Document of

The World Bank

Report No. 14535-KE

STAFF APPRAISAL REPORT

REPUBLIC OF KENYA

NATIONAL AGRICULTURAL RESEARCH PROJECT - PHASE II

December 13, 1996

Agriculture OperationsEastern and Southern AfricaAfrica Region

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CURRENCY EQUIVALENTS

Currency Unit = Kenya Shillings (KSh)US$1 = KSh 4S

WEIGHTS AND MEASURES

Metric System

GOVERNMENT FISCAL YEAR

July 1 - June 30

ACRONYMS

ARF Agricultural Research FundCAS Country Assistance StrategyESAF Enhanced Structural Adjustment FacilityEU European UnionFSA Farming Systems ApproachGOK Government of KenyaGON Government of the NetherlandsIDA International Development AssociationKARI Kenya Agricultural Research InstituteMALDM Ministry of Agriculture, Livestock Development and MarketingMR=TT Ministry of Research, Technical Training and TechnologyNARP II National Agricultural Research Project-Phase IINEAP National Environment Action PlanODA Overseas Development Administration (UK)PFP Policy Framework PaperPPF Project Preparation FacilitySASA Sector Assistance Strategy for AgricultureSIDA Swedish International Development AuthorityUSAID United States Agency for International Development

Vice President: Callisto E. MadavoDirector: James W. AdamsDivision Chief: Sushma GangulyStaff: Edgardo Quisumbing

KENYA

NATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE H

CREDIT AND PROJECT SUMMARY

Borrower: Republic of Kenya

Implementing Agency: Kenya Agricultural Research Institute (KARI)

Beneficiary: KARI, researchers

Poverty: Not Applicable

Amount: SDR 27.4 million (US$39.7 million equivalent)

Terms: Standard IDA Terms with 40 years maturity

Commitment Fee: Standard (a variable rate between 0-0.5 % of theundisbursed credit balance, set annually by theExecutive Directors of IDA)

Onlending Terms: Grant to KARI and researchers

Financing Plan: See para. 4.27

Net Present Value: US$70.3 million (For Food Grains Research Alone)

Staff Appraisal Report: Report No. 14535-KE

Map No. IBRD 26951

Project ID No. KE-PA 1354

NATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE II

(NARP H)

STAFF APPRAISAL

Contents

Credit and Project Summary ............................................................... i

1. INTRODUCTION ................................................................. 1

2. BACKGROUND ................................................................. 3A. MACROECONOMIC ENVIRONMENT .................................. ................................ 3B. THE AGRICULTURAL SECTOR .......................................................................... 4

Role in the Economy ................................................................ 4Performance ................................................................ 4Agricultural Growth: Challenges and Prospects ..................................... 4

C. GOVERNMENT POLICY OBJECTIVES AND SECTOR DEVELOPMENT STRATEGY .... 6D. PROJECT CONTEXT7 ............................................................................... 7

Bank's Country Assistance Strategy ......................................................... 7Rationale for Bank Assistance ............................................................... 8Project Preparation ............................................................... 8Lessons Learned ............................................................... 8

3. AGRICULTURAL RESEARCH ................................................................ 10National Strategy for Agricultural Research ................. ......................... 10Public Sector Role .............................................................. 10

This report is based on the findings of an appraisal mission in February-March 1995. The mission was ledby Jacob Kamnpen, Principal Agriculturist, Regional Mission in East Africa (Task Manager), and included:Messrs./Mmes. E. Quisumbing (Research Management) who assumed task management of the project afterappraisal, Gary Luhman and Jean Claude Fayd'Herbe (Financial Management), Mbuba Mbungu (Procurement);Doug Forno (Research Fund), Jock Anderson (Socio-economics), Sam Chema (Livestock), Gabrielle Persley and JohnDoyle (Biotechnology), Walter Lusigi (Natural Resource Management); Jitendra Srivastava (Crop Research andSeeds), Christian Hoste (Human Resource Development), Johnson Ndegwa (Extension), and V. Venkatesan (Seeds).The Mission was assisted by and worked cooperatively with the KARI Project Preparation Team comprising C.Ndiritu, A. Mailu, L. Ole Odupoy, D. Wachira, R. Kiome and J. Matata. Contributions were also made by GajanandPathmanathan (Section Chief, Agriculture Section, Regional Mission), John Nyaga (Finance and Audits) and DonnaCriddle (Operations Analyst). . Mimes. Cora Favis and Christine Cornelius provided assistance in preparing the costtables and Ms. Brenda Mudd in document processing. The peer reviewers are Moctar Toure (AFTSR), Marie-HeleneCollion, and Jan Weijenberg (SAIBG). Mr. Doug Forno (AGRTN) is the Lead Adviser. Sushma Ganguly andJames Adams are the Division Chief and Department Director, respectively.

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Private Sector Role ............................................. 11Institutional Framework ............................................. 12NARP I Results and Impact ............................................. 13RemainingAgenda ............................................. 14

4. THE PROJECT ............................................... 16A. PROJECT OBJECTIVES ............................................... 16B. PROJECT SUMMARY ............................................... 16C. DETAILED FEATURES .............................................. 17

Institution Building ............................................. 17Priority Applied Research Programs ............................................. 20Seeds Program ............................................. 23

D. PROJECT COST AND FINANCING .................... .......................... 24E. PROCUREMENT ARRANGEMENTS .............................................. 26F. DISBURSEMENT .............................................. 29

5. PROJECT IMPLEMENTATION ............................................ 31A. INSTITU T.ION BUILDING .............................................. 3 1B. RESEARCHPROGRAMS .............................................. 32C. SEEDS PROGRAM .............................................. 33D. KEY IMPLEMENTATION PROGRESS INDICATORS ............................................. 33E. ACCOUNTING, AUDITING, AND PROGRESS REPORTING ........................ ........... 33F. SUPERVISION PLAN .............................................. 34

6. BENEFITS AND JUSTIFICATION ..................... .......................... 35A. BENEFITS .............................................. 35

Facilitating Overall Growth ............................................ 35Making Strategic Choices ............................................. 36Economic Analysis ............................................ 37

B. EMPLOYMENT AND POVERTY IMPACT ....................... ....................... 38C. ENVIRONMENTAL IMPACT .............................................. 39D. SOCIAL AND GENDER ISSUES .............................................. 39E. RISKS .............................................. 39F. SUSTAINABILITY .............................................. 40

7. ASSURANCES AND RECOMMENDATIONS ............................................... 42A. ASSURANCES AND AGREEMENTS .............................................. 42B. RECOMMENDATION .............................................. 43

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LIST OF CHARTS/ANNEXES

Chart I. KARI Headquarters Organization StructureChart II. Center Linkage Organization

Annex 1. Letter of Sectoral Policy for Agricultural ResearchAnnex 2. Project Cost TablesAnnex 3. Estimated Schedule ofDisbursementAnnex 4. Project Implementation Plan (PIP)Annex 5. Procurement Packages and Implementation ScheduleAnnex 6. Project Performance and Impact IndicatorsAnnex 7. National Agricultural Research Strategy and PlanAnnex 8. The Regional Research Strategy and PlanAnnex 9. Consultant Services RequirementsAnnex 10. Agricultural Research FundAnnex 11. Supervision PlanAnnex 12. Kenya Agricultural Research InstituteAnnex 13. Private Sector RoleAnnex 14. EconomicAnalysisAnnex 15. Selected Documents in the Project FileAnnex 16. Map

NATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE II (NARP II)

STAFF APPRAISAL REPORT

1. INTRODUCTION

1.1 The proposed project is the second in support of Kenya's National AgriculturalResearch Program. It is a follow-up to NARP I (Credit 1 849-KE) for which theInternational Development Association (IDA), the European Union, the Government ofthe Netherlands, Japan, Sweden, the United States, the United Kingdom, and several otherdonors provided assistance to the Government of Kenya (GOK) for programimplementation. The primary objectives of NARP I were to: (i) focus on priority researchwith a likelihood of high and early returns to investments; (ii) develop technologies thatcontribute to increased productivity, particularly of smallholdings; (iii) enhance producerparticipation; (iv) encourage cooperation between the new Kenya Agricultural ResearchInstitute (KARI) and other agricultural research institutions; and (v) strengthen linkagesbetween research and extension. The strategy to achieve these goals was to assist GOK inreorganizing agricultural research under a single institution, KARL, and to support theInstitute in the implementation of the research program.

1.2 NARP I has laid the institutional foundation for agricultural research and the firstphase objectives have largely been achieved. KARI has been established as a semi-autonomous institution with its own Board and has responsibility for publicly-fundedagricultural research. Donor coordination has greatly improved. KARI's accountingsystems were reorganized and computerized. An improved Scheme of Service has been-introduced for scientific staff. The training program has been effective. A network of,Research Centers (RCs) has been set up with responsibility for adaptive research andresearch/extension linkages. An Agricultural Research Fund (ARF), financed throughGovernment, donor and private industry/NGO contributions, was established to encouragecollaborative research. KARI now has considerable "on-the-shelf' technology in terms ofimproved crop varieties and better cultivation practices; important achievements were alsomade in the area of integrated pest management, dairy production and animal health.

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1.3 However, the adoption of improved technologies developed by research was slow.Several "on-the-shelf' technologies were not adequately tested and evaluated by farmersfor their relevance and adaptability. In other cases, the delivery system (e.g., for seeds andvegetatively propagated planting materials) is not adequate. Thus, notwithstanding theareas of progress under NARP I, there is a critical need for continued support to maintainthe momentum, address newly emerging priorities and solidify agricultural researchincluding increased support from the private sector.

2. BACKGROUND

A. MACROECONOMIC ENVIRONMENT

2.1 Kenya is a low-income country with a per capita income of $270 in 1994. Theeconomy is heavily dependent on agriculture, that employs 70 percent of the labor forceand contributes about one quarter of Gross Domestic Product (GDP). Coffee, tea andhorticultural crops account for over 50 percent of merchandise exports. Between 1991and 1993, Kenya's macroeconomic performance was poor. In April 1992, theGovernment agreed with the International Monetary Fund (IMF), on a program of actionsnecessary to re-establish a sound macroeconomic framework which included deficitreduction and liberalization of the foreign exchange regime. Until rmid-1993, theimplementation of the actions required was unsatisfactory. Although fiscal targets weremet, monetary targets were exceeded and the liberalization of the foreign exchange regimeproved to be unsustainable.

2.2 However, since mid-1993 there has been improvement in macroeconomicmanagement. Monetary policy was tightened and the economy began to stabilize.Inflation slowed, the nominal Treasury bill rate declined and the market-determinedexchange rate appreciated paving the way for the unification of the official and marketrates. These improvements allowed the Government to negotiate a three-year PolicyFramework Paper (PFP) with the Bank and the IMF, supported by a one-year EnhancedStructural Adjustment Facility (ESAF). The Government's macroeconomic performanceunder the reform program has been generally positive, although the deficit target wasexceeded in fiscal 1994 due to arrears in debt service payments. On the structural side,virtually all exchange controls were abolished, the exchange rate was floated, pricecontrols lifted and the maize market liberalized. On the other hand, civil service reformgot off to a slow start and parastatal reform lagged. The economy's initial response to theimproved macroeconomic management measures has been positive, with the exchange rateappreciating, reserve levels increasing, inflation declining, and real GDP growing ataround 3 percent in 1994. The Government successfully completed the ESAFarrangement and has agreed on a new PFP (1995-97) with the Bank and the Fund. ThisPFP seeks to sustain fiscal adjustment and accelerate structural reforms. Donors, in aConsultative Group meeting in December 1994, indicated their support and pledged newcommitments of US$800 million equivalent for 1995.

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B. THE AGRICULTURAL SECTOR

Role in the Economy

2.3 Agriculture is still the largest single sector of the economy contributing about aquarter of GDP. The three major agricultural exports are tea, coffee and horticulturalcrops, which together account for over 50 percent of foreign exchange earnings.Agriculture also has a significant impact on other sectors of the economy; it makes anindirect contribution of roughly another 30 percent to GDP through the manufacturingand service sectors. About two-thirds of industrial output in the country is agro-industrybased. The agriculture sector is composed of a traditional subsistence sub-sector and acommercial sub-sector that include both large-scale farming and smallholder production.Large farms (over 20 ha.) cover roughly 3.6 million ha. of total agricultural area, accountfor 53 percent of marketed output and 23 percent of agricultural output. Smallholderagriculture, with an average farm size of 1.13 ha., is the dominant mode of production,and provides over 85 percent of total employment.

Performance

2.4 Historically, agricultural sector performance in Kenya has been better than theaverage for Sub-Saharan Africa. The growth rate was about 4.7 percent per annumbetween 1960 and 1970; it declined to 2.7 percent between 1970 and 1982 and thenincreased to 3.8 percent from 1982-1988. Initial increases in agricultural productionstemmed mostly from the expansion of cultivated land. Agricultural growth wassubsequently sustained primarily through the introduction of technological changeembodied in the release and adoption of new varieties, related technical packages,improved farming practices and most importantly, expanded and intensified production ofhigher value-added crops. The shift in crop mix towards higher value-added commoditiesaccounted for as much as 65 percent of the growth in agriculture in the past 20 years.Sector performance has worsened since 1988. The agricultural growth rate, barelypositive in 1991, turned negative in 1992. Whereas the drastic downturn in agriculturalgrowth resulted largely from poor rainfall, there were other factors as well, notablydeclining input use, general erosion of producer incentives arising from payment delays,weak implementation of structural reforms and inadequate support services to the sector.The situation reversed in 1994, and agriculture grew at 5 percent. A sound policyframework and an effective extension effort enabled the sector to respond effectively tofavorable rainfall.

Agricultural Growth: Challenges and Prospects

2.5 The country's main development needs remain those of food security, employmentcreation, poverty reduction and environmental protection, and agriculture is expected toplay a critical role in meeting these challenges. About 500,000 people will enter the laborforce annually between now and the year 2000, putting increasing pressure on the urban

labor markets which cannot cope with this influx. The most recent Country EconomicMemorandum (CEM) suggests that the economy has to grow at a rate of about 7 percentannually to meet the employment challenge, underpinned by at least a 4.4 percent growthin agricultural production and 1.5 percent growth in productivity; this scenario implies thatemployment in agriculture would need to grow at 2.9 percent per annum. Takingagriculture back on a sustainable growth path is also crucial for reducing rural poverty.The Kenya Poverty Assessment Report shows that the bulk of the poor live in rural areas,two-thirds of them in the high- and medium-potential areas. The report states thatproductivity growth in agriculture is vital to make a dent in rural poverty alleviation andconcludes that per capita income growth is clearly the top priority requiring bothproductivity growth and structural transformation in agriculture.

2.6 A detailed 1995 review of the agricultural sector by the Bank' suggests that theagricultural growth challenge can be met. Major growth is expected to be generated bythe smallholder sector, given that the smallholder yields are well below their potential.The report argues that increases in crop yields and livestock productivity, and shiftstowards higher-value crops will be the dominant sources of growth. The report states thatthe strategy to promote smallholder-led growth should include increased producerincentives through improved and more competitive marketing structures and moreefficient distribution channels, enhanced use of agricultural inputs, improved efficiency inpublic investment/expenditure allocations, the continued development of smallholdertechnologies and more efficient use of agricultural land.

2.7 Regarding the policy framework, significant improvements have taken place in thelast two years and critical reforms are being undertaken to encourage private sectorinitiative and involvement in all aspects of production, processing and marketing of keyagricultural and livestock commodities and in the provision of agricultural supportservices. The institutional structure of the sector is being reformulated and the role of theGovernment is being re-aligned from direct intervention to an indirect role of setting theincentive framework and organizing the regulatory and enabling environment. Progresson the structural front, however, is slow; significant public sector involvement remains inmaize, wheat and milk marketing and the divestiture of public sector ownership of sugarfactories is progressing slowly. These structural issues are being addressed in the contextof the overall dialogue on the PFP.

2.8 A significant immediate growth response can only be elicited from the fullliberalization and deregulation of markets for agricultural products and inputs as is evidentfrom coffee, where the slightly higher prices supported by an improved payment systemunder the IDA-financed Second Coffee Improvement Project (SCIP II, Cr. 2062-KE)), isresulting in better husbandry practices and increased yields. The second source of growthwould come from taking Kenyan agriculture back on the growth path based on raisingperformance of existing farming units through the application of "on the shelf'

The World Bank. 1995. Kenya Agriculture Sector Memorandum, White Cover Draft, October 12,1995.

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technologies such as new varieties and better farming and resource conservation practicesand of new, improved technologies being developed. Such technologies can come fromongoing research programs in traditional crops such as maize, wheat, sorghum and millet,and in animal health and dairy production (e.g., through promotion of zero grazing andimproved forage crops). There is also potential to introduce improved technology in thesemi-arid lands where gains would be possible from non-traditional crops such as oilseedsand cotton.

2.9 The third source of growth would come from transforming smallholder farms froma subsistence mode to a farm enterprise orientation by accelerating the change in the mixof farming activities to those which add more value per unit of land and labor. Suchchanges will require a shift from low-return food crops for subsistence consumption(maize, sorghum, millet and cassava) towards high-value-added enterprises (dairy,horticulture, tea, sugarcane, pyrethrum, etc.). Although this is happening in some of thehigh-potential areas, the change is currently frustrated by the inability of the servicedelivery systems to effectively respond to farmer demands. NARP II has a crucial role toplay in bringing about this transformation.

C. GOVERNMENT POLICY OBJECTIVES AND SECTOR DEVELOPMENT STRATEGY

2.10 The Goverrnment's development strategy was earlier articulated in Sessional PaperNo. 1, Economic Management for Renewed Growth (1986), and a Letter of SectoralPolicy prepared by GOK, as part of the proposed Arid Lands Resource ManagementProject (ALRMP). Both the Development Plan for 1994-96 and the recently releasedSessional Paper No. 1 of 1994, Macroeconomic and Structural Policy Frameworkfor1995-1997, underscore the theme of sustainable development. Government strategy isbased on realigning the policy framework and the incentives structure, and on encouraginga more competitive marketing system with increased participation of the private sector inall aspects of marketing and distribution of agricultural commodities. It states theGovernment's intent to reduce its role and that of parastatal organizations in the sector aspart of a strategy to create an enabling environment for greater private initiative,restructuring marketing parastatals and liberalizing markets. The Government'sdevelopment strategy outlined in a Letter of Subsectoral Policy for Agricultural Researchalso recognizes the need to provide support for the core programs in agricultural researchand extension.

2.11 The Government strategy is sound in its key provisions but requires sustainedcommitment and implementation. Substantial progress has been achieved to date. Pricesof agricultural crops have been largely liberalized, and marketing restrictions removed. Adecision has been taken to greatly reduce the role of the National Cereals and ProduceBoard (NCPB) in the marketing of maize and to commercialize the organization by theend of 1996. The Cotton Board's ginneries have been sold or are in the process of beingsold, and the state sugar refineries are being prepared for sale. A decision has been takento privatize seed production and distribution. Barriers to entry of private firms into thedairy industry have been removed. Thus, steps to strengthen the policy and institutional

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framework are being taken, and the agricultural research system needs to be furtherenhanced to provide the technology for smallholder farmers to take advantage of the newenvironment.

D. PROJECT CONTEXT

Bank's Country Assistance Strategy

2.12 The proposed project would be a key element of the Bank's Country AssistanceStrategy (CAS) which was discussed by the Board on January 30, 1996. The CASsupports the reduction of poverty through accelerated economic growth and employmentgeneration, by promoting an enabling environment for the private sector, improvedefficiency in the public sector, human capital development, better environmentmanagement, and targeted interventions for the disadvantaged. As the dominant sectorand with substantial potential, agriculture has a central role to play in the developmentstrategy. The sector assistance strategy, developed in a continuing dialogue with theGovernment and other stakeholders, is reflected in the Agricultural Sector Review andfocuses on revitalizing the rural economy, particularly through further liberalization ofmarketing and processing of agricultural commodities, and through raising smallholderproductivity and advancing crop diversification. Structural transformation of thesmallholder farm base would be fostered through increased emphasis on higher-valuecrops, promoted through technology generation and dissemination. This strategy is beingsupported through a series of sector operations. The Second Agriculture SectorManagement Project (ASMP II, Cr. 2445-KE) is supporting the formulation of a visionand role for Government in a liberalized agricultural sector, as well as the strengthening ofmanagement and analytical capacity in MALDM. Commercialization of NCPB is beingdiscussed as part of the policy dialogue, while privatization of parastatals in the cotton andsugar subsectors is being supported under ASMP II. In the seeds subsector, the policyand institutional framework would be strengthened under NARP II.

2.13 Support for technology generation and dissemination has been provided underNARP I and a series of extension operations, of which the Second National ExtensionProject (NEP II, Cr. 2199-KE) is currently under implementation. Further support fortechnology generation, as well as strengthened linkages to extension, would be providedunder NARP II. In view of its predominant smallholder base, agriculture is at the centerof the country's poverty reduction efforts and of the Bank's poverty assistance strategy, asdescribed in the Poverty Assessment Report. Agriculture is also the dominant element-inenvironment management and in the country's National Environment Action Plan,developed with assistance from the Bank and other donors. Thus the proposed projectwould also be an important component of the Bank's environment assistance strategy.

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Rationale for Bank Assistance

2.14 The Bank has played an important role in advising the Government onmacroeconomic and agricultural development in the context of sound environmentmanagement and with a strong focus on poverty reduction. It has assisted with the policyframework for the agricultural research subsector, the strategy and plan for itsdevelopment and the implementation of that plan in coordination with other major donors.The Bank worked closely with the Government and other donors in designing andimplementing the National Agricultural Research Project, which supported the first phaseof a longer-term program for strengthening agricultural research capacity of the country.The Bank has continued this involvement during the preparation of the proposed project,although in more of a supporting role as the Government's capacity has expanded, andwith particular assistance to the Government on donor coordination. The Bank is now ina position to make a further contribution, in terms of the readjustment of public andprivate sector roles in agricultural research, raising the efficiency of KARI, and focusingpublic research on the highest priorities for growth and poverty alleviation. Thiscontribution would complement the Bank's support for initiatives in extension,environment/natural resource management, and agricultural sector management.

Project Preparation

2.15 The project was prepared by a Government task force, led by KARI and includingall major stakeholders from the public and private sectors, supported by IDA and othermajor donors. Particular efforts were made to include farmers into the process for settingresearch priorities, through their participation in the local and regional committees.Lessons learned (see below) from the first project, as well as other projects in Kenya andelsewhere, were incorporated into the proposed project. During implementation,emphasis would be given to the farming systems approach (FSA) pioneered under the firstproject, involving farmers and extensionists in the identification of problems, and inresearch design and implementation, with a focus on research in farmers' fields.

Lessons Learned

2.16 The Bank has accumulated considerable experience in supporting research projectsthroughout the developing world. The proposed project was able to build on lessonsgained during the initial project, other agricultural projects in Kenya, and agriculturalresearch projects in other countries. For instance, uniting donor efforts in a single projectis desirable, but as the number of participants, project size and complexity increases,difficulties in coordinating donors also increase. The project will institutionalize KARI'scapacity to coordinate donors by supporting the operations of KARI's DonorCoordination Unit (DCU). The DCU's monitoring and evaluation capacity will beenhanced. It will also establish standard formats for the preparation of reports onprocurement, training, and overall project progress and finances.

1. Project performance of NARP I has been rated as satisfactory in theImplementation Completion Report. Overall performance of projects in Kenya, however,has been affected by inadequate and tardy counterpart funding, weak management andfinancial systems, and inadequate incentive and reward systems to motivate staff. Underthe project, improved management arrangements, and streamlined financial and accountingsystems would improve project management and the flow of funds. Key financialoperations would be decentralized to the research centers whose directors would bedelegated greater authority for financial transactions. A performance appraisal systemwould be implemented to determine staff promotion and rewards.

2.17 In a project where major institutional change is an objective, key elements ofchange, e.g., retrenchment of staff, rationalization of the number and functions of researchcenters, and streamlining of the priority setting process, have been identified and givenindicative timetables. Participation of farmer clients, and linkages with the extensionservice, through mechanisms such as the Farming Systems Approach (FSA) introducedunder NARP L would be greatly expanded in NARP II. Partnerships with producer andprocessor associations, and academic institutions would be fostered through researchsupported by the Agricultural Research Fund (ARF), also initiated under NARP I.Building on the successful experience with tea and coffee research, responsibility forresearch on selected industrial crops would be transferred to the private sector during thecourse of NARP II. Phasing in of other project actions would be conditional oninstitutional progress which would be reviewed during supervision missions involvingother donors and KARI.Agricultural Research

3. AGRICULTURAL RESEARCH

National Strategy for Agricultural Research

3.1 As noted earlier, the overall aim of agricultural sector development is to acceleratethe production of food, industrial, and export crops, and livestock and forestry products,on a sustainable basis, thereby contributing to the growth in rural incomes andemployment, as well as improved food security. The generation and dissemination oftechnology are crucial to achieving this.

3.2 In view of increasingly severe financial resource constraints, the roles of the publicand private sectors in agricultural research are undergoing change. In the public sector,scarce resources are being focused on the highest research priorities, particularly in thoseareas where the private sector will not contribute (especially food crops, forage crops andnatural resource management). In order to pursue these priorities in a more effective andefficient manner, the institutional framework is being streamlined, a performance-orientedincentives structure is being introduced, and partnership with stakeholders, principallyfarmers, is being strengthened. The private sector is being encouraged to assume greaterresponsibility for financing research from which it receives direct benefits, particularly inthe case of cash crops.

Public Sector Role

3.3 KARI has undertaken a broad review of national research priorities and hasidentified adaptive research on major food crops (maize, wheat, sorghum, millet, potato,cassava, sweet potato and pulses) and livestock (grass and forage crops, dairy and beefcattle, sheep and goats) as the highest priorities for the public sector. KARI is nowturning its attention to an evaluation of priorities within these broad categories, inparticular with a view to identifying "trigger technologies"--those which can have thegreatest impact in the shortest period of time. This exercise, completed in July 1995, hasreconfirmed that the priorities determined earlier remain essentially the same. Thesepriorities, listed in the Project Implementation Manual2 will be the focus of NARP II. Inaddition, KARI will be periodically reviewing research areas within the broad commoditygroups as part of the annual review process to accommodate changing circumstances.This review will deterrnine the research agenda for each coming year. The allocation ofresources will be set and adjusted in accordance with the refined priorities resulting fromthis process.

2 KARI. 1995. NARP II Project Implementation Manual; Nairobi, Kenya, 120pp.

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3.4 KARI has long recognized the difficulty farmers have had in achieving satisfactoryyield levels, even when such yield potentials are established through on-farm research.KARI believes that substantial progress can be made in part through the strengthening ofpartnerships, specially farmer participation in research priority setting, technologyverification and adaptation, and impact evaluation. Another factor will be the incentivessystem within KARI, which will emphasize farm level impact of research results. Inaddition, KARI's expanded socioeconomic capacity will devote increased attention tofarm-level analysis and the development of simple methods for measuring the effects of anew variety, improved farming practices, etc.

3.5 KARI is transforming itself into a leaner, more effective institution through theresearch prioritization process where beneficiaries participate. This involvesrationalization of the research center network, retrenchment of around 1,400 non-essentialsupport staff, redeployment of scientists, enhancement of human resource development,and improved research management such as a new system for internal review and approvalof research proposals, introduction of a new financial management system, andintegrating/upgrading KARI' s information management system. These initiatives will beundertaken as part of KARl's strategic plan, that will be supported under the proposedproject. The Government will need to assume greater responsibility for funding the leanerKARI, particularly increased funding of non-salary operating costs.

3.6 KARl's institutional development program will include the strengthening of itsplanning capacity. Part of this effort will be directed toward investment planning, in orderthat KARI will be in a position to operate effectively within the framework of a futureAgricultural Sector Investment Program (ASIP). In fact, KARI will serve as a pilot forASIP, which will be able to draw on the experience of the strengthened investmentplanning efforts of the institute.

3.7 While KARI has been strengthening its linkages with farmers, the extensionservice, universities, and industry associations, it recognizes that there is considerablepotential for expanding these partnerships. Various mechanisms have been developed,e.g., on-farn trials, joint activities with the extension service, and team research withuniversities. Major efforts will be devoted to building on the existing foundation,particularly with respect to involving the farmer clients. The ARF will foster theserelationships, since it will favor proposals which emphasize teamwork among stakeholdersand linkages with universities. KARL will also enhance its collaboration with regional andinternational research institutions, and it has agreed to become the National AgriculturalInformation Focal Point (NAIFP) for East Africa under the initiative of the SpecialProgram for African Agriculture Research (SPAAR).

Private Sector Role

3.8 As part of the Government's overall liberalization strategy for transition to amarket-oriented economy, the private sector is being encouraged to assume responsibilityfor functions for which it is best suited. In the case of agricultural research, a variety of

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mechanisms are being developed to induce the private sector to assume theseresponsibilities. These include complete transfer of responsibility for research programs toindustry associations, (e.g., sugar and pyrethrum), contract research, and various forms ofcost-sharing.

3.9 Tea and coffee research are already fully supported by the private sector throughcess funding. Responsibility for sugar research is being assumed by the industryassociation, and therefore will not be supported under the proposed project. In the case ofcotton, the proposed Cotton Development Council will help mobilize additional resourcesfor research, and it is expected that the industry will assume full responsibility for researchby the end of NARP II. For pyrethrum, the National Pyrethrum Board already providessubstantial support for research undertaken by KARI and it is expected that the industrywill assume full responsibility for research by the end of NARP II. Oilseeds represent aspecial case, because of the large production potential but low output at present.Nevertheless, a program has been prepared for the development of this industry, includingoilseeds research. In the case of cotton, pyrethrum, and oilseeds, the project wouldprovide a small amount of support for the research programs, to provide a bridge to theassumption of full responsibility by the respective industries.

3.10 The private sector has been instrumental for developing technologies to promotethe production and exports, specially of ornamental crops. In the last five years, Kenyahas become one of the leading exporters of macadamia nuts as a result of KARI'sintroduction of higher yielding hybrid varieties. In the case of horticulture, the value offresh horticultural produce rose from KSh 1.4 billion in 1989 to KSh 4.8 billion in 1994,with a significant portion exported, largely through the initiatives of the private sector.

3.11 For industries or organizations which have particular problems that they want tohave investigated, KARI would do so on a contract basis. If the issue is of high priority inthe research agenda and the industry is unable to support the full cost of the research,KARI would carry it out on a cost-sharing basis. In the case of staple crops and smallerorganizations, e.g., farmers' associations or groups, KARI would expand the cost-sharingarrangements that it has been developing on a pilot basis. The project would support theexpansion of KARl's capacity to carry out such research, with the cost to be recovered inpart or in full, depending on the specific arrangements.

3.12 Finally, the ARF would become an increasingly important instrument formobilizing support from the private sector and for fostering cooperative arrangementsamong the public sector (KARI), the private sector, academia, other research institutes,and national and international research centers.

Institutional Framework

3.13 Agricultural research is conducted by a network of organizations in the public andprivate sectors, and KARI is the lead institution of this network. Tea and coffee researchis undertaken by separate institutes supported by a cess on the produce. Research is also

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undertaken by the universities, research foundations, and private industries. KARIoperates under the supervision of the Ministry of Research, Technical Training, andTechnology (MRTTT) and is chartered to conduct research in all agricultural disciplinesand commodities, with the exception of forestry and fisheries.

3.14 KARI operates under a Board of Management, with members consisting ofrepresentatives of the funding ministry (MRTTT), the "client" ministry (MALDM), andtwo representatives of the farming community. The Director-General, the chief executiveofficer of KARI, is an ex-officio member of the Board. Headquarters is located at Kabete,just outside Nairobi. The institute operates a network of some 15 national centers, ofwhich 4 also have regional mandates, focusing on applied research on variouscommodities and factors of production, e.g., soil, fertilizers, water, pesticides, etc.. and 6regional centers, focusing on adaptation of technologies to dominant crop/livestockproduction systems in various agroclimatic zones. A list of NRCs, RRCs and associatedoutreach stations is provided in Annex 11. Close coordination is maintained with theextension service, under a Memorandum of Understanding (MOU) between KARI(MRTTT) and MALDM which provides for a number of joint activities, including on-farmresearch and membership of extension officers in the advisory committees of NRCs andRRCs.

NARP I Results and Impact

3.15 Subsector Development Program. NARP I supported the first phase of asubsector development program for agricultural research. It supported priority adaptiveresearch programs, and concurrently introduced a process for defining national researchpriorities. It also supported the strengthening of the institutional and physicalinfrastructure for research. Implementation of the project was marked by closecooperation among Government agencies, especially with the extension service, and closecoordination of multilateral (EU and IBRD) and bilateral (United States, The Netherlands,Germany, United Kingdom, Japan, Sweden, etc.) donors.

3.16 Implementation. Major achievements under NARP I have been the establishmentof essential agricultural research infrastructure, the training and upgrading of KARI'shuman resources, the establishment of an ARF to finance collaborative research contracts,the rehabilitation of a network of Research Centers serving specific commodities andagroclimatic zones, and the development of improved technology for important crops,livestock production and natural resource management.

3.17 Research Results & Impact. Significant achievements have been attained inmaize, the primary staple crop. Two hybrids, suitable for the coast and high altitude areas,have been introduced and now are planted on about 75 percent of the area planted tomaize. Average maize yield has increased from around 1 ton per hectare to 3.5 tons perhectare since the introduction of these hybrids, although expansion into more marginalareas has masked the impact of the hybrids, to some extent. Ten new cultivars will soonbe released for the lowland coastal, mid-altitude dry and moist, and highland production

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environments. Drought-tolerant and disease-resistant varieties of sorghum, millet, cassavaand sweet potato have been released for the drier areas. Several superior varieties of rice,grain legumes, and wheat have also been released. All these varieties yield higher than thetraditional varieties, due to better disease and insect resistance, and/or shorter maturitywhich allow them to escape critical periods of drought.

3.18 Concerning livestock, KARL adapted the "zero grazing" system for dairy cattle tolocal conditions, particularly the integration of the widely-grown Napier grass, whichforms the basis of the system, now widely practiced by smallholders. An increase of400,000 dairy cattle was recorded from 1987 to 1991. KARI has developed effectivemethods of immunizing cattle against East Coast Fever, and these are now ready forwidespread dissemination. Significant progress has been made in the development of adual-purpose goat for meat and milk production. A multiplication program for these goatsis being developed with MALDM.

3.19 Regarding natural resource management, KARI has determined fertilizer response(nitrogen, phosphorus, potassium, and farmyard manure) under a variety of localconditions and generated a series of recommendations for extension. KARI also providesimportant analytical and advisory services on soil and plant management, fertilizer quality,and animal feed. The Fertilizer Use Recommendation Project (FURP) funded by the EUand implemented for several years by researchers in farmers' fields at 71 sites in 31districts has established a solid base to predict crop responses to NPK and farmyardmanure, and to develop useful extension recommendations. In the Arid and Semi-AridLands (ASAL), different soil and water management practices and their effect onagricultural production were investigated; soil "pitting" and "tied" ridges were found to beeffective for water conservation and are being adopted in several areas. Research on thelong-term impact of land-use systems in important agro-ecological zones established theeffectiveness of several low-cost sustainable soil fertility management strategies.

3.20 KARl's capacity for socioeconomic analysis has been strengthened considerably,with important effects on the priority-setting process, identification of policy issues,development of the farming systems approach, and the quality of diagnostic surveys.

Remaining Agenda

3.21 NARP II would support the second phase of the subsector development program,in particular, the further strengthening of the prioritization and resource allocationprocesses; expansion of priority adaptive research, building on successful experience underthe first phase; human resource capacity building, and further enhancement of KARI'sorganization and management systems. Emphasis would be given to a refinement ofpriorities to focus on specific promising technologies, adaptive research in accordancewith these priorities (financed in part through the ARF), renewed efforts on technologyadoption through strengthened partnerships, a streamlined public sector researchestablishment, increased responsibility of the private sector for research, preparation of arolling subsector investment program, and further strengthened donor coordination. Since

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inadequate access to quality seed has been identified as a major obstacle to acceleratedgrowth in productivity, support would be provided for pilot seed production anddistribution programs, particularly for the development of the private, informal sector.Similarly, the project would facilitate an expansion of KARI's soil fertility managementadvisory services on a full cost-recovery basis (para. 4.19).

4. THE PROJECT

A. PROJECT OBJECTIVES

4.1 The project would contribute to food security, poverty alleviation and environmentalprotection by raising agricultural productivity and incomes on a sustained basis throughtechnology generation and dissemination in close cooperation with farmers andextensionists, with particular emphasis on technologies which take into account indigenousknowledge and are appropriate for smallholders and women. Improved technology wouldenable smallholders to raise yields of existing crops and also allow them to shift part of theirland resources into higher-value crops, thus raising food security and incomes.

4.2 NARP II is designed to support, in particular, an intensified effort towardtechnology development and adaptation to specific agro-ecological and socioeconomnicenvironments and improvement of the technology delivery systems, particularly throughmore effective collaboration with the Ministry of Agriculture, Livestock Development andMarketing (MALDM) and the universities, and active participation of smallholder farmersand other intended beneficiaries. An important focus of NARP II is on establishingappropriate procedures for the timely availability and efficient use of all available financialand human resources for agricultural research and the strengthening of KARI's capacity forthe assessment of research impact.

B. PROJECT SUMMARY

4.3 NARP II would consist of the following three main components:

a) Institution Building (approximately US$84.1 million). This componentwould support KARl's transformation into a leaner, more efficientorganization focused on carrying out adaptive research in accordance withthe highest national priorities and promoting the dissemination of proventechnology to farmers, particularly smallholders and women. Emphasiswould be given to enhanced research management, financial management,human resource development, and an upgraded information system. For thiscomponent (as for b and c below), the project will provide financing for staffsalaries (largely from GOK), infrastructure rehabilitation, vehicles, plant andequipment, technical assistance, training and incremental operating andmaintenance costs.

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b) Research Program Implementation (US$88.0 million). This componentwill finance high-priority adaptive research programs implemented throughthe RRCs, commodity and factor (of production) research implementedthrough the NRCs, research in natural resource management, socioeconomicresearch, collaborative research with universities, IARCs and NationalAgricultural Research Systems (NARSs) of the Eastern Africa region; andcofinancing of research proposals with the private sector for selectedresearch topics on a competitive basis through the ARF.

c) Seeds Program. (US$7.8 million). This component will finance a pilotscheme to develop a sustainable national seed system that can ensure theavailability of the quantity and quality of seeds required by farmers in atimely manner. Based on demand, basic seed will be produced by financiallyautonomous Foundation Seed Units (FSU) at selected KARI ResearchCenters, while commercial seed will be produced by the formal and informalprivate sectors.

C. DETAILED FEATURES

Institution Building

4.4 KARI intends to become more efficient in carrying out problem-oriented appliedand adaptive research in accordance with the highest national priorities and in promotingthe dissemination of proven technology to farmers. This transformation, initiated duringNARP I will be continued during NARP II, in accordance with KARl's Strategic(Corporate) Plan, which has been revised in the light of present circumstances. The Planwill serve as the conceptual framework for institution building under the project. KARl'sinstitutional development efforts during this phase of the transformation (paras. 5.2-5.8)will focus on research management and programming, financial management, improvingthe ARF, an integrated information system, human resource development, and monitoringand evaluation. KARI will also pursue the transfer of research responsibility, specially onindustrial crops, to the private sector.

4.5 KARI has initiated the process of sharing the cost of research with the privatesector where feasible, as in the case of cash crops, through various mechanisms.KARI has prepared a conceptual paper on Alternative Sources of Funds (ASF) and hasa plan to transfer the responsibilities of financing research for cash crops, particularlypyrethrum, sugar, horticultural crops, and rice to the private sector. Agreement wasreached during negotiations that KARI shall prepare and adopt, not later than 12 monthsafter the effective date, an implementation plan for the private sector financing ofagricultural research and eventually, its taking over full responsibility to carry out andfinance these research activities as appropriate; and that a fill report on the progress ofthese arrangements will be prepared and assessed during the mid-term review of theproject (para. 7.1a).

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4.6 Research Management. KARl's management of research programs is beingstrengthened to focus on the highest national priorities and raise the efficiency of programimplementation. KARI has reconfirmed the broad research priorities in crops (maize,wheat, sorghum/mnillet, pulses), livestock (grass and forages, cattle for milk and beef,sheep and goats) and natural resource conservation (soil fertility management,maintenance of biodiversity, soil and water conservation), and is reviewing the prioritieswithin each of these subsectors (e.g., resistance to leaf streak virus, Fusarium wilt disease,and the parasitic weed Striga affecting maize and sorghum). KARI has confirmed thatthis process has already been completed. During negotiations, KARI's annual workprogram and budget for the first year of the project was agreed and finalized (para. 7. Ib).

4.7 In order to ensure that research programs are in line with the priority frameworkand have the intended impact, KARI has revised the system for the preparation, review,approval, monitoring, and evaluation of proposals, including the roles of the CenterResearch Advisory Committees (CRACs) and the Regional Research/Extension AdvisoryCommittees (RREACs). An important change to be progressively introduced under theproject would be that authority and responsibility for implementing the research programs,including financial operations, will be decentralized to the centers, once the annual workprogram and budget have been approved. This process will be introduced initially at twoNRCs and two RRCs, and gradually extended to the other centers as experience is gained.

4.8 KARI will also rationalize its center network in accordance with the priorityframework and ensure that the lead center for each priority program receives adequateresources to implement the agreed program effectively. KARI would submit to theAssociation its plan for the rationalization of its network of research centers which is on-going, not later than July 1, 1997. Implementation progress would be assessed during themid-term review of the project (para. 7. lc). The "new" KARI will require fewer staff toundertake research programs through a reduced network of centers. KARI has prepared aprogram for phasing out approximately 1400 non-essential support staff over a four yearperiod. A detailed plan for implementing this program has been prepared and has beenprovided to IDA. The Government has approved KARl's proposed staff retrenchmentplan and has authorized KARI to seek the required financing of such plan. TheGovernment also agreed to allow KARI to reallocate savings arising from theretrenchment to augment KARl's annual operations and maintenance budgets (para7.1d).

4.9 Financial Management. As part of improving research management, KARI'sfinancial management and accounting systems are being strengthened to ensure that all-financial resources are mobilized and allocated efficiently in accordance with the researchpriorities, funds are made available to researchers in a timely manner, costs (and, in somecases, revenue) are properly allocated to programs and centers, accounts are kept current,financial statements are produced promptly at the end of the reporting period, and internaland external auditing processes are carried out in an effective and timely manner. Thefinance and accounting offices at headquarters are being restructured under a streamlinedorganizational setup (Charts I and 2). Details are provided in the Project ImplementationPlan (Annex 4). Budgeting/accounting functions are being decentralized to the centers.

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Internal audit will be carried out to monitor implementation of financial controls.Significant progress is being made by KARI in installing the computerized, program-basedfinancial management and accounting system. The initial number of pilot research centerswhich will use the new system has been increased from ten to fourteen. Training of theaccounts staff of these pilot centers has been completed. Assurances were obtained atnegotiations that after the first project year, and every year thereafter, a comprehensivereview would be held, in cooperation with other donors, to consider the annual work planand the new financial procedures and arrangements for the forthcoming fiscal year, andthat modifications in project design or procedures would be introduced as appropriate.(para. 7. le).

4.10 Human Resource Development. KARI has initiated the process of strengtheningits management of human resources to ensure that they operate in an appropriate- incentiveframework for achieving the objectives of the organization and for effectivelyimplementing priority research programs. As part of this effort, a new performanceappraisal system is being designed, which will seek to ensure that rewards (includingpromotions) are linked to performance. In order to implement the system, personnelmanagement will be strengthened under the project through the training of staff. Inaddition, human resource specialists will be designated at each of seven larger centers andprovided appropriate training. The performance appraisal system was discussed andfinalized during negotiations (para; 7.1]). Approval of the performance appraisal systemby KARl's Board of Management is expected shortly.

4.11 Another element is the introduction of an expanded training program to upgrademanagement, technical and administrative skills among managers, researchers and supportstaff. A training policy statement has been adopted. A training needs assessment wascarried out with the assistance of the International Service for National AgriculturalResearch (ISNAR) utilizing funds provided under the Project Preparation Facility (PPF).On the basis of this assessment, the long-term training program will be revisedaccordingly. In the meantime, some training identified during appraisal, e.g., financialmanagement system operations and computerization, would proceed, but subsequenttraining will be undertaken in accordance with the final program. IDA support wouldfocus on in-service training of management, scientific, and support staff, plus a limitednumber of post-graduate training mostly at local institutions. In addition, the projectwould support the strengthening of the Training Unit at KARI to expand its capability toorganize courses and seminars (conducted largely by outside trainers and institutions),through the provision of office equipment, staff training and financing of incrementaloperating costs.

4.12 Information Systems. KARl's information system is being strengthened toprovide relevant and timely information to managers and researchers and to facilitatecommunication and exchange of information between KARI staff and with outsideinstitutions. KARI is preparing an information technology strategy for generating anddisseminating essential information, including the operations of the NAIFP and a relatedcomputerization plan. All information support is being centralized in an informationtechnology unit, which will establish, operate, and maintain the new management

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information system (MIS), agriculture/research data bases, and enhanced library andpublication services. The project would support this effort through the provision ofincremental hardware and software in accordance with the computerization program,training of staff, technical assistance and procurement of scientific literature andreferences.

Priority Applied Research Programs

4.13 Adaptive Research at RRCs. KARI has adopted the Farming Systems Approach(FSA) for the development and adaptation of technology. This approach entails the use ofresearch methods that promote close cooperation between farmers, extension staff andresearchers to identify production constraints and adapt technologies to the beneficiaries'requirements and circumstances. The FSA was strengthened significantly under NARP I,and NARP II would build on this foundation through a further increase and reallocation ofresources to the highest priority activities. This strengthening would be undertaken inaccordance with the FSA strategy and manual that has been prepared by KARI. IDA willsupport operations and adaptive research activities of six of the ten RRCs; ODA and TheNetherlands will support the rest. Emphasis will be made on encouraging the activeparticipation of the intended beneficiaries to ensure that the processes for identifyingresearch projects are sound.

4.14 Technical backstopping to the RRCs would be provided by the NRCs whererequired. Under the new financial management system (para. 4.9), RRC directors wouldhave authority and accountability for spending funds in accordance with the approvedresearch program and budget. In support of the high priority programs, the rehabilitationof two RRCs at Embu and Mtwapa would be completed, additional vehicles, office,laboratory and field equipment would be procured to meet the needs of expandedprograms, staff training and short-term technical assistance would be provided, andincremental operating costs would be financed.

4.15 Linkages among researchers, extension staff, and farmers were strengthenedconsiderably under NARP I and a memorandum of understanding was concluded betweenMRTTT (KARI) and MALDM which sets out the arrangements for training of extensionstaff, joint workshops and field visits, collaborative on-farm research, etc.. The results todate have been highly positive. The program would be expanded under NARP II,primarily through provision to KARI of funds to match the contribution of the MALDMto the District Farming Systems Teams, for incremental operating costs. In addition toexpanding the collaborative on-farm research with individual farmers, KARI would workwith the extension service to develop arrangements for on-farm research involving farmergroups and associations, also on a cost-sharing basis. The coordination of all activities ofthe RRCs rests with the recently appointed assistant director for regional research centersat KARI Headquarters.

4.16 Crop Research. The project will finance the applied (problem-oriented) researchprogram on high-priority commodities which will be implemented through the NRCs, incollaboration with RRCs. In the case of crops, KARI will increase its focus on food crops

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such as maize, wheat, sorghum, barley, grain legumes, and root/tuber crops. Particularattention will be devoted to making improved varieties available and development ofsuperior, location-specific and cost-effective cultural management practices. NARP IIwould provide support to repair the internal roads in the research centers in Muguga,Kitale, Kisii, and Naivasha and improve the water supply system of the NRC at Njoro.Training, technical assistance, vehicles, additional office, field and laboratory equipment,and financing for incremental, operating costs would be provided for selected programs.For cash crops such as pyrethrum, cotton, oilseeds and horticultural crops such as fruits,vegetables and flowers, KARI would expand its efforts to shift the research burden to theprivate sector (paras. 3.8-3.11). Negotiations, some in an advanced stage, are on-goingwith private sector industry groups (cotton, sugar, pyrethrum, etc..) to agree on the scope,arrangements and timetable for the concerned industry to take responsibility for research.

4.17 Livestock Research. In livestock, efforts will focus on high priority aspects ofanimal production and health research on dairy cattle, beef cattle, poultry, and smallruminants (sheep and goats), as well as on pasture and fodder crops and rangemanagement. For animal health, the consolidation of national programs, which startedwith viral and protozoan diseases through the establishment of liaison mechanismsbetween KARI and the Veterinary Department of MALDM, will be extended to coverother major livestock diseases. Nationally coordinated programs in all priority disciplines(virology, bacteriology, protozoology, helminthology, entomology/acarology, andepidemiology) are being established.

4.18 Support for these programs, primarily financing for incremental operating costs,would be provided under NARP II. Another element in animal health will be thedissemination of processes (e.g., for diagnosis) and inputs (mainly vaccines) to farmers. Inparticular, KARI has developed a vaccine for East Coast Fever (ECF) in cattle andanother for Contagious Caprine Pleuropneumonia (CCPP) in goats which are to bevalidated in field trials and introduced through a pilot program with participating farrnersand private veterinarians.

4.19 Natural Resource Management Research. The conservation and managementof the natural resource base, maintaining (and, where possible, expanding) the productivepotential, and the development of sustainable farming systems, are among the highestnational priorities. Soil fertility management is a key to the intensification of agriculture.Soil fertility research and advisory services would be strengthened under the project. Thecapacity for soil testing and plant tissue analysis, and for providing advice to the extensionservice and to farmers on a full cost-recovery basis, will be pilot-tested in two RRCslocated at Kakamega and Mtwapa. The fertilizer use and recommendations program,supported by the EU, will be closely linked with this effort. The project would providesupport in the form of training, equipment and financing for the incremental operatingcosts of the two pilot RRCs. It was confirmed at negotiations that soil and tissue analysesservices are being provided on a full cost-recovery basis, in accordance with agreedarrangements (para. 7. ig). Soil and water conservation research will be continued withSIDA funding. Research on small-scale water harvesting, irrigation, and drainage wouldalso be supported under the project, with an emphasis on reviewing experience with small-

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scale schemes in different agroclimatic zones and socioeconomic settings, to producerecommendations on the most successful approaches.

4.20 Socioeconomics Research. Substantial constraints to the adoption of improvedtechnology still exist in the policy environment, and the policy issues require moreintensive review to prepare recommendations for consideration by Government. Theseareas have been assigned to KARl's socioeconomic research program. Thesocioeconomic perspective also needs to be incorporated more fully into the periodicreview and adjustment of research priorities. In addition, KARI's capacity for theevaluation of research programs (including ex-post impact studies) needs to be expanded.Strengthened leadership of the socioeconomic research program is being established atKARI headquarters (including the establishment of a new Socioeconomic Division), tosupport the work at the NRCs and RRCs.

4.21 Biotechnology. The application of biotechnology is opening up new opportunitiesfor accelerated agricultural development in many areas. The financing required to giveKARI access to biotechnology applications is included in the crops and livestock researchcomponents. To ensure the safe development and use of biotechnology products, theKenya National Council for Science and Technology is finalizing the National BiosafetyGuidelines. NARP II would provide start-up support for downstream research whichwould allow KARI to access and utilize biotechnologies, with the expectation of increasedsupport from other donors later on.

4.22 Agricultural Research Fund. Under NARP I, the ARF has provided researchgrants to both individual researchers and teams of researchers, external to KARI, for avariety of priority research topics defined by KARI. The success of this fundingmechanism as a cost-effective means to promote and support well-focused research,together with the positive experiences of simnilar mechanisms in other countries providesthe rationale for the expanded support for the ARF under NARP II. Important changes tobe introduced under the project in the policies and operations of the ARF are: (i) anexpanded scope and incentive structure involving matching grants to attract multi-donorand private agro-industry funding, (ii) expanded coverage to include research by KARIscientists as well as by universities, private sector agencies, international institutions andindividuals, and (iii) a revised ranking system for the award of grants which favors thoseproposals that seek to achieve synergy through team effort, collaboration amonginstitutions, and links with Universities, particularly the involvement of post-graduatestudents in the research projects. The revised ARF also provides an attractive means bywhich the private sector/industry can contract research, by offering a transparent andcompetitive system of research grant award, accounting, monitoring and evaluation.Other incentives for such collaboration are: (i) the provision for the ARF to give matchinggrants for funds provided by the private sector, and (ii) the absence of any proprietaryrights over the technologies/varieties developed using funds from the ARF.

4.23 The ARF will operate under a restructured management committee, with a panelof technical reviewers. It will be supported by a secretariat provided by KARI (para S. 7).An amount of about US$4.0 mnillion equivalent would be provided from the IDA Credit to

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fund the operations of the ARF. KARI would deposit from the IDA Credit to thePaymaster General (PMG) account for the ARF, an amount not exceeding US$100,000equivalent, to cover eligible expenditures. A manual of ARF policies, organization, andprocedures has been adopted by KARI's Board (para. 7.2h). The manual would not besubstantially modified without the prior agreement of IDA and other concerned donors.During negotiations assurances were obtained that the ARE policies, procedures and coremembership of its management committee would not be changed without the agreement ofIDA (para. 7. 1h).

Seeds Program

4.24 Pilot Seed Program. The availability of good quality seed and planting materialshas been a major constraint to exploiting the country's agricultural potential. Althoughmany initiatives have been undertaken, a viable national seed system has not yet emerged.A program to establish such a system has been prepared by a task force on seedsappointed by MALDM. The task force has recommending appropriate policy guidelines,legislation and regulations and defined the respective roles of the public and privatesectors. Based on these recommendations, KARI would develop a plan for implementinga pilot seed program involving the formal and informal seed production and distributionsectors. The pilot seed program will provide insights into the implementation of therecently issued seed liberalization policy of the Government.

4.25 The main feature of the program is the production of breeder and foundation seedby financially-autonomous FSUs at selected KARI centers, while commercial seed will beproduced by the private sector (both formal and informal). A National SeedsDevelopment Committee (NSDC), expanded in membership to include all importantstakeholders and with MALDM in an advisory role, will guide the development of theseed system. Quality assurance will be provided by MALDM through the National SeedQuality Control Service. KARI will strengthen its basic/foundation seeds multiplicationprogram through the establishment of the organizational structure, including theappointment of a full-time manager of the Seed Coordination Unit. Start-up activities fortwo pilot Foundation Seed Units (FSUs) will be initiated upon appointment of themanager. Additional FSUs would be established during the course of the project. KARIsestablishment of arrangements, satisfactory to the Association, for the organizationalstructure of the Seeds Coordination Unit, including the appointment of its Manager,would be a condition for Credit effectiveness (para. 7.2c).

4.26 The project would support the seeds program by providing seed processing andother field equipment, vehicles, training and technical assistance, and financing ofincremental operating costs. The Government's Macroeconomic and Structural PolicyFrameworkfor 1995-1997) and the Letter of Sectoral Policy on Agricultural Research(para. 2.10) recognize the need to improve the seed industry in operation in Kenya. TheLetter of Sectoral Policy on Agricultural Research was provided to the Association by theGovernment during negotiations. Among the actions which have been taken by theGovernment in this regard are: (i) full liberalization of the seed sub-sector, and (ii) the

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issuance of a policy statement allowing for production and trade of all seeds and plantingmaterials by MALDM-approved seed producers and traders. Actions still to be taken bythe Government include (i) establishment of financially self-sustaining seed units at KARIresearch centers based on the sale of breeder and basic/foundation seeds to private sectorseed companies and farmer seed producers, and (ii) improvement of public plantquarantine services to facilitate the import and export of seeds. The latter would involvethe establishment of the Kenya Plant Health Inspection Service (KEPHIS) under theMALDM and transfer of the plant quarantine service from KARI to KEPHIS. Assuranceswere obtained at negotiations that KEPHIS would be established, and seed certificationwould be optional for the informal seed sector, particularly for farmers who exchangeseeds on a non-commercial basis (para. 7. li).

D. PROJEcT COST AND FINANCING

4.27 A summary of estimated project costs is presented in Table 4.1. (Details of projectcosts are given in Annex 2.) A physical contingency of 10 percent has been added to thebase cost of fixed investments. The international price contingency is based on the Indexof Unit Value of Manufactured Exports, and the contingency for domestic prices is basedon the projected inflation rate.3 A constant purchasing parity exchange rate has been usedto convert domestic costs into US$ equivalent (with Kenya's liberalized exchange rateregime, this assumption is considered appropriate). All costs are net of duties and taxes.

3 For international prices, the projected inflation rates are 1.8 percent for 1996, 2.6 percent for 1997,and 2.5 percent for 1998-2000; for domestic prices, the rates are 7.5 percent for 1996 and 5 percentthereafter.

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Table 4.1 Project Cost Summary

(K.Shs. Million) (USS Million)

Local Foreign Total Local Foreign Total % Foreign % Total BaseExchange Costs

A. Institution BuildingResearch Management 2,845.2 293.2 3,138.4 63.2 6.5 69.7 9 42Financial Management 25.7 18.6 44.3 0.6 0.4 1.0 42 1Human Resource Development 30.7 105.9 136.6 0.7 2.3 3.0 78 2Jnformation Systems 47.0 60.1 107.1 1.0 1.3 2.4 56 1~~~~~~~~~...... i i .K ............................... i........................................................................................................................................ ..... ...........................................................

Sub-total Institution Building 2,948.6 477.8 3,426.4 65.5 10.6 76.1 14 46

B. Research Programs1. Regional Research 288.2 301.7 589.9 6.4 6.7 13.1 51 82. Commodity/Factor Research

Crops 486.2 517.6 1,003.9 10.8 11.5 22.3 52 14Livestock and Animal Health 411.6 597.6 1,009.2 9.1 13.3 22.4 59 14Natural Resources Management 229.7 361.5 591.1 5.1 8.0 13.1 61 8Socioeconomics 58.5 196.5 255.0 1.3 4.4 5.7 77 3

........................................... I.............................................................................................................................................................................. . .Subtotal Commodity/FactorResearch 1,186.1 1,673.2 2,859.2 26.4 37.2 63.5 59 39

3. Agricultural Research Fund 178.7 10.5 189.2 4.0 0.2 4.2 6 3Sub-total Research Program 1,652.9 1,985.4 3,638.3 36.7 44.1 80.8 55 49

C. Seeds Program 112.8 209.3 322.1 2.5 4.7 7.2 65 4

Total BASELINE Costs 4,714.3 2,672.5 7,386.8 104.8 59.4 164.2 36 100Physical Contingencies 223.8 96.8 320.6 5.0 2.2 7.1 30 4Price Contingencies 873.1 391.3 1,264.4 6.0 2.6 8.7 31 5

Total PROJECT Costs 5,811.2 3,160.6 8,971.8 115.8 64.2 179.9 36 110

4.28 The total project cost is US$179.9 million equivalent, including physical and pricecontingencies of $7.1 and $8.7 million, respectively. The IDA Credit which would bepassed on by the Government as a grant to KARI would be SDR 27.4 million (US$39.7million equivalent), of which $14.9 million would be for institution building, $20.6 millionfor research programs and $4.2 million for the seed program. The signing of the GrantAgreement would be a condition of Credit effectiveness (para. 7.2a). The Governmentof Kenya would provide US$70.4 million equivalent of which about $64.7 million wouldbe for institution building (of which $58.0 million would be for salaries), $5.0 million forresearch programs and $0.7 million for the seeds program. The private sector is estimatedto contribute US$6.9 million equivalent to finance research programs in cotton,horticulture, rice, sugar and pyrethrum. Other donors (EU, GON, UK/ODA, SIDA andUSAID) have committed to provide the rest of the required financing of about US$62.9million equivalent. In order to ensure sustained technology generation and dissemination,the Governrment would finance an increasing proportion of incremental operating costs,rising from 25 percent in the first year to 50 percent in the fifth year of the project period.An assurance was made by the Government that its contribution to project financingwould be provided in a timely manner, in accordance with the annual work plans and

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related financing plans. A summary of the financing plan is presented in Table 4.2, detailsare given in Annex 2.

Table 4. 2 Financing Plan (US$ Million)

Project Components IDA Other Private KenyaDonors Sector Governmnent Total

A. Institution Building 14.9 4.6 - 64.7 84.2B. Research Programs 20.6 55.4 6.9 5.0 87.9C. Seed Multiplication 4.2 2.9 - 0.7 7.8Total 39.7 62.9 6.9 70.4 179.9

E. PROCUREMENT ARRANGEMENTS

4.29 IDA guidelines for procurement would be followed on the use of IDA fundsregardless of the percentage of financing provided by IDA for a particular procurementpackage. Procurement financed by other donors would follow the procurementprocedures of those donors. The Bank's standard bidding and contract documents wouldbe used for all International Competitive Bids (ICB) and consulting services. Procurementof works, goods, and services would be in accordance with the Guidelines forProcurement under IBRD Loans and IDA Credits (January 1995); consultants would beretained in accordance with the Guidelines for Use of Consultants by World BankBorrowers (August, 1981). The allocation of project cost and IDA financing byprocurement method is presented in Table 4.3.

4.30 Civil Works. Contracts estimated to cost US$1.0 million or more, aggregating upto US$3.0 million, would be procured through ICB; below this level, aggregating up toUS$4.2 million, through National Competitive Bidding (NCB). Civil works to beconstructed under the project would be facilities and improvement of access roads atKARI research centers and headquarters. Consulting firms to be appointed by KARIwould supervise all engineering, design and construction of these works.

4.31 Goods. Equipment consisting of office, laboratory and field equipment, audiovisual and radio equipment, survey instruments, computing equipment, and vehicles wouldbe procured through ICB. These equipment would be grouped into cost-effectivepackages of US$100,000 or more to an aggregate amount of US$5.7 million). Contractsestimated to cost below US$ 100,000 to an aggregate amount of US$500,000 would beprocured through NCB. Items including scientific consumables (reagents, test tubes,flasks, etc.), office firniture and small items of equipment packaged in contracts ofUS$20,000 or less, and not to exceed an aggregate amount of US$500,000 would bepurchased through International/National Shopping procedures in accordance with IDAguidelines. Eligible domestic manufacturers would receive a margin of preference of up to15 percent CIF price according to IDA procurement guidelines. All ICB procurement willrequire IDA's prior review. NCB procurement over US$100,000 equivalent for goodsand US$500,000 equivalent for civil works is also subject to prior review by IDA.

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National or International Shopping will be subject to SOE disbursement procedures andIDA's ex-post review in the field (para. 4.38). Contract documentation will be selectedfor ex-post review at random during supervision missions.

Table 4.3: Summary of Proposed Procurement Arrangements (in US$ million)

Items ICB NCB Other NBF Total1. Civil Works 4.0 5.6 0.6 3.7 13.9

(3.0) (4.2) (0.0) (0.0) (7.2)2. Vehicles 2.2 0.0 0.0 5.2 7.4

(2.0) (0.0) (0.0) (0.0) (2.0)

3. Plant and Equipment 4.4 0.6 1.4 4.2 10.6(3.7) (0.5) (0.5) (0.0) (4.7)

4. Training 0.0 0.0 6.0 14.6 20.6(0.0) (0.0) (6.0) (0.0) (6.0)

5. Consultants 0.0 0.0 2.2 16.8 19.0(0.0) (0.0) (2.2) (0.0) (2.2)

6. Agricultural Research Fund 0.0 0.0 3.5 0.2 3.5(0.0) (0.0) (3.5) (0.0) (3.5)

7. Operatmig Costs 0.0 0.0 14.0 90.7 104.7(0.0) (0.0) (14.0) (0.0) (14.0)

TOTAL 10.6 6.2 27.8 135.4 179.9(8.7) (4.8) (26.2) (0.0) (39.7)

Notes: Figures in () are the respective amounts to be financed from the IDA Credit.NBF: Not-Bank financed (financed by GOK, EU, ODA, GON, USAID, private sector).Others: Local shopping, procedures for recriitment of consultants and for training, etc.

4.32 Consultant Services and Training. Terms of reference for all consultant serviceswould be subject to prior review by IDA. When the estimated value of the contractexceeds US$100,000 for firms and US$50,000 for individuals, selection procedures, shortlists, and draft contracts also would be subject to prior review. The list of long-term andshort-term consultants required for project preparation/implementation support andcapacity building is given in Annex 9. Two long-term consultants, for the seed program(36 person months) and for farming systems research (24 person-months) would berequired. The rest would be short-term consultants of not more than 9 person monthsduration. Whenever possible, contracts for consultancies would include reference totraining of counterparts. Foreign and local training will be procured by KARI subject toagreed procedures according to a training master plan requiring approval by IDA. In- -service training would be emphasized, including short-term courses in priority areas suchas research management, research center operations, research methodology, specially forsocioeconomic research, and monitoring and evaluation. Support for a small number ofpost-graduate degree training, largely to the MSc degree at local universities also wouldbe provided.

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4.33 Agricultural Research Fund Contracts. Adaptive research proposals wouldgenerally cost less than US$40,000 equivalent but the ARF could provide research grantsof up to a maximum of US$ 100,000 equivalent. Research grants would finance operatingcosts with the exception of building maintenance, and for hiring equipment, e.g. tractorsfor land preparation. Disbursements from the ARF will be through a PMG accountestablished for the purpose (paras. 4.23 and 4.40). Guidelines for the ARF are given inthe ARF Manual approved by KARI's Board of Management. The main features of theARF are provided in Annex 10.

4.34 Annual Procurement Work Program and Procurement Monitoring. Anoverall Annual Procurement Work Program (APWP) would be prepared by KARI byApril 1 of each year, in consultation with research centers which would implement theproject. The APWP would contain details with respect to each research center on: (i)items to be procured and expenditure category; (ii) procurement packages; (iii) estimatedcost per package; and (iv) the implementation schedule for procurement. The trainingplan, including budget, implementation schedule and other details would be incorporatedas part of the APWP.

4.35 KARI would prepare a Semi-Annual Procurement Progress Report (SPPR) to besubmitted within 30 days after the end of June and December. IDA shall provide KARIwith a suitable format for reporting procurement of works and goods during the projectlaunch workshop. The SPPR would inter alia contain the following information:

a) Awarded contracts: (i) project component or subcomponent, (ii) contractnumber and date, (iii) method of procurement, (iv) name of country of thesuccessful bidder, (v) value and currency of the contract, (vi) majorexpenditure category, and (vii) expected and actual date of contractcompletion, or expected and actual date of receipt of goods.

b) Procurement in process: (i) project component or subcomponent, (ii)procurement package and total funds allocated, (iii) planned and actualdates of inviting bids, (iv) date of opening of bids, (v) date of planned andactual submission of bid evaluation report to IDA, (vi) date cleared byIDA, and (vii) date of award of contract, name of contractor, supplier orconsultant and value of the contract.

c) Procurement processing time. At negotiations, standard processing time -

for procurement activities was agreed upon with GOK and incorporated inthe APWP.

4.36 Procurement Review. The IDA Credit would finance around 44 percent ofworks, 33 percent of goods and equipment, and 21 percent of consultant services andtraining, requiring prior review by IDA. Prior review by IDA is required for civil workscontracts estimated to cost over US$500,000 equivalent and for goods, over US$100,000equivalent. All sole source contracts would be subject to prior review by IDA, regardlessof the amount of the contract. This review would be supplemented by the annual audit

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which will review procurement practices, a comprehensive examination at the nid-term ofthe project, and random reviews during supervision. A list and schedule of importantcontracts for works, goods, and consultant services is given in Annex 5.

F. DISBURSENENT

4.37 The proposed IDA Credit of SDR 27.4 million would be disbursed over a periodof 5 years, with an expected project completion date of December 31, 2001 and a closingdate of June 30, 2002. The schedule of estimated disbursements is based on the standardprofile for Kenya agriculture investment operations and is summarized in Table 4.4 below.Details are given in Annex 2.

Table 4.4 Summary of Disbursement Schedule

Amount of Credit Percent of Financing(IS$ million)

1. Civil Works 7.1 90 percent.

2. Vehicles, Plant and 6.8 100 percent of foreign costs and 90 percent of localEquipment costs.

3. Technical Assistance 2.2 100 percent.

4. Training 6.0 100 percent.

6 Agricultural Research Fund 3.5 100 percent.

7. Recurrent Operating CostsVehicles 0 & M 2.3 75 percent.Building 0 & M 0.2 75 percent.Other 0 & M 8.4 75 percent

8 Refund of PPF Advance 0.7 Amounts due pursuant to DCA

9 Unallocated 2.5

Total 39.7

4.38 Disbursements would be against standard IDA documentation, except in thefollowing cases, for which statements of expenditure (SOEs) would be utilized: (i)contracts for goods up to US$100,000 equivalent, (ii) contracts for civil works up toUS$500,000 equivalent, (iii) ARF contracts up to US$50,000 equivalent, (iv) foreigntraining up to US$30,000, (iv) local training, and (v) operating costs. For consultantservices the SOE procedure could be used for contracts of up to US$100,000 equivalent forfirms and US$50,000 equivalent for individuals. SOEs would be certified by the Director ofFinance of KARI and the Director, External Resources Department of the Ministry ofFinance.

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4.39 Supporting documentation would be retained by KARI for at least one year afterreceipt by IDA of the audit report for the year in which the last disbursement was made.This documentation would be made available for review by the auditors and by visitingIDA staff upon request. Disbursements would be made in accordance with the Guidelinesfor Withdrawal of Proceeds of IBRD Loans and IDA Credits. For ARF Grant Contractswhich do not fall under the SOE threshold, the initial advance would be used assupporting documentation, with relevant documentation to be forwarded to the Bank byKARI when available.

4.40 Special Account. To expedite the disbursement of funds, the GOK wouldestablish a Special Account for the Project to cover IDA's share of eligible expenditures.The authorized amount of the Special Account of the project would be US$2.0 million,representing an average of three months expenditures. Withdrawals from the SpecialAccount would be replenished monthly in accordance with established IDA disbursementprocedures. The minimum withdrawal application size for replenishing the SpecialAccount would be US$200,000 equivalent, representing 10 percent of the initial deposit.Documentation requirements for replenishment applications would be the same asdescribed in para. 4.38. In addition, monthly bank statements of the Special Accountwould accompany all replenishment requests. Recovery of the initial deposit wouldcommence within 6 months of the project's closing date or when the total unwithdrawnamount of the Credit equals US$2.0 million or when the Credit remains inactive for morethan 6 months. Records of the Special Account proceeds and expenditures would be keptby KARI. The Special Account would be audited in accordance with the project auditingarrangements (paras. 5.11 and 7.2e). At negotiations, its was agreed that in the unlikelyevent that the Special Account does not operate in a timely manner as envisaged andimplementation of on-going research programs is adversely affected, IDA and theGovernment would immediately discuss the matter and take necessary remedial measures.

5. PROJECT IMPLEMENTATION

5.1 KARI would have primary responsibility for implementation of the project. Sincethe project would support the entire second phase of KARI's corporate developmentprogram, it would be implemented through KARI's regular institutional structure (withouta separate project unit). Coordination would be provided by the Director General,through the Office of Donor Coordination. KARI's participation in the seeds programwould be guided by its Seeds Coordination Unit. Details on implementation arrangementsare provided in the Project Implementation Plan (Annex 4). The implementation plan forthe first two years of the project was discussed and agreed during negotiations.

A. INSTITUTION BUILDING

5.2 KARI operates under the general guidance of a Board of Management, which setspolicy and takes decisions on major operations on the basis of proposals submitted bymanagement. The Board is currently chaired by a representative of the seed industry andis composed of 20 members: 12 ex-officio and 8 members appointed by MRTTT. Chiefexecutive responsibility resides with a Director General, who is assisted by a Director ofResearch and a Director of Administration. Under the Director of Research is anAssistant Director for Crops, an Assistant Director for Livestock and five other AssistantDirectors for disciplinary research areas who provide technical oversight. The Directorsof the NRCs report to the relevant Assistant Directors while Directors of RRCs report tothe Assistant Director for regional research (Charts I and 2). A Donor Coordination Unitis being established in the Office of the Director General to serve as a focus for relationswith external financiers, integrated program planning and coordination. A LibraryDocumentation and Information Unit has been established to improve and oversee theinstitute's information system. This organizational structure, as well as the functions,procedures, duties and responsibilities of staff, and terms and conditions of service, arespecified in an Organization & Management Manual which is satisfactory to IDA. Atnegotiations, assurance was given that KARI would operate in accordance with thismanual, which would be modified from time to time in agreement with IDA (para. 7. lj).

5.3 Monitoring and Evaluation (M&E) of KARI's research activities is undertaken bythe M&E Team under the Director of Research. The broad objective is to have a systemwhich contributes to improving research management and accountability. Specificobjectives include: (i) identifying and prioritizing information needs of KARI management,(ii) providing such information in a timely manner for decision making, (iii) addressingsocial and gender issues, and (iv) documenting the relevant research results generated byKARI and evaluating their effectiveness and impact on increasing the production and

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incomes of smallholder farmiers. The socioeconomics unit will undertake the economicand impact evaluation of research projects of the NRCs and RRCs.

B. RESEARCH PROGRAMS

5.4 Regional research to adapt technology for on-farm adoption in different agro-ecological zones is carried out by the network of 10 RRCs. Each Research Center has aCenter Research Advisory Committee (CRAC) and a Center Technical Committee (CTC)which ensure that research proposals are consistent with the national/regional prioritystructure, respond to stakeholder needs, and are technically sound. The membership ofthe regional CRAC comprise the RRC Director as chairman, and representatives offarmers' organizations, NGOs, agro-industries and exporters, extension workers and staffof the RRC. For NRCs, the CRACs are chaired by the relevant Assistant Director; theyhave similar members as the RRC. Directors of relevant NRCs and RRCs are invited toparticipate. Proposals approved by these committees are submitted to the ResearchCoordinating Committee (RCC) at KARI headquarters for consideration. Appliedresearch on commodities, factors of production, and disciplines is undertaken by thenetwork of 15 NRCs (of which 5 are combined NRC/RRCs). KARI would prepare annualwork programs (AWPs), including procurement plans for funding by IDA. Assurance wasobtained at negotiations that the Annual Work Programs and related financing planswould be submitted for review by IDA by March 15 of each year (para. 7. 1k).

5.5 Expanding on existing arrangements, and benefiting from experience with tea andcoffee, responsibility for research on other cash crops would be transferred to the privatesector over the course of the project. The private sector has now assumed responsibilityfor sugar research, and that for pyrethrum, cotton, and oilseeds would be transferred inaccordance with agreed plans. In the case of staple crops, participation of farmers in on-farm adaptive research would be expanded to include farmer groups and associations.

5.6 Various International Agricultural Research Centers (1ARCs) have operatedsuccessful research networks across Africa which have facilitated researcher training, aswell as collaboration and information exchange with the national agricultural researchsystems (NARSs). Collaborative arrangements with these IARCs and those activitiescarried out under the auspices of the Association for Strengthening Agricultural Researchin Eastern and Central Africa (ASARECA) are being incorporated into KARI's priorityresearch programs, according to the needs and to the contributions that these centers canprovide.

5.7 The Agricultural Research Fund is directed by the ARF Management Committee(ARFMC), with members appointed by the KARI Board of Management. ARFMC ischaired by the Director of KARI and is composed of two representatives from the privatesector, three from the research and university community, and two from the public sector.The ARFMC sets guidelines for the operation of the ARF and approves grant awardswithin the overall policy framework set by the KARI Board. A full-time Secretariatlocated at KARI Headquarters will provide support to the ARFMC and manage day-to-day operations.

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C. SEEDS PROGRAM

5.8 The seeds program would be implemented within the framework of the NationalSeeds Development Policy and under the guidance of the National Seeds DevelopmentCommittee (NSDC), chaired by MALDM and comprising representatives from the fornaland informal seed sector, KARI and MALDM. The National Seed Quality ControlService and the Kenya Plant Health Inspection System of MALDM would provide qualityassurance. KARI's participation in the program would be guided by its SeedsCoordinating Unit and implemented by the Foundation Seed Units (FSUs) to beestablished at selected RRCs. Commercial seed would be produced by firms andindividuals, using foundation seed procured from the FSUs or obtained from othersources. Qualified farmers, farmer associations, and NGOs also would procure foundationseeds from KARI and multiply these for sale as certified or non-certified seed.

D. KEY IMPLEMENTATION PROGRESS INDICATORS

5.9 The overriding objectives of NARP II are to make agricultural research relevantand to make scientists accountable for results. The elements to achieve this include theexpansion of the ARF, the reorganization of KARI, the introduction of operating manuals,the evaluation of the performance of scientists, the nomination of key staff, theimplementation of a program-based accounting system, and the revision of researchprograms to conform to priorities set. Project objectives would be translated into keymonitorable indicators for each year of project implementation (Annex 6). These wouldinclude indicators for (i) development impact, e.g., adoption rate, yield increase, and clientparticipation; (ii) implementation progress, e.g., institution building, procurement, training;and (iii) financial performance, e.g., Government funding, disbursement of IDA and otherdonors, and KARI's financial management status. Progress would be tracked by KARI'sM&E Unit and reviewed through regular IDA supervision missions.

E. ACCOUNTING, AUDITING, AND PROGRESS REPORTING

5.10 Accounting. KARI would maintain records and accounts in accordance withKenyan and international accounting standards. Separate accounts and records,satisfactory to IDA, would be maintained for the ARF. Annual financial statements(income statement, balance sheet, and cash flow) identifying project transactions would beprepared for KARI and separately for ARF. The unaudited financial statements for bothKARI and ARF would be submitted to IDA within three months after the end of eachfiscal year.

5.11 Auditing. The accounts and financial statements (including the Special Accountand SOEs) for KARI and ARF would be audited in accordance with the Kenyan andinternational standards on auditing, by independent auditors which in this case would bethe Auditor General (Corporations) or other private auditors, acceptable to IDA,appointed by and operating under the supervision of the Auditor General (Corporations).The audit reports, including specific references to the Special Accounts and separate

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opinions on the SOEs and ARF, and incorporating management letters, would besubmitted to IDA within six months after the close of each fiscal year (para. 7. l).

5.12 Progress Reports and Mid-Term Review. Progress reports would be preparedby KARI on a semi-annual basis, in accordance with the format contained in the ProjectImplementation Manual (PIM), and submitted to IDA within 30 days of the end of eachsemester. A mid-term review of project progress and impact would be undertaken byKARI, IDA and other donors by December 1998. To facilitate this review, KARI wouldprepare a status report of the project and submit it to IDA at least three months prior tothe date of the review. Three months before the closing date, the Government wouldprepare and provide to IDA its own evaluation of the project, in accordance with agreedguidelines.

F. SUPERVISION PLAN

5.13 A project launch workshop would be organized in March 1997, for which fullparticipation of all donors would be sought. This first workshop would include allmanagers, including Program Heads and Center Directors. Immediately thereafter,separate launch workshops would be organized at each research center, which would alsoinclude key extension staff and members of the regional research advisory comnmittee. Amid-term review would be carried out (para. 5.12). The focus of subsequent progressreviews would be the research priority setting process, the implementation priorityresearch programs, the restructuring program (especially the reduction of non-essentialstaff, redeployment of staff, and rationalization of the center network), the operations ofthe Special Account arrangements, and functioning of the budget process, especially therelease of funds and provisions for recurrent operating costs. Expertise (local and foreign)in agricultural research, institutional development, and financial management would beincorporated into the joint progress review process, as appropriate. A detailed supervisionplan is given in Annex 11.

6. BENEFITS AND JUSTIFICATION

A. BENEFITS

Facilitating Overall Growth

6.1 The project supports the Government's development strategy and is wellembedded in IDA's Country Assistance Strategy (CAS). The Government has recentlycompleted a review of the Agricultural Sector which was done in conjunction with workon an Agricultural Sector Memorandum by the Bank. The sector strategy that is evolvingclearly recognizes that rapid and sustained growth in agriculture is essential to ensurecontinued overall economic growth, employment creation and poverty reduction. If theseobjectives are to be achieved, Kenyan agriculture will have to undergo a structuraltransformation of smallholder farms from a subsistence orientation to a farm enterpriseorientation; this would also require accelerating change in the mix of farming activities tothose which result in more value added per unit of land and labor. The role of research inthis process is crucial. The challenge is not just to maintain high growth rates in landproductivity, but rather to actually increase growth rates in yields without sacrificing thelong-term productive capacity of the natural resource base. There are already indicationsthat this capacity is being compromised in the highlands with nutrient losses significantlyexceeding nutrient inputs. Moreover, soil erosion has become a major problem in someagricultural highland districts. The task is thus to intensify land use while enhancing thelong-term productive capacity of the soil and water resource base. This can only comeabout through effective agricultural research that produces new technologies and practicesto meet the needs of Kenya's farmers; establishing a sustainable framework to allow this tohappen would be an important project benefit.

6.2 The macroeconomic and sectoral conditions are generally favorable to allow theproject to have a positive impact on agricultural growth. Kenya has maintained arelatively stable macroeconomic environment over the past year and the benefits arebeginning to filter through to agriculture. In addition, domestic and international marketdemand will remain buoyant for the main commodities produced domestically. From asectoral perspective the Government's agricultural strategy recognizes that an appropriatepolicy environment which sends consistent and credible signals to the market has to be inplace and the Government has taken steps to complete the policy agenda (para. 2.10-2.11). The Government's strategy also recognizes that the institutional framework has tobe readjusted and emphasizes that the reform of the operations of the public sector willhelp to release resources that can be used for higher-priority tasks. Efforts to restructureMALDM is already under way, being supported under ASMP II. A key element of the

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Govenmment's strategy is the rationalization of the provision of support services in linewith the strategic directions for smallholder agriculture. Research is a key support activityand this project is designed to assist in achieving the above aim.

Making Strategic Choices

6.3 A major achievement of NARP II would be to put in place a system in whichstrategic choices on technology development can be made. The aim would be to focusresearch undertaken by KARI using public funds to very specific areas largely limited tobasic food crops and livestock research. The rationale for establishing priorities wouldclearly focus on supporting research largely of a public good nature for which privatesources of funds would generally not be available or are not available at the present timeas the industries have not yet developed. At the same time and over the life of the project,the aim would be to transfer the burden for financing research on industrial/export cropsto the private sector, i.e., to industry associations and to the farmers themselves.

6.4 Following the above principle, KARI would continue to focus primarily oncommodities destined for domestic consumption, with responsibility for research onexport and other industrial crops, e.g. pyrethrum, sugar, cotton, being increasinglyassumed by the private sector. Even within food crops there is the recognition that whileagricultural growth will depend on increasing the commercialization of agriculture, thereare crops that can increase the stability of food supplies, such as sorghum and cassavaparticularly for the poor. Research aimed at enhancing food security would continue toremain a public function.

6.5 The project will also aim to improve post harvest handling and processing. Thebasic rationale here is that just decreasing the costs of production may not lead toimproved market prospects for a commodity. Developing new products (e.g., forcassava), new processing methods (e.g., for sorghum, groundnut, and sunflower seed) ornew handling methods (e.g., for bananas and fruits and vegetables) may be as important asimproved production technology. The food processing industry in Kenya is still at a verynascent stage of development and, therefore, is still unable to finance significant researchinto these aspects. The project would investigate these issues on a commodity-by-conmmodity basis and any promising developments would be made available to the foodprocessing industry for further development.

6.6 The third research focus supported by the project would be to examine theextemalities involved with the agricultural strategy and to come up with mitigatingactions. Agricultural growth in Kenya depends on substantial increases in landproductivity. However, agriculture is an extractive industry, especially in terms of soilnutrients. Extraction rates increase in direct relation to enhanced production, and the ratesof nutrient raining in Kenya are already high and unsustainable. The increased andeffective utilization of chemnical and organic fertilizer will have to be a key component offuture agricultural growth. Formulation of strategies to promote this, based on solidresearch would be a major benefit of the project.

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Economic Analysis

6.7 Evidence from ex-post analysis shows that investment in agricultural research, inboth developed and developing countries, generates high returns, exceeding 40 percent inmost cases.4 A Bank-organized cross-country comparison of East and West Africancountries suggests that similar returns have been obtained in many of these countries. Thestudy concludes that investments in research are justifiable, particularly when coupled withan ongoing extension effort. This conclusion is underscored by a study on the impact ofmaize research across five African countries5, as well as by a study on the Kenyan6

situation; where the returns were 40 to 60 percent on maize, and 33 percent on wheatresearch. The development of the dual purpose (for milk and meat production) goat inKenya showed that incomes of farmers growing these type of goats increased by as muchas 60 percent.

6.8 The calculation of an economic rate of return (ERR) for the project as a whole isconstrained by data limitations. The technology improvements that will be developed, therate and extent of their adoption by farmers, and the productivity and output gains due totheir application cannot be accurately predicted and are likely to vary significantly amongagroecological zones. Benefits from improved technologies could also be influenced byexternal factors like the availability of agricultural inputs and the efficiency of themarketing and distribution system. A limited economic analysis focusing on determiningthe benefits from research on food grains ( maize, wheat, sorghum and millet) wasattempted as described below. The analysis confirms that the economic benefits fromresearch is considerable.

6.9 Full details of the economic analysis is provided in Annex 14. Benefits from foodgrains research was assumed to accrue for the first time in Year 6, the year immediatelyfollowing the closing date of the project. The benefits were derived by assuming thatmaize yields would increase from an average of about 1.0 ton per hectare to about 1.8tons per hectare, in a ten year span; yields of wheat would increase from 2.0 tons to 2.3tons per hectare, and yields of sorghum and millet would increase from 0.4 to 0.6 tons perhectare. The adoption rate of improved food grains technology developed under NARP IIwould increase from 2.5 percent in Year 6 to 37 percent in Year 10, and remain constantthereafter. The adoption rates used in the calculations are quite conservative consideringthat where hybrids/improved varieties have been introduced in Kenya, and seeds areavailable, adoption rates of up to 90 percent have been observed. The assumed yieldincreases are also conservative, representing less than 50 percent of yields in developedcountries and in researcher managed trials in Kenya. The incremental production of foodgrains would substitute for imports, and is valued economically at US$180 per ton. It is

4 World Bank. 1981. Agricultural Research Sector Policy Paper, Washington, D. C.

USAID Africa Bureau. 1993. Maize Research Impact in Africa: The Obscured Revolution.Washington, D.C., July 1993.

6 USAID. 1993. The Impact of Agricultural T'echnology in Sub-Saharan Africa. A Synthesis ofSymposium Findings. USAID Technical Paper No. 3, Washingtoni, D. C., June 1993.

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further assumed that the incremental costs of production of the food grains would beequivalent to 40 percent of the incremental value of production (value:cost ratio of 2.5).

6.10 The analysis shows that research on food grains would yield an ERR of 24 percent,while the net present value ( NPV) of food grains research based on a 15 year cash flow,discounted at the opportunity cost of capital, or OCC (12 percent), would amount toabout US$70 million. The ERR is robust under various sensitivity scenarios. Theswitching values show that benefits from food grains research could go down by 61percent or costs to increase by 155 percent and the ERR would still be equal to the OCCor 12 percent.

6.11 The economic analysis shows that the overall ERR of the project, calculated byallowing for total project costs (including the costs of cotton, oil crops, horticulturalcrops, livestock and natural resource management research) and using only the benefitsfrom food grains research, would at least equal 15 percent. In this case the switchingvalues indicate that the benefits from all NARP II research could decrease by 18 percent(assuming the highly unlikely event that (gross) benefits from other research would be nil)or alternatively overall costs could increase by 22 percent, and the ERR would still beequal to the OCC or 12 percent. Based on the above analysis, the economic benefits fromthe project could be expected to be similar to the usual benefits resulting from projects ofthis nature.

6.12 Clearly, management of the research program would have an impact on thebenefits from the project. An effectively run KARI, along with efficient resource flows tosupport research in the high priority areas, a favorable policy environment and marketdevelopments would naturally lead to high rates of return. A major focus of the project isto enhance KARI's management capacity and transform it into a more effective institution.This emphasis will increase the likelihood of the project providing these benefits.

B. EMPLOYMENT AND POVERTY IMPACT

6.13 The project will have an indirect long-term impact on income generation in ruralKenya by assisting in putting in place a coherent agricultural development strategy. Thecrop and livestock commodities that will be addressed by the project are those that aregrown by resource-poor, smaliholder farmers who constitute about 80 percent of Kenya'spopulation. Through the eventual adoption of improved agricultural production and farmmanagement techniques, the project will lead to increases in smallholder productivity andfarm output, thus generating additional income for farmers and their household members.The project's focus on generating new and improved technologies for the sustainableproduction of food and export crops by resource-poor smallholder farmers wouldultimately secure the food supply and increase incomes, and will therefore be an importantcomponent of Kenya's poverty alleviation strategy. Most of the poor are in the relativelyhigh-potential areas where intensification of agriculture through research basedproductivity growth is likely to take place, and thus where most of the poverty alleviationwill occur.

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C. ENVIRONMENTAL LIPACT

6.14 This project has been given an environment assessment category C since its mainobjective is environmental conservation while increasing crop and animal production tomeet the food needs of a growing human population. Priority is being given to soil andwater conservation research to protect the basic resources of agriculture. By increasingproductivity on existing farms, the project will lessen the need for farmers tounnecessarily expand agriculture into marginal lands, which is usually accompanied byserious degradation; it will also lead to less destruction of forests and water catchments. Asustainable strategy to achieve improved soil fertility management would be developed.Research on fertilizer use will concentrate on finding the most appropriate fertilizers forthe different soils and the correct application rates which will enhance environmentalconservation. A low-input strategy for pesticides would be developed, given the largeenvironmental and health concerns with increased emphasis on development of IntegratedPest Management (IPM). In some situations, the use of chemicals may be eliminatedthrough new technology (e.g., immunization against East Coast Fever). The possibledanger of contamination of natural genetic materials through the introduction of exoticmaterials will be minimized through assurance of the use of up-to-date technologies andtesting in controlled conditions before extrapolation. Overall therefore, NARP II'senvironmental impact would be positive.

D. SOCIAL AND GENDER ISSUES

6.15 The project would promote awareness of the social and cultural dimensions ofdevelopment, including gender-related issues, through the involvement of the full range ofbeneficiaries in the planning and implementation of research, to ensure that social, cultural,and gender focus and concerns are reflected. Monitoring and evaluation of social andgender-related issues will be carried out to ensure that relevant issues are considered andthat women, children, and other disadvantaged groups will benefit from technologicalinnovations introduced under the project.

E. RISKS

6.16 The macroeconomic and sectoral performance risks facing the project hinge on theGovernment staying the course on the reform program. Progress is relatively steady andoutstanding macroeconomic issues as well as sector specific structural issues are beingaddressed (paras. 2.6, 2. 7 and 6. 2).

6.17 The other main risks facing the project could be: (i) inadequate or unreliableGovernment funding of non-salary operating costs; (ii) an ineffective Governmentdisbursement system; (iii) inadequate progress on KARI's transformation program into amore effective institution, (iv) slow progress in focusing on the highest national researchpriorities; (v) inadequate effort to incorporate farmer clients as full participants in theresearch process; and (vi) the slow transfer of industrial crop research to the privatesector.

- 40 -

6.18 The Government funding risk would be addressed through firm Governmentcommitments on the allocation and release of funds in accordance with annual work plansand related financing plans (para. 4.28), which would be monitored closely duringimplementation. KARI is also in the process of finalizing a strategy of establishingsustainable funding mechanisms to supplement the Government's budget allocation foragricultural research. The Government disbursement system (particularly Special Accountmanagement) is being addressed at the country level, and the Government has agreed to aplan to accelerate disbursements. Some of the donors, the EU in particular, havecommitted to finance the retrenchment program. KARI's plan for the rationalization of itsresearch center network is expected to face strong resistance, particularly from the localofficials who would not want research centers in their provinces to be closed down. Inthis regard, KARI will continue to explore the possibility of transferring some of itsresearch centers to private sector producer/industry associations, as in the case of sugarand pyrethrum.

6.19 Implementation of KARI's transformation program is already underway. TheGovernment's and KARI's commitment are reflected in the Letter of Sectoral Policy forAgricultural Research (Annex 1) and in the agreed action plans. IDA's commitment tosupporting Kenya's agricultural research capability is a long-term one. It has to berecognized that the objective of establishing a sustainable and effective research capabilitywould not be fully achieved by the end of the proposed project. Continued IDA supportwould be required. Concerted efforts to make farmer clients full partners in researchthrough representation on research committees at local, regional, and national levels, andespecially through the farming systems approach introduced under NARP I. FSA wouldbe greatly expanded under NARP II.

6.20 Transfer of responsibility for research on industrial crops would be implementedthrough agreed action plans, undertaken in the context of subsector developmentprograms prepared under the Second Agricultural Sector Management Project. Progresson implementing the plans also would be accorded close attention during supervision.

F. SUSTAINABILITY

6.21 Currently, the total annual expenditure on agricultural research is around 2 percentof agricultural GDP. This amount of expenditures is on the high side for sub-SaharanAfrica and underscores the emphasis placed on research in Kenya. In comparison,research expenditures in the United States and Western Europe is well over 2 percent ofagricultural GDP. During the project period, the Governments is expected to contributeUS$8.7 million (or about US$1.7 million annually) for incremental operating costs. Thisis within current budgetary allocations.

6.22 GOK finance about a third of the total cost of agricultural research and the balanceis currently financed by donors. The donor share of research financing is expected togradually decline over the years. At the end of NARP IL, GOK share of financing isexpected to increase slightly to 42 percent. However, continued donor involvement in thefinancing of research is envisaged after NARP II. Initiatives being taken under the project

- 41 -

will attempt to reduce the fiscal burden of research expenditures by transferring thefinancing burden to industry organizations in the case of industrial crops, retrenchment ofnon-essential support staff, rationalization of KARI's research center network, andexpanding KARI's revenue base through the sale of seeds and planting materials ofimproved crop varieties, animal breeds, and vaccines.

7. ASSURANCES AND RECOMMENDATIONS

A. ASSURANCES AND AGREEMENTS

7.1 Assurances on Project Implementation:

(a) KARI shall prepare and adopt, not later than 12 months after the effectivedate, an implementation plan for the private sector financing of agriculturalresearch and eventually, its taking over full responsibility to carry out andfinance these research activities as appropriate; and that a full report on theprogress of these arrangements will be prepared and assessed at the mid-term of the project (paras. 4.5 and 4.16);

(b) The annual work plan and financial plan of the project for the first year ofthe project was agreed and finalized (para. 4.6);

(c) KARI will submit to the Association, it's plan for the rationalization of itsnetwork of research centers which is on-going, not later than July 1997.Implementation progress will be assessed during the mid-term review ofthe project (para. 4.8);

(d) The Government has approved KARI's proposed staff retrenchment planand has authorized KARI to seek the required financing of such plan. TheGovernment also agreed to allow KARI reallocate savings arising from theretrenchment to augment KARl's annual operations and maintenancebudgets (para. 4.8).

(e) After the first year of the project and every year thereafter, acomprehensive review would be held, in cooperation with other donors, toconsider the annual work plan and the new financial procedures andarrangements for the forthcoming fiscal year, and modifications in projectdesign or procedures would be introduced as appropriate (para. 4.9);

(f) The Staff Performance Appraisal System was discussed and finalizedduring negotiations (para. 4.10);

(g) Soil and tissue analysis services is being provided on a full cost-recoverybasis, in accordance with agreed arrangements (para. 4.19);

- 43 -

(h) ARF policies, procedures and core membership of its managementcommittee would not be changed without the agreement of IDA (para.4.23);

(i) KEPHIS would be established, seed certification would be optional for theinformal seed sector, particularly for farmers who exchange seeds on non-commercial basis (para. 4.26);

(j) KARI would operate in accordance with the agreed organization andmanagement manual, as modified from time to time in consultation withIDA (para. 5.2);

(k) The Annual Work Programs and related financing plans will be submittedfor review by IDA by March 15 of each year (para 5.4); and

(1) The accounts and financial statements (including the Special Account andSOEs) for KARI and the ARF would be audited by independent auditorswhich in this case would be the Auditor General (Corporations) or otherprivate auditors, acceptable to IDA, appointed by and operating under thesupervision of the Auditor General (Corporations) (para. 5.11).

7.2 The following would be required as conditions for Credit effectiveness:

(a) Grant Agreement between the Government and KARI (para. 4.28),

(b) KARI has adopted a Project Implementation Manual satisfactory to theAssociation (para. 3.3and 4.23),

(c) KARI establishes arrangements, satisfactory to the Association, for theorganizational structure of the Seeds Coordination Unit, including theappointment of its Manager (para. 4.25); and

(d) Adoption of the ARF Manual (para. 4.23).

B. RECOMMENDATION

7.3 Subject to the above assurances, the project is suitable for an IDA Credit of SDR27.4 million (US$39.7 million equivalent) to the Republic of Kenya.

KENYASecond National Agricultural Research Project

Center Linkage Organization

A DirectorGeneral

| cDirector Et l Directorof Finance and DrcoAdministration of Research

Assistant Director Director Director Director Di rector Director Di rector Director Assistant Director

Finance Management Resource Economics Production Health Management Management Research Food Crops and Industral

DNC DNC DNC DNC RDNC DNC

Animal Animal Semi-arid Mtwapa Wheat and-Accounting Transport Training and AnmlNutrition Dryland Range Mwea Terereand Budget ~~~~~~~Evaluation Production Livestock FarmingOise .

Naivasha Disease Katurent Management | DR

F 1 < r Kakamega | 't S s | ~~~~~~~~~~~~~~~~~~DNC

DNC ~~~~~DNC DNC EmuDNC HorticulturalGeneral Assets ~~~~~Library Beet rp

and Center -anagement LPersonnel LDocumentation L Research NAC LArid RangeMazanThkAccount and Management and Center Muguga Management DCPastures

Maintenance Information LanetMasbtKalDN

DNC DNC~Kkaeg Qalt DNCa

Management Supplies NR ult

Note: Technical Links exist between Centers through ADs L

L| | M ~~~~~~~~Pyrethrum :3,

DNC = Director, National Center rt

DRC = Director, Regional Center

KENYASecond National Agricultural Research Project

KARI Headquarters Organization Structure

Finance~~~~~~~~~~~~~~ a Board of Reerc nDirectorofFinance anagementr

Administration TechnicalCommittee Committee

Director _

General ---------------------------------------------------........

Directrof Fiac Director |and AdministraAon of Research

Assistant Assistant Assistant Assistant Assistant Assistant Assistant Assistant AssistantCif Assistant Director Director Director Director Director Director Director Director Assistant Directorr

( I nternal )| Director Estate Human Socio- Animal Animal Soil & Water Range Regional Director Horticultural Secretariat Coordination 4-

Finance Management Resource Economics Production Health Management Management Research Food Crops and I

Cost Monitoring Codntr Coordinator Soil Fertility Coordinator CoordinatorAccounting TransPOrt -Training and Codntr Tick Borne -and Plant Coordinator Coordinator - Cereals Horticultureand Budget Evaluation Dairy Disease Nutrition

General Assets Coordinatorand Center Management Personnel LDocumentation Coordinator Coordinator Coordinator Coordinator industrial

- Account | n and Management and Others Others L Others L Others L CropsMaintenance Information

ProcurementL Cash L and

Management Supplies

cri

- 46 -Annex I

REPUBLIC OF KENYA Page of 9

MINISTRY OF FINANCE

Telegraphic Address: 22921 Office of the MinisterFINANCE - NAIROBI 27t9se9SNs+}P.O. Box 30007FINANCE -NAIROBI NAIROBI 2~1 NllTelephone: 338111 NAIROBIWhen replying please quote e KENYA

Ref. No.. EA/FA 62/189/012/D(107) 20th February, 1996and date

Mr. James D. WolfensohnPresidentThe World Bank1818 H Street N.W.Washington, D.C.U.S.A.

Dear f(i k

LETTER OF SECTORAL POLICY NATIONAL AGRICULTURALRESEARCH PROJECT PHASE II (NARP II)

The agricultural sector continues to be the backbone ofKenya's economy. The Government attaches high priority to thesector's role in promoting growth, reducing poverty and conservingthe environment. This letter highlights the sector's mainconstraints and the Government' s strategies to address them withsoecific attention to actions that will facilitate the developmentoa, new technologies for agricultural production and theirdissemination to farmers. The strategies outlined here will beused by the Government to underpin the design and implementation ofthe proposed joint-donor assisted Second National AgriculturalResearch Project (NARP II), and the Agricultural Sector InvestmentProject (ASIP) as well as all other donor-supported projects.

Background

Kenyan Agricultuire's Recent Performance and Future ProsDects

In recent years Kenyan agriculture has not achieved itsoptimum potential. The growth rate averaged 4.7 percent per annumbetween 1960 and 1970 but declined to 2.7 percent per annum between1970 and 1982. It picked up again to 3.8 per cent per annum in1982 to 1988, but was barely positive in 1991 and turned negativein 1992 and 19993. In the last two years, however the growth ratehas increased to over 3.5 per cent per annum. Private grosscapital formation in agriculture fell by 0.4% in the 1980, and even

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Letter of Sectoral Policy: NARP 1I Page 2 of 9

furzher by 3. 1% o.a. in the early 1990 to 1993. It 3, nGoweVereaxec7ed to ircrease as the economi_ growth did in 1934. arc 1395Tnese fluctuations are explained by subcivision of cultivarec areasa'c climatic var-ao!ilty, but sustainea agricultural grzw:n wassuoseQuently maintained primarily througn the introcuction ofte-hnological change emoodied in release and adootion of newvarieties, relazed technologically packaged and improved farmingoractices. ine siow growth in agr,cultural GOP anc continuingCasirvestment ,n the sector has hac signifi,cant repercussisns onagriculture's zontr,bution to overall economic gr.wth. Asagr,culture's con:ribution to GOP growth declined, so aic overalleconomic growt' wnich in tne 90's has been well below -ne rate ofpoculation increase. Consecuently, average incomes have fal len andthe incidence of ooverty has almost certainly increasea. Withoutgreater investment in agriculture, it is unlikely that the economywill grow as fast as desired in order to reduce poverty.

The Government expects the economy to grow at a rate of about7 oercent annually between 1996 and 2000 to provide sufficientemPloyment for tne growing labour force. This rate of growth hasto be underpinned by at least a 4.4 percent per annum growth inagricultural procuction and a 1.5 -percent annual growtn in labourproductivity. Threse targets have not ceen acnieved and theclallenge is even greater now. The choices are very clear. Unlessagriculture gets rack on a sustainec growth path of between 4-5p-rcent oer year, it will be very cifficult for Kenya to grow at arate f"ast enough to arrest tne decline in per capita income, createsuftic,ent emplcyment opportunities ana make a signirhcantcontribution towards oover:y reduction. Furthermore, unless farm-leval procuctivi-y and incomes are raisea, tnere wil1 corninue tooc out-rnigratiorn to the frag-ile aril and semi-arid areas thuscontributing to environmental degradation of these marg nal lands.Another asoect is that relatively low farm incomes encourage ruralu-oan migration of people in search of employment, a trend whichmay fuel social upneavals.

The Government is convinced that the agricultural growthchallenge can oe met as observec by the grcwth- of the sector in1994 and 1995. Althougn the sectcr has consicerable potential forgrowth, wide tecnnolo9y gaps exist and there is scoce to raisecuzout by increasing the use of imcroved inputs and there are,also, ample opcoftunities for prcauctive investment.

Significant potential also remains for tne diversification ofthe sector from low to higher value commodities. The future,tnerefore, 1ies in transforming smallholder farms from asuzsistence orientation to a farm enterprise orientation byaccelera ing the change in the mix of farming activities to thoseW-ich aad more value per unit of land and labour.

Trere 1s limited scope for scatial agricultural expansion

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Letter of Sectoral Policy: NARP II Page 3 of 9

witlnou causing severe environmenral damage. The two main ooricnsror agr cuitu aI growth are tnrougn intensification andciversirica.ion into hicher value commcd.ties. Amongst the

industrial/ex:orr crops, tea. hort culture and coffee offer tnegreates7 wotential. In the food crops sector, maize and potatoeso-7er a similar ococrtunity while in the liivestocx sector cairyingcouic easily be the front runner. These are the main areas rhatcan zicome imoortan: sources of grcwth in the medium term.

Minor cereals, while being importan. crops from a food self-su-f,ciency coint of view, are unlikely to make a significanzconrributior to growth and the livestock sector, beef procuct.onwill contirue to keep pace with population increase and risingincomes. Poultry can also become arn.mportant supplementary sourceof cash income for smailholder farmers. In all these areas,technology generation and dissemination to ena users is morecritical now than even before.

National Agricultural Research Proiect

The croCosed NARP II is the seconc in supoort of Kenya'sNational Agricul;ural Research Programme, in follow-up to NARP I(Credit 1 aL9-KE), curing wnich the Inrernational DeveloomentAssociation (IDA), The European Union (EU), the Government of t'LeNetnerlancs (GoN), the Unitea States Agency for InternationalDevelooment (USAID), the Overseas Development Administration (OOA)of t.e United Kingdom, ano several orher donors provided assistanceto the Government for programme implementation. NARP I's primaryobjectives were to: (i) focus on prioriLy research programmes witha slgrnifcant ikelihood of high ana early returns to investments;('i) cevelop technologies that contribute to increasadproductivity, particularly of smallho'dings; (iii) intensifyorocucer participation in research programme formulation; (iv)encourage cooperation between KARI and other institutions involvedin agricultural research; and (v) strengthen linkages betweenresearch and extension. The strategy to achieve these goals was toreorganize agricultural research into a single Kenya AgriculturalResearch Institute (KARI) and to support the Institute in theimplementation of the -fARP.

The first phase objectives have been largely achieved. NARPT laid the institutional foundation for agricultural research inKenya. KARI has been established as a semi-autonomous institutionwith its own Board and nas responsibility for publicly-fundedagricultural research wnile coffee and tea research is organizedthrough foundations financed by growers. Donor coordination hasbeen greatly improved. KARI's accounting systems were reorganizedand computeri_ed. An improved Scheme of Service has beenir:roducec ifor scientific staff ana staff training programme hasbeen very effective.

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Letter of Sectoral Policy: NARP II Page 4 of 9

A networx o f Research Centres has been set uD wi thresoons1bility for both strategic anc acapt ve researcn; and forresearch extension linkages. An Agricultural Research Func (ARF),,financec througn Government, donor and private incustrycontrioutions, was established to encourage contract andcolIaoorative research. For imoortant crops such as maize, sorghumand po,tao, KART now has considerable on the shelf technology interms or imoroved varieties and better cultivation prac ices;imoortant achievements have also been mace in the areas of animalprocuc:ion and health and soil and water management.

Looking aneac, tnere is a continuec and urgent need to removepolicy barriers to the adoo.ion of new tecnnologies. In aadition,notwithstanding the areas of progress under NARP r, suoport to thenational agricultural research system requires to be continued andincreased to maintain the momentum, address newly emergingpriorities, and solidify agricultural research funding includingfinancing by bringing in the private sector.

Several on the shelf technologies nave not been adequatelytested and evaluated by farmers for their relevance andacooTabili:y. In other cases the delivery system (e.g for seedsand orner planting materials) are inadequate and require furtherwo r k .

The most serious challenge under NARP I has been thed,i-fficulty for tne Government to orovide funds to KARI in a timelyfashion and in the required amounts, according to the establishedpr,orities anc work plans. Problems were also encountered due to.nsufficient adootion of imoroved technologies developed byresearch. All these will be addressed in NARP T I. In addition theterms and conditions of service for research staff require furtherimorovemnent with special recognition of research impact.

NARP II is therefore being designed to especially suoport anintens7fied effort towards technology development and adaptation tosoecific agro-ecological and socio-economic environments andimprovement of the technology delivery systems. An important focusof NARP II will be on fostering the timely availability andefficient use of all av'ailable financial resources for agriculturalresearch.

Strategies and Plans

The Government of Kenya has been implementing an economicreform programme whose main objective is to reduce poverty throughrestoration of sustainable growth. As in the past, theagricultural sector is expected to provide the main imPetus fore-onomic and social growth and develoPmen.. The key policysoJeczives include the need to achieve and maintain internal food

- 50 -Annex 1

Letter of Sectoral Policy: NARP II Page 5 of 9

self-sufficiency ir, basic roocs. emoloyment creai,--, incomegenera ion and the earning of forei gn exc.narge.

W,LIn subsIantial deregulation of the domestic mra,'e: ,or allaqriculturai commodities achieeved in the easz three years, thesecijec Ives will be oursued under a liberali:ed system ir Nnich the2rivate secror will play a greater role in orocuction, marketing,distrioution ana processing as wel, as in agricultura research.Government effor.s will concentrate on the crovision of a concuciveenvironment witnin which the pr,vate sector can cs-elcp and,4lourish and aiso on the celivery of goods and services to helpOromote and fac itaae development activi:ies. The Governmentwill, therefore, con.inue to dives- itself of puolic enterpriseswnnich hitherto dealt with the marketing and processing ofagricultural commodities. The latter includes the priva.ization ofvarious agricultural-based parastatals.

Consistent with these changes, the institutional s-ructure ofthe Ministry of Agricultural, Livestock Development an: Marketing(,MALOM) is being reformulated; the role, function ano structure ofMALOM is in the orocess of being substantially re-designec; and therole of cooperatives in the production and mar<ezing ofagricultural commodities is being re-examsned. The Government* ntends that by end of 1997 MALOM's activ ties will fzcus on thecore agricultural services of suu3ort to adaptive research, theorovision of effective extension, essential quality control andotner regulatory resoonsibilities. Over the medium term, theGovernment intends to comolete the policy reform ano institutionalrestructuring agenda with the view to accelerating agriculturalgrowth and productivity, thereby increasing rural incomes and ruraloff-f,arm employment.

The Government continues to place great emonasis on theImoortance of agricultural technclogy generation, ceve'ooment andGissemination. The Government, therefore, recognizes .ne role ofKARI as crucial to accelerated cevelopment. Consecuently, theGovernment is committed to ensuring that KARI will operate in anenvironment conducive to effective and efficient execution ofagricultural research programmes, including the provision ofadequate operation and-maintenance recurrent funds in a timely andcepencable manner. The Government is also committed to themaintenance of attractive terms anc conditions of service for staffthrough regular reviews in order to retain a highly qualified andcroductive human resource in the agricultural researc., service.

To achieve impact of research on imoroved germclasm, theGovernment considers it essential that an effective ano efficientnational system for the multiplication and distriburtin of seedsand elan7ing materials is in place. The Government also recognizes-na- the seed ,ndustry in Kenya woulc benefit from increased butcarefullv rsqulatea comoetirion. In order to have a competitive

- 51 - Annex I

Letter of Sectoral Policy: NARP II Page 6 of 9

seed incustry in coeration in Kenya. the Government n 1995, tookinitial steps, rhrough cabinet decision tc:

i) issue a :oIhcy statemer: allcwing fcr o c -ion andtrace of all seeds (es?ecially cereals) ard lantingmaterials by a plurality of MC,A,DM-aoprovedprooucers/zracers;

ii) Iiberalize r.aie marketing of seeac/Ianting ma2. rals andinsti:ut- careful monitoring mechanisms .o avoidexploitazisn of farmers either tecnnicaMly orfinancially;

iii) establisn financially self-suooorting breecer andfoundation seed units in KARI centres, basec on the saleof KARl's foundation and breeder seeds to Private sectorseed comoanies, farmer seec procucers besiCes the KenyaSeed Comoany;

iv) improve public plant cuaranzine facilities ;o facilitatetne imocr. and export of seeds. The resocnsibility forseed insoection and certification will be assumec by theproocsec Kenya Plant Health InsPecr-orare Service (KEPHIS)as soon as the Service is establ shed;

v) strengthan the researcn-sxtens.on-farmer cOllaborativelinkages, particularly the information feecoack mechanism,rom far.mers to the research cent res and final researchprogramming, and

vi) institute cost-sharing and recovery mecnanisms whereby-he consumer of research oroducts contri:uze funds tomeet KARr's requirements for ooerating and maintenanceexpenses, for example, through collection of royalties,levies/cess etc., basea on sale of commercial seed andother planting materials.

With the current resource constraints, the Government willcontin~ue to encourage KARI to give emphasis to the execution oflivestock, crop and factor research projects that are of the-highest national or,ority. In the context of the procosed NARP II,the Government has initiated a review of KARI and has caveloped anaction plan to streamline the Institute to allow it to implementits mandate more effectively and efficiently. Implementation ofthis plan is scheduled to occur over the 1995-97 period. This willinclude a rationalization of the Research Centre NetworK, reductionin non-essential staff, re-deployment of staff, and greatlyimoroved funding of, non-salary research ocerating costs. BeforeJuly 5996, the Government will strengthen and expand .he role ofKARI's Agricultural Research Fund (ARF) in the financing ofresearch contracts". including ccllaborative researon with other

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Letter of Sectoral Policy: NARP II Page 7 of 9

National and Inzer-ational Agricultural Research Centres f iARCs).Tris is witn a view to enhancing team worK aimong s ake-nolcers andiinkages with uni,ersities and IARCs amon- cthers.

ModalIties for ensuring the long term sust anab i -y of theA RF wi 1 be exolo-ed. The ARF Management Committee will, inaid!tion to KARP management, include rec-esentation of clientM,nistries, the agricultural faculties in local universi-,es anatne priva-e sector. The ultimate purpose of t-is e'`or: is tou ilize rne ava la le infrastructure ana human resource ca.acitydeveloped during NARP I more efficientlv.

KARI receives f-inancial resources for implementatior of itsprogrammes from Government, external donors (including grants-in-aid from USAID, ODA, the Netherlands, UNOP, JICA, SIDA, EU), andthe private sector. As a consequence of declining budgetaryresources, the Institute needs to identify sources of funds andmecnanisms from outside the Government and its present donors tocomolement resources from *hese two sources ana, eventually, tosrovice a more sustainable source of resar-ch funding. KARI istherefore in the orocess of shifting resoonsibility for someresearch work to the private sector througn a variety of mechanismssucn as cost-snaring, contracting and comocete transfer of theresconsibility for research to approoriate commodity agencies. TheGoverrment strongly supports tris search for new sources oragricultural research financing. Similarly, theGovernment is examining the status of various commodities with av,ew of instituting cost-sharing mechanisms to finance agriculturalresearc.

The Action Programme

While much has been achieved througn Government and donorassistance to Phase I of the National Agricultural ResearchProgramme, the Government recognizes the need to provide furthersupport to KARI during Phase II of NARP. This is necessary inorder to build on the achievements of NARP I and to effectivelyrespond to the continuing and emerging technology needs of anincreasingly more complex national agricultural sector. TheGovernment wants to see the establishment of a strong and efficientKARI poised to melt the production and develooment challenges of anecologically sustainable, stable gender-sensitive and profitableagriculture in Kenya.

To bring this about, the Government will take the followingsoeclfic actions:

i) streamline the flow of resources so that adequate fundsreach KARI in a timely manner. In this regard theGovernment will continue to monitor the flow of both GoK

- . Annex I

Letter of Sectoral Pol icy: NARP II Page 8 of 9

ana conor funds to ensure smooth (mplementa-ion of, theproject;

ii) in each year, beginning FY 1996/97, recues- --3 WNorlaBank to deccsiz within two weeks of the beg rein, of- eacnquarter tre quarterly advances o,f IDA f ncs in-o aproject account w7 th Pay M1aster General;

iii) increase buogetary orovisions for recurrent agr-oult uralresearch ocerating costs by at l east 1 0% p4 ̂ ye ar romthe FY 1995/96 Printea Estimatas level over rne curationof the project;

iv) indicate to KARI by January 31 of each year the NARP r;3-year forward budgetary commitments, beginr,nG 1996;

v) allow KARI to reallocate salary savings aris ng from theproposed retrenchment and attrition of non-essentialstaff to the oPerating budgets;

vi) assis. KARI during NARP II to trans'fer rescors4b- Ity forr,nancing of research concerning sugar, py-eznrum andnorticu zure to a significant extent (excee:ing 50%) to.he concerned private sector producer anc crocessororganizations through the Kenya Sugar Autnority,Pyrethrum Board of Kenya and Horticultural ,evelopmentAuthority;

vii) institutionalize Plant Breeders Rights privileges andalso establish instruments for collecticn c- levy fromseecs/planting materials that are aevelocec art testedentirely by or in conjunction witn KARI and sc'c locally;

viii) transfer the KARI seed certification and plan: p_arantineresocnsibiIities to KEPHIS (MALOM) as soon as the Serviceis established.

Conclusion

In recent years, the Government has undertaken importantpolicy reforms which should promote growth and reduce cover.y. Itis however, recognizea that substantial further progress is neecedto meet the challenges of the 1990's. This will reauire greatlystrengthened caoacity of the national agricultural research system.The Government believes that the implementation of the abovemeasures, concurrent with ongoing improvements in the policyenvironment will bring about accelerated agricultural technologydevelopment and acoption and hence promote widespread growth,poverty reduction and the conservation of natural resources andbic-diversity. The Government also believes tnat imolemnenza:ion of

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Letter of Sectoral Policy: NARP II Page 9 of 9

the procosed second National Agricultural Research PrZJect and'urther strengmhening of the Kenya A4r,cultural Researcn Institutewill clay an imoortant role in realizing the intencec overallaevelooment oojec.ives of the Kenya Government.

Yours O 4. ,

W. MUS P.UtNrS INANCE

Kenya National Agricultural Research Project Phase II (NARP II)Components by Financiers (US$ '000)

IDA Other Donors Private Sector Government Total For. LocalExch. (Excl.

Amount % Amount % Amount % Amount % Amount % Taxes)

A. histitution Building

Research Management 10,665.2 13.8 2,169.1 2.8 - - 64,319.7 83.4 77,154.0 42.9 7,070.4 70,083.6

Financial Management 536.3 50.0 536.3 50.0 - - 0.0 - 1,072.6 0.6 441.6 631.0

Human Resource Development 2,638.8 78.9 705.9 21.1 - - 0.0 1.7 3,344.7 1.9 2,592.0 752.8

Information Systems 1,088.9 42.0 1,156.7 44.6 - - 346.1 13.4 2,591.7 1.4 1,438.8 1,152.9

Sub-total Institution Building 14,929.1 17.7 4,568.0 5.4 - - 64,665.8 76.8 84,163.0 46.8 11,542.7 72,620.2

B. Research Programs

1. Regional Research 7,045.6 49.3 4,995.6 35.0 - - 2,238.5 15.7 14,279.7 7.9 7,219.7 7,060.0

2. Commodity/Factor Research

Crops 5,462.5 22.3 10,645.6 43.5 6,957.2 28.6 1,436.1 5.9 24,466.1 13.6 12,524.8 11,941.3

Livestock and Animal Health 2,452.8 10.1 21,379.7 88.0 - - 467.4 1.9 24,299.8 13.5 14,213.4 10,086.4

Natural Resources Management 1,152.7 8.0 12,932.7 90.1 - - 271.9 1.9 14,357.3 8.0 8,708.4 5,648.9

Socioeconomics 550.8 9.9 5,286.8 86.8 - - 254.0 4.2 6,091.6 3.4 4,674.1 1,417.5

Sub-total Commodity/Factor Research 9,618.7 13.9 50,244.8 72.6 6,957.2 9.6 2,429.5 3.5 69,214.9 38.5 40,120.7 29,094.2

3. Agncultural Research Fund 3,970.3 88.4 222.9 5.0 - - 298.6 6.6 4,491.8 2.5 257.0 4,234.7 ,

Sub-total Research Program 20,634.7 23.5 55,463.2 63.0 6,957.2 7.8 4,966.5 5.6 87,986.4 48.9 47,597.5 40,388.9 x

C. Seeds Program 4,142.9 53.2 2,915.7 37.4 - - 729.2 9.4 7,787.9 4.3 5,029.0 2,758.8 o

TOTALDISBURSEMENT 39,706.7 22.1 62,947.0 35.0 6,957.2 3.6 70,361.6 39.1 179,937.2 100.0 64,169.2 115,767.9 W

Kenya National Agricultural Research Project Phase II (NARP II)Expenditure Accounts by Financiers (US$ '000)

IDA Other Donors Private Sector Government Total For. Exch Local_________ _______ __________ _____ ~~~~ ~~~~~(Excl.

Amount % Amount % Amount % Amount % Amount % Taxes)

I. Investment Costs

A. Civil Works 7,201.2 51.6 2,773.0 19.9 1,156.6 8.3 2,824.7 20.2 13,955.6 7.8 4,187.8 9,767.8

B. Vehicles 2,059.0 27.9 4,368.7 59.2 948.3 12.9 - - 7,375.9 4.1 7,375.9 -

C. Plant and Equipment 4,701.1 44.5 4,226.9 40.0 625.4 5.9 1,012.7 9.6 10,566.1 5.9 10,566.1 -

D. Training 5,972.6 29.0 13,913.1 67.5 721.6 3.5 0.0 - 20,607.3 11.5 16,486.3 4,121.0

E. Technical Assistance 2,231.6 11.7 16,591.2 87.2 199.5 1.0 0.0 - 19,022.3 10.6 17,120.3 1,902.0

F. Agricultural Research Fund Grants. 3,505.5 95.2 176.9 4.8 - - - 3,682.3 2.0 - 3,682.3................................................................................... ...................... ................ ..... .... .............. .. .................. ....... .... ............... ...... .... ......... ................... ..... ........ ............... .... ..... ........... ..........Total Investment Costs 25,671.0 34.1 42,049.8 55.9 3,651.4 4.9 3,837.5 5.1 75,209.6 41.8 55,736.5 19,473.2 l

II. Recurrent Costs a

A. Salaries and Emoluments - - 1,441.3 2.4 34.3 0.1 57,788.7 97.5 59,264.3 32.9 - 59,264.3

B. Vehicle Operations and Maintenance 3,009.8 35.7 3,891.8 46.1 515.8 6.1 1,020.1 12.1 8,437.4 4.7 5,062.5 3,374.9

C. Building Maintenance 163.6 4.2 723.6 18.4 430.8 10.9 2,622.9 66.6 3,940.90 2.2 - 3,940.9

D. Other Operations and Maintenance

Travel and Per Diem 2,170.3 30.4 3,807.0 52.3 341.7 4.8 831.6 11.6 7,150.6 4.0 - 7,150.6

Equipment Operation and Maint. 1,390.1 30.1 2,159.7 46.8 363.6 7.9 702.3 15.2 4,615.6 2.6 - 4,615.6

Utilities, Post and Telecom. 1,628.3 51.7 529.5 16.8 158.0 5.0 834.1 26.5 3,149.9 1.8 - 3,149.9

Offices and Lab Supplies 2,184.2 32.4 3,306.1 49.1 169.1 2.5 1,080.8 16.0 6,740.2 3.7 3,370.2 3,370.0

Casual Labor 1,380.0 36.1 1,392.6 36.4 394.5 10.3 658.5 17.2 3,825.6 2.1 - 4,825.6

Misc. Inputs 2,109.5 27.7 3,645.6 47.9 862.7 11.3 985.2 13.0 7,603.0 4.2 - 7,603.0.................................................................................................. ................................................................................................................

Sub-Total other Operations & Maint. 10,862.4 32.8 14,840.5 44.9 2,289.6 6.9 5,092.4 15.4 33,084.9 18.4 3,370.2 29,714.7

Total Recurrent Costs 14,035.7 13.4 20,897.2 20.0 3,270.5 3.1 66,524.1 63.5 104,727.5 58.2 8,432.8 96,294.8 M..................................... ............................................. ........... ................ ..................... ... ................... ......................... ........... ..................... ........ ........... ........ I'.......... ...........rT70

TOTAL DISBURSEMEENT 39,706.71 22.1 1 62,947.0 35.0 6,921.9i 3.81 70,361.6i 39.1,179,937.2i 100.01 64,169.2 1115,767.91

Kenya National Agricultural Research Project Phase I (NARP II)Project Components by Years -Totals Including Contingecies

Base Cost (K. Shs. 'millions) Base Cost US$ '000)1997 1998 1999 2000 2001 Total 1997 1998 1999 2000 2001 Total

A. Institution BuildingResearch Management 763.5 816.9 728.4 753.1 804.5 3,866.4 16,706.0 18,284.4 14,885.6 14,424.1 15,093.0 77,154.0Financial Management 14.9 10.4 9.8 10.3 7.9 53.2 320.5 211.6 194.2 198.5 147.7 1,072.6Human Resource Developnment 31.9 42.7 37.4 38.0 16.6 166.6 687.1 874.0 741.0 732.0 310.7 3,344.7Information Systems 37.5 29.2 25.2 21.8 14.3 128.0 805.6 597.6 499.3 421.0 268.2 2,591.7Sub-total Institution Building 847.9 899.2 800.9 823.2 843.2 4,214.4 16,233.6 18,389.2 15,858.6 15,862.0 15,819.5 84,163.0

B. Research Programs1. Regional Research 178.8 147.4 167.10 130.5 85.1 708.9 3,844.2 3,015.5 3,309.3 2,513.9 1,596.8 14,279.72. Commodity/Factor Research

Crops 314.4 236.7 247.0 206.1 213.4 1,217.5 6,761.2 4,839.9 4,890.3 3,971.0 4,003.7 24,466.1 1Livestock and Animal Health 392.0 256.4 209.8 195.2 144.5 1,197.8 8,430.0 5,244.0 4,145.4 3,760.4 2,711.1 24,299.8 _n

Natural Resources Manag. 175.6 119.0 149.8 140.9 131.6 716.8 3,775.8 2,432.6 2,965.8 2,714.6 2,468.6 14,357.3Socioeconomics 91.1 83.9 55.1 47.3 22.0 299.5 1,959.7 1,716.3 1,091.5 912.2 411.9 6,091.6Sub-total C/F Research 973.1 696.0 661.6 589.5 511.4 3,431.6 20,926.7 14,232.8 13,102.0 11,358.2 9,595.2 69,214.9

3. Agriculturld Research Fund 22.3 39.6 73.5 56.3 35.3 227.0 479.2 810.2 1455.01 1,085.0 662.4 4,491.8Sub-total Research Program 1,174.1 883.1 902.2 776.3 631.8 4,367.6 25,250.1 18,058.5 17,866.3 14,975.1 11,854.4 87,986.4

C. Seeds Program 71.5 62.0 129.2 74.6 52.5 389.9 1,537.0 1,267.7 2,558.7 1,473.7 986.8 7,787.9Total PROJECT Costs 2,093.5 1,844.3 1,832.3 1,674.1 1,527.6 8,971.8 45,020.7 37,715.5 36,283.6 32,256.7 28,660.7 179,937.2

xoFh

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Annex 3

KENYASECOND NATIONAL AGRICULTURAL RESEARCH PROJECT (NARP II)

Estimated Schedule of Disbursement

(US$ million)

IDA FY Semester Disbursement Cumulative % TotalDisbursement

1996 2 0.5 0.5 1

1997 1 1.2 1.7 4

2 1.2 2.9 7

1998 1 1.6 4.5 11

2 2.9 7.4 19

1999 1 3.1 10.5 26

2 1.6 12.1 30

2000 1 3.1 15.2 38

2 3.2 18.4 46

2001 1 4.7 23.1 58

2 3.2 26.3 66

2002 1 3.2 29.5 74

2 3.2 32.7 82

2003 1 4.7 37.4 94

2 1.6 39.0 98

2004 1 0.7 39.7 100

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Annex 4Page 1 of 7

KENYASECOND NATIONAL AGRICULTURAL RESEARCH PROJECT (NARP II)

PROJECT IMPLEMENTATION PLAN (PIP)

Guidelines for Format and Content

This document presents an outline for the preparation of the PIP. It is understood that the PIPis organized on the project components and that the respective component-level implementation plansare derived from the NARP 1I Project Implementation Manual (PIMj). Copies of both the PIM and PIPare in the project file. Organizationally, each Component is the assigned responsibility of the Directoror Assistant Director overseeing the relevant Division or Unit of KARI. They have responsibility forthe more detailed implementation required within their respective areas.

1. Purpose, Premises and Users

The Project Implementation Manual (PIM) for NARP II is first and foremost a managementtool to for senior-level institutional managers of KARI and the World Bank who are responsible, at theirinstitutional levels, for the overall management and monitoring of this project. The PIP for the initialtwo years of the project was discussed and agreed during negotiations.

As an executive-level management instrument, the purpose of the PIM is to focus the attentionof senior managers on project and program performance and on strategic issues and concerns affectingthe intended aims, outcomes and impacts of the project. It is meant to assist the senior-level managersto assess and give guidance to those who are responsible for planning, implementing, monitoring,managing project-related activities throughout KARI.

T;he design of the PIM is based on the following premises.

* The PIM sets goals and guides implementation planning and decision-making, but doesnot specify or impose specific activities or operational decisions.

* The PIM promotes performance; it does not prescribe operational plan details.

* The PIM sets the framework for measuring and evaluating progress towardprogrammatic and project goals and targets.

* The PIM is adaptable in format and structure so that implementation infonnation canbe updated on semi-annual and annual basis as required by KARI and the World Bank.

The most important uses of the PIM will be for KARI's continuous, internal quarterly and semi-annual reviews and for the World Bank's annual and mid-term joint GOK-Donor review meetings.

2. Management Requirements of Users

The key users of the PIM are institutional-level decision-makers. In KARI, these are (i) TheKARI Board, (ii) The KARI Management, (iii) KARI Directors and Assistant Directors and (iv)

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Annex 4Page 2 of 7

Research Center Directors. In the World Bank, these are (i) Task Manager, (ii) Technical SupportOfficers, and (iii) Supervision Mission members. In the Ministry of Research, Technology andTechnical Training, these are (i) Senior Management Team of the Ministry, (ii) Budgeting andAccounting Officers, and (iii) Technical Liaison Officers.

The GOK and KARI institutional-level project implementation management requirements focuson planning, managing, coordinating, guiding and controlling organizational and project resources forachieving the project purposes and expected outcomes. The World Bank executive-level projectimplementation management requirements focus largely on monitoring and evaluation project progress:

Factor KARI Management Requirements World Bank ManagementRequirements

Inputs Planning, allocation and management of Financial flows and compliance withresources dedicated to the project and project plans and conditions for projectrelated activities resources

Outputs Guidance and control of resources for Accomplishments and productsachieving results planned for NARP II achieved against those planned for

NARP II

Milestones Critical moments and/or measures of Critical moments and/or measures ofachievement at planned points in time achievement at planned points in time

Impacts Guidance and coordination purposes and Leverage effects and sustainable resultsfor analysis of effects and results for prompted through the project anddecision-making and policy-making related policy effects and impactspurposes.

Assumptions Important, critical changes in the Important, critical changes in thecontextual setting or assumptions that contextual setting or assumptions thatare likely to affect the project in any are likely to affect the project in anysignificant way significant way

Issues Identification of critical operational, Identification of critical issues whichimplementation, technological, are likely to affect the achievement ofmethodological, organizational, policy project aims and need to be addressedissues which need management guidance within the context of the projectand direction

3. PIM Structure

The PIM is structured in line with the following key terms. "Project" refers to NARP II in itstotality. "Dimension" refers to one of the three aspects of the project -- (1) Institutional Development,

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Annex 4Page 3 of 7

(2) Research Program Implementation, and (3) Special Programs. (Note that these were called"components" in the World Bank documentation. "Component" is used to refer to the primary projectimplementation areas which comprise the elements or sub-components of the project dimensions.

The PIM will be organized into the following sections.

Section 1: Summary of NARP II

The PIM comprises an introductory chapter with a summary of the project scope and objectivesand other project information deemed relevant for executive-level implementation managementand monitoring. Critical information contained in other project documents such as the StaffAppraisal Report, Aide Memoires and Working Papers are included.

Section 2: Organizational Arrangements for Implementation

This section of the PIM presents the organizational structure for project implementation,including organizational responsibilities for implementation, relationships with other relevantorganizations and parties, and administrative arrangements for project implementation.

Section 3: Project Monitoring and Evaluation

This section of the PIM presents a summary of the monitoring and evaluation arrangements forthe project, in particular the World Bank supervision and evaluation plan, and identifies criticalproject conditions, covenants and key impact indicators which require monitoring and/or specialattention.

Section 4: Financial Management Arrangements

This section of the PIM presents the project accounting and financial management system,agreement on auditing procedures and schedules, and arrangements for project accounts,statements of expenditure and financial reporting. It 1 includes the overall financial plan andschedule for the project.

Section 5: Project Component Implementation Plans

This comprises the largest section of the PIM. The structure and content of the PIM is basedon the Project Components as defined in Section 4 which are consistent with the projectdocuments and are in line with the organizational structures and responsibilities of KARI, asportrayed on KARI's organizational structure.

4. Organization of PIM by Project Components

The preparation of the PIM and implementation plans for NARP II is organized around theproject components within each dimension.

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Annex 4Page 4 of 7

5. PIM Implementation Information Requirements for Components

The implementation plans for each of the project's Components consist of the informationindicated on the following list and worksheets.

1. Brief Introductory Narrative for the Component(one-two paragraphs -- summarized from Project and Appraisal Reports)

2. Statement of Objective(s) for the Component(one-two paragraphs -- summarized from Project and Appraisal Reports)

3. Key Roles, Responsibilities related to Project Implementation and OrganizationalStructures and Components

4. List of Key Milestones and Benchmarks by year for life of project.

5. Component Summary Implementation Framework: A summary chart to be used formonitoring the key elements of each Component. (See Figure 1)

6. The Component Summary Implementation Plan: A chart summarizing the plannedyear-by-year achievements and most important implementation factors to be monitoredat the executive level by KARI and the World Bank. (See Figure 2)

7. A Component Summary Annual Implementation Monitoring Plan: A planning chartwhich summarizes the annual achievements and factors to be monitored at the executivelevel by KARI and the World Bank. (See Figure 3)

8. Component Summary Implementation Schedule: A bar chart summarizing theimplementation schedule by key activities and by quarter-years for life of the project.(See Figure 4)

The format allows the plans in the PIM to be updated for use in semi-annual, annual andspecial review and evaluation meetings and exercises agreed upon and coordinated by KARI and theWorld Bank.

At such meetings, the managers can also be requested to prepare a Management Submissionconsisting of a narrative of additional management and implementation information which may beuseful for executive management project reviews. These can be updated for reviews and can cover, forexample, the status or any related issues such as: critical project inputs, project outputs and outcomes,complementary projects, key assumptions, implementation issues, sustainability issues, etc.

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Annex 4Page 5 of 7

IMPLEMENTATION SCHEDULE

ACTIVITY YEAR 1 YEAR 2

Start End Start End1.1. Organizational Development

* Decentralize financial management procedures Month 1 Month 12accountability in four centers

* Strengthening research program coordinators Month I Month 12& coordination offices

* Strengthen performance of research Month I Month 6committees

* Decentralize personnel management and Month 3 Month 12training procedures

* Establish monitoring & evaluation processed Month 3 Month 6and procedures

. Staff rationalization Month 7 Month 121.2 Research Management & Management

Information Systems* Training workshops for research management Month 3 Month 12

procedures and information systems* Consolidate/enhance INFORM to contain up- Month 3 Month 12

to-date information on research systems* Establish & Operate a Management

Information System, with focus on PM&E Month 3 Month 12* Development & Operate a research

management information systems (RMIS) Month 3 Month 12* Link RMIS with other management

information systems Month 3 Month I1.3 Documentation and Information Services

* Creation of a computerized union catalogue im Month 1 Month 8KARI

* Provision of selective dissemination of Month 3 Month 12information (SDI) and current awarenessservices (CAS)

* Revitalize NARC Muguga library as KARl's Month 3 Month 12central library

* Establish plans for decentralization of library Month I Month 3services

* Establish links with external databases Month 7 Month 1* Training in information technology Month 5 Month 12* Establish hardware repair and maintenance Month 3 Month 6

capacity* Establish computer training facility Month 6 Month 12* Set up electronic mail Month 7 Month 12

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Annex 4Page 6 of 7

ACTIVITY YEAR 1 YEAR 2........... .......................... ............................ .............................

Start End Start End

* Training in computer communications and Month 3 Month 12documentation

* Publicity activities Month 11.4 Financial Management Systems

* Definition of requirement Month 1 Month 2* Establishment of procedures, and policies Month 1 Month 2* Training Month 2* Computerization Month 6* Financial evaluation Month 7 Month 8.......................................................................................................................................................................................................................................

1.5 Human Resource Management & Development* Training needs assessment Month 4 Month 6- Receiving of application Month 1 Month 2 Month 1 Month 2* Selection of scientists Month 2 Month 3 Month 2 Month 3- Selection of technical support staff Month 2 Month 3 Month 2 Month 3* Selection of management support staff Month 2 Month 3 Month 2 Month 3* Administer admissions Month 3 Month 4 Month 3 Month 4

Improve terms and conditions of service Month 7* Implement new staff promotion system Month 7

.improve staff welfare conditions Month 7............... ..... . ........ ...................................................................................................................................................................................

1.6 Civil Works and Procurement* Establish estate management division Month 6* Draw master plans Month 3 Month 5*Start civil works at Thika Month 6 Month 4- Completion of Embu and Mtwapa Month 7 Month 5* Muguga roads Month 11 Month 9* Njoro water Month 12 Month 5* Access roads at RRCs and NRCs Month 12 Month 5* KARI-HQ junior houses Month 10 Month 8* Purchase of lab and field equipment Month 8 Month 3* Purchase of vehicles Month 7 Month 6............................................................................................................................................................................................................................

2.0 Research Programs* Project compilation Month 1* Presentation of projects of CRACs Month 2* Presentation of projects to CTRC Month 2* Presentation of projects and work plans to SPC Month 3* Approval of Projects Month 4* Approval of funds Month 4* Release of funds Month 4.. Research project implementation Month 4

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Annex 4Page 7 of 7

ACTIVITY YEAR I YEAR 2

Start End Start End

3.0 Seeds Sector Development

* Start seed system coordination unit Month 6* Establishand Operate SIDUs Month 9* Establish & Operate FSUs at Katunami and

Thika Month 9 Month 12* Establish & Operate FSUs at Marinda and

Kitale Month 7* Establish & Operate FSUs at Njoro and Embu Month 7

KENYA NARP It. Procurement Packages and Implementation Schedule

ACTIVITIES P. M. 1996 1997 1998 1999 2000 2001' 1 2 3 1 4 1 2 3 4 1 2 3 4 1 2 3 4 <23 4 12 3-4

1. Works

I I Embu RR Rehllab ICB .1. 2 i .4 . ..1 23 4 56 78j j9

1 2 MtAwapa RRC Rehab ICER

I D I ,: 1 ^ "I :~~~I 13I Njoroi NRC' Water Suppi\ & Rehab NCB

1 23 4 56 7 8 91 4 Seed Unit Facilities NCB

1 23 4 56 6 7 .

1.6 Thilka NRC Laboratories NCB

1 23 4 156 178 91.7 Access Road - Muguga NRC NCB ½< X 1 :

1.8 Internal Road - Kitale. Kisii NCB A isg

1.9 Intemal Road - Naivasha, Njoro NCB I

1.10 Intemal Roa.d - Lmbu NCB 4 56 9

1.11 KARI-IIQ StailHlouses NCB 4 ,78

___ _ _ _ _ _ _ _ _ ____ ____~ ~~~ ~~ ~~~ J23 4 56

PROCUREMEN 1 ACTIONS PROCUREMENT METHOD (PM)I Prepare bidding documents 6 IDA no objection for award ICB-Intemational Competitive Bidding2 Submission of drafl BID to IDA 7 Contract award NCB-Local Competitive Bidding3 Clearance by IDA 8 Construction FA-Force Account oD D4 Bidding period 9 Construction completed x5 Bid evaluation o

0

KENYA NARP 11. Procurement Packages and Implementation Schedule

ACTIVITIES PM 1995 1996 1997 1998 1999 20001 2 1 3 1 4 1 2 ' 3 1 4 _ 1 2 3 4 2 4 12: 3 41 2 ___ __ ____ ___ 2 _3 2 3 4 1 2 3 4

2 Vehicles

2 1 Carsand Pick-upis I B11:x..... s ......

I 2 3 4 5 6 7 8 1 23 4 56 7 8

2 2 Trucks and Buses I[CBR , 4 7Ll i~~~~~~~~~ 2 3 4 156 7 | 8

3 (ioods

. I I.ahoiton Iquipnment 1 ( 13 . + I R R : B

I 1 23 4 56 7 8 9 1 23 4 56 7 8 932 Audio Visual lE quipment ICB

1 23 456 7 8

3 3Uflce Equipment & Compuitel-s ICB i1 23 4 56 7 X 1 23 4 567 8

Ail~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.

NCB1 23 4156 17 8 1 23 - 567

3 4 Field Equipment ICB | B. s

1 23 456 7 8 1 23 4 !56 7 8

3 5 Work;shop Equipment ICB ....... .. [ |

:l *,:~::i~: ! 1 23 456 718 1 23 4 56 7 8

36 Fumiture NCB I *.L1

PROCUREMENT ACTIONS PROCUREMENT METHOD (PM)1 Prepare bidding documents 6 IDA no objection for award ICB-International Competitive Bidding P2 Submission of draft BID to IDA 7 Contract award NCB-Local Competitive Bidding o3 Clearance by IDA 8 Delivery FA-Force Account x4 Bidding period 9 Installation5 Bid evaluation o

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Annex 6Page 1 of 2

KENYANATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE II (NARP II)

Summary Of Objectives And Key Performance Indicators

OBJECTIVES INPUTS OUTPUTS RISKS AND(Resources provided (Goods and services CRMCAL OUTCOMES ANDfor project produced by the project) ASSUMPTIONS IIPACTSactivities) (The outcome is (of project activities)

dependent on ... )Transfonnation of * IDA Credit * improved financial and * Sustainability and * Financial and account-KARI into a leaner ($14.9 million). accounting system which timeliness of local ing system decentralizedand more efficient * Grants from is decentralized to the counterpart funding. and operational in allorganization. other donors (S4.6 research centers. * Strengthening of research centers.

million). * Rationalized network of extension and * Reduction in number o* GOK counter- research centers. support services. research centers.part (S64.7 * Streamlined KARI * Reassignment and * 1400 staff retrenched.million). headquarters organization rationalization of * Two pilot soil

and management. functions of research analysis laboratories forFunds will * Library upgraded at centers. improved fertilizerfinance civil KARI headquarters and * Staff retrenchment recommendationsworks, equip- research center. program is on established.ment, books, * Agricultural Research schedule. * More effectivetraining, research, Fund in place. * Functions/man- research planning andtechnical * Scientists trained in dates and numbers of management system.assistance and the advanced research research centers are * 10% increase inretrenchment techniques. rationalized, number of scientist withprogram. * Fanming systems * Modalities for postgraduate degrees.

research approach (FSA) management and use * Greater participationintroduced. of funds generated of farners in planning* Establish sustainable are transparent and and implementation ofsource of research sound. relevant researchfunding programs.

* Continuity of researchprograms is assured.

Implementation of * IDA Credit * 25% increase in re- * Availability and * Research focused onpriority research ($20.6 million). search output on crops, timeliness of priority areas.programs and effective * Other donors livestock, biotechnology, counterpart funding. * 25% increase indissemination of ($55.5 million). natural resource manage- * Increased farmer improved technologiesinproved technologies , Private sector ment and socioeconomics. involvement in iden- for dissemination.

(S7.0 million). * Specialized laboratories tifying production * Specialized research* GOK ($5.0 rehabilitated and constraints and in laboratories are inmillion). equipped. implementation of operation.

* Improved quality and on-farm adaptive * Increase technologyFunds will implementation of research. transfer support at 10finance operating adaptive research at * More effective RRCs.costs, civil works, Regional Research collaboration with * Increase collaborationfield equipment, Centers (RRCs). the extension with extension.in-service train- service.ing and technicalassistance.

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Annex 6Page 2 of 2

Summary Of Objectives And Key Performance Indicators

OBJECTIVES INPUTS OUTPUTS RISKS AND(Resources provided (Goods and services CRMCAL OUTCOMES ANDfor project produced by the project) ASSUMPTIONS IMPACTSactivities) (The outcome is (of project activities)

dependent on...)

Implementation of * Standard research and * Increase inpriority research development procedures productivity of majorprograms and effective using the FSA introduced. crop/livestock/agro-dissemination of im- * Two pilot soil analysis forestry productionproved technologies. laboratories for improved systems.(con't) fertilizer recommenda-

tions established.

Provide good quality * IDA Credit * Liberalized seed * Implementation of * Availability of highseeds or planting ($4.1 million) industry. policies to liberalize quality seeds andmaterials of * USAID (S3.0 * Improved seed the seed industry. planting materials ofrecommended million). processing and recommended varieties.varieties. * GOK (S0.7 distribution system. * Import and export of

million). * Seeds of recommended seeds is facilitated.varieties available to * Production of seeds

Funds will farmers. by the informal seedfinance training, * 5 Foundation Seed sector, e.g. individualseed processing Units in operation. farmers, is facilitated.facilities and * 5 commercial seedtechnical industry developmentassistance. units established.

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Annex 7Page 1 of 3

KENYA

NATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE II (NARP II)The National Agricultural Research Strategy and Plan

1. Kenya continues to require significant and sustained increases in agricultural production to keeppace with population growth, provide additional employment, generate better standards of living andincrease exports. There is extreme pressure on the resource base of land and water. Greatly increasedproductivity must therefore be achieved while maintaining or if possible, improving the productivecapacity of natural resources.

2 In addition to the inadequacies in the policy environment, the physical challenges to increasingsustained agricultural growth are formidable. There is very little high potential agricultural land left forexpansion of cultivated agriculture or grazing, leaving intensification of land use as the only viableoption for increased production. Plots of land continue to be subdivided to a size that is increasinglyunable to sustain the families which farm them, leading to migration to semi-arid areas, encroachmentof farming into forests and game parks and widespread off-farm employment in search for additionalsources of income. The fragile drier areas are experiencing adverse environmental impacts of rapidpopulation increases and use of inappropriate technologies. The spread of settled agriculture in theseareas denying pastoralists access to dry season grazing areas, have also caused deepening povertyamong the mainly nomadic people.

3. Transformation of agriculture and moving the sector to a higher growth path, encouragingprivate enterprise and refocusing the role of Government, will require new yield and productivityenhancing technology. In order for the research system to operate efficiently and have impact, it isessential to have a clear vision of the national agricultural development strategy and the researchpriorities. The framework which guides KARI in the identification of the Institute's research prioritiesis laid down in major policy documents endorsed by GOK which outline the role and obligations of the

1 2

National Agricultural Research System (NARS) and its main thrusts.

4. Sessional Paper No. 1 of 1986 focuses on the adoption of more productive practices inagriculture using improved varieties and fertilizers, and control of diseases and pests. It emphasizes

The NARS includes all institutions and organizations involved in agricultural research in Kenya, not justKARI.

2Important among these are: Sessional Papers No. 1 of 1986 on Economic Management for RenewedGrowth and No. 1 of 1994, on Recovery and Sustainable Development to the year 2000; the NationalDevelopment Plans of 1989-1993, and of 1994-1996; the National Council for Science and TechnologyReport on National Priority Areas (No. 30 of October, 1989);and the National Agricultural ResearchStrategy and Plan (1986), and several PFPs, especially the latest (1995-1997).

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research on new varieties especially in maize and other food grains, production of tea, coffee andvegetables in order to generate higher incomes and employment. The paper lists the following crops inorder of priority: coffee, tea, maize, wheat, milk, meat and horticultural crops. Those listed assecondary are: sorghum, millet, rice, root crops, sugar and oil crops. Sessional Paper No. 1 of 1994stresses the importance of the development and diffusion of technical innovations to enhance yields andthe availability and efficient use of labor, fertilizers and other inputs; the promotion of high valueagricultural activities to generate increased employment, incomes and foreign exchange is advocated.The paper advocates strengthening agricultural research and extension services and ensuring improvedeffectiveness through increased financing for non-salary operating and maintenance costs, among othersas a result of Civil Service Reform. Strengthening of linkages between research (KARI) and extension(MALDM) is emphasized. Research on horticulture and oil crops is assigned high priority. Theimportance of protecting and ensuring the sustainable use of genetic resources is stressed.. It is statedthat agricultural marketing institutions and other organizations will be encouraged to collect commodity-specific research levees such as already exist for coffee, tea and sugar. The Government's policy toensure an adequate supply of good quality seeds for a wide range of crops is high-lighted, urging theprivate sector to invest in seed production and distribution. The importance of small-scale irrigationdevelopment through private farmers initiative is emphasized.

5. The National Development Plan (1989-1993), outlines an overall thrust for agricultural policyin Kenya. According to the plan, the three principal development policy objectives for Kenya are:

(i) to achieve internal self-sufficiency in agricultural production;

(ii) to maintain adequate levels of strategic reserves; and

(iii) to generate additional supplies for export.

6. This policy thrust is expected to contribute towards the attainment of Kenya's objectives ofincreased employment, income generation, foreign exchange earnings, rural and urban balance, foodsecurity and overall economic growth. The document for 1994-1996 reiterates these broad policyobjectives. In addition, it stresses the importance of agricultural research, of age and gender as factorsin agricultural production, of safeguarding the country's genetic resources and of recognizing PlantBreeders' Rights. A commitment is made to maintaining an up-to-date assessment of nationalagricultural research capacity and to the optimum utilization of human resources and infrastructure;closer collaboration between KARI, Universities and LARCs is advocated, confirming that KARI willmaintain its role as the umbrella organization for agricultural research in Kenya. The Plan alsorecommends that the application of biotechnology in agriculture and livestock production be encouragedand developed. It advocates competition in seed production and marketing, and the need forGovernment to continue to ensure seed quality.

7. The National Council for Science and Technology Report identifies as research priorities: postharvest processing and storage, watershed management and hydrological studies (especially in relationto the conservation and management of soil resources), plant and animal genetic resources, cropproduction, agro-forestry systems, plant and animal health and diseases, animal production managementand ecology, agricultural policy research, the economics of farming, education and extension and,energy for production in agriculture.

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8. In the current draft PFP, the Government recognizes that the seed industry in Kenya wouldbenefit from increased competition. In order to have a competitive seed industry in operation, theGovernment would take additional steps to:

(i) issue a policy statement allowing for production and trade of all seeds especiallycereals) and planting materials by a plurality of MALDM-approved producers/traders;

(ii) liberalize marketing of seed;

(iii) establish financially self-sustaining breeder and foundation Seed Units at the KenyaAgricultural Research Institute's (KARI) research centers based on the sale of KARI'sfoundation and breeder seed to private sector seed companies and farmer seedproducers; and

(iv) improve public plant quarantine facilities to facilitate the import and export of seed.

9. The Government acknowledges the importance of technology generation and dissemination inits strategy to accelerate agricultural growth; in that respect, the role of KARI is crucial. In the contextof NARP II, the Government has initiated a review of KARl and has developed an action plan tostreamline the Institute to allow it to implement its mandate more effectively and efficiently.Implementation of this plan is scheduled to occur over 1995-97. This will include a rationalization ofthe Research Center Network, reduction in number of non-essential support staff, redeployment ofscientists, and greatly improved funding of non-salary research operating costs. The Government willexamine the potential for financing agricultural research from levies based on agricultural seed sales.'he Government will also strengthen KARI's performance and facilitate agricultural research beingfocused on the key priorities by expanding the role of KARl's Agricultural Research Fund (ARF) in thefinancing of research "contracts", including collaborative research with other National or InternationalAgricultural Research Institutions.

10. The research priorities generated and accepted by KARI such as laid out in the "AgriculturalResearch Priorities to the Year 2000" and the NARP Phase II PPD, are based on the above nationaldevelopment goals and objectives. The national research thrusts identified and detailed in the researchpriority statement based on the key national priority areas, including: proper management andconservation of the natural resource base as an insurance for sustained agricultural productivity;promotion of national food security; sustained use of under-exploited natural resources; generation ofemployment opportunities in order to alleviate poverty and thus facilitate overall economic growth; andgeneration of foreign exchange earnings through export of surplus agricultural products.

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Annex 8

KENYANATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE II (NARP 11)

The Regional Agricultural Research Strategy of Countries in the ASARECA

1. KARI is a member of the Association for Strengthening Agricultural Research inEastern and Central Africa (ASARECA), established at Addis Ababa in September 1994 andcomprising the National Agricultural Research Institutes of 9 countries in the region (Burundi,

Eritrea, Ethiopia, Kenya, Madagascar, Sudan, Tanzania, Uganda and Zaire). ASARECA isthe region's response to the critical need for efficiency and effectiveness in agriculturalresearch, and based on the realization that the NARSs of the Eastern and Central Africa (ECA)region together can be more than the sum of its parts. The members of ASARECA haveendorsed a "Framework for Action", which seeks to better equip national agricultural researchto make its essential contribution to equitable development, food security and environmentalsustainability, both regionally and nationally.

2. This will involve:

(i) Institutional reforms of NARSs, building capacity to evolve an enabling environmentfor creativity, innovation and improved performance. This includes the generation of aNational Research Master Plan and Strategy. Agricultural research should featureprominently on the agenda of policy-makers to ensure adequate, stable and timelyfunding especially of recurrent research operating expenditures;

(ii) New modes of regional collaboration among NARSs, based on the principles ofcomparative advantage and relative strengths to achieve economies of scale and criticalmass to address common priority constraints; and,

(iii) Farmers' participation in setting the research agenda, and research and extensiondelivering technology to them in easily understandable terms. The active involvementof scientists, farmers and extensionists in the implementation of research will beencouraged and supported.

3. Strengthening of the NARSs implies up-to-date national strategic plans for agricultural researchthat include stakeholders in the setting of the research agenda, are gender-responsive and concemed withenvironmental sustainability, and ensure that the research agenda reflects key developmentopportunities, applies a production to consumption approach, and promotes institutional pluralism. TheFFA subscribes to the development of regional collaboration by rationalizing current collaborativenetworks and by setting priorities for regional collaboration in agricultural and natural resources

management research, including involvement of the IARCs.

1Two additional countries, Rwanda and Somalia are expected to join ASARECA later.

2For a more detailed description of the FFA, see "Strengthening National Agricultural Research Systems inEastern and Central Africa, World Bank, 1995".

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Annex 9Page 1 of 4

KENYASECOND NATIONAL AGRICULTURAL RESEARCH PROJECT (NARP II)

CONSULTANT SERVICES REQUIREMENTS

Person Months ProcurementProcedure '

A. CAPACITY BUILDING SUPPORT

Short-term Consultants

1. Training Specialist 8 International2. Integrated Pest Management 9 International3. Research Management LumpSum Intemnational4. Socio-economist Lump Sum LocaUInternational5. Various disciplines - Supervision/Studies Lump Sum Local6. Desk-top Publishing Consultant Lump Sum International/Local7. Biotechnology International8. Natural Resource Management Lump Sum International/Local9. Pasture Agronomist International/Local

10. Post-harvest Specialist (Durables and Perishable) Lump Sum International11. Livestock Specialist 9 Local12. Crop Protection Specialist (Weed Control) 9 International13. Various disciplines Lump Sum Local/International

B. PROJECT PREPARATION ANDIMPLEMENTATION SUPPORT

1. Farming Systems Research Specialist 24 International2. Seed Production Specialist 36 International

(Short - Term Consultants) Lump Sum International/Local

1. Procurement Specialist2. Information Specialist3. Monitoring & Evaluation Specialist4. Mid-term Review5. Various studies6. Engineer/Architect - Design and Supervision

of Civil Works program7. Agricultural Research Fund8. Personnel Management Specialist9. Organization and Management Specialist

10. Financial Management Specialist

Notes: Additional details on the consultancy requirements are provided in the Project Implementation Plan.a/ "International" means internationally recruited; "local" means locally recruited.

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Annex 9Page 2 of 4

TERMS OF REFERENCE

Farming Systems Research Specialist

INTRODUCTION

1 . KARI has identified a need in the Office of the Assistant Director for Regional ResearchCenters (RRCs) for a farming systems research specialist to assist in the development of researchmanagement systems, research protocols, including diagnostic analyses of production constraints,design of the appropriate research, analysis of data and interpretation of results; and formulation ofeffective programs for the transfer of technologies to beneficiaries. The consultant would continue theinstitutionalization of the farming systems approach for developing and adaptation of improvedtechnologies which was initiated under NARP I.

SCOPE OF WORK

2. The farming systems research specialist would assist KARI:

(a) Identify and generate technologies appropriate to farmers in the dominantcrop/livestock production systems of the various agro-ecological zones of the regions;

(b) Formulate strategies and implement actions to disseminate such technologies throughimproving quality and relevance of adaptive research,

(c) Identify priority areas requiring improvements/strengthening to improve theimplementation of the Farming Systems Approach (FSA) to agricultural research anddevelopment in KARL;

(d) Strengthen mechanisms to effectively coordinate interdisciplinary regional researchprograms at KARI HQ and RRCs and improve the procedures to provide necessarytechnical guidance and on-the-job training to RRC scientists; and suggest actions to betaken to implement such actions;

(e) Develop standard FSA methodologies suitable for Kenyan circumstances which wouldbe applied to all projects following the FSA, irrespective of sources of funding/donors;

(f) Coordinate technical assistance inputs in research programs following the FSA;

(g) Strengthen working linkages between the AD for RRC and other KARI directorates,NRCs, Ministry of Agriculture, Livestock Development and Marketing (MALDM),Universities, farmers, and NGOs and lARCs;

(h) Improve institutional mechanisms for systematic and timely planning, implementation,evaluation and reporting of regional adaptive research activities; and

(i) Publish a Newsletter on the FSA and other RRC activities.

3. The consultant would participate in the delivery of training courses, various meetings, seminarsand symposia; and specific activities related to facilitating operationalization of FSA in KARI andimproving the effectiveness of the RRCs.

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Duration:

Two years.

Duty Station.

KARI Headquarters, Nairobi, Kenya. The farming systems specialist will report to theDirector for Research through the Assistant Director for RRCs.

TERMS OF REFERENCE

Seed Systems Specialist

INTRODUCTION

To implement the seed component of NARP II, KARI has identified the need for a seed systemsspecialist (hereinafter referred to as "specialist") in the Seed Coordination Unit. The mainresponsibilities of the specialist would include assisting KARI and MALDM in the development of aseed system initially in the pilot area.

SCOPE OF WORK

More specifically the specialist will:

(a) Assist KARI in the implementation of seed production programs in the informal andformal sectors in the pilot area, and in improving the effectiveness of the breeder andfoundation seed production activities of the Foundation Seed Units (FSUs) to be set upunder the project.

(b) Identify the existing barriers to the entry of good quality seed and germ plasm intoKenya and assist KARI and MALDM to take appropriate policy and proceduralmeasures to overcome them.

(c) Provide on-the-job training to the FSU and Seed Industry Development Unit (SIDU)staff.

(d) Assist the KARI research staff of the centers concerned, in training the Subject MatterSpecialists of the extension system in the various aspects of seed production, includingdissemination of information relating to seed production technologies and marketing.

(e) Identify and generate a management system appropriate to the Seed Coordination Unit,FSUs and SIDU.

(f) Propose measures to strengthen mechanisms in KARI to effectively provide thenecessary technical and business assistance to seed growers and marketeers.

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(g) Assist KARI in drawing up the annual work program and budget to implement the seedcomponent of NARP II.

(h) Propose improvements to the institutional mechanisms for systematic and timelyplanning, funding, implementation, evaluation and reporting of seed production andmanagement, information dissemination, training and consulting activities.

(i) Assist KARI publish a bi-annual Newsletter on seed industry in general and on theactivities under the seed component of NARP II in particular, and to draw the attentionof private and public seed sector seed industry to the current trends and practices in theindustry relevant to Kenya.

(j) Assist KARI strengthen the working linkages between the Seed Coordination Unit andother departments/divisions of KARI, NRCs, RRCs, MALDM, Universities, formaland informal seed producers, and NGOs.

4. The specialist will participate in the design and delivery of training courses, various meetings,seminars and symposia, and specific activities related to the development of seed system in Kenya; andwill assist the MALDM in formualting a legal framework for seed system development which wouldfacilitate its all-round development.

5. The specialist will report to the Director for Research through the Manager of the SeedCoordination Unit.

Duration

Three years.

Duty Station

KARI Headquarters, Nairobi, Kenya.

ANX09CONFNLJune 14, 1996 11:54AM

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Annex 10Page 1 of 5

KENYANATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE II (NARP II)

AGRICULTURAL RESEARCH FUND

INTRODUCTION

1. The need for local universities, private sector and individual scientists to complement andsupplement KARI efforts in agricultural research and development was identified during reorganizationand rationalization of the national agricultural research system (1985-86). The reorganization andrationalization process resulted in a plan called the National Agricultural Research Program ofSeptember, 1986. One of the Program's recommendations was the creation of an Agricultural ResearchFund (ARF). The ARF was established in February 1990, and officially launched by the Minister forResearch, Science and Technology on July 19, 1991. The ARF is now fully operational with aSecretariat based at the KARI Headquarters.

RATIONALE

2. The creation of the Agricultural Research Fund and its establishment within KARI is justifiedas follows:

i) Under the reorganized and rationalized National Agricultural Research System,KARI is the major research organization responsible for research work on cropsand livestock, except research on some industrial crops, primarily coffee and tea.It is charged with developing national agricultural research plans and priorities inaccordance with the national development goals and objectives.

ii) KARI is a parastatal research organization established under the Science andTechnology (Amendment) Act of 1979. It is a body corporate with perpetualsuccession and a common seal. It has power to acquire, hold and dispose ofmovable and immovable property for its own purposes. Under this provisionKARI can receive grants, gifts and loans for the purposes of agricultural research.Therefore, the creation of the ARF did not require the establishment of a separatecorporation.

iii) As a statutory requirement under the Act, KARM is expected to establish andstrengthen linkages with other public and private organizations involved (directly orindirectly) in agricultural research and production. Through appropriate forumsand linkage mechanisms, these organizations can contribute to the setting ofnational research priorities, implementation of research programs anddissemination and use of research results. The ARF constitutes a major linkagemechanism.

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Annex 10Page 2 of 5

iv) KARI's financial and procurement regulations and procedures are acceptable toboth the Kenya Government and to the broad donor community, thus facilitatingdisbursement of funds and accountability.

OBJECTIVES

3. The Agricultural Research Fund (ARF) was established to provide a mechanism for fundingagricultural research that is complementary to the research funding through KARI, universities andother agencies from public, private bilateral and multilateral sources. Such complementarity is achievedby focusing the ARF funds on selected, high priority topics within the framework of KARl's prioritiesfor supporting agricultural development, and by competitively allocating funds in a manner designed toachieve synergy and cost-effective research.

4. The specific objectives of the Agricultural Research Fund are:

i) To more effectively access the country's scientific community and draw upon thecomparative advantage of various institutions to contribute to the priority researchof KARI.

ii) To contribute to developing an environment that promotes and expandsopportunities for innovative research by scientists in both the public and privatesectors.

iii) To achieve synergy and more cost-effective research through mechanisms thatenhance teamwork, collaboration between KARI scientists and those in public andprivate institutions, and greater participation of stakeholders in the formulation andfunding of agricultural research proposals.

iv) To broaden the participation of the private sector in supporting research,particularly of major commodities, and

v) To promote stronger linkages between agricultural research and tertiary leveltraining in agriculture to enhance the quality of training, particularly at post-graduate levels.

ORGANIZATION AND STRUCTURE

5. The Agricultural Research Fund is a discrete entity within KARI. It is managed, on behalf ofthe KARI Board of Management, by the Research Fund Management Committee (RFMC). Themembers of the RFMC comprise representatives drawn from public and private institutions, eachmember having been chosen for his/her distinguished career in agricultural development, particularlyagricultural education, research or research management. Members serve for three years, extendible foranother three year term. The RFMC has the following broad representation and minimum of sevenappointed members:

* Universities and Scientific community (three members)

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* Government institutions (two members)* Private sector (two members)

6. The Director and Deputy Directors of KARI, Head of the ARF Secretariat and donorrepresentatives are ex-officio members of the RFMC are:

GENERAL AREAS OF RESEARCH

7. The following broad descriptions give a general idea of research topics supported by the ARF.Specific areas of investigation will be defined each year by the RFMC, and announced publicly.

a) Crop Science: Research on production of agricultural and horticultural crops;crop management including soil, water, fertilizer studies; plant-microorganismrelationships; disease, pest and weed control; plant breeding; plant biotechnology;and farming systems

b) Animal Production: Animal breeding, reproduction and nutrition; health anddiseases; development, production, conservation and utilization of feed; animaltraction; animal biotechnology; and animal production systems.

c) Food Science: Post-harvest systems and technology; storage; food processing andtechnology; food safety and quality; and food composition and nutritional value.

d) Agroforestry: Agroforestry for control of soil erosion, improvement andmaintenance of soil fertility; multipurpose trees/shrubs for fodder, fruits, fuelwood,timber, etc.; and farming systems.

e) Natural products: Identification, isolation, characterization and preparation oforganic compounds to produce medicinal, insecticidal, biological and industrialproducts.

f) Aquaculture: Selection of sites; selecting, breeding, rearing and nutrition ofcultivable organisms; and disease control.

g) Agricultural Policy and Economics: Research on policies affecting agriculturalresearch and development; pricing and marketing of commodities; and technologyadoption studies.

8. It is anticipated that research proposals will be for highly applied research and contributedirectly to technology formulation and uptake by farmers, or lead to commercial applications.

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ADMINISTRATION AND PROCEDURES

Invitation for Research Proposals

9. The ARF Secretariat will publish the Invitation for Research Proposals in daily newspapers(with copies sent to relevant institutions) in June each year. Application submissions are due bySeptember 15, and the applicants will be informed of the decisions by December 31 of the same year.Grant funds will be available from January 1, of the following year.

10. Applications must be made on Annex 1, the ARF Application Form, and be in accordancewith the guidelines provided in Annex 2 of the form. Copies, including telefaxed copies will not beaccepted. A copy of the application form may be used. The applicant must submit to the ARFSecretariat the original signed document. The quality of the document must be good enough toenable the Secretariat to make copies. Applications shall be prepared in English and typed.

Registration of Applications

11. Each application received by the Secretariat will be given a number and entered in a register.All research proposals will be filed and treated as confidential documents by the ARF Secretariat.

FUNDING SOURCES AND POLICIES

12. Funding of the ARF comes from public and private institutions, donors and individuals. Initialfunding has come from the United States Agency for International Development (USAID) for US$0.521million; KShs.20,000 from the Agricultural Research Foundation (AGREF) to support Small RuminantResearch, and KShs. 1 million from the Kenya Seed company for crop varietal development and seedtechnology; £50,000 pound sterling from the ODA; and US$49,000 from the World Bank. Governmentcontribution to the ARF would be provided through an IDA credit in the amount of about US$4 million.Additional funding is to be sought from donors and Kenyan agro-industries, particularly those involvedwith major commodities. Funds are maintained in a multi-donor account with a Commercial Bank.Earmarking of funds for specific purposes by the donors is permitted, as are special conditions relatingto proprietary rights and royalties. In cases of such special conditions, these are reflected as anaddendum to the contract agreement between the ARF, the principal Investigator receiving the awardand the participating (host) institution.

13. To attract industry funding of the ARF, the RFMC is prepared to consider allocatingmatching funds in support of research grants supported through industry funding. Matching fundsmay come either from untied ARF funds or from KARI where the proposed research is seen byKARI management to be highly complementary to KARI work. The revised ARF provides anattractive means by which the private sector/industry can contract research, by offering atransparent and competitive system of research grant award, accounting, monitoring andevaluation. The incentives for such are i) the provision for the ARF to give matching grants forfunds provided by the private sector, and ii) the absence of any proprietary rights over thetechnologies/varieties developed using funds from the ARF. ( The arrangements for collaborativeand contract research through the competitive mechanism of the ARF should be viewed ascomplementary to those arrangements which KARI may wish to contract directly, in order to

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supplement its own research). It is the long-term objective of the RFMC to establish an EndowmentFund for the ARF to sustain its operations. Accordingly the RFMC maintains a separate interestbearing account with a Commercial Bank to receive grants and donations towards the establishmentof an Endowment Fund.

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KENYANATIONAL AGRICULTURAL RESEARCH PROJECT PHASE II (NARP II)

Supervision Plan

Timing Staff Weeks Stafring Duration

FY1997 12 Bank resources of which:- Task Manager 6 weeks- Financial Management Specialist 2 weeks- Agricultural Economist 2 weeks- Seeds Specialist 2 weeks

FY1998 22 Bank resources (including the Mid term Review) of which:- Task Manager 6 weeks- Financial/Management Specialist 2 weeks- Civil Works/Procurement Specialist 2 weeks- Information/MIS Specialist 2 weeks- Seeds & Crops Research Specialist 2 weeks- Socio-economist 2 weeks- Livestock Specialist 2 weeks- Technology Transfer/Extension Specialist 2 weeks- Research O&M and M&E Specialist 2 weeks

FY1999 20 Bank resources of which:- Task Manager 6 weeks- Financial/Management Specialist 2 weeks- Farming Systems Specialist 2 weeks- InformationtTechnology Transfer Specialist 2 weeks- Socio-economist 4 weeks- NRM/Soils Research Specialist 4 weeks

FY2000 12 Bank resources of which:- Task Manager 6 weeks- Research O&M and M&E Specialist 2 weeks- InformationwTechnology Transfer Specialist 2 weeks- Civil Engineer/Procurement Specialist 2 weeks

FY2001 8 Bank resources of which:- Task Manager 6 weeks- Research O&M and M&E 2 weeks

FY2002 18 Bank resources (including the ICR) of which:- Task Manager 6 weeks- Research Management Specialist 4 weeks- Financial Analyst 4 weeks- Socio Economist 4 weeks

Some of the required experts would be provided by the other donors.

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Annex 12Page 1 of 5

KENYANATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE II (NARP Il)

KENYA AGRICULTURAL RESEARCH INSTITUTE

INTRODUCTION

Mandate and Mission

1. The Kenya Agricultural Research Institute (KARI) was established as a parastatalorganization by the 1979 Science and Technology (Amendment Act) to establish: a firm base fordeveloping a national agricultural research program responsive to the national developmentobjectives to develop well focused, relevant short and medium term research projects. This wouldbe accomplished through the establishment of a dynamic organizational structure and researchmanagement systems, human resource development to produce highly skilled staff, and adoption ofa terms and conditions of service and performance incentive schemes to retain these staff andprovide them an environment conducive to high quality research and generation of relevant andcost effective technologies, particularly for smallholder agriculture in Kenya. KARI is the maininstitution comprising the Kenya National Agricultural Research System (NARS).

2. KARl's programs focus on poverty alleviation and sustainability of agriculturalproduction while protecting the environment and conserving Kenya's natural resource base.KARI's mission is to protect, conserve and improve the basic resources upon which Kenyadepends for agricultural development; increase and improve the quantity and quality of food andother farm products, and thereby, increase the demand for those products in the local and exportmarkets. KARI will give emphasis to developing improved farming technologies which willincrease farmers' production and incomes and improve their quality of life. It is KARl'sresponsibility to participate in the development of Kenya's Science and Technology policyspecially as it pertains to agricultural research policy, deternine agricultural research priorities,formulate research plans to support national development objectives, and ensure that effectivemechanisms for integrating and linking technology generation and dissemination are in place.

Organization and Management

3. KARI started as a research institute located at Muguga under the East African Agricultureand Forestry Organization (EAAFRO) and the East African Veterinary Research Organization(EAVRO). Both organizations were attached to the Ministry of Agriculture and LivestockDevelopment and Marketing (MALDM). In 1986, KARI was established as a nationalagricultural research organization by consolidating the former EAAFRO, EAVRO and thescientific research division of the MALDM into the present KARI. When MALDM was split intotwo ministries, KARI remained with the Ministry of Agriculture. In 1991, KARI was eventuallytransferred to the Ministry of Research, Technical Training and Technology (MRTTT) where itcurrently belongs.

Annex 12 -8 -

Page 2 of 5

4. The Kenya Agricultural Research Institute is managed by a Board of Managementcomprising eleven ex-officio members representing relevant Government offices, and sevenappointed members representing researchers, members of the academe, agri-businessorganizations/parastatals and farmers. KARI comprises a Headquarters Secretariat providing theoverall implementation coordination oversight for technical and administrative operations. The dayto day management of the Institute is the responsibility of the Director of KARI. He is assistedtwo deputy directors, and 11 assistant directors who are experienced scientists in various areas ofagricultural research, personnel administration and financial management and accounting. KARI'snetwork of research centers and organizational chart are given in Attachment 1 and, Charts 1 and 2respectively. KARI is comprised of National Research Centers (NRCs) and Regional ResearchCenters (RRCs). The management of the research centers rests with Center Directors. Currently,KARI has 11 centers with national mandates, 4 centers with both national and regional mandatesand 6 centers with regional mandates, spread throughout the country. In addition KARI has 12subcenters which serve as experimental sites. National research programs are coordinated andmanaged at NRCs by program leaders or program coordinators based at the NRCs. The RRCdirectors, assisted by adaptive research coordinators, are responsible for the adaptive researchprograms of the regions which are predominantly conducted in farmers' fields.

Research Programs

5. The Kenya Agricultural Research Institute has put in place a process for research programplanning and priority setting which involves the active participation of the extension service, farmersand other intended beneficiaries. Since 1991, KARI has established the research priorities for variouscommodities, technical disciplines and factors of production. These priorities were reviewed in 1995and further prioritization within the research programs has been initiated. KARI is currentlyimplementing strategic and problem-oriented, applied research programs, in various commodities(cereals, fruits and vegetables, industrial crops, roots and tubers, floriculture, grain legumes, beef anddairy cattle, small ruminants, poultry, etc.), factors of production (animal diseases, soil and watermanagement and conservation, range management, fertilizer use), and disciplines (integrated pestmanagement, postharvest physiology, socioeconomics, etc.). KARI has made significant achievementsin the development and release of improved, high yielding, disease resistant varieties of most ofstrategic food and pasture crops, animal vaccines, animal disease diagnostic kits, fertilizerrecommendations packages, soil conservation and water harvesting technologies, integrated pestmanagement practices, dairy and beef production packages, and in the selection and development ofimproved breeds of large and small ruminants.

Physical Infrastructure and Human Resource

6. KARI's physical infrastructure has been rehabilitated and expanded in past years(including under NARP I) and is now reasonably adequate though a small part of theconstruction/rehabilitation program remains to be completed. The remainder of the program wouldbe implemented under NARP II.

7. KARI's most important asset is its highly trained human resources. At reorganization,KARI had a staff compliment of approximately 6,200, comprising 576 scientist, most of them withbachelors and masters degrees At present, the number of staff has decreased to 5307. The numberof scientists also decreased to 537 scientists but the number with PhD degrees has increased by 30percent, with MSc degrees by 50 percent and those with B.Sc. degrees down to 20 percent.

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Annex 12Page 3 of 5

KARI's training program has, therefore, been successful in upgrading the qualifications and skillof the scientist. Under NARP II, a special focus will be given to upgrading the skills of technicaland administrative staff.

Financial Resources

8. KARI is supported by the Government of Kenya (GOK) and a number of multi-lateral andbilateral donors. The total GOK support to KARI for personnel emoluments, recurrent operatingand development cash book expenditure has increased from KSh 275.7 million to KSh 677.5million form 1990 to 1994. The Donors that have supported KARI over the last 10 years includethe World Bank, the European Union (EU), the Japan International Cooperation Agency (JICA),Overseas Development Agency (ODA), Swedish International Development Authority (SIDA),United States Agency for International Development (USAID), the Government of the Netherlands(GON), Canadian International Development Agency (CIDA), United Nations DevelopmentProgram (UNDP) and the Australian Center for International Agricultural Research (ACIAR).Total donor contribution to KARI amounted to KSh 178.7 million in 1993/94 financial year. Thetotal support from the GOK and donors amounted to KSh 856.3 million. KARI is allowed to useincome generated from its operations to augment its budget for non-salary recurrent cost. KARIearned KSh 12 million in 1990 which rose to KSh 24 million in 1993/94.

Annex 12 - 87 -

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KENYA NATIONAL AGRICULTURAL RESEARCH FACILITIES

A. MAIN RESEARCH STATIONS

Centers Main Program

1. National AgriculturalResearch Center, Kitale

2. National Sugar Research Negotiations for transfer to KSACenter, Kibos on-going.

3. National Plant Breeding Water supply will be improvedResearch Center, Njoro under NARP II.

4. National Agricultural No additional work requestedResearch Laboratories,Kabete

5. National Horticulture Admin. block and res. laboratoryResearch Center, Thika needed. No donor identified.

6. National Dryland Fanming No additional work needed.Research Center, Katumani

7. National Potato Research No donor identified.Center, Tigoni

8. National Animal Husbandry Requires all weather road. AlsoResearch Center, Naivasha supported by GON

9. National Range Research No additional work needed.Center, Kiboko

10. National Agricultural Soil & water, dairy, plantResearch Center, Muguga virology, gene bank, CBC, has

regional mandateI. National Veterinary Production, virology proto-

Research Center, Muguga zoology, helminthology12. Regional Agricultural RRC

Research Center, Kakamega

13. Regional Agricultural RRCResearch Center, Kisii

14. National Pyrethrum & Pyrethrun and HorticultureHorticulture ResearchCenter, Molo

15. Regional Research Center, RRCEmbu

16. National Fiber Research Cotton, kenaf and sunflowerCenter, Mwea Tebere

17. Regional Research Center, RRCMtwapa

18. National Cotton Research CottonCenter, Kibos

19. Beef Research Center, Lanet Beef Production20. National Seed Quality Seed Technology

Control and CertificationCenter, Lanet

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Annex 12Page 5 of 5

A. MAIN RESEARCH STATIONS (Con't.)

Centers Main Program

21. Regional Research Center, Perkerra RRC22. National Arid Lands Research Arid-Semi Arid Lands.

Center, Marsabit23. Veterinary Research Center, Kabete Vaccines24. Regional Research Center, Garissa RRC

B. SUB-STATIONS

Sub-Centers Parent Center

1. Olhnagongo, Research Site, NRC, Naivasha

2. Transmara Field laboratory, VRC

3. Alupe Research Site, RRC, Kakamnega

4. Homa Bay, Research Sites, RRC, KisiiOyuni, Kilgoris

5. Gituamba Research Site, NRC, Thika

6. Kampiya Mawe, Research Sites, NRC, KatumaniVoi

7. Marindas, Research Sites, NRC, MoloLimuru

8. Murinduko Research Site, RRC, Embu

9. Giaki Research Site, NRC, Mwea

10 Matuga, Research sub-stations, MtwapaMsabaha

I1 Mpeketoni Research Site, Mtwapa

12 Buchuma Research Sub-Center, Kakamega

13. Nyandarua, Sub-center, Muguga14. Mariakani Sub-center, Mtwapa

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Annex 13Page 1 of 3

KENYANATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE II (NARP II)

Private Sector Role

As part of the Government's broad strategy for transition to a market-oriented economy, and inthe context of severe public sector resource constraints, the private sector is being encouraged to assumeresponsibility for the types of agricultural research for which it is suited (e.g. research on cash crops),while the public sector is focusing its efforts on the highest priorities in those areas where the privatesector is unlikely to contribute (particularly food crops).

Several mechanisms are being developed to increase private sector involvement in agriculturalresearch. Some of these (especially for industrial crops) have been tested and serve as models for futureefforts, while others (cost-sharing arrangements) are still in the early stages of testing. Tea and coffeeresearch is already fully funded by the private sector, through a cess on exports. This model, withappropriate modifications, has been applied to sugar research, which will shortly be supportedcompletely by the private sector. The model is also being adapted to research on pyrethrum, cotton,oilseeds, and horticultural crops. Barley is an important dual-purpose crop, for beer production and asa food staple, and research can be supported by the private sector along the industrial crop model andalso on cost-sharing arrangements. Building on the barley experience, efforts will be expanded tointroduce cost-sharing arrangements with local farmers' unions and informal groups for staple cropssuch as maize, sorghum, and millet.

TIhe Agricultural Research Fund (ARF), which is to be restructured and expanded under theproposed project, is an important mechanism for fostering partnerships among stakeholders in the publicsector, the academic community, the processing industries, and producers. Under new operatingguidelines, research proposals would be funded on a competitive basis, with weight given to proposalsbased on such partnerships.

The ultimate objective is to establish an integrated agricultural research system consisting ofmutually-supporting entities in the public and private sectors. The private-sector stakeholders willassume increasing responsibility for research in their own interest, while the public sector will remainclosely involved through a network of relationships, and will continue to carry primary responsibility inspecific areas.

Sugar

Private sector responsibility for sugarcane research is already well-advanced. The SugarIndustry Group (SIG) presently funds about 60 percent of the recurrent costs of sugarcane researchundertaken by KARI and also supports some private sector research. The proposed agreement betweenSIG and KARI provides for assumption of full responsibility for research by SIG within 3 years. Underthe terms of this agreement, KARI would continue to undertake the bulk of the research, but on acontract basis. Over time, SIG expects to expand the use of the contract mechanism to support researchon problems of particular concern to the industry by a range of researchers in the public and privatesectors. Together with the tea and coffee models, sugarcane research provides an example ofarrangements to be introduced for other industrial crops. Because SIG has the capacity to assume full

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Annex 13Page 2 of 3

responsibility for relevant research, no incremental support would be provided under the proposedproject.

Pyrethrum

At present, the Pyrethrum Board of Kenya (PBK) finances about 40% of the recurrent costs ofpyrethrum research undertaken by KARI. During the transitional phase to be supported under theproposed project, research would be rationalized and focused on the highest priorities, and,simultaneously, PBK and the industry would assume an increasing responsibility for the research. Bythe end of the project period, the would have full responsibility for research, and no further direct publicsector support would be provided.

Cotton

Government is considering a proposal to establish a Cotton Development Council representingthe primary stakeholders in the cotton and textile industries, which would have funds at its disposal tosupport cotton research. In order to provide a transition between the low level of cotton research atpresent and the expanded system of research to be supported by the CDC (and also directly by thecotton and textile industries), the proposed project would support cotton research on a declining basis.It is expected that CDC and the industries would assume full responsibility for cotton research by theend of the project period.

Oilseeds

Governnent is considering a proposal to establish an Oilseed Development Councilrepresenting the various groups of stakeholders and to allocate revenue from import duties on oilseedsand oilseed products to an Oilseeds Development Fund (ODF). Among other things, the ODF would beused to finance research on oilseed production which, initially, is likely to be carried out by KARI undercontract. As oilseed production develops from its minimal level at present, and as the ODF comes intooperation, direct public sector funding of oilseed research would be phased out. The proposed projectwould support oilseed research by KARI during this transition phase and establish the foundation onwhich ODF-funded research would build. It is expected that all oilseed research would be funded byODF (and, in part, directly by the industry) by the end of the project period.

Horticulture

Horticulture is a thriving industry which provides substantial amounts of exports (fruit, Asianvegetables, and flowers), but it is also a widely diverse industry in which the export segments are muchbetter able to support related research than those producing for the domestic market. Therefore thestrategy for private sector support of research is also diverse. In the case of export crops, theHorticultural Crops Development Authority (HCDA) comprising producers and processors, has beenproviding assistance in the promotion and development of export markets and limited amounts offunding for research undertaken by KARI. It would assume full responsibility for research over thecourse of the project period.

Producers aiming primarily at the domestic market are not nearly as well organized, althoughlocal associations exist which are expected to gather strength over time. In this case, most of the

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Annex 13Page 3 of 3

research has been undertaken by KARI with public sector funding. Nevertheless, the rudimentary localassociations provide a mechanism for cost-sharing of research, which KARI has begun to explore andwhich seems to hold considerable promise for the future. KARI, therefore, intends to expand thisarrangement during the project period, in terms of both the number of crops, the geographical area, andthe proportion of cost borne by the associations. This arrangement for horticulture crops represents amodel for cost sharing that KARI intends to utilize for staple crops, as well. By the end of the projectperiod, it is expected that private producers and processors will be funding a significant proportion ofresearch for a number of horticulture crops, although some public sector support is likely to be neededover the longer term.

Staple Crops

Barley. This crop represents a special case, since it is used by Kenya Breweries and it is also astaple food crop. Kenya Breweries has long supported research (undertaken mostly by KARI) onvarieties of barley utilized for beer production. This arrangement will be continued on a contract basis,and the contract mechanism is expected to be expanded over time to cover research undertaken by arange of public and private sector researchers. Research on barley used for food will require publicsector support on an extended basis. However, since many farmers produce barley for both beer andfood consumption, there is an opportunity to "piggy-back" cost sharing arrangements for food barleyresearch on existing arrangements for beer barley research. With the dual-purpose farmers as anucleus, associations of barley producers are being forned which have the potential to fund part of thecost of food barley research. Research on problems of particular concern to producers will beundertaken by KARI under agreements with associations, which will specify the cost-sharingarrangements for each case. KARI intends to expand the use of such agreements over the course of theproject period, and to fund a significant portion of food barley research in this manner by the end of theproject period. It also intends to build on this experience in introducing similar arrangements for otherstaple crops.

Cost Sharing Mechanism. Producers of maize, sorghum, millet, and other staple cropsgenerally are not organized into producers' associations, and the farmer unions (with local, district, andnational chapters) have been engaged primarily in lobbying activities. Nevertheless, KARI has haddiscussions with the unions about problems of particular concern to producers and possible cost-sharingarrangements, and feels that there is some potential for agreements with local unions. It will pursuethese discussions further during the project, with a view to introducing agreements for on-station andon-farm research on a cost-sharing basis. In addition, there are various infornal farmer groups (e.g.women's groups) that may have potential as counter-parties for research on problems of local concern,in terms of designing and implementing research (primarily on-farm) and contributing to the cost ofsuch research. These arrangements will build on existing arrangements with individual farmers for on-farm research, under which the farmer typically contributes his/her labor, while KARI covers theremaining costs. KARI is attempting to extend such arrangements to farmer groups. Over the longerterm, it is envisaged that farmer unions and groups also will begin to contract with private researchersto address particular problems.

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Annex 14Page 1 of 5

KenyaNational Agricultural Research Project Phase II

Economic Analysis

General

1. The economic analysis of the NARP II is performed along the lines of a conventionalcost/benefit analysis. The contribution by the project to the Kenyan economy is expressed in terms ofthe economic rate of return (ERR), by allowing for a cash flow which includes only project specificcosts (investment, recurrent and replacement) and benefits (from incremental production). Theeconomic analysis is carried out in constant 1995 prices expressed in US dollars. The sensitivityanalyses of costs and benefits, are summarized in the form of the switching values.

2. The economic value of the investment and the recurrent costs are derived from the financialproject cost estimates by excluding all taxes, duties, subsidies and other forms of transfer payments, aswell as price contingencies. All recurrent costs which are not incremental are excluded from theeconomic costs; costs of relevant replacements, as well as the residual value of the investment, havebeen accounted for in the cash flow.

3. The benefits of the project are expressed in terms of the net value added by the incrementalproduction resulting from the investment. The benefits are obtained by allowing for analysis ofdevelopment in relevant agriculture production, in both the with project and the without projectscenarios. The project provides support for institution building, research on crop, livestock andenviromnental management, and a pilot seed program. In the absence of sufficient data relating to cropsother than food grains, livestock, and environmental management programs, only benefits resulting fromfood grains research are used in the economic analysis. It is assumed that incremental food grainsproduction would substitute for food grains imports. The incremental production has been priced usingthe Bank's commodity price forecasts, the costs of shipping and insurance charges, as well as thehandling and transport costs between port of import and the farm.

Costs

4. The economic costs of the project are estimated at US$96.4 million. They exclude salaries andemoluments of research staff who would be in place in the without project and the with project situationalike. The consolidated (net) investment and operation and maintenance costs are shown in Table 1,column 1 (entire NARP II) and column 2 (food grains research under NARP II).

BenefitA

5. General. The benefits of the project are anticipated to come in the form of incrementalproduction of food grains (maize, wheat, sorghum and millet) and other crops (cotton, oil crops, rootcrops, horticultural crops), livestock products (meat and milk), improved animal health, and improvednatural resource management. Other than food grains, information on the quantifiable indicators of thevarious research programs on other crops, livestock research, and natural resource

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Annex 14Page 2 of 5

management research are limited or unavailable to carry out reliable economic analyses. Therefore, thefocus of the economic analysis has been confined to food grains research. The analysis is expc,ted toprovide some indication of the benefits that would be derived from all research activities supported bythe project, by using the information available for the food grains research program.

Table 1. Net benefits Flow and Economic Indicators(value in constant 1995 US$ million)

Incremental Incremental Incremental Net Benefits Net BenefitsCosts of Entire Costs of Benefits Foodgrains Entire

NARP II Foodgrains Foodgrains Research NARP IIYear Research Research NARP H

NARP II NARP I(1) (2) (3) (4) = (3-2) (5) =(3-1)

1 28.7 13.0 0.0 -13.0 -28.72 20.8 11.0 0.0 -11.0 -20.83 19.3 10.1 0.0 -10.1 -19.34 15.5 7.7 0.0 -7.7 -15.55 12.1 5.8 0.0 -5.8 -12.16 9.7 3.8 0.6 -3.2 -9.17 5.8 2.7 2.6 -0.1 -3.28 6.5 3.0 7.1 4.1 0.69 5.7 2.7 15.4 12.7 9.710 5.5 2.7 29.7 27.0 24.2' 1 14.6 5.8 49.8 44.0 35.212 7.0 3.3 69.0 65.7 62.013 7.7 3.7 87.1 83.4 79.414 6.5 3.2 103.9 100.7 97.415 -3.1 -2.8 126.3 129.1 129.4

ERR - - - 24 percent 15 percentPV 95.2 45.5 115.8NPV - - 70.3 20.6

Switching ValuesCosts 155 percent 22 percent

Benefits -61 percent -18 percent

6. Area under food grains. Several statistical sources' point to difference in the areas under majorfood grains in Kenya. Variations in cultivated areas are considerable according to these sources.However, it appears reasonable to set the yearly cultivated area under food grains at about 2.1 million

Kenya Ministry of Agriculture and Livestock Development (MOALD), Central Bureau of Statistics (CBS), Ministry of Planning andNational Development (MOND), Departmerit of Resources Surveys and Remote Sensing (DRSRS) of MPND

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Annex 14Page 3 of 5

hectares, which is close to the figures given by the Central Bureau of Statistics (CBS). The major foodgrains are distributed as follows: maize, with 1.8 million hectares is the major crop, followed by wheat,sorghum, and millet, each of which is cultivated on 0.1 million hectares. The total cultivated area offood grains is maintained constant in the without project as well as the with project scenario, in thepartial economic analysis involving only food grain research,.

7. Yields of major food grains. Average yields for the major food grains vary by statisticalsource. CBS data indicate that the yield for maize averages nation wide at about 1.0 ton per ha, whilethe same source states about 0.4 ton per ha for millet, 0.4 ton per ha for sorghum, and 2.0 ton per ha.for wheat. A recently published report by the Kenya Agriculture Research Institute (KARl)2 confirmsthat the trend in average annual yield increases (aggregated on a country-wide basis) for major foodcrops such as maize, wheat, sorghum and millet have been decreasing. This negative trends are duemainly to expansion into less productive areas with marginal environments for crop cultivation, ratherthan by detriorating yields in medium and high potential areas. The adverse effect on national yieldsresulting from an expansion of cropping activities into marginal lands is, however, irrelevant to theanalysis as cultivated area and cropping pattern are maintained constant to the base year (Year 0), inthe with and without project scenarios.

8. Relevant crop yields are summarized in Table 2, below, for the target years of the withoutprject and the with project situation. It can be seen from this table that the average yields would

increase at the same pace, both in the without project and in the with project situation, during the initialfive project years. It is assumed that such increase would be due exclusively to an expanding adoptionrate by farmers of recommendations based on the results of research which was done outside the scopeof the proposed NARP II research program. The adoption rate increase from 2.5 percent in Year 6 to37 percent in Year 10 for improved food grains technology developed under NARP II, used in thecalculations are quite conservative considering that where hybrids/improved varieties have beenintroduced in Kenya, adoption rates of up to 90 percent have been observed.

9. It is further assumed that from Year 6 onwards yields would continue to increase, both in thewith project and without project scenario. In the without project scenario, the increase in yield wouldresult mainly from enhanced utilization of technology packages which were recommended prior to Year6. Yields would further increase during Years 6 to 10 of the project, due to the introduction ofimproved technologies which would be generated by NARP II research. The improved technologieswould be disseminated by the existing extension staff as part of the on-going extension program.

10. Details on the development of the benefit stream are shown in Table 3. The benefits, expressedin terms of incremental net value added from food crop production, are calculated by assuming thatfarmers will progressively adopt technology developed during the 5 years of NARP II.

Kenya Agricultural Research Institute, National Agricultural Research Laboratory, Socioecononiics Unit Working Paper No.4, April 1995.

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Annex 14Page 4 of 5

Table 2. Yield Development of Major Food Grains With and Without the Project(tons/ha)

Yield YieldCrop and Year Without Project With Projectmaize

year 0 1.00 1.00year 5) 1.10 1.10year l0 + 1.20 3.00

wheatyear 0 2.00 2.00year 5 2.10 2.10year 10 + 2.20 2.40

sorghumyear 0 0.40 0.40year 5 0.45 0.45year 10 + 0.50 0.80

milletyear 0 0.40 0.40year 5 0.45 0.45year 10 + 0.50 0.80

11. As shown in Table 3, the NARP II technology would for the first time be adopted in Year 6 onan area equivalent to 2.5 percent of the total cultivated area (52,500 out of 2,100,000 hectares plantedto food grains); it is assumed that the area to benefit from the NARP II technology would expandgradually by an additional 2.5 percent (i.e., by 5 percent in Year 2, by 7.5 percent in Year 3, etc.) oftotal cultivated area, in each of the following 4 years up to Year 10. The total area to benefit fromNARP II technology would be equivalent to 37.5 percent in Year 10 (or 787,500 out of 2,100,000hectares), and remain constant at this level in the years thereafter. Application of the NARP IItechnology at the farm level would require additional inputs, the nature and cost of which are presentlyunknown. In the absence of detailed crop budgets, it is assumed that the incremental costs of productionwould be equivalent to 40 percent of the value of incremental production (value: cost ratio of 2.5).Incremental production is valued at an import parity price of US$ 180 per ton of food grains (farngatelevel).

Net Benefit Flow, the Economic Rate of Return (ERR) and Sensitivity Analysis

12. The total flow of incremental costs and benefits, as well as the resulting stream of net benefits isshown in Table 1. The limited economic analysis, which focuses solely on the costs and benefitsassociated with food grains research, reveals an ERR of 24 percent, and a net present value (NPV) ofUS$ 70.3 million (discounted at 12 percent). As evidenced by the switching values, the economic returnof food grains research is robust. The switching values indicate that

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Annex 14Page 5 of 5

the cost of research on food grains could increase by 155 percent, or alternatively, that the food grainsresearch benefits could drop by 61 percent, and the ERR would still be equal to the OCC or 12 percent.

Table 3. Major Food Grains Area Affected by NARP II ResearchValue of Production, and Net Value Added

(area in ha, value in constant 1995 US$ million)

Year Area Affected Value of Selected Food Incremental Costs Value Addedby Production of Food Grains Value of of Production of from Food

NARP II Grains Production Food Grains With Grains Due toTechnology Without NARP II With NARP II NARP n1 NARP II

Technology Technology Technology Technology

I 0 403.2 403.2 0.0 0.02 0 413.7 413.7 0.0 0.03 0 422.1 422.1 0.0 0.04 0 432.6 432.6 0.0 0.05 0 441.0 441.0 0.0 0.06 52,500 449.4 450.2 0.2 0.67 157,500 455.7 459.5 1.2 2.68 315,000 464.1 474.8 3.6 7.19 525,000 470.4 493.4 7.6 15.410 787,500 478.8 523.3 14.8 29.711 787,500 478.8 541.1 24.8 49.812 787,500 478.8 553.4 34.5 69.013 787,500 478.8 609.5 43.6 87.114 787,500 478.8 634.6 51.9 103.915 787,500 478.8 667.2 63.1 126.3

13. The economic analysis shows that the overall economic rate of return of the project, calculatedby allowing for total project costs (including the costs of cotton, oil crops, horticultural crops, livestockand natural resource management research) and using only the benefits from food grains research,would at least equal 15 percent. In this case the switching values indicate that the benefits from foodgrains research could decrease by 18 percent (assuming the highly unlikely event that (gross) benefitsfrom other research would be nil) or altematively overall costs could increase by 22 percent, and theERR would still be equal to the OCC. It is concluded that NARP II is very likely to attain an ERR inexcess of the OCC, and is, therefore, an economically viable project.

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Annex 15

KENYANATIONAL AGRICULTURAL RESEARCH PROJECT-PHASE II (NARP II)

SELECTED DOCUMENTS IN THE PROJECT FILE

1. Working Group Reports

1.01 Working Paper 1. Institutional Development and Research Management1.02 Working Paper 2. Restructuring KARl's Financial Management System1.03 Working Paper 3. Human Resources Development and Training1.04 Working Paper 4. Food Crops Research and Related Areas1.05 Working Paper 5a. Animal Production, Pastures and Fodder1.06 Working Paper 5b. Animal Health Research1.07 Working Paper 6. Natural Resource management Research1.08 Working Paper 7. Support to Socioeconomic Research in KARI1.09 Working Paper 8. Farming Systems Approach: Support for Regional Research Centers1.10 Working Paper 9. Collaboration in Agricultural Research1.11 Working Paper 10. Biotechnology

2. Manuals

2.01 KARI Organization and Management Structures2.02 Project Implementation Manual2.03 Agricultural Research Fund

3. KARI Strategic (Corporate) Plan

4. Staff Rationalization Study

5. Training Plan

6. Improvement of Advisory Analytical Services

7. Kenya Seed Sub-sector Implementation Program

8. Detailed Project Cost Tables

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