tihama and the Eastern Plateau are based on soil conservation and water harvesting through terracing, dikes and small dams. Their maintenance i s key to the conservation and management o f soil and water, ensuring flood protection and the infiltration o f water to replenish the groundwater tables. The deterioration of the terraces has therefore an impact on the amount o f water available for the entire Yemeni population, not just the rural people. Unlike the low lands, which have been developed through spate irrigation improvements, the upper catchments o f the wadis have been left unattended. Farmers are increasingly unable to maintain the deteriorating terraces due to the meager income they derive f iom the low productivity o f these production systems.

Table 1: Yemen’s Agro-ecological Zones for Agriculture

Rainfed area

1. Highlands North

Western Uplands

Eastern Slopes

Mountain Plains

2. Eastern Plateau

3. Tihama Plains

4. Coastal Area (Tihama and around the Gulf o f Aden)

Percent of cultivated area

47%

18%

31%

4%

Percent of farms

63%

11%

19%

7%

Annual rainfall

up to 1,200 mm

450-800 mm

100-200 mm

450-1,200 mm

50-100 IIIIII

250-450 mm

50-250 IIUII

Farming systems

Banana, papaya, citrus, vegetables, coffee. Livestock production: mainly cattle with few small ruminants. Terraces: Cereals (mainly sorghum). Further down: maize, sorghum, alfalfa, banana, coffee, papaya. Extensive livestock production: mainly cattle with few small ruminants. Sorghum and mil let mainly for feed. Cultivation occurs o n pockets o f soil where runoff rainwater collects o r can be channeled f i om the rocky slopes. Livestock production: widespread herding o f goats and camels plus some sheep. Mainly sorghum plus legumes such as lentils. Livestock production: cattle and small ruminants. Sorghum and mil let mainly for feed. Livestock production: mainly goats and camels plus some sheep. Variety o f crops including sorghum and millet. Primarily rangelands

Traditional rainfed production systems and poverty. Most o f the poorest people in Yemen are farmers subjected to rainfed production conditions for their livelihood. Livestock represents at a minimum twenty percent o f farm production in the Highlands and Tihama, and is a major source of cash income for households with inadequate landholdings. However, livestock promotion is

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an effective w a y to target the rural poor, (they can still raise livestock, even with limited access to land or water rights). In addition, since livestock activities are mostly women’s activities, targeting the livestock sub-sector is one way to improve the income o f rural women, one of the most “at r isk” segments o f the population.

In summary, investing in rainfed agriculture and livestock production systems would directly contribute to poverty alleviation and to natural resource management and would benefit rural women in particular. In addition, through backward and forward linkages, a boost to farming activities would trigger growth in agriculture-related activities as wel l as in other aspects of the rural economy as farmers spend most o f their incomes on non-tradable goods.

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Annex 2: M a j o r Related Projects Financed by the Bank and/or other Agencies

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

Sector IDA-financed

Agriculture services

RuraULocal Development

Irrigated agriculture Community development Water management

Other Development agencies

Rural Development IFAD

Agricultural Development

Agricultural Development

Rural Development

Community development and agriculture

UNDP

Rural development

Project

Seeds and Agricultural Services (closed) Southern Governorate Rural Development Project (closed) Irrigation Improvement (ongoing) Social Fund I11 Groundwater and Soil Conservation (ongoing)

Al-Dhala Community Resource Management (Pipeline)

Dhamar Participatory Rural Development (ongoing)

Al-Mahara Community Development (on-

Raymah Area Development (ongoing) going)

IDAS 111

Community-based Rural Development

Latest Supervision (PSIUISR) ratings (Bank financed 1 Implementatio n progress (IP]

S (OED: M U)

S

S S S

ojects only) Development Obiectives (DO)

S

S

S S S

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Annex 3: Results Framework and Monitoring

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

Results Framework

Project Development Objectives

1.1 Farmers in five governorates adopt improved seeds and seed technology.

1.2 A sustainable farmer-based system o f seed production and distribution improvement i s created.

2.1 Farmers’ use o f veterinary paraprofessionals’ services in project area has increased.

2.2 Capabilities for disease diagnostics are improved.

2.3 The risk o f introducing serious epidemic disease i s reduced.

2.4 Prevalence and incidence o f diseases most threatening to livestock productivity and production has decreased.

3.1. In the 22 districts, rural producers are better organized.

3.2 Rural producers have diversified their activities or increased their output.

3.3 Soil i s better conserved and more water i s harvested.

Project Outcome Indicators

Number o f k g o f improved seeds bought.

In each governorate, one seed grower association or a network o f seed grower groups i s distributing seed produced by seed grower groups.

Number o f visits per veterinary paraprofessionals in project area have increased.

Number and diversity o f tests practiced in laboratories have increased.

One quarantine station i s functioning.

Number o f cases reported have decreased.

Number o f functioning rural producer groups, associations or networks.

Beneficiaries’ activities and outputs.

Area with improved soil conservation and water harvesting.

Use of Outcome Indicators

If improved seeds are not bought by farmers, i t would be demonstrated that either the varieties are not interesting for the farmers, or that prices are too high or that the marketing strategy i s not appropriate.

If visits to paraprofessionals do not increase, it would signal that either the quality o f their services i s not sufficient, or that fees for services are set too high.

If the number and diversity o f tests does not increase it may mean that t echc ians did not receive adequate training.

If the prevalence and incidence o f disease does not decrease, it means that the epidemio surveillance network i s not functioning If the number o f rural producer groups does not increase it may mean that the difficulties o f getting rural people together have been underestimated. Potentialities for diversifying activities and increasing outputs may have been overestimated.

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1.1. Landraces are characterized and conserved.

1.2. Improved seeds are produced.

1.3. Seed grower groups are formed and trained to produce improved seeds.

2.1. Farmers have better access to livestock goods and services.

2.2. Animal health laboratories and quarantine station are functioning.

3.1. Village rural producer committees are able to make decisions on sub-projects.

3.2. Rural producers increase investments in production, processing and marketing.

3.3. Land i s rehabilitated for cultivation or protected agains erosion.

term Indi Number o f landraces characterized and conserved.

Number o f tons o f improved seeds produced each year.

Number o f seed grower groups formed and trained.

Number o f veterinary paraprofessionals trained, equipped, and operating in five governorates.

Rehabilitation completed, equipment in place, personnel trained and operating costs covered for three laboratories and one quarantine holding ground. Number o f Village Rural Producer Committees created and functioning.

Number o f sub-projects that Village Rural Producer Committees have reviewed and selected. Amount o f funding disbursed for sub- projects. Number o f rural producers involved. Kms o f terrace wall rehabilitated. Number o f water harvesting structures rehabilitated. Kms o f wadi banks protected. Number o f has o f upper catchments areas revegetated.

If targets are not achleved, the PSU and the Bank team wil l have to investigate the reasons, and the activities for the component will have to be revisited.

Same as above.

Same as above.

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Arrangements for results monitoring

0 Institutional issues: Under Component 1, GSMC will report on i ts activities related to the project. The entity recruited to support the establishment o f seed grower groups will also provide reports regarding the activities o f the seed grower groups. Similarly, the consultant who will be hired to support the creation o f seed grower associations wil l produce a report. The PSU wil l consolidate these reports.

Under Component 2, the project will support the design and implementation o f a national disease surveillance network. This wil l be based upon yearly participatory epidemiology surveys complemented by samples collection when needed to be’ undertaken on a statistically representative sampling basis in the project area. These surveys are expected to be contracted to private veterinary and livestock production professionals. These surveys will focus on animal production issues and wil l use participatory appraisal technique. Samples will be treated at the central veterinary laboratory while data collected will be analyzed by the GDAR’ epidemiology and livestock production specialists. Comparison o f these representative data from one year to the next will allow for monitoring the situation o f animal diseases and herds productivity. Feedback to farmers and other stakeholders wil l be the responsibility o f the GDAR’s communication facility.

In addition, the laboratories will report on the number and types o f diagnosis carried out.

0 Datu collection: For Component 1 and 2, there should not be additional data collection, except to monitor the extent to which livestock owners use more the services of paraveterinarians. The epidemio-surveillance network i s expected to generate data from the participatory surveys and sample collection. Both are indispensable to improve control o f contagious diseases. The collected data will indirectly be used for project M&E. In other words no additional data collection wil l be required.

Camcitv: Given the limited capacity o f GDAR, particularly with regard to livestock production, to undertake the relevant surveys and systematic sampling collection, these will be contracted to the private sector interacting with the fanners, in particular veterinary professionals, input traders and private consultants.

For Component 3, the indicators and the data that will be collected will be determined at the end o f the pilot phase which i s undertaken by SFD between now and effectiveness. This will be entered in the Manual o f Procedures to be agreed upon with IDA (disbursement condition).

For all components, a baseline survey will be conducted by external consultants and updates will be carried out at mid-term review and project completion.

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Annex 4: Detailed Project Description

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

Governorate Al-Mahweet Hajjah Hodeidah Lahej Sana’a

Succinct overview o f the Proposed Project area

Pre-identified Districts Bani Sa’ad, AI-Mahweet, AI-Khabt and Ar-Rojom Aslam, Khairan Al-Moharaq, Mastaba’a, Bakil AI-Mir and A1 Maghrabah, Jebal Ras, Bora’a, Al-Hojailah, Al-Mansoriah and Al-Lohaiyah Al-Kobita, Toor AI-Baha, AI-Madhareba wa Ras Al-Arah and Al-Makaterra Bilad AT-ROOS, Bani Matar, Hmdan, Jehanah and Arhab

The proposed project area i s located in the five governorates o f Al-Mahweet, Hajjah, Hodeidah, Lahej and Sana’a (see Table below). The total population o f the five governorates i s 5.7 mill ion, out o f which approximately 4.4 mi l l ion live in rural areas. The GOY chose the governorates on the basis o f the prevalence o f rural poverty and o f the importance o f rainfed agriculture.

Table 1: Characteristics of Governorates in the Project Area

Component 1 and 2 will cover the entire governorates. Component 3 will be implemented in selected districts o f the five governorates. Potential districts for implementation were identified by the Governorate Local Councils, using the following criteria:

(a) relatively high population density; (b)

(c) accessibility; and (d)

rainfed agriculture and animal production are dominant economic activities in the district;

selected districts are to be adjacent or close to each other.

SFD will review the district pre-identification with the Local Councils and with their agreement, SFD will finalize the selection to ensure that the district selected presents a favorable socio-economic environment for the implementation o f Component 3. Therefore, there may be some adjustments in the above list.

Dominant rainfed farming systems found in selected districts are as follows:

0 Cereals and livestock farming systems are the dominant farming systems in al l selected districts.

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0 Farming systems based on red sorghum (Ghareb) + millet+ barley + livestock are dominant in the highlands (1000m - 1500m). In wadis and foothills (400m- 650m) farming systems based on red sorghum + millet + livestock are widely spread.

0 Farming systems based on cereals+ qat+ fruit trees+ vegetables + livestock are found in some parts o f Sana’a and Al-Mahweet Governorates.

0 Pure livestock farming systems are found in some parts o f Lahej Governorate.

0 Coffee and qat rainfed farming systems are found in Jebal Bora’a District in Hodeidah Governorate and some parts o f Al-Mahweet and Sana’a Governorates.

Component 1 : Farmer-based svstem of seed improvement and management

Rationale

Landraces o f cereals and legumes form the basis o f the rainfed agricultural systems. They are known for their valuable genetic diversity to adapt to the diversity o f ecosystems and meet the needs o f farmers for both grain and fodder. At present, the formal seed production system does not produce seeds from existing landraces. Th is component aims at the development o f farmer-based seed production and supply system for the conservation and sustainable use o f landraces o f sorghum, maize, millet, wheat, barley, cowpea, peas, lentil, faba bean and fenugreek in five governorates.

Th is component will benefit from the activities o f the component “Productive Rural Development” which wil l identify and characterize local communities in at least 23 districts.

Development objective

To promote the use o f appropriate crop landraces and seed technology practices with the view to increasing crop productivity and securing agricultural production in rainfed areas.

Specific objectives

(a) Promote on-farm conservation and participatory improvement o f prominent landraces; and

(b) Create a sustainable farmer-based system for seed multiplication and distribution o f landraces in rainfed areas by encouraging farmer groups to establish themselves as seed producers groups and ultimately marketing associations.

Expected results/performance indicators

Development Indicators:

0 Five hundred eighty tons o f seeds o f prominent landraces will be produced and supplied annually to fanners by the fifth year o f project implementation. This will allow coverage o f 24,000 ha with improved landraces. T h i s indicator will be measured through records o f production, stocks and sales at the outlets.

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0 One seed growers’ association or network o f seed producer groups will be established in each governorate. Th is indicator can be measured through registration records in each governorate.

Intermediate performance indicators:

0

0

0

Number o f landraces collected, characterized, evaluated and improved. Volume o f basic seeds o f the most prominent varieties provided to seed producers groups. Number o f seed producer groups formed and trained and number o f seed grower associations formed and trained to handle seed production and supply activities at the governorate level. Seed quality o f crops produced by the seed producer groups passes minimum standards o f quality.

0

Description

Th is component wil l include three sub-components:

(a) Landrace improvement and maintenance; (b) (c)

Promotion of seed producer groups; and Seed delivery and marketing network.

Sub-Component I.:1 Landrace improvement and maintenance

T h i s sub-component will promote the a-situ and on-farm conservation o f local varieties of cereals and pulses using participatory approaches.

Crop improvement will include: (i) the collection o f landraces in different locations of the project area, (ii) their characterization and evaluation, (iii) the initiation of participatory genetic improvement for the most prominent varieties o f cereals and pulses, and (iv) the a-situ and on-farm conservation o f the genetic resources. A database will be developed to record the main characteristics o f the landraces including the genetic origin, history, variety description and environmental adaptability for their registration as valuable germplasm;

Variety maintenance o f the most prominent landraces which will be advanced according to scientific principles o f maintenance, so that the identity o f such varieties will remain, and pure seed lots can be preserved from physical, genetic or physiological deterioration as long as the variety remains viable in the seed market. Security seed stocks will be maintained in each governorate; and

Capacity building through training and technical backstopping for ex-situ and on- farm conservation and maintenance of landraces. Participatory approaches for improvement o f landraces, informal seed production systems and use o f DNA molecular techniques for the characterization o f genetic diversity o f landraces will be introduced. National research, extension and seed production and distribution organizations and representatives o f NGOs can benefit from these new approaches

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and methods which are well developed in international research centers such as ICARDA.

Sub-component 1.2: Promotion of seed producer groups

Th is sub-component will promote a farmer-based informal seed production system. The experience gained nationally under the “outreach program” with the Seeds and Agricultural

Project will be taken into account in i ts implementation and i t s activities wil l

Selection o f farmer communities and sites for seed multiplication. This wil l be done on the basis o f the community sensitization work carried out under Component 3 in the districts and governorates where Component 3 i s implemented;

Establishment o f seed producer groups. The most committed farmers will be selected as members o f seed producer groups and will receive specific training in seed production and farmer organization;

Enhancing on-farm seed production and handling o f prominent landraces including the transfer o f appropriate technology packages (Table 1);

Rehabilitation o f Agricultural District Offices to enhance their capacity to participate in the implementation o f demonstration and on-farm seed production activities;

Technical backstopping and training o f farmers, seed grower groups, local extension staff and members o f local NGOs on seed production, variety improvement and maintenance, and seed storage and quality assurance (e.g., isolation, rouging, selection, threshing, seed cleaning and dressing, seed storage and quality control); and

M&E o f seed production activities including routine seed testing for a l l the attributes o f seed quality including purity, germination, moisture content and seed health. Th is activity i s meant to ensure the production o f good quality seed lots.

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Table 2: List of Innovations to be used for Production, Post Harvest and Storage of Seeds

This sub-component will promote the establishment o f seed producer groups which will ensure the reliability, sustainability and spread o f the seed production and supply systems to be developed. Five to six seed producer groups wil l be created in each governorate. Seed producer groups will also be involved in on-farm demonstration trials for the entire period of variety testing. They will be research partners in evaluation and improvement o f local landraces. The figure below presents a schematic set up for the seed production at the governorate level.

There will be a strong linkage between variety improvement, maintenance and seed supply mechanisms through farmers’ feedback on varieties and other innovations which will guide researchers o n farmers’ options and priorities. Some elements o f quality control mechanisms will be injected. Seed grower groups will be trained to produce seeds that meet quality standards as well as responding to farmers’ perception o f quality. Laboratory testing of representative samples to ensure that standards o f quality are maintained wil l be routinely carried out. Also, demonstration activities on farmers’ plots with accompanying assessment of varieties during field days wil l be used as criteria for advancement o f varieties in subsequent years.

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Figure 1: Schematic Set-up for the Seed Production at the Governorate Level

Seed Seed Seed producers producers producers

Seed producers group 1 group 2 group 3 group 4

Farmer 1 Farmer1 Farmer 1 Farmer 1 Farmer 1 Farmer 1 Farmer 1 F a r m e r l Farmer 1 Farmer 1 Farmer 1 Farmer 1

Seed Seed producers producers group 5 group 6

Sub-comvonent 1.3: Seed delivery and marketing network

Under this sub-component, support will be provided to seed grower groups so that they can form one seed grower association per governorate. Support will also b e provided to the existing seed company working o n cereals and legumes (GSMC) to strengthen the availability and marketing o f local landraces in rainfed areas.

Activities:

0 Surveys o f seed demand and market information system.

0 Upgrading o f G S M C capabilities to multiply varieties for rainfed areas including maintaining security seed stocks for the prominent landraces. (Capacity for producing and storing seed security stocks, approximately 100 tons).

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0 Establishment o f seed grower associations and seed dealers’ network for promoting and marketing seeds o f landraces.

0 Construction o f seed outlets for the seed grower associations (2 to 4 outlets per seed grower associations).

0 Training and technical backstopping on management o f seed outlets, packaging and labeling, awareness increase, pricing guidelines.

0 Impact analysis on farmers’ perception on seeds.

For this sub-component, a business and marketing approach will be adopted, with profitable prices, availability o f seeds at the appropriate time for the farming communities as we l l as awareness and promotional campaigns. The seed market information system wil l assist with:

(a) market analysis including the identification o f possible dealers and distributors in targeted governorates;

(b) guidelines for promotional materials and bill board distribution; and

(c) collection and analysis o f market information on regular and systematic basis.

Component 2: Livestock husbandrv and health services

Development objectives

The development objective o f Component 2 i s to increase GDAR capacity to fulfill i t s core functions and to improve livestock owners’ access to quality services and goods to enhance the health and productivity o f their animals.

The component will achieve these objectives through strengthening the GDAR’s animal health and production departments to better fulfill their primary core responsibility o f protecting the national herd from contagious and specific transboundary animal diseases and promoting better production practices. The component will also facilitate a public-private sector partnership to promote more efficient delivery o f goods and services including: (i) specific in-depth surveys and research programs as required, and systematic informatiodcornmunication on activities undertaken and proven recommendations; (ii) incentive and partnership arrangements to encourage proximity services and inputs delivery; and (iii) training community veterinary technicians and animal health workers who will make basic animal health and production services more accessible in rural areas.

Expected results and performance indicators

GDAR will become more effective in i ts surveillance and control o f endemic contagious diseases and transboundary animal diseases within the country hence reducing the r i s k o f having the latter enter the country from abroad. Three refurbished disease diagnostic laboratory facilities, new laboratory equipment and reagents, plus an effective cadre o f trained staff with a wide presence in rural areas will allow more effective detection, diagnosis and control o f the major infectious diseases such as foot-and-mouth disease, peste des petits ruminants, sheep and goat pox, R i f t Valley fever and Avian influenza. As GDAR animal

37

disease surveillance capacity i s designed and implemented and effectively covers more districts more effectively, the GOY will be able to design and undertake national disease control pol ic ies which are both more efficient and cost effective.

A s the rehabilitated l ive animal quarantine grounds at A1 Mokha Port becomes operational, the national herd will have a reduced r isk o f being infected by major transboundary animal diseases. However, should these diseases be inadvertently imported, they wil l be more effectively detected and controlled at the port o f entry and within the country. Reducing these disease risks will help ensure that gains in livestock productivity achieved by the project are maintained.

Activit ies for enhancing livestock health and productivity will be identified, studied and tested in the early years o f the project. Information on these newer, as w e l l as previously proven activities will systematically be disseminated to facilitate livestock owners’ adoption.

A cadre of trained and equipped animal health providers employed and supplied by professional veterinarians will grow in number in the project areas and thus access to basic inputs and services will be enhanced. A public-private partnership that encourages these rura l service providers will be developed so that private livestock production and clinical goods and services are offered in al l rural areas where rainfed agriculture predominates. This partnership will also be the basis for convincing presently underemployed GDAR technical staff to leave government employment for private sector work. Private services providers will have their revenues more secured through regular contracting o f government activities (surveys, surveillance sampling, and vaccinations).

Ideally, a core, full-time publ ic GDAR staff will effectively carry out i ts regulatory functions more effectively in a context that i s not affected by il legal dual public-private interests. An array of private sector businesses for provision o f livestock-related inputs and services, freed from unfair competition by publ ic employees will thus be in a position to operate more securely within the country. T h i s sector i s expected to grow rapidly and spread further into rural areas and indications suggest that this i s happening for livestock-related input businesses and the project will foster this trend.

Sub-components and activities

Sub-component 2.1: Strengthening GDAR core functions

This sub-component will support the GDAR in developing i ts regulatory and control functions at the national level whi le simultaneously fully implementing them in the five governorates as a model for future national coverage. They will main ly address: (i) GDAR’s capacity to develop adequate policies and strategies for the livestock sub-sector and the preparation o f an enabling regulatory environment for i ts development; (ii) data collection and analysis; (iii) disease control efficiency through the establishment o f a national epidemio- surveillance network and o f an emergency preparedness plan; and (iv) the development of appropriate media support for the information and technical awareness o f farmers.

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Activities:

a

a

a

a

a

a

a

a

Modest rehabilitation (painting and wiring) o f GDAR’s office building. Technical advice on organization, policy-making, legislation, regulation and control. Technical assistance for field training in participatory epidemiology and participatory identification o f livestock production issues. Organizing and making functional the animal disease surveillance network in the f i ve governorates with links to GDAR, including information technology, participatory epidemiology surveys completed by samples collection, animal disease reporting database, internet communication capacity and disease reaction plans. Improvement o f office and computer facilities for the epidemiology and livestock production departments. Organization o f yearly workshops on policies and regulations, epidemio- surveillance and disease control and animal production issues. Technical advice and training on informatiodcommunication. Specialized equipment for media support preparation andhor generation.

Sub-comuonent 2.2: Central and regional veterinary laboratories

The objective of this sub-component i s to strengthen animal disease diagnostic laboratories in order to provide quality diagnostic and analytical services for: (i) regulatory surveillance; (ii) control, to provide quality assured biological and pharmaceutical products for the Yemeni market; and, (iii) private sector demand for such services. Th is wil l include limited refurbishing o f essential infrastructure at both central and governorate levels; provision of essential laboratory equipment and supplies; and an init ial stock o f chemicals and reagents for the regular replacement o f laboratory consumables according to their use and preemption date. As the‘GOY has committed itself to build and fund a new and functional diagnostic laboratory in the existing compound, the proposed project will assist in completing the investment through provision o f lab benching and the provision o f a modern incinerator (for environment protection) and o f an emergency generator. A pi lot Newcastle disease virus vaccine production facility, using heat-stable production technology, wil l be equipped and quality- assured vaccine prepared in the present laboratory building when diagnostic and analysis functions are moved to the new building in year 3 o f the proposed project. This vaccine will be distributed for the benefit o f village poultry-raising projects particularly at the request of women’s groups and under veterinary paraprofessionals’ supervision.

Activities:

a Modest rehabilitation of GDAR’s Central Veterinary Laboratory (Sana’a); two Regional Veterinary Laboratories (HodeidaWTDA, Taiz) rehabilitated; and one Regional Veterinary Laboratory constructed (Abs).

a Complementation of the above laboratories and offices’ essential equipment, glassware and furnishings including information technology and internet communication facilities.

a Installation o f benching in the new building to be funded by GOY.

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Procurement o f start-up reagents and chemicals.

Procurement and installation o f a modem incinerator and an emergency generator

Set up o f a pi lot Newcastle disease vaccine pi lot production and quality control facility at the Central Veterinary Laboratory.

Procurement o f office furniture and computer equipment for essential diagnostic units o f the Central Veterinary Laboratory and the regional laboratories.

Install a scientific library in the Central Veterinary Laboratory’s administrative building and procurement o f seed money for the purchase o f essential scientific documentation.

Procurement o f sufficient sampling equipment for the needs of the epidemio- surveillance program in the five directorates and for emergency f ield investigations.

Organization o f post-graduate training abroad for a bacteriologist, a virologist, a toxicologist and a pathologist and short-term training abroad in quality assurance, advanced lab technology, mycoplasma diagnostic techniques etc.

Provision o f scientific assistance and advice in quality assurance and lab information management, laboratory management systems, vaccine production, disease prevalence and economics and local training in laboratory technology.

Sub-comuonent 2.3: Animal quarantine facilities

Under this sub-component, one functioning l ive animal quarantine facility at A1 Mokha Port will be completed and the specifications and plans for one quarantine holding ground at A1 Mukalla will be prepared. The relevance o f establishing two additional quarantine grounds, one in Haradh and one in Dhobab, will be assessed. The justification for establishing two l ive animal quarantine facilities i s to reduce the r isk to the Yemeni livestock herd f rom introducing serious epidemic diseases. In addition, modem and functioning quarantine facilities may meet essential requirements on the part o f importing countries, particularly the Kingdom o f Saudi Arabia and Sultanate o f Oman, to conduct legal l ive animal trade. Should legal trade be initiated, th is would be an immediate source o f user-fee revenue for the GOY as wel l as an incentive for livestock producers to supply l ive animals and products to meet these high price markets.

Activities:

e Design and enforce adequate quarantine management policies for Yemen, compatible with international standards.

e Redesign (as needed), rehabilitate and complete the GOY’S quarantine facility at Al-Mokha Port.

e Provide technical professional advice to finalize design and tendering procedures.

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0 Furnish and equip the quarantine inspectors’ office and provide init ial stock o f earmarks and other identification material.

0 Provide vehicles to the quarantine inspectors.

0 Ensure proper surveillance o f the works during the construction period.

0 Prepare the plans and tendering documents for another quarantine station at A1 Mukalla.

0 Investigate the relevance o f other quarantine holding grounds at Harat or Dhobab.

Sub-component 2.4: Public-private partnership for veterinary services and inputs

The objective o f this sub-component i s to improve livestock owners’ access to quality veterinary services and essential inputs for increasing livestock productivity through: (i) the creation of an enabling environment for the development o f private veterinary services initiatives in remote areas; (ii) encouragement o f public servants to engage only in private livestock services activities; (iii) the design and enforcement o f relevant policies and regulations on training standards and conditions for the exercise o f veterinary services activities; (iv) training o f approximately 275 veterinary technicians and CAHWs to be employed by veterinarians for the service o f remote communities in the proposed project area; and (v) the creation and implementation o f sanitary mandate conditions to contract public services functions to private veterinarians.

A menu o f field-tested livestock improvement interventions will be identified in the early years of the project for the benefit o f livestock owners who will also receive the necessary information and technical awareness from the paraveterinarians with whom they are in contact.

Activities:

0 Training o f veterinary technicians from the project area in Sana’a’s veterinary Institute.

0 Design and policy-making on a standard minimum curriculum for the training of CAHWs.

0 Contract the YVMA for the organization and undertaking o f CAHWs’ training.

0 Promote the employment by professional veterinarians o f the trained veterinary technicians and CAHWs.

0 Deliver sanitary mandates to professional veterinarians and contract YVMA to manage the delegation o f public activities to sanitary mandate holders (including participatory epidemio-surveillance, samples collection and legal vaccinations.

0 Provision o f veterinary technicians and CAHWs’ instruments and drug kits to professional veterinarians willing to employ veterinary paraprofessionals.

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0 Provision o f a stock o f legal vaccines for emergency and strategic vaccinations to be undertaken through sanitary mandate procedures.

0 Provision of one vehicle 4x4 pickup per governorate.

Comvonent 3: Productive rural development

A Community-Driven Development approach to promote sustainable rural income

Development objective

Component 3 i s expected to help producers upgrade and diversify their agriculture and livestock production, processing and marketing systems, and better conserve soil and harvest water in the Uplands.

Specific objectives

(a) Enhance the organizational capacity o f producers at the community and inter- community levels to improve their access to public and private services as well as input and output markets;

Provide funding and technical assistance to rural producers to upgrade and diversify their agriculture and livestock production, processing and marketing systems, and better conserve soil and harvest water in the Uplands; and

(b)

(c) Improve market information dissemination.

Overall approach

The above objectives would be achieved through:

(a) Providing support to rural producers to organize at community and inter- community levels and building their capacity to: (i) manage their organizations; (ii) prepare and implement sub-projects identified by them; and (iii) access services and input and output markets;

(b) Supporting rural producer groups' initiatives at community and inter-community levels through financial and technical assistance; and

(c) Establishing regular f low o f market information between local producers and distant markets stakeholders.

Rural producers' capacity building is at the core o f the component. Capacity building will be achieved either directly through, (i) the provision o f facilitators and technical advice to local producers (male, female, youth) to help them become organized; and (ii) indirectly through farmer groups implementing sub-projects o f their choice, with technical and financial support f iom the project.

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Sub-pro j ects

Sub-projects to be funded could relate to the enhancement of: (i) rainfed cereals and legumes production and post-harvest handling, including seed production and management; (ii) livestock-raising, beekeeping and marketing, livestock product processing (cheese, ghee); (iii) small vegetable gardens; (iv) fruit production and post-harvest handlindmarketing; (v) coffee production, post-harvest handling and marketing; (vi) handicraft production and marketing; and (vii) soil conservation and water harvesting.

The activities funded would include, on a cost-sharing basis:

Seed money for on-farm testing o f improved technologies and small equipment related to improved productivity and production.

Start-up investments to establish agricultural and livestock input outlets or seed storagehank, at village or intercommunity level.

Financing of labor-saving devices, especially for women, such as biogas stoves.

Financing of small agro-processing equipment, in particular for milk collection, storage and processing (ghee and cheese).

Support for post-harvest handling and marketing, including market information dissemination, financing o f marketing storage infrastructure, etc.

Financing o f terrace rehabilitation and other water-harvesting structures.

Technical advice and training.

Organizational and managerial capacity-building for existing and/or newly formed farmer groupslorganizations.

Target population

The component i s combining rural producers’ technical and social capital capacity building. Flexibil i ty in implementation i s therefore essential regarding the selection and number of communities and groups who will benefit from component implementation. The figures below indicate the scope in terms of number o f expected communities which may benefit from the project in the five selected governorates. They are not indicators against which the component implementation will be evaluated.

Twenty-three districts have been pre-identified for implementation in collaboration with Governorate Local Councils. However, to ensure that the communities where the component will be implemented will make the best use o f component support, SFD wil l assess the socio- economic environment of the 23 pre-identified districts, including farmers’ interest in component activities. On that basis, they will agree with the Local Councils o n a final list. SFD will build consensus for any proposed changes with Governorate Local Councils.

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Expected results/performance indicators

0 Village rural producer committees and rural producers’ interest group, organized at community and inter-community level and engaged in partnership with public andor private partners institutions.

0 A series o f communities and inter-communities producer groups’ initiatives have been funded and completed. These sub-projects have helped rural producers to increase either their self-consumption or their marketed output or diversified their activities.

0 Rural producers have regular access to information on prices and quality of products required on distant markets.

0 National traders and exporters have regular updated information on products (quality and quantity) available from specific rainfed areas.

Capacity building and funding f o r sub-projects available at three levels

0 Community level 0 Inter-Community level 0 District level

Communitv level sub-proiects will be prepared and implemented by rural producer groups from the same community.

Inter-communitv sub-proiects will be prepared by a network o f rural producer groups with a successful experience in running collective action and willing to j o i n their resources to finance an initiative to improve the efficiency o f productive activities o f group members.

District level sub-proiects may be initiated by SFD, developed in consultation with rural producer groups and committees, with the participation o f Local Councils and would address improvement o f local market infrastructure.

Funding arrangements

The proposed project would finance sub-projects on a cost-sharing basis. The amount of the cost-sharing will depend on the type o f activities, more for activities with a direct benefit, less for activities such as soil and water conservation, training or capacity building. The proposed project will follow the cost-sharing procedures established by SFD who will adjust these procedures as necessary, building upon lessons learned as implementation progresses.

The communities will know the amount o f funding allocated to them. The allocation to each community wil l be made on the basis o f a number o f criteria, including members of households in the community. The criteria will be defined in a Manual o f Procedures to be finalized upon completion o f a p i lo t implementation in one district before the project becomes effective .

44

Micro-finance

During year one o f the proposed project, SFD’s micro-finance team wil l assess the possibility for engaging a micro-finance program in areas where rural producers have started to organize themselves with support from the project. SFD’s MF team wil l carry out an assessment o f the financial viabi l i ty o f a possible micro-finance program prior to involving any M F I s under the component.

Market information/facilitation

Activities would be implemented at district, governorate and national levels and would

Characterization o f products produced in each district that could be sold on local and distant markets;

Identification o f potential distant traders/exportersibuyers interested in buying products from rainfed districts and their respective requirements;

Organization o f products-specific information meetings, between distant buyers and local producers in rainfed areas;

Contracting out a series o f product specific supply chain analyses; and

Dissemination o f market information produced by the General Directorate for Marketing through Community and Inter-Community Farmer Committees and providing farmers’ feedback to General Directorate for Marketing.

Improving local rural market infrastructure

Local weekly or daily markets efficiency could be improved through appropriate investments such as: (i) slaughtering facilities with running water; (ii) park and animal loading facilities; (iii) space distribution and organization; (iv) kiosk for vendors; and (v) hygiene facilities (latrine, etc.).

Soil conservation and water harvesting activities

Activities would be farmer-driven and include terrace rehabilitation, water harvesting, erosion control, etc., and implemented at community and inter-community level as sub-projects.

Finalizing the Manual of Operation of Procedures for Poor Rural Producers’ Activities

SFD will pilot implementation o f Component 3 in 2006 in one district. Lessons learned from the pi lot operation will be used to finalize the Manual o f Operation o f Procedures for Poor Rural Producer Activities.

45

Component 4: Proiect Suvvort Unit

A Project Support Unit (PSU) will be established and financed for the management o f Components 1 and 2, in particular with regard to procurement, financial management (FM), reporting and monitoring and evaluation (M&E). The proposed project wil l finance the operating costs of this PSU (the salaries o f a project manager, financial management specialist, accountant, procurement specialist and a bilingual secretary) as we l l as the purchase o f computers and office equipment and the recruitment o f consulting services as required.

For Component 3, the proposed project will rely upon the support units established in SFD. They will be financed through the provision o f overhead costs as the increased volume o f work will impose the recruitment o f additional staff and wil l result in additional operating costs for SFD.

46

Annex 5: Project Costs YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

Table 1: Project Costs by Component

Project Cost By Component and Activity

Component 1. Farmer-based system of seed improvement and management

1.1 Landrace improvement and maintenance I .2 Promotion o f seed producer groups 1.3 Seed delivery and marketing network

Sub-total

Component 2. Livestock husbandry and health services 2.1 Strengthening GDAR core functions . 2.2 Central and regional veterinary laboratories 2.3 Animal quarantine facilities 2.4 Public-private partnership for veterinary services and inputs

Sub-total

Component 3. Productive rural development 3.1 Demand-Driven Fund for poor rural producers' activities 3.2 Farmers Capacity Building

Sub-total

Component 4. Project Support Unit 4.1 Project Management Costs 4.2 Social Fund Development Fee

Total Baseline Costs Sub-total

Physical Contingencies'

Price Contingencies',

Total Project Costs

Local

0.47 1.22 .52

2.20

0.50 0.28 0.72 1.14 2.64

15.70 2.29

17.99

0.67 0.58 1.25

24.08 0.61

5.08

29.77

Foreign

0.15 0.38 0.19 0.72

0.34 1.02 0.54 0.45 2.35

0 0.60 0.60

0.09 0

0.09 3.76 0.14

0.13

4.03

Total

0.61 1.60 0.71 2.92

0.84 1.30 1.26 1.59 4.99

15.70 2.89

18.59

0.76 0.58 1.34

27.84 0.75

5.21

33.80

'Physical contingencies are applied at the rate of 10 percent on civil works and 5 percent on goods and equipment. *Price contingencies are applied on the base costs and derived from local and foreign inflation forecasts as follows: - Local Foreign

2006-10 7.6%

Note: Numbers may not add up due to rounding.

-0.6% (World Bank estimates 2005)

47

Project Cost By Component and Activity

Components 1 and 2 Component 3

r Total Project Costs I 20.00 10.00 3.00 .so 33.80 I

IDA Credit AFPPF GOY Rural

groups producer Total

9.20 0 0 0 9.20 10.80 10.00 3.00 .80 24.60

48

Annex 6: Implementation Arrangements

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

MA1 will implement Components 1 and 2, and SFD will implement Component 3.

Proiect Support Unit (PSU) to implement MA1 components. To ensure efficient and timely procurement and financial management, GOY will create a PSU which will be headed by a manager and include a procurement officer, a financial management specialist, one accountant and one bilingual secretary. They will be recruited under IDA guidelines and financed from the proceeds o f the Credit.

The PSU wil l be responsible for:

(a) preparing, advertising, evaluating tenders and awarding contracts for the procurement o f works, goods and services for the various entities involved in the project; obtaining relevant clearances including customs and transporting equipment to the project site; preparing FMRs and withdrawalh-eplenishment applications; maintaining project accounts on a regular basis using sound auditing procedures; consolidating and submitting to IDA bi-annual project progress, as wel l as mid-term and completion reports; serve as a liaison between MAI, SFD, MOPIC, MOF and IDA; and monitor progress on implementation and have baseline surveys, mid-term and final evaluation studies carried out, in collaboration with relevant staff o f GDAR and GSMC.

(b)

(c) (d) (e)

(f) (g)

Component 1 : Farmer-based system o f seed improvement and management

Selection of site for seed production

Information gathered for Component 3 “Productive Rural Development” will assist in the selection o f communities which wil l collaborate in seed production and supply. Four to six communities will be selected in each governorate, based on their suitability for seed production and on the availability o f most the prominent targeted landraces. Seed production sites may have to be shifted to a more suitable environment if the volume o f seeds needed cannot be economically produced in certain sites.

Role of farmer groups

Seed producer aoups

Each community will establish a seed producer group which will participate in the production o f quality seeds o f prominent landraces and members o f these groups will be selected o n the basis o f the following:

(a) (b) (c)

strong desire and willingness to be mobilized in group activities; availability o f land and independent decision-making process during participation; willingness to share the cost o f certain technologies; and

49

(d) willingness to share experiences with other farmer groups, extension units, local council representatives and project staff.

Women wil l be particularly targeted as they are the guardians o f farm practices related to indigenous knowledge and the proposed project will involve them while respecting their norms and traditions.

Seed growers’ associations

The most active and committed members o f the seed producer groups in each governorate may establish a seed growers’ association for marketing and distribution o f seeds o f the most prominent landrac es .

Other entities which mayplay a role

ARA has a national mandate for the collection, improvement and conservation o f genetic resources and maintains an operational gene bank. Other entities involved in genetic resource collection and conservation are the Genetic Resources Center at Sana’a University and the International Center for Agricultural Research in the Dry Areas (ICARDA). I C A R D A has a Seed Production and Genetic Resources Unit for the Middle East agro-ecological zones and has been providing training o f trainers and technical backstopping for national and local institutions throughout the Middle East and North Africa. These entities may be interested in implementing activities related to genetic resource collection, conservation and improvement under contractual arrangements. Landraces and improved varieties registration i s the responsibility o f the Quality Control Division o f the General Plant Production Directorate of MAI.

Implementing enti@ and mode of implementation

GSMC, which has a national mandate for seed security and maintenance o f seed stocks, will have the technical responsibility for the implementation o f Component 1. The collection and characterization of local landraces will be done in collaboration with the local communities. Seed production and supply activities will be conducted through the promotion o f seed grower groups and seed growers’ associations. The activities under Component 1 will be implemented under contractual arrangements awarded on a competitive basis.

Sub-component I. I: Landrace improvement and maintenance:

This sub-component will be implemented through four contracts tendered by PSU for: (i) collection and characterization o f landraces; (ii) variety improvement; (iii) variety maintenance; and (iv) capacity building and technical backstopping.

Sub-component 1.2: Promotion of seed producer WOUDS. This sub-component will be implemented under three contracts tendered by PSU for: (i) establishing seed producers groups; (ii) on-farm seed production; and, (iii) M&E o f seed production to ensure quality.

Establishing seed producer groups will build upon the community mobilization efforts carried out under Component 3, which should result in the creation o f Village Rural Producer Committees who will be engaged in the selection o f sites and potential seed growers.

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The second contract will involve the services o f extension agents o f the Agricultural Offices. They will conduct demonstrations and assist in: (i) routine follow up; (ii) training o f farmer groups; and (iii) production and dissemination o f brochures, pamphlets and a l l the capacity building needs.

The fees o f the Quality Control Division o f the General Plant Production Directorate to ensure the quality o f seeds produced at the farm level will be covered under the third contract.

Sub-comvonent 3. I : Seed delivew and marketing network:

PSU will tender on a competitive basis the support to the Seed Grower Associations for a l l activities related to seed distribution and marketing. The contract wil l include provision to carry out: (i) demand surveys and provision o f marketing information as we l l as sustaining an awareness campaign; and (ii) quality assurance by the Quality Control Division.

Training activities and civil works

PSU will contract specialized national and international institutions to provide training and expertise, as we l l as consultants to conduct special studies on marketing. It will also tender the rehabilitation o f District Agricultural Offices and procure office equipment for them.

Accompanying measures

0 Security stocks o f genetic resources o f landraces to be collected from different regions should be organized to allow for repatriation o f adapted germplasm when lost to unpredicted disasters. The gene bank at ICARDA can help in this regard.

0 GSMC should include the multiplication o f seeds o f adapted landraces within their formal seed production program.

0 Appropriate legislation needs to be developed for the promotion o f an informal seed sector and for ensuring farmers’ property rights over their landraces.

Component 2: Livestock husbandrv and health services

Institutions and Actors

Role o f GDAR

The entity responsible for delivering public veterinary and animal production goods and services and for regulating private veterinary goods and services i s GDAR and i t s core staff at the governorate level who have a sanita y mandate from GOY. Carrying out specific tasks under this mandate can, however, be delegated to others including the private sector.

While private initiatives will be encouraged, GDAR will progressively increase i ts regulatory role over the provision o f such services through a range o f regulations and incentives. In the interim, measures will be taken through enactment o f specific veterinary regulations and contracting o f YVMA to monitor and standardize the training o f paraveterinarians (veterinary technicians and CAHWs). YVMA will manage contracting o f certain GDAR’s functions (epidemio-surveillance surveys and sample collections as we l l as legal vaccinations) in a way

51

that motivates veterinarians to elect for private services only and employment of paraveterinarians.

Role o f Tihama Development Authority (TDA)

TDA, a parastatal under MAI, i s the dominant public service provider in Hodeidah Governorate. Hence, in this governorate, GDAR will implement regulatory activities envisioned under the project in full collaboration with TDA based on existing working relationships. The existing TDA-supported diagnostic laboratory wil l be upgraded through TDA to the standard o f a regional diagnostic laboratory. The project wil l provide some reagents and other laboratory consumables.

Role of Agricultural and Livestock Outlets

Agricultural and livestock outlets are often owned and operated by experienced public servants in technical ministries who chose to set up private shops that provide advice and inputs on a full-cost recovery basis. During government working hours, a hired shop keeper may operate the shop, while after hours coverage i s provided by the owner-operator himself. GDAR and YVMA will develop adapted regulations and incentives to encourage them to leave their public services functions.

For epizooty control, these livestock outlet owners will have an essential role as part o f the diseases surveillance network to be developed by GDAR.

Women ’s Involvement

Women may be underserved by livestock service providers as most animal remedies and inputs are purchased by male family members. The specific needs o f female livestock herders and owners will be met through: (i) encouraging women to become livestock service providers; and (ii) training and encouraging veterinarians to employ women veterinary technicians and CAHWs. A special opportunity exists as and where women’s groups decide to raise poultry under village or semi-commercial conditions. This i s often a priori ty activity for women and youth and many NGOs as wel l as the Food and Agriculture Organization (FAO) offer well tested packages for village or semi-commercial poultry raising. Under these schemes, one or more women can be trained and supported to deliver poultry health packages with emphasis on control o f Newcastle disease. Quality assured heat-stable Newcastle disease vaccine, produced by the Central Veterinary Laboratory, can be widely and effectively delivered via these channels. Other methods to reach female livestock care providers wil l be explored, e.g. through input suppliers who will agree to target extension messages to women and youth.

Implementation arrangements of the sub-component

GDAR will have overall responsibility o f administering Component 2, in particular, for those activities and inputs directly related to i t s sanitary mandate from GOY.

PSU will procure veterinary or livestock production, goods, works and services on the basis of procurement specifications and tendering defined by GDAR. However, some specialized support with regional implications (surveys associated with quarantine facilities, training of CAHWs) will be directly contracted to specialized regional or national institutions (Red Sea

52

Livestock Trade Commission, YVMA). Professional staff with line ministry responsibility, e.g., disease surveillance, epidemiology or disease control within GDAR, will not be employed by PSU. All l ine ministry regulatory responsibilities will be firmly embedded within the central and governorate GDAR system.

Component 3: Productive r u r a l development

Overa l l implementation

SFD and i t s Agricultural and Rural Development Unit wil l be responsible for implementation of this component. SFD would manage a separate SA, and follow i ts own procurement and financial management procedures which have already been agreed upon with the Wor ld Bank under previous projects.

As necessary, each SFD unit (Training and Organizational Support Unit, Community Contracting Project, Water and Environment Unit, Micro-finance Unit, Finance and Administration Unit, etc.) would support the Agricultural and Rural Development Unit which will be in charge o f coordinating project implementation.

The Agricultural and Rural Development Unit will implement the project through project officers: one coordinator based in Sana’a and 5 project officers at SFD branches in Sana’a, Aden, and Amran. (See chart below).

53

Organizational Chart for Component 3 under SFD

Individual firms consultants

I Managing Director I

Technical Unit Finance and Administration U n i t Water and Environment Unit Training and Capacity Bui ld ing

SF

A L M a hwee t

Project Off icer (male:

Proiect Off icer

- .. -. ....... -. . SF

Sana'a

Project Officex

Prolect Officer (male)

......

I 1 L

.-L

- _ _ _ . .

Tech. Res. Staff ........ ..

i . . . . . . . . . . I

sFD i 1 i t

Aden

Project Officer

Project Officer (female (male)

+--;

............... L.-

......

Component implementation steps:

Local Communi@ Level

0 Selection o f targeted communities. 0 Mobilization o f selected communities through participatory rural appraisal

techniques. 0 Rural producer groups' promotion, formation and preparation o f sub-projects. 0 Review, funding and implementation o f rural producer groups' sub-projects. 0 Review, monitor and evaluate a selection (random sample) o f f irst round sub-

projects .

Inter-Communi@ Level

0 Organizing exchange o f experience and special events among Rural Producer Groups from different communities.

54

0

0

0

Promotion o f union o f groups, whose members would be rural producer groups from different communities, who will prepare inter-group sub-projects. Technical review, funding and implementation o f inter-group sub-projects. Review technical and financial auditing and evaluation o f first-round inter-group sub-projects (random sample).

District Level:

0

0

Preparation o f district-lev,el sub-project proposals related to improvement o f market infrastructures. Review, funding and implementation o f proposed district-level sub-projects. Review, monitor and evaluate district-level sub-projects.

Market information activities

SFD would recruit a team o f consultants to work at national, governorate and district levels with various market agents, General Directorate for Marketing, agro-entrepreneurs, rural producer groups, Local Councils, etc. The team will help establish a regular f low of information between local producers and distant markets and may assist Local Councils to improve market infrastructure.

Improving market physical infrastructure

Improvement of market infrastructure will be discussed with key market stakeholders and brokers. The Local Council would have a central role and would benefit from technical support t o be provided by SFD. Improvement needed would be based on consensus agreed with a l l stakeholders and local brokers.

User Groups

Rural Producer Groups: Individual male and female farmers in targeted communities would organize themselves in groups o f mutual interest and undertake the following tasks:

0 identify agricultural and livestock production initiatives that may need collective action and for which they would need support (technical and financial);

0 elect rural producer groups’ representatives to form the Community Rural Producer Committee;

0 develop sub-project proposals and submit them to Community Rural Producer Committee;

0 receive funding andor services to implement sub-projects;

0 report to group members and Community Rural Producer Committee on sub-project implementation progress;

0 share experiences with other groups within their communities and in other communities; and

55

0 participate in initiation, preparation and implementation o f inter-community sub- projects with groups from other communities.

Community Rural Producer Committees

Representatives o f Rural Producer Groups existing in the community make the Community Rural Producer Committee. Basic roles o f Community Rural Producer Committees would be to:

0 facilitate exchange o f experience among rural producers;

0 under supervision and facilitative role o f SFD, screen sub-project proposals submitted by Rural Producer Groups and select them according to agreed-upon criteria for technical review and funding;

0 monitor implementation o f sub-projects by Rural Producer Groups;

0 participate and share their experiences with committees in other communities;

0 link and communicate between SFD and Rural Producer Groups;

0 promote and facilitate initiation and implementation o f inter-groups sub-projects; and

0 represent rural producers from the community if Rural Producer Groups’ members entrust them to do so.

Inter Community Rural Producer Committees

Inter Community Rural Producer Committees could be formed f rom representatives o f Community Rural Producer Committees existing in the districts. Basic roles o f the Inter- community Rural Producer Groups could be:

facilitate exchange o f experience among Rural Producer Groups from different communities;

0 under supervision and facilitative role o f SFD, screen, pre-select and forward to SFD sub-projects proposed by groupings o f Rural Producer Groups f rom different communities;

0 monitor implementation o f approved sub-projects;

link and communicate between SFD, Local Councils, l ine ministry offices and Rural Producer Groups; and

0 represent rural producers from the district if Rural Producer Groups’ members entrust them to do so.

56

Local Councils

The Local Councils in selected districts will participate in implementation through:

0

0

0

promoting the project throughout the district; participating in the preparation o f sub-project proposals related to improvement o f market infrastructures; and providing institutional support as requested by Rural Producer Groups.

Social Fund for Development implementation mechanisms:

(a) SFD Governorate project officers will perform the following duties:

0 carry out sensitization campaigns in communities potentially interested in the project;

0 represent Component 3 at the governorate level;

0 recruit community development and technical resource persons to perform various tasks related to component implementation steps;

0 communicate with Rural Producer Groups in all component-related issues;

0 handle procedures o f sub-project funding and implementation within SFD system;

0 monitor work carried out by consultants; and

0 supervise, monitor and facilitate screening process done by Community and inter Communities Rural Producer committees.

(b) Communitv Development Resource-Persons

SFD will recruit, on a retainer basis, community development resource persons who will perform the following functions in targeted communities:

0 community Mobilization (Participatory Rural Appraisal Exercise);

0 community organization (promotes and facilitates formation o f Rural producer Groups, Community Rural producer Committees and Inter-Communities Rural Producer Committees);

0 on-the-job training for Rural Producer Groups and Community Rural producer Committees;

0 facilitate identification and preparation o f sub-projects by Rural Producer Groups at various levels;

57

0 facilitate experience exchange and networking interventions among Rural Producer Groups and Community Rural Producer Committees; and

0 provision o f organizational support as requested by Rural Producer Groups.

(c) Technical Resource Persons

SFD will recruit, on a retainer basis, or mobilize resource persons in various specialties related to component interventions such as agriculture, livestock, bee- keeping, water harvesting, forestry, handicrafts, marketing, seed production and/or any other discipline related to interventions for Component 3. The role o f resource persons i s to: (i) provide technical review and advice to SFD on sub-projects submitted by Rural Producer Groups and projects prepared by Local Councils; and (ii) provide technical support to Rural Producer Groups in developing and implementing sub-project proposals in their specialties.

(d) Other partners: NGOs and MFI

The menu o f activitieshterventions envisioned contain activities that NGOs are engaged in, in some governorates. These NGOs could thus become Social Fund sub-contractors to provide support for the implementation o f sub-projects. For example, associations such as Abs Women Association, which provides support to women groups to develop handicraft activities in Abs District, may be interested in extending i ts activities in selected districts o f the project. Support to women groups for handicraft activities could be sub-contracted to this Association.

S F D M F I unit may pilot innovative approaches to support small businesses development (for agro-processing activities, for example) and other rural producers’ initiatives that lend themselves to micro-finance, such as livestock fattening.

Community Involvement in Contracting

Whenever possible, the Rural Producer Groups and/or network o f rural producer groups and/or Local Councils will be involved in the selection o f contractors, service providers or resource-persons who will provide advice support or implement parts o f sub-projects. The contractual arrangements would therefore be three-partite arrangements between the Social Fund, the Rural Producer Groups and the service provider.

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Annex 7: Financial Management and Disbursement Arrangements YEMEN, REPUBLIC OF: Rain fed Agriculture and Livestock

1 Procure, install, implement, train, and operationalize the accounting software to capture, summarize, record, and analyze financial information (software and TORS should be acceptable to the Bank). The software wil l also produce a full set of FMRs in accordance with Bank guidelines.

Hire an independent and private external auditor. After Effectiveness 1

Executive Summary and Conclusions

60 days from PSU/private consultant signing

60 days after PSU and Central effectiveness Organization for

Control and Audit

An assessment o f the financial management (FM) arrangements for the proposed project was undertaken during the appraisal mission to determine whether these arrangements are acceptable to the Bank.

As detailed in the implementation arrangements section (Annex 6), the project will be implemented by two separate entities (i.e., the PSU in MA1 and SFD). With regard to Components 1 and 2, the activities wil l be implemented based on contracts tendered by the PSU and under the technical supervision o f two agencies: the General Seed Multiplication Corporation (GSMC) and the General Directorate o f Animal Resources (GDAR). Component 3 will be implemented by SFD through i ts regional branches as wel l as through subcontracting NGOs.

As detailed below, the init ial financial management r isk assessment for the PSU and SFD i s High and Moderate respectively. During the pre-appraisal phase and later during appraisal, an FM action plan was agreed upon with officials from MA1 by which the PSU was required to: (i) recruit an FM specialist to handle the FM function in the PSU, (ii) draft financial policies and a procedures manual; and (iii) procure an accounting software, before negotiations (conditions o f negotiations). It was further agreed that any condition not fully met before negotiations will be set as a condition of effectiveness. Prior to negotiations, the said action plan, except for the procurement o f the software, was successfully implemented which reflects the positive level o f commitment and seriousness o f MAI. Accordingly, the maintenance o f the existing FM arrangements, in addition to other mitigating measures which will be closely monitored during project life, i s expected to bring the residual FM r isk for each entity to Moderate and Low respectively.

Action Plan

Project Support Unit (PSU):

The following actions will be required to be implemented before and after effectiveness:

59

Social Fund for Development (SFD:

From an FM perspective, SFD has sound experience in implementing Bank projects, having successfully implemented two phases o f SFD project financed by IDA and currently implementing the third SFD project. During the recent Implementation Status and Results for the ongoing SFD I11 Project, SFD was found to have overall satisfactory FM arrangements and the following FM arrangements were agreed upon for the proposed project:

(a) the creation o f a separate accounting entity on the current accounting software used by SFD;

(b) due to the current work load, SFD management will consider the possibility o f hiring an additional accountant to be in charge o f maintaining the accounting transactions for this project;

(c) the current Accounting Polices and Procedures Manual will be updated (if needed) to reflect the specific setup o f implementation and FM arrangements related to this project; and

(d) separate financial statements will be prepared. Also, as in the case for the ongoing IDA project implemented by SFD, the project accounts will be audited by the same external auditor auditing accounts and all i t s ongoing projects. This audit will be separate from the audit o f Component 1 and 2 implemented by the PSU o f the MAI.

Financial Management R i s k s

Country Risks: As reported and outlined in the CAS o f 2002, the quality o f governance in Yemen i s a critical issue. The Country Financial Accountability Assessment Report (2003) indicated that there had been some progress recently in the fiscal area, particularly in terms of budget expenditure classification and consolidation o f investment and current budget. There is, however, a lack o f progress on achieving budget comprehensiveness as well as on implementing a broader fiscal framework beyond the annual budgeting cycle. Efforts to move forward in reforming budget implementation, cash management, accounting and reporting have been pinned on the design and implementation o f the Bank-supported Accounting and financial management information system, s t i l l on-going. On the other hand, the draft Reports on the Observance o f Standards and Codes Accounting and Auditing Report (2003) stated that “at present, the accounting and auditing practices in Yemen suffer f rom institutional weaknesses in regulation, Compliance, and enforcement o f standards and rules.” Although Some companies claim compliance with International Accounting Standards, full compliance i s not readily achieved. There i s also inadequate adherence to International Standards on Auditing and professional ethics. These factors, as well as the poor quality of education and training in accounting, have contributed to the generally observed weaknesses o f the financial reporting and auditing regime.

In addition, the recent Country Portfolio Performance Review (CPPR) conducted in Yemen, identifiedre-emphasized a number of cross cutting issues that are currently facing IDA- financed projects implemented in Yemen. Some issues included in the action plan proposed for the area o f FM have already been addressed, and there i s on-going coordination between the Bank and GOY in implementing the remaining required actions.

60

Inherent Risks

Based on the findings of the various Economic and Sector Work conducted recently, serious weaknesses were identified in the accounting and auditing professions in Yemen.

Delays in accessing Counterpart Funds

Delays in approval of withdrawal applications.

High

Moderate

Moderate

auditing firm. - Ring-fence the project implementation and funds.

Although the Bank experience with timeliness of counterpart fund contribution to Bank- funded projects in Yemen i s quite mixed, there i s a general high level o f commitment from GOY. GOY has recently taken the required actions to cut down and streamline the approval process. This i s welcomed as it was noted, in the past, that long delays occurred before any payment was made from the SAs. This was particularly due to the involvement of several parties involved in the payments approval

Moderate

Moderate

Moderate

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Project Financial Management Risk:

Control risk - MA1 PSU: The following are the FM-related risks with regard to PSU under MAI:

Issue I Risk

Implementing Aeencv

- New PSU in implementing Bank projects. - The project design in connection with the involvement o f at least two implementing agencies in addition to other players (e.g,. YVMA, TDA, groups o f farmers, etc.) would require special attention. Stafting

MA1 will need the support o f FM professionals with Bank experience.

High

High

- Selection o f qualified PSU core personnel based on TORs acceptable to the Bank.

- Review (from an FM perspective) the contractual agreements signed between PSU and various contractors.

Moderate

- The selection and hiring o f the FM specialist was a condition for negotiations which has now been met. The Bank carefully reviewed and cleared the short- listed candidates and the selection criteria, as well as the C V o f the proposed FM specialist. -The PSU would also include at least one accountant. He/ she w i l l be hired based on detailed TORs acceptable to and cleared by the Bank. - Provide regular training to finance team on Bank’s FM-related guidelines. - Close supervision by the Bank’s FM specialist w i l l be provided.

Moderate

Information System Lack of appropriate record- High - As a condition o f effectiveness, the PSU Moderate keeping procedures or use o f inefficient manual recording system.

would procure and install automated accounting software (based on TORs acceptable to and cleared by the Bank). - The new system should enable the automated generation o f FMRs.

Financial Policies and Procedures Lack o f appropriate High - The PSU FM, with the aid o f a Moderate financial policies and procedures.

competent consultant, w i l l develop the required financial and accounting policies and procedures for the proposed project. These policies will cover: (i) treatment o f expenditures, including their classification, (ii) eligibil i ty o f expenditures to be reimbursed from the loan, (iii) efficient management o f funds, (iv) project accounting policies, including

62

Risk After MM

Comments/ Mitigatlng Measures (MM)

Risk

MM Issue 1 Risk Before

those related to the conversion from foreign to local currency and authorization and payments system, and (v) internal control systems. The Bank reviewed the draft FM Manual prior to negotiations and will review again the final version prior to

I issuance. Flow o f Funds Lack of appropriate flow of I High funds

Reporting and Monitoring MA1 will need the support of FM professionals with Bank experience to handle the Reporting and Monitoring function.

High

- All types of payments will be centralized in the PSU. - Major payments will be made in accordance with signed contracts with implementing agencies. - The use of cash advances will be limited and based on prior approval from the Bank. - The external auditor will review quarterly FMRs including SOEs. - A separate SA will be maintained and the traditional disbursement will be used.

High

- As a condition for effectiveness, PSU i s required to procure automated accounting software which would enable generation of reports as required. - The PSU designed i ts first FMR template which was reviewed and approved by the Bank as a condition of negotiations. - FMRs will be reviewed quarterly by the external auditor. - Close supervision by Banks’ FM specialist.

Moderate

External Audit Timeliness and quality of High An independent private auditor, Moderate audit reports. acceptable to IDA, will be hired to audit

PSU accounts according to TORS, cleared by and acceptable to the Bank, on an

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Control Risk SFD: T h e following are the overall r isks and risks mitigating measures for the component imp lemen ted by SFD:

Implementing Agency

the project. Experience in implementing Low SFD has a vast experience in L o w

implementing single and multi-donors projects and is currently successhlly implementing the ongoing SFD 111 Project.

Staffinc SFD has a strong accounting department and an experienced qualified Financial Manager. The risk is that the current workload would not give him appropriate t ime to manage the operations under the project. Information Svstem

accounting system. developed management information system . Under the ongoing SFD 111 Project, the interface between the financial and procurement modules o f this system i s in progress and is about to be fully completed. - A separate accounting entity with a new chart o f accounts will be created on the accounting system.

Moderate

Lack o f an appropriate Low - SFD possesses a sound in-house L o w

Financial Policies and Procedures SFD has a comprehensive Moderate - As agreed with SFD management, the LOW Policies and Procedures Manual. These policies would need to be updated to reflect the design and arrangements of the proposed project.

FM Manual will be updated as necessary to include the nature o f operations under the proposed project.

funds. Moderate

- The Bank has discussed with SFD management the possibility o f hiring an additional full time/part time accountant to handle the FM-related transactions for the proposed project.

- All payments wil l be centralized at SFD’s head ofice. - Payment requests will be prepared and validated by SFD managers in the five governorates. - SFD has experience in dealing with NGOs and following up on the progress o f their activities. - The majority o f the payments will be made using bank transfers or checks in the name o f the beneficiaries. - All payments will be approved by SFD’s director. - A separate SA will be opened under the

Moderate

L o w

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Risk After MM

Comments/ Mitigating Measures (MM)

Risk

MM Issue I Risk Before

Report Frequency Preparation Due Date Responsibility

FR Monthly 10 days from end o f month PSU/SFD

proposed project. - SFD i s currently applying the FMR based disbursement method under the on going SFD 111 project. It was agreed that under the proposed project, disbursements will be made based on quarterly FMRs.

Internal Audit Lack ofan internal audit Moderate - SFD has an internal audit department Low function. which was found to be satisfactory in the

last ISR prepared for the ongoing SFD 111 Project. - We agreed with SFD’s management that collaboration and access to required internal audit reports, as needed, should be made to the Bank’s FMS during regular supervision missions.

ReDorting and Monitoring

Sent to MOPICY MOF

SFD i s currently using FMRs previously PMRs as the basis of disbursement in addition to them being a monitoring tool. However, following a recent supervision mission on the SFD I11 Project, i t was noted that procurement and physical progress reports were not being generated. In addition, budget figures used to compare actual expenditures were manually entered instead of automatically linked.

FMR

PFS

Moderate

t

Quarterly 3 weeks from end of quarter PSU/SFD External Auditor

Annually 3 months from end of fiscal year PSU/SFD External Auditor

- Following discussions with SFD’s management, it was noted that these issues have not yet been resolved. - As interim arrangements, additional reports might be prepared in Excel as needed. - FMRs will be reviewed quarterly by private external auditors.

External Audit Timeliness and quality o f Moderate An independent private auditor, Moderate audit reports. acceptable to IDA, will be hired to audit

the project’s SFD component according to TORS cleared by and acceptable to the Bank on an annual basis.

Reporting and Monitoring. PSU and SFD will issue each separate monthly financial reports (FRs), quarterly financial monitoring reports (FMRs) and annual project financial statements (PFSs):

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Monthly un-audited FRs. These reports will be prepared on a monthly basis and wil l no t be sent to the Bank. However, as part o f Bank’s supervision, they wil l be reviewed and reconciled with the monthly withdrawal applications and quarterly FMRs. The format o f these reports should be quite simple (listing o f sources and use of funds and Bank reconciliation).

Report

FMR

PFS

Quarterly reviewed FMRs. The format and content o f FMRs was agreed upon at negotiations, and included in FM Manual. FMRs should include financial, procurement and physical progress information. There should also be introductory narrative discussion o f project developments and progress during each quarter. FMRs should be prepared and finalized within 3 weeks from the end o f the quarter and reviewed by the project’s external auditor. Once reviewed they would be submitted to IDA no later than 45 days after the end o f each quarter; and

Due Date Responsibility Sent to Language Scope 45 days from External IDA/MOPIC/MOF ArabidEnglish Review end o f Auditor quarter 6 months External IDA/MOPIC/MOF ArabidEnglish Audit from end o f Auditor fiscal year

Annually audited PFS. The PFS should include: (i) a statement o f sources and uses of finds indicating funds received from various sources, project expenditures, and assets and liabilities o f the project; (ii) schedules classifylng project expenditures by components, subcomponents and expenditure categories; (iii) an S A Reconciliation Statement; and (iv) Statement o f Withdrawals made on the basis o f Statements o f Expenditures (SOEs). Audited PFS would be submitted to the IDA not later than 6 months after the end o f GOY’s fiscal year.

Audit Arrangements

Two separate annual project financial statements for project components implemented by the PSU and the component implemented by SFD will be audited by independent private auditors acceptable to IDA and under two separate contracts. Audit reports wil l be submitted within six (6) months after the end o f GOY’s fiscal year. The external auditors will also be required to review the FMRs on a quarterly basis. Reviewed FMRs would then be submitted to IDA no later than 45 days after the end o f each quarter.

The audits would be comprehensive and cover a l l aspects o f the project (i.e., a l l sources and uses of funds, and expenditures incurred by each entity). They will be carried out in accordance with International Standards on Auditing. TORS for th is assignment should cover an audit of financial transaction, the SOEs, SAs, FMRs, and an assessment o f the accounting FM system, including a review o f internal control mechanisms. PSU and SFD would provide the auditors with access to project-related documents and records, and information required for the purpose o f preparing the audits. The auditors would carry out a concurrent audit during the fiscal year and to bring to management’s attention any issues which need to be addressed. Th is would strengthen internal controls and would also facilitate early completion of each annual audit.

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Disbursement Arrangements

Amount o f Credit

Allocated Category (US$ ‘000)

1. Works under: (a) Parts A and B o f the Project 2,000

2. Goods under: (a) Parts A and B o f the Project 1,300

100 (b) Part C of the Project

3. Local Consultants’ Services under: (a) Parts A and B of the Project (b) Part C o f the Project

3.300 1,600

4. International Consultants’ Services under: (a) Parts A and B o f the Project 300

100

1,400

8,100

(b) Part C o f the Project

(a) Parts A and B of the Project

6. RP Grants under Part C o f the Project

(a) Parts A and B of the Project

5. Training under:

7. Incremental Operating Costs under: 600 600 (b) Part C o f the Project

To ensure that funds are readily available for project implementation, the P S U and SFD would each open, maintain and operate an SA at the Central Bank o f Yemen (or a commercial bank). Deposits into, and payments f rom the SAs, will be made in accordance with the provisions stated in the Credit Agreement. Disbursement for P S U component will b e made according to the traditional disbursement procedures that include withdrawal applications for direct payment, reimbursement and requests for the issuance o f special commitments. With regard to SFD’s component, which i s currently using the report based disbursement method under the o n going IDA projects implemented by SFD, disbursements will be made according to the report based method using quarterly FMRs.

YO of Expenditures to be Financed

100%

100%

100%

100%

100%

100%

100%

Withdrawal applications and replenishments of the S A will be prepared and sent to the Bank by PSU and S F D signed by authorized signatories. The name and corresponding specimen of signature for each authorized signatories wil l be submitted to IDA.

Allocation o f Credit proceeds. The allocation o f Credit proceeds by disbursement category and percentage to be financed i s shown in the table below. The percentage o f expenditures to be financed has been set to 100 percent in accordance with the recently approved Country Financing Parameters. They stipulate that IDA m a y finance 100 percent o f project costs especially for projects that support the social development agenda, which the proposed project does.

Allocation o f Credit Proceeds

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Estimated Disbursement

Fiscal Year 2007 2008 2009 2010 2011 MA1 1.15 2.40 2.20 1.60 1.30 SFD 0.55 1.85 2.70 2.80 2.15 Total 1.70 4.25 4.90 4.40 3.45

The following table presents the Estimated Disbursement by Year for Component 1 and 2 (MAI) and Component 3 (SFD).

2012 Total 0.55 9.20 0.75 10.80 1.30 20.00

Use o f Statements of Expenditures (SOEs). Full documentation for expenditures under contracts requiring the Bank's pr ior review would be submitted with the corresponding application. Disbursements for contracts valued at less than US$200,000 for works, US$lOO,OOO for goods; US$lOO,OOO for services for consulting f i rms, and US$50,000 for services o f individual consultants would be made o n the basis o f SOEs. Documentation to support these expenditures would be maintained by PSU and SFD, and would be made available for review by visit ing Bank missions and for project auditing.

Special Account (SA). Two SAs would be maintained in the Central B a n k o f Yemen for PSU and SFD, and would be operated by the PSU and SFD, respectively. The SAs would be operated in accordance with IDA'S operational policies. The authorized allocations o f the SAs for PSU would be US$800,000 and for SFD, since disbursements will b e made according to the report-based method using quarterly FMRs, there will be n o ceil ing to SA.

Direct Payments and Special Commitments. The minimum amount for applications for direct payments and for special commitment will be 20 percent o f the authorized allocation to the SA, and only for foreign suppliers o f goods.

Bank Supervision

Before effectiveness. Implementation o f the agreed-upon FM action p lan wi l l b e monitored by the Bank-accredited FMS.

After effectiveness. A Bank-accredited F M S will assist in the regular supervision process. F M R s for the project will be reviewed on a regular basis by the F M S and the results and any issues will be followed up during the supervision missions. Financial audit reports will be reviewed and any issues identif ied will be fol lowed up by the FMS. In addition, during the Bank's supervision missions, the project's FM and disbursement arrangements (including a review o f sample of SOEs and movements o n the SAs) will be reviewed to ensure compliance with the Bank's minimum requirements and to develop the FM rating.

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Annex 8: Procurement Arrangements YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

A. Background: A Country Procurement Assessment Report (CPAR) for Yemen was carried out in late December o f CY2000. The report showed that the current procurement legislation (Law No. 3 o f 1997 concerning Government Tenders, Auctions and Stores, and corresponding Regulations introduced by Decree No. 234 o f 1997) i s a significant improvement over the previous legislation o f 199 1. However, i t showed that legislation i s not yet up to international standards, notably in the following areas: (i) gaps in the legislation; (ii) absence of use o f Standard, Bidding Documents by public agencies; and (iii) conflicts with procurement guidelines o f donors, including IDA. Even where reasonable rules exist, they are not necessarily followed.

As a transition strategy, until a revised procurement law i s enacted, the CPAR recommended a set of national Standard Bidding Documents for goods, works and services. These documents, together with a comprehensive National Procurement Manual support capacity building of GOY'S procurement function at al l levels, have now been prepared. IDA through an IDF Grant for procurement capacity building and the Government o f the Netherlands have supported the development of the National Procurement Manual and requisite Standard Bidding Documents, which also include a separate volume on procurement procedures for local authorities. The 'assignment to prepare and ro l l out the National Procurement Manual through pi lot workshops and training-of-trainers for c iv i l servants in core-spending ministries i s expected to be completed by April 2006.

Overall, in terms o f IDA-financed projects in Yemen, lengthy processing times for awarding contracts i s clearly impacting the level o f performance at appraisal o f projects in IDA'S supervision portfolio. Th is problem clearly manifests itself by the decline in the Yemen's portfolio disbursement ratio from 29 percent to 11 percent during the period FY2000 to FY2005. The Bank and GOY have recognized the need to improve the situation and within the past 18 months, two CPPRs have been carried out. The most recent CPPR was completed in September 2005 with a focus on identifymg constraints to improve implementation and to agree with the Borrower on key measures required to address them.

In the above regard, the main procurement-related issues identified were: (i) lack o f qualified procurement staff in the local market; (ii) unnecessarily l ow approval thresholds for both l ine ministries and implementing agencies; (iii) lengthy contract processing periods; and (iv) inadequate project management capacity, as we l l as non-compliance o f the High Tender Board with IDA guidelines in awarding contracts above the US$200,000 threshold for project management units. To ensure proper fol low up and monitoring o f the agreed-upon recommendations on a time-bound action plan (including procurement issues), a tripartite CPPR Follow-up Committee has been established which comprises the MOPIC and MOF as well as the Bank. This committee i s expected to meet monthly to monitor and help coordinate with line ministries and the project executing agencies.

Use of Bank Guidelines: In the interim, procurement for the proposed project would be carried out in accordance with the Wor ld Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated M a y 2004; and "Guidelines: Selection and Employment o f Consultants by Wor ld Bank Borrowers'' dated M a y 2004, and the provisions stipulated in the

69

Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame for contract processing have been finalized in the Procurement Plan for the f i rst 18 months o f activity prior to negotiations.

B. Advertisement. A General Procurement Notice (GPN) wil l be issued in the United Nations Development Business and DGMarket to advertise for major consulting assignments and to obtain expressions o f interest, and for any International Competitive Bidding (ICB) for goods which are anticipated, not less than eight weeks prior to the publication o f the f i rst Specific Procurement Notice (SPN). The SPN will be updated annually for a l l outstanding procurement. The GPN will also be published in the national press or official gazette for purposes o f obtaining expressions o f interest for contracts under National Competitive Bidding (NCB) and to obtain expressions o f interest from national consultants. The Borrower will keep a roster o f the responses received from potential bidders and interested consulting f irms.

Procurement Capacity and Implementation Arrangements

For Components 1 and 2, the PSU o f MA1 will be responsible for a l l procurement activities and supervision o f work procedures to ensure quality control and efficientltransparent fiscal procedures. MAI, through the SASP (closed), and the current GSCP , Irrigation Improvement Project and Southern Governorates Rural Development Project, has considerable experience with Bank Procurement. A Procurement Capacity Assessment o f MAI was conducted in M a y 2000 and updated in October 2003 and during the appraisal mission for the proposed project, a capacity assessment update was carried out building upon the October 2003 capacity assessment completed for the ongoing GSCP. The PSU i s staffed with a procurement specialist with qualifications to manage IDA-funded procurement. She has been recruited on a competitive basis under IDA guidelines.

Procurement for Component 3 will be carried out by SFD who are currently successfully implementing i ts third project with the Wor ld Bank, in addition to having experience with procurement and FM with a number o f other donors. A formal procurement capacity assessment o f SFD has been carried out in accordance with the Procurement Services Policy Group guidelines dated July 15, 2002 during the preparation o f the SFD I11 Project under which an action plan and training program i s being undertaken for headquarters and Branch Offices. There i s therefore no need for an additional training program under the proposed project. SFD will designate one o f the staff from i t s Procurement Unit to be responsible for procurement activities required by Component 4.

Procurement Capacity Strengthening. In order to strengthen the procurement capabilities o f the PSU, i t s procurement staf f and TenderinglAwarding Committees, on-the-job training program will be provided under the project (as part o f the training program) by recruiting a short-term procurement specialist and conducting training workshops on procurement. During the f i rst s i x months o f project implementation, the procurement specialist located in the Bank’s office in Sana’a will provide intensive coaching.

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Procurement Plan

A detailed procurement plan, indicating the procurement method and processing time for each contract covering the first 18 months, was reviewed during the November 2005 appraisal mission for submission o f a final version by negotiations. The procurement plan will be updated at least annually, or as required, to reflect the actual project implementation needs and improvements in institutional capacity at the PSU for MA1 components, and by SFD for Component 3.

Procurement Methods (See Table A)

Procurement of Works: The aggregate total for works i s estimated at US$2.09 mill ion. This would include the construction o f small seed storage facilities and outlets, improved market infrastructure, rehabilitation o f laboratories, veterinary offices, agricultural district offices and the rehabilitation o f a quarantine station at A1 Mokha. With the exception o f the A1 Mokha quarantine rehabilitation estimated to cost US$1.23 million, the average size o f each contract i s expected to be around US$50,000 ranging in size from US$25,000 to less than US$lOO,OOO. Due to the small size o f these individual contracts, and their dispersed geographical locations, they would not l ikely attract the interest o f foreign construction companies. Therefore, except for the quarantine rehabilitation which will be subject to ICB procurement procedures, a l l c iv i l work contracts would be awarded under NCB procedures, packaged together to the extent possible with interested foreign bidders s t i l l eligible to submit bids. N C B bids will be advertised in at least two national newspapers allowing bidders no less than 30 days to prepare their bidding proposals from the time bids have been issued.

Another type of works financed under the project involves either rehabilitation or construction of water harvesting and soil conservation structures. Whenever technically feasible and appropriate, for contract amounts o f US$30,000 equivalent or less, these will be procured through community contracting arrangements approved by the Bank, with the farmers whose land would benefit from the works. See below the section on “Community Participation”,

Procurement of Goods: The estimated aggregate amount for goods i s US$1.33 mill ion. It will include equipment and products for: laboratories, seed storage facilities, livestock epidemio-surveillance network, paraveterinarians’ kits, Agricultural District Offices’ equipment as well as training materials and a l imited number o f vehicles. Contracts will, to the extent possible, be packaged together for similar products. Bid packages above an estimated size o f US$lOO,OOO will be procured using ICB procedures. Bid packages o f estimated size between US$5,000 and US$lOO,OOO per bid would be procured using N C B procedures, with bids advertised as for works contracts. Contracts and purchase orders below US$5,000 can be procured using national or international shopping procedures with at least three quotations being solicited from local suppliers, when these goods are available locally at competitive prices. Otherwise, quotations would be solicited from at least three international suppliers from at least two different countries.

Procurement of Services. Technical assistance contracts will amount to U S $ l . l m i l l i on for international consultants and US$4.9 mi l l ion for local consultants, including what has been termed as “non-consulting services” (below) which refers to contractual arrangements with, for example research institutions, for carrying out certain activities.

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In addition, training has been evaluated at US$1.6 million. The upgrading o f the regulatory services of t h e GDAR, the laboratories and quarantine station will require the support of various specialists (mostly international consultants), providing advice as we l l as training of staff. The project will also recruit local market informants/facilitators and local agriculture and livestock advisors. Activities such as the on-farm testing and adapting work (establishment o f demonstration plots, support to seed production, gene banks establishment) will be contracted out on a competitive basis. For consultancies above an estimated contract value of US$lOO,OOO equivalent, the selection method would be Quality and Cost-Based Selection (QCBS) and IBRD’s Standard Request for Proposals (RFP) wil l be used. For consultancies involving the selection o f f i rms below an estimated contract value of uS$100,000 equivalent the selection method would be Consultants’ Qualifications (CQ) or Least Cost Selection (LCS) method. The short l i s t o f consultants for services less than US$lOO,OOO may comprise entirely national consultants. For contracts with individual consultants, the Selection o f Individual Consultant method according to IDA’s Guidelines will be used. In exceptional cases, Single Source Selection l imited to contracts estimated to cost less than US$50,000 subject to IDA’s prior clearance could be used in accordance with the provisions o f paragraphs 3.9 through 3.13 o f the IDA’s Guidelines. For a l l consultancies above US$200,000, a request for expression o f interest would be advertised in the UN Development Business and in local newspapers. Auditors will be selected using the Least- Cost Selection (LCS) procedures.

Community participation (i.e. contracting)

The total amount procured under community contracting procedures wil l amount to US$8.2 mill ion.

For community contracting, SFD will fol low the procedures established under the Social Fund for Development I11 Project and presented in i t s Operational Manual, which has been cleared by the Bank. SFD has two procedures depending on the groups’ capacity to manage funds and procurement: (i) the groups implement the sub-projects, but uses “delegated contract management” under which SFD manages the contracts and processes payments; (ii) groups have proven capacity to manage the funds and carry out their o w n procurement of services.

Prior Review: The first three contracts in each category and each procurement method (works, goods and services), irrespective o f the estimated contract value would be subject to IDA’S prior review, in accordance with the applicable guidelines. Thereafter, a l l procurement of goods and works, which i s subject to ICB procedures, would be subject to IDA’s prior review. Furthermore, any works contract o f a size greater than US$200,000 and goods contract of a size greater than US$lOO,OOO would be subject to IDA’s prior review. All consulting contracts over an estimated size o f US$lOO,OOO with f i rms and US$50,000 with individuals, as well as single-source contracts, and the f i rst three RFP under any selection method for services would be subject to prior review. The prior-review process would cover about 65 percent o f total works, goods and services contracts, which would be reasonably achieved under the circumstances o f the project where there are many small and scattered c iv i l work contracts, especially the ones procured with farming communities, which fall below reasonable review thresholds. All other contracts would be subject to post-review on a random basis during supervision missions and procurement audits.

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Post Review Monitoring and evaluation o f the PSU’s procurement performance would be carried out under the prior review thresholds during IDA supervision missions and through ex- post procurement audits as deemed necessary during project implementation. At a minimum, 3 out o f 10 contracts managed by the PSU will be subject to post review. Post reviews o f in- country training wil l be also be conducted from time to time to review the selection of institutionskourse contents/trainees and justifications thereof‘, and costs incurred. An independent technical audit would be carried out prior to the mid-term review to: (i) verify that the procurement and contracting procedures and processes followed for the projects were in accordance with the Development Credit Agreement (DCA); (ii) verify technical compliance, physical completion and price competitiveness o f each contract in the selected representative sample; (iii) review and comment on contract administration and management issues as dealt with by participating agencies; (iv) review capacity o f the PSU in handling procurement efficiently; and (v) identify improvements in the procurement process in the light of any identified deficiencies. All thresholds will be reviewed by the Borrower and IDA from time to time as necessary.

Expenditure Category 1. Works

2. Goods

3. Training

4. Consultants: Local

International

5. Farmers’ Community Grants

6. Management Costs

Total

Table A Project Costs by Procurement Arrangements (US$ million equivalent)

Procurement Method ICB NCB Othec N.B.F. Total Cost 1.230 0.949 2.179

(1.180) (0.911) (2.091) 0.009 1.389 1.398

(0.005) (1.323) (1.328) 1.662 1.662

(1.648) (1.648)

6.552 6.552 (4.874) (4.874) 1.147 1.147

(1.095) (1.095) 19.804 19.804 (8.2 12) (8.2 12)

1.037 1.037 (0.900) (0.900)

1.230 0.958 31.591 33.779 (1.180) (0.916) (18.052) (20.148)

Note: Figures in parenthesis are the amounts to be financed by IDA. All costs include contingencies. 1/ Includes consulting services, services o f contracted staff o f the Project Support Unit, training,

technical assistance services, and incremental operating costs related to managing the project,

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Prior review thresholds (Table B)

Procurement Method

I C B N C B

Simplified N C B (three quotations)

ICB NCB

NSIIS (three quotations)

QCBS CQ ss

Section V o f Consultants’ Guidelines

Section V o f Consultants’ Guidelines

Table B: Thresholds for Procurement Methods and Prior Review’

Contracts Subject to Prior Review (US$ millions) All contracts

First three contracts and all contracts > = 0.2

First three contract

All contracts First three contracts and all

subsequent > 0.10 First three contracts

All contracts First three contracts

All SS contracts All contracts

All SS contracts

Expenditure Category 1. Works

2. Goods

3. Services(Firms)

4. Services (Individuals)

Contract Value Threshold

> = 500 < 500

(US$ ‘000)

< 15

>= 100 4 0 0

=> 100 < 100

< = 5 0 >=50

< 50

Total value of contracts subject to prior review: US$8.2 mil l ion

Frequency of procurement supervision missions proposed: Overall Procurement Risk Assessment: High

One every 6 months (includes special procurement supervision for post-reviewlaudits)

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Annex 9: Economic and Financial Analysis YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

Project objectives

The main objectives o f the proposed project are to improve M A I ’ s regulatory functions, to increase the delivery capacity o f agricultural services providers in traditional rainfed and spate irrigation production systems, and to enhance the capacity o f farmers’ organizations and village communities in accessing agricultural services, formulating and implementing activities aimed at the improvement o f their traditional production and marketing systems.

The proposed project will support the diffusion o f improved seed technology for rainfed crops and forage by promoting the adoption o f appropriate crop and seed technology and by creating a sustainable and participatory system for variety improvement. It wil l further the involvement of diverse stakeholders in variety improvement activities and encourage farmer groups to develop seed producer groups and seed grower associations. The proposed project will also improve livestock-related public regulatory services and increase livestock owners’ access to private goods and services such as veterinary treatments and husbandry advice. Finally, the proposed project will provide funds to rural producer groups for the implementation o f demand-based small-scale projects directed at improved agricultural production base, increased access to market opportunities and upgraded agricultural and livestock activities. This will include but not be l imited to investments in water harvesting facilities, terrace rehabilitation, labor-saving devices, ago-processing equipment as we l l as post-harvest handling and marketing activities. I t will also provide support for small-scale demand-based projects formulation and implementation.

Summary of Benefits and Costs

Project Beneficiaries. Direct project beneficiaries include local farmers and livestock owners. Farmers will benefit from the introduction and greater availability o f improved seed and crop technologies which i s expected to result in increased crop yield and income. They will gain from improved market infrastructure, better access to market opportunities as wel l as agricultural inputs and services. Livestock owners will be provided with more accessible veterinary goods and services, innovative husbandry methods, feed supplements and fodders for improved livestock productivity. Along with broader local communities, they will also benefit from funding programs for small-scale soil and water harvesting facilities, community labor-saving devices (especially for women), agro-processing facilities and production-related start-up activities. The latter will include, but will not be l imited to new technologies and farm experiments such as seed selection, forage growing trials, village/district veterinary pharmacies and seed banks or agricultural and livestock input outlets at the village level.

Project Benefits. The proposed project will generate a wide range o f economic, environmental and social benefits. An illustration o f the potential benefits i s presented in the sections below.

0 Economic Benefits. Direct and indirect economic benefits will be generated during the project’s lifetime. Direct benefits wil l mainly consist o f increased farmers’ and livestock owners’ income through improved agricultural and livestock productivity

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in rainfed and spate irrigation areas and greater access to markets. Indirect economic benefits are expected to arise from the creation o f non-farm income opportunities and the promotion o f community-wide development. For instance, upgraded market infrastructure will primarily be used by beneficiaries in the community but will also attract market participants from non-project areas, thus benefiting local economies beyond project boundaries. Also, funds for small-scale demand-based projects will support non-farm income-generating activities such as beekeeping, handicraft production and marketing, traditional sources o f income in addition to agriculture.

0 Envi ronmenta l benefits. The proposed project will generate major environmental benefits through i t s support to terrace rehabilitation and water harvesting investments in rainfed areas o f Yemen. Terrace cultivation i s an important part o f the local agricultural economy and plays an important role in natural resource conservation and management. Together with water reservoirs and cisterns, their proper maintenance i s key for soil erosion control and water infiltration to replenish the groundwater table. Farmers in the highlands o f Yemen have not been able to properly maintain the deteriorating terraces and need adequate water harvesting facilities. Ma jor benefits from such small scale investments will include reduced soil loss from erosion and help increase groundwater recharge. Furthermore, soil moisture retention and crop rooting depth will be significantly increased, resulting in improved yields and net farm incomes from rainfed agriculture on highland terraces.

0 Social benefits. The proposed project will promote the capacity building and direct involvement o f farmers and, more broadly, local communities in various areas o f agricultural activities. It i s expected that by supporting the participatory approach, the project will promote equal access to financial resources, agricultural and livestock- related services and lead to improved social cohesion and equity in the project areas. Finally, by helping farmers to become organized at community and intercommunity levels, the project wil l build social capital. Project which have invested in social capital in addition to investing in other forms o f capital have proven to result in more sustainable project interventions.

Analyt ical Approach. A cost-benefit analysis has been undertaken on quantifiable economic benefits generated by the proposed project. It i s expected, however, that non-quantifiable benefits, mainly environmental and social benefits, are l ikely to be substantial. Hence, the total benefits quantified in the cost-benefit analysis should thus be interpreted as a conservative lower bound estimate. Possible off-farm incomes induced by the project are not considered in the analysis. Furthermore, investments in small-scale demand-based projects are not included in the economic analysis. The present analysis only focuses o n incremental revenues from crop and livestock production activities, resulting from project implementation.

The economic analysis i s based on five-year project implementation period and the following assumptions:

(a) the period for evaluation o f crop and livestock production activities i s 30 years;

(b) a discount rate o f 12 percent i s used in the analysis;

(c) al l cost benefit calculations are carried out in 2004 constant prices;

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(d) world market reference prices are calculated for tradable goods and used in the economic analysis; and

(e) financial prices as observed in the project areas have been used for a l l other products.

Evaluation of Economic Benefits. The estimated incremental benefit stream i s derived from comparing the "without" and the "with" project net value o f incremental net annual revenue from agricultural and livestock activities. Incremental annual net revenues from agricultural production are calculated by subtracting operational expenditures from the total revenue from the proceeds of crop sales. Yield estimates represent average yields over the past four years. The overall benefits from crop production are aggregated over the proposed project area and the net value o f incremental crop production derived from project investment costs in the improved seeds program. Component 1 i s expected to impact 60,000 farmers who wil l use improved seeds and seed technology on a total o f 24,000 ha at the end of implementation period. Benefits from livestock investments are calculated based on herd size estimates at governorate and national levels. It i s expected that about 30 percent o f the total herd in project governorates will benefit from improved access to veterinary services with an increase in meat and milk productivity o f 40 percent by the end o f project completion. In addition, herds in other governorates will observe an increase in productivity by 15 percent by the end o f the fifth year at project completion. The following additional assumptions also applied:

lower than average rainfall seasons are assumed to occur every two out o f f ive years and are incorporated in the economic analysis;

adoption o f improved seeds will not start until the third year o f the project as the first two years will be spent on on-farm variety improvement and capacity building;

crop productivity i s expected to gradually increase over the project l i fe and level o f f in later years. Th is approach i s judged conservative as adoption and diffusion o f improved seeds as well as agricultural technologies and inputs in the project area are l ikely to be sustained several years after the project closes. The model assumes an increase in annual crop productivity starting in Year 3 o f the project for a cumulative 10 percent increase at the end o f the implementation period;

while it i s expected that about 60,000 farmers will benefit from the proposed project, i t i s estimated that the improved seed production system will meet around 10 percent o f the potential demand for cereals and pulses (see Table 1 below) and cover approximately 24,000 ha in the region; and

the proportion o f livestock with access to improved livestock veterinary services i s expected to increase by 3 percent annually starting in Year 2 o f the project and reach 30 percent f ive years after project completion.

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Table 1: Potential Seed Demand by Crop and Project Governorate (ton)

Targeted Crops Sorghum Maize

Cereals Mi l let Wheat Barley Lentils Cowpeas

Pulses Fenugreek Peas Broad bean

Total

Project Governorates Hodeidah Lahej Al-Mahweet- Hajja Sana’a

1,750 41 157 436 1,38 1 93 24 10 12 99

603 19 30 38 65 3 78 46 2,808 3 46 7 1,790

13 6 209 126 1 6 5 21

4 4 5 73 1 3 47

85 7 88 2,576 91 430 565 6,581

Project Governorates Livestock Hodeidah Lahej Al-Mahweet Hajja Sana’a

Cattle 2 19,642 4 1,079 87,714 115,390 73,913 Small 1,100,000 552,000 1,05 1,000 484,000 825,000 ruminants Camels 13,071 2,445 5,220 6,867 4,398

F a r m models. The proposed project will directly support the improvement o f f ive cereals: sorghum, maize, wheat, barley and millet; and f ive pulses: lentils, cowpea, fenugreek, peas and broad beans. In each project governorate, budgets for these crops have been developed and the net returns per h a are presented in Table 3 below.

Other Governorates

800,000 9,000,000

120,000

Table 3: Crop Budget by Project Governorate (YIUhectare)

ed Crops Sorghum Maize Mil let Wheat Barley Lentils Cowpeas Fenugreek Peas Broad bean

Targ

Cereals

Hodeidah 48,050 26,350 18,250

18,420 45,200 Pulses

Source: Pro

Lahej 26,850 25,600 17,500 65,500 3 1,000

17,920

43,450 24,100 16,000 64,500 30,000 36,800 16,920 42,200 74,400 67,700

Hajja 52,240 23,350 15,250 64,000 29,500 36,800 16,420 4 1,200 72,650 66,700

Sana’a 48,800 24,100 16,000 64,500 30,000 36,800 16,920 42,200 74,400 67,700

Project Costs. Project costs included in the analysis comprise: (i) investment costs in seed improvement and support to l ivestock services, and (ii) estimated physical contingencies over the proposed project’s implementation period.

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Economic Rate of Return (ERR). A total economic net value o f benefits f rom project investment i s derived from farm models. The overall ERR for the project i s about 17.7 percent while a lowest rate o f 10.7 percent i s observed in Sana’a governorate compared to 23.7 percent in Hodeidah Governorate. Details are shown in Table 4 below.

Governorates Economic rate o f return ERR

Al-Mahweet 17.0% Hajjah 16.6% Hodeidah 23.7% Lahej 17.3% Sana’a 10.7% Overall 17.7%

Table 4: Results of Economic Analysis

Net Present Value (million YR)

137 76

697 73

-55 929

Economic rate of return ERR (‘Yo)

Economic Sensitivity Analysis. Results o f the sensitivity analysis show that the project returns are. robust for al l project areas with the exception o f Sana’a governorate which s t i l l shows negative returns and the lowest rate o f return as in the base scenario.

Net Present Value (million YR)

Table 5: Sensitivity Analysis Results

14.2 14.0 20.8 14.5 8.5

15.0

14.2 14.2 19.6 14.5

14.7 8.9

An increase in project costs by 20% Al-Mahweet Hajjah Hodeidah Lahej Sana’a Overall

Al-Mahweet Hajj ah Hodeidah Lahej Sana’a Overall

Al-Mahweet Hajjah Hodeidah Lahej Sana’a Overall

A decrease in project benefits by 20%

A two-year delay in project implementation

57 30

477 33

-146 451

64 35

476 36

470 -142

14.7 14.4 21.3 15.0 8.9

15.4

85 45

616 47

-157 636

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Project financial impact at farm level. The financial viability o f small farms under the expectations of the proposed project i s assessed in this section. It i s analyzed within the framework on the most common and identifiable production systems in the project areas. Financial farm-gate prices are used in the calculation o f costs and revenues. Also, farm size in each ecological zone o f the project governorates i s considered. Results o f the farm models are presented in Table 6 below.

Fiscal Impact Analysis. At the national level, the proposed project i s expected to positively impact the country’s foreign exchange with an increase in selected crops production and thus, a reduction o f their imports. In 2003, for instance, Yemen imported approximately 1.8 mi l l ion tons of wheat and maize for a total value o f 41 b i l l ion YR. At the governorates level, the project i s expected to have a positive fiscal impact. GOY’S contribution will be in the form of central government expenditures and i s not expected to result in a direct fiscal impact for the five governorates. On the other hand, there will be indirect fiscal advantages at the governorate level due to additional farm production and increased off-farm income. In addition, project support to demand-based small-scale projects will reduce the pressure on local municipalities, districts and governorates’ investment budgets.

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Table 6: Farm-level Income Analysis

Zovernorates \I-Mahweet gighlands

Large farm Small farm

Large f a r m Small f a rm

Large f a r m Small f a rm

Jplands

Wadis

Hajjah Highlands

Large fa rm Small farm

Large farm Small farm

Large farm Small farm

Uplands

Wadis

Hodeidah Highlands

Large farm Small farm

Large farm Small farm

Large farm Small farm

Uplands

Wadis

Lahej Highlands

Large farm Small farm

Large farm Small farm

Large farm Small farm

Uplands

Wadis

Sana’a Highlands

Large farm Small farm

Large farm Small farm

Large farm Small farm

Uplands

Wadis

Without project - annual income

(YR)

76,134 38,067

13,612 4,537

132,766 33,191

18,996 12,664

25,556 10,222

189,957 63,3 19

26,550 13,275

60,271 30,136

285,512 71,378

14,011 1 1,209

2 1,022 8,409

56,043 16,813

63,870 12,774

48,860 24,430

117,120 19,520

With project - annual income

(YR)

89,714 44,857

16,123 5,374

157,266 39,3 16

22,290 14,860

30,046 12,018

222,897 74,299

30,787 15,394

69,75 1 34,876

331,112 82,778

16,643 13,315

24,847 9,939

66,573 19,972

74,615 14,923

57,045 28,523

136,680 22,780

Incremental annual income (YR)

13,580 6,790

2,5 11 837

24,500 6,125

3,294 2,196

4,490 1,796

32,940 10,980

4,238 2,119

9,480 4,740

45,600 11,400

2,633 2,106

3,825 1,530

10,530 3,159

10,745 2,149

8,185 4,093

19,560 3,260

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Annex 10: Safeguard Policy Issues

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

On behalf of the Ministry o f Agriculture and Irrigation, the Food and Agriculture Organization (FAO) prepared an Environmental Assessment (EA) and Environmental Management Plan (EMP) for the Yemen Rainfed and Agriculture and Livestock Project (RALP). A summary o f the key findings from the E N E M P as well as the environmental screening criteria for proposed sub-projects follows and the full text i s available from the Task Team.

The EA found the project to be a major advance in Yemen for supporting traditional rainfed agricultural systems (as opposed to groundwater withdrawal systems) and improved animal husbandry in the five governorates. It confirmed that the social and environmental benefits o f the project (in terms o f increased agricultural and animal productivity as a result o f improved seed production, enhanced livestock protection and expanded water and soil conservation and management) will outweigh any potential adverse environmental or social impacts and, further, that any potential adverse impacts can be prevented or minimized by the preventive actions and mitigation measures recommended in the EMP.

The EMP addresses the range o f potential adverse environmental and social impacts, particularly those raised by the rehabilitation o f the veterinary laboratories, the construction of the animal quarantine facility at A1 Mokha and the small-scale infrastructure projects for markets, water harvesting and flood control, terrace rehabilitation, etc. to be financed by the project. It proposes a process and criteria for screening the small-scale infrastructure projects, as we l l as a monitoring and evaluation program for tracking project environmental impacts and an environmental training, capacity building and awareness program for the range o f public and private sector institutions and local populations involved in the project.

The EA confirmed the "category B" classification o f the project under Wor ld Bank safeguard policies, finding no significant, cumulative or irreversible environmental impacts from the project. Furthermore, it found that n o other safeguard policies apply, but it recommends capacity building in integrated pest management to address any pest management concerns, in management and conservation o f natural areas to address natural habitat considerations, etc.

ENVIRONMENTAL I M P A C T S

The RALP i s designed to provide economic, social and environmental benefits to the farmers and livestock owners, their families and the rural communities in the project areas through increased agricultural and animal productivity as a result o f improved seed production, enhanced livestock protection and expanded water and soil conservation and management. The EA confirmed that the overall environmental impact o f the project should be positive - the social and environmental benefits outweighing any potential adverse environmental or social impacts (see detailed matrix o f environmental impacts identified by the EA - Matr ix 1).

The potential adverse impacts the EA identified can be prevented or minimized by simple preventive actions and mitigation measures incorporated into the planning, design,

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construction, operation and maintenance phases o f the project (see proposed actions and measures in the EMP).

ENVIRONMENTAL MANAGEMENT PLAN

The EMP outlines the appropriate preventive actions and mitigation measures for addressing the potential adverse environmental and social impacts identified by the EA for the various activities included in the R4LP. There are three primary sections:

0 The recommended actions and measures, covering the design, construction, and operation phases are presented in two environmental management matrices - one for the construction o f the animal holding grounds at A1 Mokha, the other for the rehabilitatiodconstruction o f the veterinary laboratories and the small-scale infrastructure activities for markets, water harvesting and flood control, terrace rehabilitation, etc. to be financed by the project. It also recommends a monitoring and evaluation plan for tracking key environmental and social indicators during the life of the project.

0 The environmental screening criteria and Drocedures to be used in reviewing the small-scale infrastructure activities that have not been specifically identified in the project document in order to identify and address any potential adverse impacts.

0 A proposed environmental awareness, capacitv-building and training; plan to address the obvious needs for raising environmental awareness o n natural resources management in the rainfed project areas and building technical and managerial capacity in local institutions for environmental assessment and management.

Environmental Management Matrices

The environmental management matrix for the project intervention at the animal holding grounds at A1 Mokha i s presented in Matrix 2. It identifies a range o f preventive actions and mitigation measures to address environmental and social concerns during the design, construction and operation phases o f the quarantine facility.

The environmental management matrix for the constructionhehabilitation o f the veterinary laboratories and the other small-scale infrastructure activities i s presented in Matr ix 3. It also identifies a range of actions and measures to address environmental and social concerns during the design, construction and operation phases o f these project interventions.

Environmental Monitoring and Evaluation Plan

Although the overall environmental and social impacts o f the RALP are expected to be beneficial, the diversity o f the project’s interventions and the fragil ity o f the ecological conditions in the rainfed project areas strongly suggest the need for periodically monitoring and evaluating the impacts o f the project. To this end, the EMP includes the following two- tiered environmental monitoring and evaluation plan:

0 Monitoring implementation o f preventive actions and mitigation measures. The PSU for Components 1 and 2, and SFD for Component 3 will be responsible for monitoring proper implementation o f the various preventive actions (e.g. waste management

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planning) and mitigation measures (e.g. rangeland rehabilitation) required by the EMP or by the EPA. T h i s wil l entail periodically making site visits to ver i fy that the appropriate actions and/or measures have been implemented. The PSU and SFD also will conduct random evaluations o f project sites to determine the effectiveness of measures taken and the impacts o f project activities on the surrounding environment.

0 Monitoring key environmental and social indicators. During the l i fe o f the project, the PSU and/or SFD (in collaboration with the EPA) will carry out periodic monitoring and analysis o f water resources conservation and management (both quality and quantity), rangeland conservation and management, animal and human health. The key indicators will be identified with stakeholder participation during the first year o f the project, but they should enable the PSU, SFD and EPA at least to determine the impacts o f the project on (i) the general quality and availability o f water for human consumption and use for agriculture and livestock, (ii) the natural vegetative cover and biodiversity o f rangelands used for livestock grazing and (iii) the overall health and welfare o f the human and animal populations in the project areas.

The proposed environmental and social monitoring plan i s presented in Table 1

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u * e 0" -

9 I * W

3 e 0" - - * w I

-s

-s

-s

ENVIRONMENTAL SCREENING FOR ACTIVITIES

The objective of these environmental screening criteria and procedures i s to ensure review of the small-scale infrastructure activities to be financed by the RALP in order to identify and address (minimize or eliminate) potential adverse environmental impacts. Where potential impacts are minor, they should be addressed through the preventive actions or simple mitigation measures identified in the EMP; more significant impacts may require review under Yemeni EIA regulations (as explained below) and implementation o f specifically identified mitigation measures.

Activities Subject to Environmental Screening

The various components o f the R4LP include financing for a number o f different activities involving the constructionhehabilitation o f small-scale infrastructure works, some o f which are identified in the project document (i.e. the laboratories and the animal holding grounds), others which wil l be identified only during project implementation (i.e. the market infrastructure improvements and the water harvesting and soil conversation works). Because these infrastructure investments may have adverse environmental impacts, they will be subject to the environmental safeguard screening criteria and procedures described here. The general types of activities included in the RALP are identified in Table 2.

Table 2: Types of Small-Scale Infrastructure Activities Financed by the RALP

and re-equip GDAR Central Laboratory and Analytical Laboratory gional Veterinary Laboratories LivestocWanimal health

0 construct and equip one Regional Veterinary Laboratory

al quarantine holding LivestocWanimal health

small enclosures/pens and animal loading Commerce/rural

0

0

slaughter facilities with access to water

facilities relocation, space distribution and organization improvement o f booths, stalls, kiosks

0

small diversion channels from the wadis water reservoirs/cisterns/tanks to catch surface water

frastructure, such as protection

Sana’a

Hodeidah , Taiz

Abs

Sana’a

AI Mokha

AI Mukalla

To be determined during project implementation

To be determined during project implementation

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Use of Environmental Screening Criteria for Activities

Environmental screening will be incorporated into the regular project development cycle for al l activities financed under the U P , beginning with initial identification o f the sub-project (for those not already specifically identified in the project document, i.e. the laboratories and the animal holding grounds) by the Local Councils (for market infrastructure improvements) or the intercommunity rural producer committees (for water harvesting and soil conservation works), followed by review and approval by the technical staff in the SFD, ending with execution o f the sub-project under the supervision o f SFD technical staff. At the sub-project identification stage, SFD regional coordinators, working with Local Councils or rural producer committees, wil l review the environmental screening criteria (see Appendix V) in order to identify potential environmental impacts, suggest appropriate good practices, preventive actions or mitigation measures from the environmental management matrix, and trigger further environmental review, where necessary, under Yemeni EPA EIA regulations.

As to the construction o f the animal holding grounds at A1 Mokha Port, i t i s by far the largest infrastructure works under the RALP and may pose the most significant environmental risks, and it has been treated separately under this EA and has i ts own environmental management matrix.

PSU and SFD Review and Approval

SFD will ensure that all activities identified in Table 1 (with the exception o f the animal holding grounds) have been properly reviewed using the screening criteria before approving execution o f a sub-project under the RALP. Where the screening criteria suggest the need for appropriate good practices, preventive actions or mitigation measures in location, design, construction or management o f a sub-project, SFD wil l ensure that the appropriate practices, actions, measures or training are provided and that such practices or measures are followed in execution o f the sub- project. Where the screening criteria trigger further environmental review under Yemeni EPA EIA regulations, the PSU or SFD will ensure that the appropriate EIA forms are completed and delivered to the EPA for review and that execution o f the sub-project awaits approval by the appropriate authorities. The PSU or SFD wil l provide any additional information needed to facilitate the EPA review.

EPA Review and Approval

The vast majority o f RALP activities (i.e., market infrastructure improvements, water harvesting and soil conservation projects), because they are small in scale and minimal in impact, are not expected to require formal EPA review. The good practices, preventive actions and mitigation measures identified in this document for location, design, construction, and management should be used to address potential environmental impacts. A few activities (e.g., laboratory rehabilitatiodconstruction, animal quarantine facility construction) may require EPA review (to be determined by EPA). For these activities the PSU will ensure that the EPA’s EIA procedures are followed.

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Field Supervision and Monitoring

The PSU or SFD staff wil l monitor execution o f all RALP activities to ensure that environmental considerations 'are incorporated, i.e., that good practice, preventive actions or mitigation measures are employed and that EPA-required mitigation measures are taken. Once a sub-project has been completed, PSU or SFD staff will certify that appropriate practices, actions or measures have been utilized or that any required mitigation measures have been completed. The PSU or SFD staff wil l also monitor compliance with environmental requirements and include the results in regular project reports.

AWARENESS, CAPACITY-BUILDING AND TRAINING PLAN

In order to ensure proper implementation o f the various environmental activities (preventive actions/mitigation measures, monitoring and evaluation) recommended in this EAMP, the RALP will support a range o f awareness-raising, capacity-building and training activities for building both awareness o f and capacity for proper environmental management in the project areas. This will include strengthening technical capacity in the PSU and in MA1 and i t s Governorate and District Agricultural Offices, as well as essential capacity building in environmental management for the Local Councils and rural producer committees and for local farmers and livestock owners. The activities to be financed by the RALP will include the development o f public outreach and awareness campaigns for the local populations, the delivery o f training for local officials and the provision o f specialized consultant services as needed for any special studies or analyses identified during project implementation. Each o f these activities i s described below.

Public Awareness

Whi le the EA found a reasonable level o f public and official awareness o f environmental concerns in the project areas visited, it also identified a hndamental need for basic information on the best (and often simple) practices, methods and technologies for improving management of the limited natural resource base in the rainfed agricultural areas. The RALP will organize community outreach and public awareness campaigns on a range o f water and soil conservation, land degradation and environmental management issues. Among these are rational water use, conservation and protection o f water resources, rangeland management, integrated pest management and simple sanitary-hygienic practices. The EPA should have experience with such public awareness campaigns and should use i ts local offices to support project initiatives in this regard. National and local environmental NGOs may also play a role in public awareness-raising and should be considered in the development o f local programs.

Training

The RALP will provide appropriate environmental training to the range o f relevant stakeholders (i.e. PSU, SFD, Local Councils, rural producer groups and rural producer committees, and local populations) under the project, both to raise general environmental awareness and to strengthen overall environmental management capacity in the project areas. Furthermore, this training will address the specific technical sk i l ls necessary to perform the environmental management and monitoring functions required. The training program will raise the environmental management

88

capacity within the PSU and SFD by training management and technical staff. I t will also reinforce existing capacity within MAI ’s Agricultural Offices and EPA’s local offices by providing specialized training to enhance environmental assessment, management and monitoring skills and practices.

Consultant Services

The R4LP will provide additional, specialized technical support for environmental assessment and management through the services o f a l imited number o f national and international environmental consultants as needed. These consultants wil l be used to enhance the environmental capabilities o f the PSU and SFD in specific technical areas, such as proper management o f veterinary laboratory wastes, (to be identified).

The set of activities included in this awareness, capacity-building and training plan i s presented in summary fo rm in Table 3.

Table 3: Awareness, Capacity-building and Training Plan

Component

Public awareness campaigns

Training

Consultant services (to be specified)

Rational water use

Conservatiodprotection o f water resources

Rangeland management

Integrated pest management

Sanitary-hygienic practices Environmental awareness, assessment, management

Environmental assessment, mitigation, monitoring

Environmentallnatural resources management

Specialized environmental technical capabilities

LCs, local communities

LCs, local communities

Livestock owners, local communities

farmers, local communities

Local communities PSU or SFD management, technical staff, consultants

MA1 Agricultural Offices, EPA local staff

LCs, SFD, local leaders and communities

PSU, SFD, EPA .

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Annex 11: Summary of Social Assessment

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

Social Issues

Background

Social issues were assessed during project preparation through a SociaYGender Assessment conducted in selected districts o f the five project governorates (A1 Kobaitta District, Lahej Governorate; A1 Lohaiyah District, Hodeidah Governorate; Aslam District, Hajjah Governorate; Bilad A1 Roos District, Sana’a Governorate; Khamis Bani Sa’ad District, Al-Mahweet Governorate) and through the Governorate Preparation Field Reports. The objective o f the social assessment was to evaluate the opportunities, constraints and likely social impacts of the proposed project. I t also aimed to solicit stakeholder participation and evaluate stakeholder views in order to improve project design and to respond to social development concerns by tailoring the benefits of the project to the poor and vulnerable, particularly rural Yemeni women. Critical social issues were also identified in the Bank’s timely and highly relevant Yemen Country Analysis (CSA) in 2005. This section i s based upon the findings o f these three studies which used a variety o f methods including key informant interviews, household interviews, focus group discussions, stakeholder analyses, participatory observation and secondary data collection.

Consultations

During project preparation, the social assessment conducted consultations with key stakeholders including female agricultural extension workers, local council representatives, members of various women’s organizations (e.g., the Abs Women’s Association) and female and male farmers.

Key Social Issues Identified

The following key social issues, o f relevance to the project, were identified:

0 Poverty:

Poverty levels in Yemen are high and increasing. The levels o f poverty in rainfed areas are even higher, particularly among marginalized groups.

Increasing poverty i s weakening traditional systems o f social solidarity making particular groups vulnerable. Socially marginalized groups in the project area include: widowed women, disabled individuals and marginalized groups such as the Akhdam.

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0 Agriculture: . Approximately 50 percent o f Yemen’s population i s employed in the agricultural sector and for rural inhabitants agriculture remains the primary means of livelihood. . Agriculture has grown faster than the rest o f the economy in recent years at a rate of 5.5 percent growth between 1996 and 2000. This i s in part due to an expansion of agricultural production and employment thanks to mechanization and a progressive shift from subsistence farming to cash cropping and to increased groundwater extraction.

. There i s a process o f feminization o f subsistence agriculture taking place as a result of men shifting to cash-cropping, coupled with continuing male out-migration. This puts rural women at a significant disadvantage, with heavy agricultural tasks poorly attended, such as terrace rehabilitation (Yemen CSA, 2005).

0 Gender:

Women play a significant role in rural livelihoods and according to the Preparation Field Reports (2004), female farmers contribute to over 85 percent o f plant production and 95 percent o f animal management. . Women’s social and economic status in Yemen i s low. Women have limited decision-making powers and generally restricted mobility. Nevertheless regional/governorate specific variations exist. . The opportunities for joint (male and female) decision-making and mobilization o f rural Yemeni women at the village, uzla, district or governorate levels are few. The isolated nature o f many communities in addition to social norms and values means that i t i s generally considered socially unacceptable for women to regroup with men. Exceptions do exist however. . Women’s decision-making and mobilization i s generally among women and i s usually related to tasks at the household level between groupings o f neighboring and/or related households. For example women work together to fetch water.

Men also tend to mobilize and make decisions together with other men but their geographical scope of influence i s larger than that o f women as i s their control over decisions and resources. . Access to credit. Female farmers have limited access to credit.

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Access to Land: . A mixture o f traditional and modern rights and responsibilities characterize the management and use o f land and water in Yemen. Land ownership i s based on the principals o f Islamic law although regional differences in land ownership exist. . In general, the more effective the tribal organization, the more l ike ly i t i s for land to be distributed equitably. For example, in the Highlands, land i s comparatively equitably distributed and although holding sizes differ, the majori ty o f the population owns land and there does not appear to be significant loss o f ownership. In the southern governorates in contrast, the holdings o f larger agricultural land owners are expanding at the expense o f small farmers. . Overall women’s access to land ownership is l imited and traditional inheritance practices as wel l as customary law favors males (Yemen CSA, 2005).

0 Access to Water:

Water is scarce and inequitably distributed across regions and across social groups and water rights are based on a combination o f Islamic principles and customary law and practice.

Water is considered an ownerless resource. I ts ownership i s l inked with land rights (Islamic practice) and can only be appropriated when it is ‘collected’ for a given purpose. I t must be shared however, with anyone in need o f a drink, including animals. Islamic practice also recognizes the fimdamental linkage between land and water rights. . The cost o f water i s progressively increasing. Some villages have to resort to trucking water for both domestic use and irrigation. Bo th women and children pay the price for the increasing scarcity and high cost o f water, especially for domestic consumption. Access to groundwater i s highly inequitable and farmers who can afford to install tubewells are able to draw water, while small fanners cannot exploit the resource (Yemen CSA, 2005).

Out-migration: . Few rural households are now able to survive o n agriculture alone.

As rural poverty deepens, a common feature o f rural coping strategies i s to send at least one family member out to work, often young boys. A s opportunities for international migration lessen, households are resorting to internal rural-urban migration. This contributes to the feminization o f agriculture as women who are left behind continue to work in subsistence-based agriculture o n terraces that are deteriorating due to the lack o f male labor (Yemen CSA, 2005).

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a Community associations: . The social assessment found that few community-based associations were found in the five selected districts although they do exist in the project site more generally. Those that did exist were largely informal. Data gathered as part o f the Preparation Field Reports and during project preparation shows that there are a number of associations in the project area including some women’s associations which could potentially partner with the project. One such organization i s the Abs Women’s Association in Hodeidah Governorate.

a The Uzla i s an important and significant organizing principal for a group o f villages but no decision-making power was found to be vested at this level.

Implications for Project Design

These social and gender-specific issues have implications for project design and outcomes and will be addressed through a set o f gender sensitive implementation arrangements to ensure that female farmers, and other vulnerable groups such as poor farmers with limited access to water and land, have access to project benefits.

Recommendations include: Work through SFD which has considerable expertise in community mobilization and capacity building. SFD will manage the finds for farmer-demanded investments.

Ensure that a share o f sub-project funding will go to female farmers and livestock producers for the intensification and marketing o f on- and off-farm activities.

Promote gender-sensitivity in project implementation by paying attention to the hiring of male and female project staff, including members o f the social mobilization team who will develop strategies appropriate for both female and male farmers.

Recruit the services o f a gender specialist as a member o f the technical advisory team responsible for developing gender sensitive and technically and economically feasible options for the various farming systems.

Identify and partner with existing civ i l society organizations especially women’s associations (both formal and informal), for example, the Abs Women’s Association, Hodeidah Governorate, and provide them with capacity-building support.

Avoid creating parallel organizational structures where possible and prioritize the capacity building o f existing civil society organizations to partner with the project when possible.

Target women and people from marginalized social groups.

Use participatory methods and strategies when possible.

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Annex 12: Project Preparation and Supervision

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

Planned Actual PCN review 12/l4/2OO4 1211 512004 Init ial PID to PIC 1213 112004 03/03/2005 Init ial ISDS to PIC 12/31/2004 03/03/2005 Appraisal 11/12/2005 11/13/2005 Negotiations 0 1 I1 612006 0 1/16/2006 BoardlRVF' approval 07/06/2006 Planned date o f effectiveness 01/01/2007 Planned date o f mid- tern review 0913 012009 Planned closing date 0613012012

Key institutions responsible for preparation o f the project:

Ministry o f Agriculture and Irrigation (MAI) Social Fund for Development (SFD)

Bank staff and consultants who worked on the project include:

Name Title Unit Marie-HClkne Collion Lead Agric. Services Specialist, M N S R E

Naj i Abu-Hatim Pierre Rondot Jean-Philippe Tre John Bryant Collier Yaa Oppong Abdul Salam Al-Zubayri

Hussam Abu-Dagga Christine Allan Josephine Salang

Mikael Mengesha Karim Kami l Fahim Maiada Kassem Ghada Youness Hyacinth Brown Salah Rouchiche

Philippe Blanc Steven Baas David Ward Mohammed Alwadan

Task Team Leader Senior Rural Devt. Specialist Senior Sector Economist Agricultural Economist Operations Officer Social Devt. Specialist Watershed Management Specialist Operation Officer Operations Analyst Senior Program Assistant

Senior Procurement Specialist Financial Management Specialist Financial Management Specialist Senior Counsel Senior Finance Officer Watershed Management and Forestry Specialist Livestock Specialist Community Devt. Specialist Livestock Specialist Agricultural Economist

M N S R E M N S R E M N S R E M N S R E M N S R E M N S R E

M N S R E M N S R E M N S R E

MNACS MNACS MNACS LEGMS LOAG2

Consultant, FA0

Consultant, FA0 Consultant, FA0 Consultant, FA0

Consultant

94

Name Title Unit Amakeletch Teferi-Bel Agronomisfl lant Protection & Consultant

Jean-Francois Barr& Rural Institution Specialist Consultant Intesar Awadh Bakhwar Social Devt. Specialist Consultant Abdul Maged Al-Hemiary Soil & Water Mgt. Specialist Consultant Ahmed Abdel-Aziz Ahmed Seed Production Expert Consultant Ismail M. Sharief Rural Institutions Specialist Consultant Lars Soeftestad Social Anthropologist Consultant Sanaa Salloum Gender Expert Consultant

Quality Control Specialist

Bank fknds expended to date on project preparation:

BB : US$409,919.68 BBFAO 133,100.00

1. Bank resources:

2. Trust funds: 105,199.57 3. Total: US$648,219.25

Estimated Approval and Supervision costs: 1. Remaining costs to approval: 0 2. Estimated annual supervision cost: $85,000

95

Annex 13: Documents in the Project File

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

e

e

e

Synthesis Governorate Preparation Report, February 2005. Hajjah Governorate Preparation Report, October 2004. Lahej Governorate Preparation Report, December 2004. Hodeidah Governorate Preparation Report, December 2004. Sana’a Governorate Preparation Report, December 2004. Rural/Local Development Strategy Report, May 2003. Farmer-based System o f Seed Improvement and Management in Rainfed Areas, February 2005. Women Farmers’ Activities and Gender Sensitive Implementation Arrangements, February 2005. Support to Farmer Groups to Implement Farmer-Demanded Sub-Projects, February 2005. Public-Private Partnership for Livestock Husbandry and Animal Health Improvement, February 2005. Soil Conservation and Water Harvesting, July 2005.

96

Annex 14: Statement o f Loans and Credits

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

Difference between expected and actual

disbursements Original Amount in US$ Millions

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd

PO76185 2005

PO82976 2004

PO82498 2004

PO74413 2004

PO65111 2003

PO57602 2003

PO64981 2003

PO43254 2002

PO76183 2002

PO70092 2002

PO70391 2001

PO62714 2001

PO43255 2001

PO05906 2001

PO68830 2000

PO50706 2000

P050483, 2000

PO50530 1999

PO05902 1998

RY-Basic Education Development Program

RY-THIRD PUBLIC WORKS

RY-SOCIAL FUND FOR DEVELOPMENT 111

RY-Groundwater & Soil Conserv Proj

RY-PORT CITIES DEVELOPMENT PROGRAM RY .URBAN WTR SUPPLY & SANITATION APL

RY-SANA'A BASIN WATER MGMNT PROJ RY-Health Reform Support Proj (HRSP)

RY Higher Education

RY TAlZ MUNICIPAL DEV & FLOOD PROTEC

RY-RURAL ACCESS IMPROVEMENT PROGRAM RY-IRRIGATION IMPROVEMENT

RY Basic Education Expansion Project

RY-RURAL WATER SUPPLY & SANITATION

RY-Second Social Fund for Dev RY-CIVIL SERVICE MODERN

RY CHILD DEVELOPMENT

RY-SANA'A EMERGENCY POWER

RY-Southern GOV AGRI PRIVATIZA

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00 0.00 0.00

65.00

45.00

60.00

40.00

23.40

130.00

24.00

27.53

5.00

45.20

45.00

21.30

56.00

20.00

75.00

30.00

28.90

54.00

24.70

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00 0.00

0.00

0.00

0.00 0.00 0.00

0.00

0.00 0.00

0.00

0.00 0.00 0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00

0.00 0.00 0.00

0.00 4.01

67.28

41.79

61.60

39.12

25.30

151.14

25.32

3 1.45

5.72

34.95

25.58

19.65

30.10

18.82

0.95

23.82

13.74

10.36

8.02

0.00 -1.39

14.36

4.44

9.03

48.77

3.84

2.39

1.26

22.81

17.56

14.02

2.52

1 1.49

-0.43

19.26

10.26

7.58

11.98

0.00 0.00 0.00

0.00 0.63

0.00

0.00

0.00 0.00

10.64

1.70

0.00 0.00 -0.29

0.00 0.00

0.00

5.14 0.00

Total: 0.00 820.03 0.00 0.00 4.01 634.71 199.75 17.82

YEMEN, REPUBLIC OF STATEMENT OF IFC's

Held and Disbursed Portfolio In Millions o f US Dollars

FY Approval Company

Committed Disbursed

IFC IFC

Loan Equity Quasi Partic. Loan Equity Quasi Partic.

1999 ACSM 7.83 0.00 0.00 0.00 7.83 0.00 0.00 0.00

2002 Ahlia Water 1.51 0.00 0.00 0.00 1.51 0.00 0.00 0.00

1998 Radfan 0.95 0.00 0.00 0.00 0.95 0.00 0.00 0.00

Total portfolio: 10.29 0.00 0.00 0.00 10.29 0.00 0.00 0.00

97

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

~ ~~ ~

Total pending commitment: 0.00 0.00 0.00 0.00

98

Annex 15: Country at a Glance

YEMEN, REPUBLIC OF: Rainfed Agriculture and Livestock

POVERTY and SOCIAL

2003 Population, m id-year (millio nsl GNIpercapita (Atlasmethod, US$) GNI (Atlas method, US$ billions)

Average annual growth, 1997-03

Population (%j Labor force (%j

Yemen

19.2 5 0 9.8

M o s t recent estimate ( latest year available, 1997-03)

Poverty (%of population belo wnationalpoveltyline) Urban population (%of total population) Life expectancyat birth (pars) Infant mortality (per $000 live births) Child malnutrition (OAofchildmn under5) Access to an improved water source (%ofpopulation) llliteracy(%ofpopulation age 59 Gross primaryenrollment (%of school-age population)

Male Female

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

2.9 3.0

42 25 57 83 46 69 50 81 97 64

GDP ( U S billions) Gross domestic investmentJGDP Exports of goods and selviceslGDP Gross domestic savingslGDP Gross national savings/GDP

Current account balance/GD P Interest payments/GDP Total debtlGDP Total debt service/exports Present value of debUGDP Present value of debt/exports

1983 1993

.. 4.9

.. 20.2

.. 27.4

.. -ff.2

.. -5.2

.. -25.5

.. 0.4

.. ao.9

.. 5.2

1983-93 1993-03 2002 (average annual grovdh) GDP .. 5.5 3.9 GDP percapita .. 2.5 0.8

M . East & N o r t h Low-

Africa income

3 P

689 2 2 0

19 2.9

58 69 44

88 31 96 a0 92

2002

9.9 20.5 38.7 19.1

25.8

5.4 0.5

54.1 3.0

35.9 68.3

2.30 450

1038

19 2.3

30 58 82 44 75 39 92 99 85

2003

110 210 37.7 B.8

23.0

18 0.5

49.0 4.6

32.5 65.5

2003 2003-07

3.1 3.7 0.1 0.6

STRUCTURE o f the ECONOMY

(%of GDP) Agriculture Industry

Services

Private consumption General government consumption Imports of goods and services

Manufacturing

(average annualgroW Agriculture Industry

Services

Privateconsumption General government conSUmPtiOn Gross domestic investment Imports of goods and services

Manufacturing

1983 1993

.. 22.6

.. 23.1

.. P.7

.. 54.3

.. 98.2

.. 19.1

.. 64.9

1983-93 1993-03

.. 5.3

.. 7.8 8.1

.. 4.3

.. 2.6 5.1

_. 5.0 .. 0.4

2002

114 4 15 5.4

47.1

64.1 16.7

40.2

2002

-0.1 3.5 7.0 6.3

2.2 0.9

17 7.0

2003

a.8 416 4.9

47.6

63.6 ff.6

, 39.9

2003

3.8 0 A 4.5 4.7

2.2 8 A 5.7 4.0

Development diamond'

Life expectancy

GN I Gross per primary capita nrollment

1 Access to improved water source

-----Yemen, Rep. Lowincome group

Economic ratios'

Trade

T

Indebtedness

= =- Yemen, Rep. Lowincome group

Growth of investment and GDP (K)

6o T

I -GDI -GDP -

Growth o f exports and imports (K)

6o T 40

20

0

-20

-40

I --...-Exports - I ~ o r t s I

99

Yemen. Rev. PRICES a n d GOVERNM ENT FINANCE

D o m e s t l c p r i ces (%change) Consumer prices Implicit GDP deflator

1983

Governmen t f inance (%of GDP, includes cunent granfs) Current revenue Current budget balance Overall surplus/deficit

T R A D E

(US$ millions) Total exports (fob)

Crude oil (government share) Crude oil (companyshare) Manufactures

Total imports (cif) Food Fuel and energy Capital goods

Export price index (895=100) Import price index(895=WO) Terms of trade (895=7JO)

B A L A N C E o f P A Y M E N T S

(US$ millions) Exports of goods and services Imports o f goods and services Resource balance

Net income Net current transfers

1983

1983

Current account balance

Financing items (net) Changes in net reserves

Memo: Reserves including gold (US$ millions) Conversion rate (DEC, /ocaVUs$) 4.6

EXTERNAL D E B T and RESOURCE FLOWS

(US$ millions) Total debt outstanding and disbursed

1983

2,796 IBRD 0 IDA 253

Total debt service IBRD IDA

Composition o f net resource flows Official grants Official creditors Private credtors Foreign direct investment Portfolio equity

World Bank program Commitments Disbursements Principal repayments

85 0 2

231 454

14 8 0

0 55 0

1993

35.8 19.2

15.2 -9.5

-2.8

1993

1187 277 556 20

2,08 548 148

502

DO 89 IC?

1993

1344 3,182

-1838

-408 998

-1248

1391 -144

148 48.6

1993

5,923 0

726

18 0 D

D9 49 D

897 0

27 46 5

2002

6.8 4.9

33.9 6.0

-0.7

2002

3,684 1600 1,546

0 8 2,932

997 4 8 747

t34 83 182

2002

3,861 3,992

- Q I

-7 18 1384

535

217 -752

4,056 175.7

2002

5,352 0

1350

158 0

29

3 60

0 39 -6

183 83 8

2003

11.9 72.5

33.9 5.0

-2.3

2003

3,934 1828 1631 0 9

2,932 1153 480 852

154 91

l70

2003

4,222 4,468 -246

-828 1274

199

383 -583

4,445 183.4

2003

5,394 0

1477

252 0

34

55 60

0 - 0 1

2

47 89 23

Inf lat ion (X) I

*----GDPdefiator -CPi I I

Export and impor t leve ls (US$ mill.)

5,000 T

97 98 99 00 01 02 03

Exports Imports

Current account balance t o GDP (Oh)

15 T

Compos i t i on o f 2003 debt (US$ mill.)

G 438

A - IBRD €-Bilateral B - IDA D - OIIw mJliialeral F - Rivale C-IMF G - Short-term

100

MAP SECTION

A L -A L -M A H R A HM A H R A HH A D R A M O U TH A D R A M O U T

S H A B WAS H A B WA

A B YA NA B YA N

TA I ZTA I Z

DHAMARDHAMAR

AL-AL-DHALE'EDHALE'E

M A R I BM A R I B

A L - J O W FA L - J O W F

SANA'ASANA'A

AMRANAMRAN

HODEIDAHHODEIDAH

S A A D A HS A A D A H

HAJJAHHAJJAH

A L - B E I D AA L - B E I D A

L A H E JL A H E J

I B BI B B(3227 m)(3227 m)

(3199 m)(3199 m)

MM aa hh rr aa tt MM tt nn ss ..

RRaammllaatt aass SSaabb''aattaayynn DDeesseerr tt

HHaa dd rr aa mm aa ww tt

WWaaddii JJaawwff

WWaaddii ZZaabbiidd

WWaaddii BBaannaa

WWaaddii MM

aakk

hhuunn

WWaaddii HHaaddrraammoouutt

WWaaddii AAll JJiizz HuthHuth--¸̧

RidaRida

At TurbahAt Turbah

HaribHaribNuqubNuqub

NisabNisab

Al HuwaymiAl Huwaymi

Al GhurafAl Ghuraf

HawraHawra

ThamudThamud

ZamakhZamakh

ShabwahShabwah

SanawSanaw

HabarutHabarut

Mar’aytMar’ayt

IbbIbb

LahejLahej

AtaqAtaq

MaribMarib

Al HazmAl Hazm

AmranAmran

TaizTaiz

DhamarDhamar

HajjahHajjah

Al BeidaAl Beida

Al Dhale'eAl Dhale'e

SaadahSaadah

Al MahwitAl Mahwit SANAASANAAAL-AL-MAHWITMAHWIT

A L -M A H R ATH A D R A M O U T

S H A B WA

A B YA N

ADEN

TA I Z

DHAMAR

AL-DHALE'E

M A R I B

A L - J O W F

SANA'A

AMRAN

HODEIDAH

S A A D A H

HAJJAH

A L - B E I D A

L A H E J

AL-MAHWIT

I B B

Huth-¸Maydi

Al Luhayyah

Rida

At TurbahMocha

AtTurbah

HaribNuqub

Shaqra

Nisab

Al Huwaymi

Al Ghuraf

Hawra

Qalansiyah Qadub

Nishtun

Thamud

Zamakh

Shabwah

Damqawt

Ahwar

Sanaw

Bir Ali

Salif

Shihr

Qishn

Sayhut

Habarut

Mar’ayt

Ibb

Aden

Lahej

Ataq

Marib

Al Hazm

Amran

Taiz

Dhamar

Hajjah

Al Beida

Al Dhale'e

Al Hodeidah

Saadah

Al Mahwit

Zinjibar

Al Mukalla

Al Ghaydah

SANAA

Socotra

The BrothersDarsaSamha'Abd al Kuri

ERITREA

DJIBOUTI

S A U D I A R A B I A

O M A N

Wadi Jawf

Wadi Zabid

Wadi Bana

Wadi M

ak

hun

Wadi Hadramout

Wadi Al Jiz

Gul f of Aden

R e d S e a

To Abha

To Mirbat

To Thamarit

M a h r a t M t n s .

Ramlat as Sab'atayn Deser t

Ha d r a m o u t

(3227 m)

(3199 m)

42E 44E

42E 44E

20N20N

18N

16N

14N

12N

16N

14N

12N

46E 48E 50E 52E 54E

46E 48E 50E 52E 54E

REP. OFYEMEN

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.

0 50 100

0 50 100 Miles

150 Kilometers IBRD 34325

NO

VEM

BER 2005

REPUBLIC OF YEMENRAINFED AGRICULTURE AND

LIVESTOCK PROJECTPROJECT GOVERNORATE

SELECTED CITIES AND TOWNS

GOVERNORATE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

GOVERNORATE BOUNDARIES

INTERNATIONAL BOUNDARIES