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Completion Report

Project Number: 34308-022 Grant Number: 0063 September 2015

Nepal: Commercial Agriculture Development Project This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – Nepalese rupee(s) (NRs)

At Appraisal At Project Completion (13 June 2008) (30 June 2013)

NRs1.00 = $0.0146 $0.0105 $1.00 = NRs68.528 NRs95.24

ABBREVIATIONS

ADB – Asian Development Bank CAA – Commercial Agriculture Alliance CAF – Commercial Agriculture Fund DADO – district agriculture development office DDC – district development committee DOA – Department of Agriculture EDR – Eastern Development Region EIRR – economic internal rate of return HVC – high-value crop MOAD – Ministry of Agriculture Development NGO – nongovernment organization NPV – net present value PMU – project management unit PPTA – project preparatory technical assistance PSC – project steering committee

WEIGHTS AND MEASURES

Ha – Hectare Mt – metric tons

NOTES

(i) The fiscal year (FY) of the Government of Nepal ends on 15 July. FY before a calendar denotes the year in which the fiscal year ends, e.g., FY2015 ends on 15 July 2015.

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

Vice-President W. Zhang, Operations 1 Director General H. Kim, South Asia Department (SARD) Director K. Yokoyama, Nepal Resident Mission, SARD Team leader G. Gewali, Senior Project Officer, SARD Team members B. Sitoula, Project Analyst, SARD

D. Singh, Senior Environment Officer, SARD J. Sharma, Gender Consultant, SARD L. Subedi, Senior Social Development Officer (Safeguards), SARD R. Bhattarai, Operations Assistant, SARD

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

CONTENTS

Page

BASIC DATA i I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 5 D. Disbursements 6 E. Project Schedule 6 F. Implementation Arrangements 6 G. Conditions and Covenants 7 H. Consultant Recruitment and Procurement 7 I. Performance of Consultants, Contractors, and Suppliers 8 J. Performance of the Recipient and the Executing Agency 8 K. Performance of the Asian Development Bank 8

III. EVALUATION OF PERFORMANCE 9 A. Relevance 9 B. Effectiveness in Achieving Outcome 9 C. Efficiency in Achieving Outcome and Outputs 10 D. Preliminary Assessment of Sustainability 11 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 14 C. Recommendations 15

APPENDIXES 1. Design and Monitoring Framework 16 2. Key Outputs of the Commercial Agriculture Alliance 23 3. Training Participants by Gender and Social Group 27 4. Project Cost Breakdown by Sources 28 5. Annual Project Disbursements According to Source 29 6. Project Implementation Schedule 30 7. Status of Compliance with Grant Covenants 34 8. Consulting Services under Packages A and B 47 9. Economic Analysis 48 10. Gender Equality and Social Inclusion Action Plan Results 60 11. Environmental Safeguards Compliance 69

BASIC DATA A. Grant Identification 1. Country 2. Grant Number 3. Project Title 4. Recipient 5. Executing Agency 6. Amount of Grant 7. Project Completion Report Number

Nepal 0063-NEP Commercial Agriculture Development Project Government of Nepal Ministry of Agriculture Development $18.0 million 1542

B. Grant Data 1. Appraisal – Date Started – Date Completed 2. Grant Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Grant Agreement 5. Date of Grant Effectiveness – In Grant Agreement – Actual – Number of Extensions 6. Closing Date – In Grant Agreement – Actual – Number of Extensions

7 August 2006 18 August 2006 16 October 2006 17 October 2006 16 November 2006 23 February 2007 24 May 2007 6 August 2007 30 June 2013 11 February 2014

7. Terms of Grant – Interest Rate – Maturity (number of years) – Grace Period (number of years)

NA

8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

NA

9. Disbursements a. Dates Initial Disbursement

01 October 2007

Final Disbursement 19 June 2013

Time Interval 69 months

Effective Date 6 August 2007

Original Closing Date 30 June 2013

Time Interval 71 months

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b. Amount ($‘000)

Category or Subloan Original

Allocation

Last Revised

Allocation Amount

Canceled

Net Amount

Available Amount

Disbursed Undisbursed

Balance Consulting services 2,251 2,111 140 2,111 2,064 47 NGO contract services 3,185 3,000 185 3,000 2,983 17 Survey, monitoring, and evaluation

181 306 (125) 306 301 5

Market information dissemination

294 420 (126) 420 369 51

Vehicles and motorcycles

362 342 20 342 342 0

Office equipment and furniture

242 279 (37) 279 279 0

Training and workshops 1,035 1,497 (462) 1,497 1,501 (4) Commercial Alliance Management

2,169 2,518 (349) 2,518 2,518 0

Commercial Alliance Fund

8,000 4,527 3,473 4,527 4,527 0

Unallocated 281 0 281 0 0 0 Total 18,000 15,000 3,000 15,000 14,884 116

10. Local Costs (Financed) - Amount ($ million) 7.01 - Percent of Local Costs 100.00 - Percent of Total Cost 32.02 C. Project Data

1. Project Cost ($ million) Cost Appraisal

Estimate Actual

Foreign Exchange Cost 18.0 14.88 Local Currency Cost 6.1 7.01 Total 24.1 21.89

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual

ADB Financed 18.00 14.88 Government of Nepal Financed 0.80 2.42 Other External Financing (CAA, DDC, Community) 5.30 4.59 Total 24.1 21.89

ADB = Asian Development Bank, CAA = commercial agricultural alliance, DDC = district development committee, NGO = nongovernment organization.

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3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual

A. Base Cost Commercial Agriculture Investment and Management 15.60 11.66 Inclusive Development of Stakeholders 3.60 3.03 Market Information Dissemination 0.30 0.56 Capacity Enhancement of Project Partners 0.20 1.86 Project Implementation Support 3.60 4.78

Subtotal A 23.30 21.89 B. Contingencies 0.80 0.00 Total 24.10 21.89

4. Project Schedule

Item Appraisal Estimate Actual

Establish project steering committee Jan 2007 Feb 2008 Recruit team leader and deputy team leader Feb 2007 July 2008 Recruit other consultants April 2007 Dec 2008 Establish complaints redressal mechanism April 2007 July 2007 Prepare subproject implementation guidelines May 2007 Sep 2008 Finalize detailed subproject selection criteria May 2007 Sep 2008 Conduct baseline survey July 2007 Nov 2008 Conduct product chain studies July 2007 Oct 2008 Establish results monitoring framework Oct 2007 Dec 2008 Establish project website June 2007 July 2007 Fully staff the CAA and district branches May 2007 Jan 2008 Begin dissemination of information aimed at a balanced CAA membership May 2007 Feb 2008 Contracts for community-based market infrastructure investment with the DDCs and implementation

Jan 2008 July 2009

Contracts for non-infrastructure investment with CAA general members and implementation

Jan 2008 July 2009

Finalize partnership agreements with NGOs June 2007 July 2009 Identify HVC production areas and marketing points July 2007 July 2008 Begin assisting with the production and marketing of HVCs July 2007 July 2009 Begin training farmer groups on marketing July 2008 July 2009 Begin skills-based training for landless persons in transport, packaging, production, primary processing, tool making, and servicing

July 2007 July 2008

Begin strengthening the capacity of semi-commercial stakeholder groups for accounting, bookkeeping, and group management

Oct 2007 July 2009

Help strengthened farmer groups apply for CAA membership and prepare community-based market infrastructure subprojects

July 2009 July 2009

Provide awareness training to commercial stakeholders on social, gender, and environmental issues and responsibility

July 2007 Feb 2008

Begin establishing an integrated market information system Oct 2007 July 2008 Begin offering project standardization training on project details and cross-cutting values to all partners

May 2007 July 2007

Begin offering basic marketing development training to all partners July 2007 July 2007 Provide training to partner NGOs on various topics including social mobilization

July 2007 July 2009

Provide training to DOA staff on various topics relating to commercial agriculture

July 2007 July 2007

Provide training to CAA district branch staff on subproject proposal evaluation and other topics

July 2007 July 2007

CAA = commercial agricultural alliance, DDC = district development committee, DOA = Department of Agriculture, DTL = deputy team leader, HVC = high value crop, NGO = nongovernment organization.

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5. Project Performance Report Ratings Implementation Period

Ratings

Development Objectives

Implementation Progress

From 1 November 2006 to 31 December 2006 Satisfactory Satisfactory From 1 January 2007 to 31 December 2007 Satisfactory Satisfactory From 1 January 2008 to 31 December 2008 Satisfactory Satisfactory From 1 January 2009 to 31 December 2009 Satisfactory Satisfactory From 1 January 2010 to 31 December 2010 Satisfactory Satisfactory From 1 January 2011 to 31 March 2011 Satisfactory Satisfactory From 1 January 2012 to 31 December 2012 On Track On Track From 1 January 2013 to 30 September 2013 On Track On Track From 1 October 2013 to 31 December 2013 On Track On Track From 1 January 2014 to 31 March 2014 From 1 April 2013 to 30 June 2014

On Track On Track

On Track On Track

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Members

Fact-finding 1–14 February 2004 5 70 a,c,d,f,g Consultation 14–17 September 2004 2 8 d,g Consultation 15–17 March 2006 2 6 d,g Follow-up fact-finding 16 May–2 June 2006 7 126 a,c,d,f,g,q,r Appraisal 7–18 August 2006 4 48 c,d,g,r Inception 7–16 May 2008 2 10 d,g Review 1 5–14 November 2008 2 10 d,g Review 2 23–31 August 2009 2 18 d,g Review 3 24–27 November 2009 3 12 d,g Review 4 11–15 May 2010 1 5 d Midterm review 8–19 December 2010 6 72 d,g,j,k,m,s Review 5 7–25 July 2011 4 76 g,j,k,s Review 6 16 December 2011–5 Jan 2012 3 63 g,j,k Review 7 5–25 July 2012 4 84 g,j,k,s Review 8 17–27 December 2012 3 33 g,j,k Special project review 1–8 April 2013 2 16 g,k Project completion review 15 September–10 October

2014 4 100 g,j,k,m,o

a = agricultural and rural road specialist, b = financial specialist, c = counsel, d = economist, e = procurement specialist, f = programs officer, g = project officer, h = portfolio management officer, i = governance officer, j = gender and social development consultant, k = project analyst, m = environment officer, n = peace building consultant, o = social safeguard officer, p = project management specialist.

I. PROJECT DESCRIPTION 1. The Asian Development Bank (ADB) approved the Commercial Agriculture Development Project on 16 December 2006. The project aimed to support the Government of Nepal’s key agenda of inclusive poverty reduction through agriculture commercialization. 1 The project intended to streamline the marketing and processing of high value crops (HVCs)2 in the Eastern Development Region (EDR)3 by (i) targeting potential clusters, stakeholders, and communities; (ii) encouraging the private sector and local governments to invest in agribusiness; (iii) expanding economic opportunities for the rural poor by involving them in project activities; and (iv) strengthening the institutional capacity of local organizations. The project aimed to accelerate agriculture commercialization by (i) promoting HVC production and marketing; (ii) responding to stakeholders’ needs; (iii) strengthening their linkages; (iv) transporting products from production clusters to processing centers; and (v) ensuring fairer benefits for the poor, disadvantaged communities, and women. The landless poor were provided with skills development training to build their capacity to generate income. The project also aimed to add value to agriculture products and encourage stakeholders to help less advantaged people through socially inclusive behavior. 2. HVC production has offered high returns per hectare (ha) in recent years. However, the increased return from HVCs is important for smallholders earning relatively low returns from cereal production. To optimize agricultural returns and mitigate marketing constraints on all crops, particularly HVCs, it was necessary to (i) enhance market-chains and interfaces between producers and markets, and (ii) improve the knowledge and capacity of farmers to address market risks and increase returns while enhancing their productivity. The project investment accelerated the process of agriculture commercialization in the EDR by (i) building on earlier project experiences,4 (ii) responding to the needs of stakeholders, and (iii) realizing potential opportunities in the project districts. 3. The project was designed to be market-oriented and demand-driven to respond to local needs and priorities by participating actively with market-chain stakeholders, local nongovernment organizations (NGOs), and district farmer production and marketing groups. Its primary focus was to improve farmers’ incomes by helping them become more knowledgeable, capable, and competitive within the market chain. By investing in local infrastructure such as collection and storage centers, cool stores, access to market information, and product improvement technologies, the project encouraged private processors and traders to contribute to improving the quality and regular supply of their purchased products by coordinating with farmers, thereby investing in the market chain. The project’s focus on social inclusion urged subsistence and semi-commercial farmers to adopt HVCs to improve their returns and commercialize, while encouraging the employment of landless persons in market-chain activities through skills development training. Furthermore, the project’s involvement in commercial agriculture and adoption of cross-cutting values and operational safeguards built the capacity of its partners such as the implementing agency, local government organizations, the private sector, NGOs, and farmer groups.

1 ADB. 2006. Report and Recommendation of the President to the Board of Directors for a Proposed Asian

Development Fund Grant for Nepal for Commercial Agriculture Development Project. Manila. 2 The HVC mainly include tea, cardamom, ginger, turmeric, honey, and vegetables.

3 The project covered 11 districts of the EDR namely Dhankuta, Ilam, Jhapa, Morang, Panchthar, Saptari, Siraha,

Sunsari, Taplejung, Teherathum, and Udayapur. 4 ADB. 2002. Report and Recommendation of the President to the Board of Directors for a Proposed Asian

Development Fund Loan for Nepal for Crop Diversification Project. Manila.

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II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation

4. The project was designed during the 10-year long political conflict and approved after its cessation to help the government address the main sources of the conflict—poverty and other social and economic exclusions. The project design remains relevant to the country. It is also consistent with government policies and priorities as well as with the ADB country strategy and program 2005–2009 for Nepal,5 which emphasized agricultural commercialization to promote inclusive development, thus addressing the causes of the conflict. The gender equality and social inclusion action plan further enhanced the project’s relevance by ensuring the participation of women, the disadvantaged, and landless people in HVC production and processing, and the resulting generation of employment and income. The project design remains relevant to the inclusive economic growth pillar of ADB’s current country partnership strategy, 2013–2017.6 5. The project was designed in close consultation with the government and key development partners, and was based on lessons learned from previous projects.7 The design was consistent with the poverty reduction strategy in the government’s Tenth Five-Year Plan (2002–2007), 8 and the Agriculture Perspective Plan (1995–2015), which emphasized the importance of agriculture commercialization for inclusive poverty reduction and economic growth.9 The project is also consistent with the ongoing Thirteenth Plan (2014–2016)10 that emphasizes agricultural transformation through increased productivity and post-harvest operations. The project design also aligns with the government’s Agriculture Development Strategy (2014–2034), 11 which promotes inclusiveness, environmental and economic sustainability, and private participation by effectively linking value-chain actors. 6. The project preparatory technical assistance (PPTA)12 supported the project design by identifying the needs and potential of the project area. Hence, the original project design was not significantly changed, other than incorporating district agriculture development offices (DADOs) in annual program planning and monitoring during implementation. By improving coordination with the DADOs, the project secured their ownership. Although the Commercial Agriculture Alliance (CAA) 13 was envisaged as a key institutional means to boost private participation, the project design did not adequately assess or address the CAA’s need for capacity development. Furthermore, the project design did not provide mechanisms to generate adequate resources to monitor and follow up on CAA subprojects. This jeopardized the sustainability of the institution’s operation, as well as the follow-up and monitoring of CAA-financed subprojects after project completion. The PPTA should have foreseen and addressed these issues during project design; instead, they were mitigated by capacity development measures during project implementation, which contributed to the timely completion of the project as well as the achievement of the project outputs and outcome targets. Details are in Appendix 1. 5 ADB. 2004. Country Strategy and Program (2005–2009), Nepal. Manila.

6 ADB. 2013. Nepal: Country Partnership Strategy (2013–2017). Manila.

7 ADB. 2009. Project Completion Report of the Crop Diversification Project. Manila.

8 Government of Nepal. 2001. Tenth Five-Year Plan, 2002–2007. Kathmandu.

9 Government of Nepal. 1996. Agriculture Perspective Plan (1996–2015). Kathmandu.

10 Government of Nepal. 2013. Thirteenth Plan: Nepal, 2014–2016. Kathmandu.

11 Government of Nepal. 2015. Agriculture Development Strategy): 2015–2034. Kathmandu.

12 ADB. 2002. Technical Assistance to the Kingdom of Nepal for Preparing the Commercial Agriculture Development Project. Manila

13 The CAA was established as a not-for-profit entity under the Companies Act, 2006.

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B. Project Outputs

1. Increased Public and Private Investment in Commercial Agriculture

7. The project exceeded the output targets. The CAA, which was established on 28 September 2005 before the project was approved, had 502 active members at project completion against the target of 160. Of these, 276 (55%) were farmer groups, 142 (28%) cooperatives, 51 (10%) traders, and 33 (7%) processors. The members were involved either in production, processing or trading of vegetables, potato, fruits, spices, tea, and non-timber forest products. 8. There was initially little demand for project support due to the small number of CAA members and a lack of familiarity with the Commercial Agriculture Fund (CAF) accessing requirements with sound business plan; however, demand accelerated after 2009 when the number of CAA members increased due to improved orientation activities. The project financed 76 community-based market infrastructure subprojects (exceeding the target of 50), including 23 agriculture market centers, 22 farm-to-market road maintenance subprojects, 17 agriculture produce collection centers, 14 nine small irrigation systems maintenance subprojects, three community godowns, one small bridge, and one cardamom nursery. Against the target of 200, the project also financed 322 non-infrastructure subprojects relating to HVCs such as vegetables, spices, potatoes, tea, fruits, and non-timber forest products, including 210 for production; 49 for processing; 41 for marketing; 12 for adding value post-harvest; 15 and 10 for improving input supply. The details of these subprojects are in Appendix 2. However, the large number of small, self-contained subprojects spread throughout the project districts made it difficult to monitor and link them. Furthermore, the low CAA investment ceilings—$80,000 for infrastructure and $20,000 for non-infrastructure subprojects—attracted few large processors and traders, and the suboptimal locations of nine market centers rendered them either non-functional or partially functional. The absence of binding legal provisions also led to breaches of supply and buying contracts.

2. Inclusion of Poor and Semi-Commercial Stakeholders in Commercial Agriculture

9. The project almost met or exceeded all of its output targets. It recruited 11 NGOs to provide social mobilization and training to small and marginal farmers and landless persons. The NGOs formed 902 groups of 23,379 subsistence stakeholders of whom 17,695 were small and marginal farmers (719 groups) and the remaining 5,684 were landless (183 groups). All group members were trained in agribusiness development, HVC production and marketing, and income generation skills. Ultimately, 1,347 members from 378 groups adopted small-scale commercial agriculture enterprises, and 35 marketing points and 165 HVC production pockets

14

Collection and marketing centers are providing easy access of farmers to market to sale their vegetables and fruits and traders to buy required quantity in one place to supply to bigger markets. For example, vegetable collection and marketing center in Jante, Morang is providing market to sale vegetable of about 200 farmers every day; wholesale market center in Guthitar, Dhankuta is providing selling and buying market for about 500 producers and 50 traders every day; and about 150 farmers are selling vegetables daily in vegetable collection and storage center in Chitre, Teherathum.

15 Examples of processing and postharvest subprojects are (i) Swami honey production and processing center in Lahan, Siraha is producing honey, buying honey from 40 other producers, refining and packaging the honey, and selling to local markets; (ii) Maa Bhagawati agriculture cooperative in Maleth, Saptari is buying tomato from its 38 members, making ketchup, packaging, and selling to local markets and restaurants; and (iii) Kanchanjunga organic handmade tea industry is collecting tea leaf from about 400 small producers, processing and packaging the tea, and selling to local, Kathmandu and international markets.

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were identified. Of the 5,684 landless people who were trained in agroprocessing and related income generation activities, 378 began small-scale commercial activities. 10. To support semi-commercial stakeholders, the project recruited 11 more NGOs, which formed and mobilized 255 groups (6,444 members) that became marketing entities. Of these, 81 groups (1,704 members) joined tea, ginger, and cardamom associations and improved the quality of their post-harvest operations due to a targeted training program. Another 31 semi-commercial groups (cooperatives and farmer groups) joined the CAA, 12 of which accessed the CAF; and four groups became cooperatives and were nearing CAA membership. Ultimately, 138 marketing groups gained accounting, bookkeeping, and group management skills, while 749 semi-commercial and commercial groups were trained on gender, social inclusion, and environment management. All CAA-financed subprojects were screened and implemented after meeting inclusive criteria. 11. Of the 61,922 individual members in the 502 CAA groups, 29,722 or 48% (above the target of 30%) were women, and 73 groups (14.6%) were composed entirely of women. Of all the CAA members, 6% were dalits, 33% janajatis, and the remaining 61% other castes. Similarly, with regard to the 398 infrastructure and non-infrastructure subprojects, 1,489 (59%) of users and implementation committee members in key decision-making positions (such as the chair, secretary, and treasurer) were women (exceeding the 30% target), 7% were dalits, and 35% were janajatis. 12. To increase its impact on poverty, the project implemented a scheme to improve the livelihoods of poor households, including indigenous, disadvantaged, and landless persons in the Dhankuta, Morang, Saptari, and Sunsari districts. The scheme was financed under the Japan Fund for Poverty Reduction from 2007 to 2010.16 Twelve partner NGOs were recruited and trained to group target beneficiaries and facilitate subproject implementation. The NGOs (i) formed 455 self-help groups comprising 12,159 members, (ii) developed the institutional capacity of these groups and ensured their registration with the relevant DADO, (iii) provided literacy training to 2,133 persons, and (iv) trained 96 literacy facilitators. Most members were trained in seasonal vegetable cultivation and nursery management and received livelihood support, about 80% benefited from the income generation fund, and each member earned on average NRs9,040 per year through income-generating activities. Of those who benefited from the income generation fund, 32% were landless. The project facilitated the leasing of 141 ha of land for vegetable production to landless beneficiaries, who spent the resultant income on food and educating their children. The scheme was rated successful because it achieved its intended outputs and outcome.17

3. Timely Provision of Market Information to Farmers

13. Although this output was not specifically targeted, the project significantly (i) disseminated agriculture market information to multiple users, (ii) broadened access to market information, and (iii) enhanced market-chain transparency. The project established two separate websites to disseminate project and agriculture market information. It also helped 21 groups and cooperatives establish (i) a group-based market information system, and (ii) a results-based market information framework to collect project output data disaggregated by sex and ethnicity.

16

ADB. 2006. Improving the Livelihoods of Poor Farmers and Disadvantaged Groups in the Eastern Development Region (Financed by the Japan Fund for Poverty Reduction Grant 9101 NEP). Manila.

17 ADB. 2013. Implementation Completion Memorandum of Nepal: Improving the Livelihoods of Poor Farmers and Disadvantaged Groups in the Eastern Development Region (Financed by the Japan Fund for Poverty Reduction). Manila.

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The project (i) provided daily e-bulletins to 232 user institutions and stakeholders, (ii) published 32 monthly market information bulletins, (iii) disseminated wholesale price information relating to four regional and 10 district markets, and (iv) disseminated price information for 42 commodities at the Biratnagar, Birtamod, Dharan, and Kathmandu markets through 16 FM radio stations and SMS services. 14. Information centers were established at three regional wholesale markets (Dharan, Birtamod, and Biratnagar) and four district chambers of commerce and industry (Dhankuta, Taplejung, Panchthar, and Terhathum). A market information desk was established in the regional agriculture directorate at Biratnagar. This group-based market information sharing system effectively disseminated market information among stakeholders, of whom 48% were women (exceeding the target of 40%). Improving women’s access to price information increased their bargaining power and decision-making capacity. Of the 845 persons trained on the agriculture market information system, 31% were women, exceeding the target of 25%. The project conducted 31 training sessions and workshops to facilitate the sustainable dissemination of information. This system was incorporated into the government’s regular program after project completion; however, a lack of funds prohibited the operation of websites and information channels other than those disseminating wholesale prices for four regional markets.

4. Enhanced Capacity of Project Partners to Support Farmers

15. This output involving the capacity enhancement of project partners such as district development committees (DDCs), NGOs, DADOs, and the CAA also exceeded project targets. The project organized (i) 43 project standardization training sessions to enhance stakeholders’ understanding of the project, its components and approaches, and the importance of addressing cross-cutting issues; and (ii) 143 basic marketing development training sessions on post-harvest operations, market-chain improvement, quality assurances, product handling, and agribusiness development. The sessions were attended by 5,278 persons, of whom 1,238 (23.4%) were trained in product standardization, and 4,040 (76.6%) in basic market development. Of the total number of trainees, 38% were CAA members, 28% NGO staff, 21% DOA staff, and 13% partner NGO staff. Of the total number of trainees, 25.4% were women out of which 41% were CAA members, 30% partner NGO staff, 12% DOA staff, and 17% CAA staff. Further, 26.3% of the total number of trainees were janajatis, 4% dalits, and the remaining 69.7% other castes. This distribution is detailed in Appendix 3. By standardizing their products, CAA members (processors and traders) improved the salability of their products, such as tomato ketchup, mango and orange juices, and tea, in domestic and foreign markets. Producers also ensured better returns by improving the grading and packaging of vegetables and fruits, including tomatoes, beans, cucumbers, potatoes, bananas, and oranges. C. Project Cost 16. At appraisal, the project cost was estimated at $24.1 million, to be covered by an $18 million grant from ADB, $0.8 million from the government, $4.0 million from the CAA, $0.8 million from the DDCs, and $0.5 million from farmer communities. The actual project cost was $21.89 million. Of the $18.00 million ADB grant, the project utilized $14.88 million, and the remaining $3.24 million was cancelled. This amount was saved primarily from the $8 million allocated for the CAF, of which only $4.24 million was used. The government’s contribution increased to $2.42 million because it financed the DADOs, which was not in the original design (para. 6). Conversely, the CAA members’ contribution decreased slightly to $3.44 million, although over half of the CAF was utilized. The DDCs and farmer communities’ contributions

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were close to the original estimates. The component wise appraisal and revised costs are detailed in Appendix 4. D. Disbursements 17. ADB disbursed $14.88 million (82.7% of the total project cost) during implementation and cancelled $3.24 million during project implementation and at the closure of the grant account on 11 February 2014 after reimbursing the executing agencies’ eligible claims. The disbursement was lower than estimated due to (i) the higher contributions of CAA members who provided about 60% of total subproject costs (against estimates of 25% for infrastructure and 50% for non-infrastructure subprojects); (ii) the devaluation of the Nepalese rupee against the US dollar by nearly 20% between January 2012 to June 2013; and (iii) the approval of a large number of small subprojects by the CAA. Quarterly and annual disbursements are detailed in Appendix 5. The disbursement schedule set at appraisal was not followed due to initial delays in project implementation; however, the process smoothed out after implementation as consultants and NGOs were recruited and the CAA approved the first batch of subprojects. A project imprest fund was established to ensure timely payments by easing liquidity possession, and the statement of expenditure procedures was applied to claims of up to $50,000. These mechanisms significantly improved liquidity management for the payment of project expenditures, as well as the timely settlement of small expenditures and the reimbursement of claims by ADB. E. Project Schedule 18. As projected at appraisal, the project was implemented from 17 November 2006 to 30 June 2012. Despite delays in the recruitment of consultants and NGOs and in the establishment of central and district CAA offices, the project accelerated after implementation structures and requirements were established. The original and actual project implementation schedules are in Appendix 6. F. Implementation Arrangements 19. The Ministry of Agriculture Development (MOAD)18 was the executing agency and the CAA was the implementing agency for component 1 of the project. The DOA was the implementing agency for the remaining four components through a project management unit (PMU). The CAA was established in Biratnagar with satellite offices in 11 districts; managed by a board of directors from the private sector, government, and DDCs; and led by a chair elected from the private sector. A general manager as member secretary, along with a company secretary, account officer, compliance officer, and monitoring officer performed everyday tasks. A PMU was established in Biratnagar under the leadership of a project manager supported by planning, implementation, procurement, monitoring and evaluation, and technical officers. The PMU was responsible for (i) preparing the annual work plan; (ii) recruiting consultants and NGOs; (iii) supervising, monitoring, and evaluating project inputs, outputs, and outcomes; and (iv) preparing progress reports. To provide overall guidance, a project steering committee was established, with the MOAD Secretary acting as chair, the project manager acting as member secretary, and committee members drawn from six related ministries. The provision of consultants and NGOs helped fill the DOA’s capacity gap. Although the project implementation arrangements were adequate, the inclusion of DADO roles during implementation and the

18

The name of the executing agency was changed to the Ministry of Agriculture Development after the government created a new Ministry of Cooperatives and Poverty Alleviation in July 2011.

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project manager’s participation as an observing member of the CAA board improved coordination and contributed to the delivery of outputs and outcomes (para. 6). G. Conditions and Covenants 20. The project included 54 covenants, of which 20 were particular covenants of grant and project agreements, eight were related to the private sector, one was environmental, two were social, 11 were financial, and 12 were related to other areas. All of the covenants were complied with. However, some compliance delays arose regarding conditions related to (i) approval of the CAA standard operating procedure and code of conduct to manage the CAA and CAF, (i) approval of the CAA’s business plan, (iii) formation of an appraisal panel to review and approve investment proposals, (iv) establishment of district review committees, and (v) approval of subproject selection criteria. The implementation delays were largely tied to the delayed establishment of the CAA board, which comprised representatives of the government, private sector, and local bodies whose compliance could only be achieved after the board was established. The project caught up after 12 months by making decisions quickly and integrating the DADOs’ role in district activities, and was able to meet its outputs and outcome targets. All of the covenants for project and sector performance were realistic. Details of these covenants and their compliance status are in Appendix 7. H. Consultant Recruitment and Procurement 21. The project management and implementation consultants were recruited in two packages following ADB’s guidelines on the use of consultants. Package A covered the recruitment of (i) an international consultant as team leader and project management and market-chain development advisor for 36 person-months, and (ii) a national consultant as deputy team leader and senior market-chain specialist for 40 person-months. These consultants were recruited following the individual consultant selection method. The Package B consultant was recruited through a consulting firm for 531.5 person-months to provide multiple services including training, social inclusion and participation, agribusiness development, market-chain development, investment and fund management, market information, environment management, and monitoring and evaluation. These consultants were recruited following the quality- and cost-based selection method. 22. The international team leader was procured through SAMES International, a consulting firm based in Bangladesh, and the national deputy team leader was procured on an individual basis. The Package B consultant was procured through Full Bright Consultancy, a national consulting firm based in Kathmandu. These procurements were delayed by about 6 months, primarily because (i) the PMU’s capacity was constrained, and (ii) a procurement consultant was not initially provided. The Nepal Resident Mission helped the PMU finalize the procurement process. Since the procurement of consultants was the PMU’s responsibility, the CAA at times had difficulty acquiring services on demand. The international consultant utilized 29.06 person-months and resigned for health reasons. As a suitable replacement for the team leader could not be found, the deputy team leader’s terms of reference were broadened to include the team leader’s work, which utilized 39 person-months input. The Package B consultant utilized 500.5 person-months input, including 20 person-months input of a civil engineer provided through contract variation to respond to the needs of CAA-financed subprojects. The number of person-months utilized was lower than expected was due to recruitment delays and the resulting revision of inputs to respond to project needs. Packaging and procurement methods were implemented according to the need and nature of the project, and there was no deviation in

8

contract packaging and mode of consultant procurement occurred compared with the original design. The utilization of consultants under Packages A and B is outlined in Appendix 8. I. Performance of Consultants, Contractors, and Suppliers 23. The two individual consultants recruited under Package A and the team of consultants recruited under Package B were appropriately qualified and provided sound technical services. The deputy team leader later entrusted with the duties of the team leader also performed very well. During project implementation the consultants delivered according to their terms of reference and played a key role in achieving project outputs on time within the original budget, with limited turnover. The partner NGOs also (i) provided inclusive development services to semi-commercial and subsistence stakeholders, and (ii) worked closely with the PMU, CAA, and private sector, although their planned inputs for 24 months were inadequate for social mobilization and building institutional capacity of subsistence and semi-commercial groups. 24. All CAA-financed infrastructure subprojects were managed by local communities under the design and supervision of the district technical officer of the relevant DDC. As no contractors were involved, the infrastructure subprojects suffered delays in design, supervision, work measurements, and payment due to the heavy regular workload of the DDC engineers. The vehicles, equipment, office supplies, and construction materials for all subprojects were generally delivered by suppliers on time and met the specified quality. Overall, the performance of the consultants, NGOs, and suppliers was satisfactory. J. Performance of the Recipient and the Executing Agency 25. The performance of the government as the recipient, and MOAD as the executing agency of the project was satisfactory. The project remained high among the government’s priorities throughout its implementation. In general, the government allocated an adequate budget on time and provided counterpart funds for project implementation. The government also assigned competent project staff, most of whom remained with the project until completion. Despite procurement and monitoring challenges, the project achieved the targeted outputs and outcome, due in part to the inclusion of the DADOs in the planning, implementation, and monitoring of field activities. The executing agency submitted periodic progress reports, the recipient’s project completion report, and annual audited project financial statements on time. These indicate that the assessment of the executing agency’s capacity at appraisal was reasonably accurate, barring its capacity to (i) procure and manage consultants, (ii) coordinate with the DDCs, (iii) commence project implementation on time, and (iv) secure engineering services for CAA-financed infrastructure subprojects. 26. The project has improved the institutional capacity of the MOAD and DOA, which are now implementing agribusiness projects supported by ADB and other development partners. The CAA’s capacity to prepare business plans and mobilize own, government, and external resources has also increased. In light of the growing scope for agribusiness development and agriculture commercialization, the CAA must be further enabled in the areas of procurement, financial management, safeguard planning and implementation, monitoring and evaluation, and reporting. K. Performance of the Asian Development Bank

27. Despite replacing four project officers during project implementation (an undesirable change), ADB’s performance was rated satisfactory because it (i) delegated project

9

administration directly to the Nepal Resident Mission before the midterm review, and (ii) worked closely with the executing agency to address implementation problems. ADB reviewed the project biannually throughout implementation and followed up with the executing agency on agreed actions. ADB fielded 11 review missions, visiting project sites and meeting with relevant government agencies, consultants, CAA central officials and district staff, and subsistence, semi-commercial, and commercial stakeholders. ADB promptly responded to the executing agency’s requests and took full responsibility for timely disbursements to expedite project implementation. ADB provided technical, financial, procurement, and environmental management orientation, training and onsite coaching to project staff. This allowed the project to be completed as designed by achieving its targeted outputs and outcome.

III. EVALUATION OF PERFORMANCE A. Relevance 28. The project and its design were relevant at the time of appraisal, and remained so during implementation (paras. 4 and 5). The PPTA (footnote 11) adequately assessed development problems and designed the project with complementary outputs that collectively (i) improved the efficiency of HVC production, marketing, and processing; and (ii) achieved the project outputs and outcome. The project (i) promoted linkages between producers and traders; (ii) capacitated project partners; (iii) enhanced the capacity of farmer groups to reach markets and work jointly with private processors and traders; (iv) enhanced access to market information; and (v) increased the production and marketing of HVCs that offer high returns and employment for marginalized farmers and landless persons. The project design’s focus on inclusion ensured the application of cross-cutting values such as equity, gender equality, fairness in dealings between stakeholders, and public–private partnerships. The project design remains relevant, as the promotion of commercial agriculture provides gainful employment for rural youths who would otherwise go elsewhere. B. Effectiveness in Achieving Outcome 29. Having achieved its intended outcome of improving the efficiency of HVC marketing and processing, the project is rated effective. The land area devoted to HVC cultivation in the project districts increased from 154,740 ha in 2006 to 179,498 ha in 2013, an increase of 16% (24,758 ha) against the 15% target. The regular supply and quality of HVCs have significantly improved in response to market demand. The value of HVC production increased by 58% from NRs9,803 million in 2006 to NRs15,460 million in 2013.19 The quality of tea, vegetables, and potatoes has also improved. HVC production increased from 135,000 metric tons (mt) in 2006 to 146,968 mt in 2013, an average annual increase of 6.6%, exceeding the 5.6% project target. Exports of selected HVCs such as cardamom, fresh vegetables, ginger, and tea to Bangladesh, Bhutan, and India increased by 26% from 10,290 mt in 2006 to 13,901 mt in 2013, exceeding project target of 16%. By investing NRs360 million in infrastructure and non-infrastructure subprojects, the project has been able to mobilize NRs45 million from local governments, NRs47 million from local communities, and NRs274 from the private sector, amounts far exceeding the project target. 30. The project directly benefitted 1,612,678 persons, of whom 23,379 were subsistence stakeholders, 6,444 semi-commercial stakeholders, and 1,582,855 commercial stakeholders. Of the commercial stakeholders who benefitted from the CAA-financed infrastructure and non-

19

As estimated by the project completion review mission in September 2014.

10

infrastructure subprojects, 50.6% were women. Of the infrastructure subproject beneficiaries, about 43% were janajatis and 14% were dalits; while of the non-infrastructure subprojects beneficiaries, 40% were janajatis and 17% were dalits. Targeted training and financial support improved the capacity of women and socially disadvantaged groups to produce vegetables and engage in group saving. About 20% of subsistence farmers began cultivating HVCs (mainly tomatoes) on a commercial scale, earning an average annual income of NRs6,000, which increased household cashflows.20 It was also found that women and socially excluded persons were increasingly graduating from subsistence farming to commercial trade. Subsistence farmers benefited from links to project-supported collection centers that extended market access for HVCs. Some of these groups have formed cooperatives.21 Subsistence farmers and landless persons equally benefited from skills training in the making of pickles, candles, and incense sticks, as well as beekeeping.22 The project involved landless persons in its activities by organizing them into groups and leasing land to them for vegetable cultivation. 31. Project-supported non-infrastructure subprojects like HVC storing, processing, and marketing have doubled their operational capacity, each employing on average 15 persons per year and 20 persons on a seasonal basis (about 6 months per year). Women, landless persons, and disadvantaged persons were given priority for employment opportunities. The infrastructure subprojects, such as the maintenance of farm-to-market roads, have improved market access and enabled the selling of HVCs. This has led farmers in surrounding villages to triple both HVC production and their annual income (about NRs90,000), derived particularly from the production of tomatoes, cauliflower, radishes, peas, and beans. This increase in income is partly due to the ability of the farmers or farmer groups to sell their produce directly to markets.23 C. Efficiency in Achieving Outcome and Outputs 32. The project was rated efficient in achieving the outcome and outputs. Despite facing startup problems, the project took effective countermeasures to address them. In particular, project progress was enhanced and initial delays made up by (i) the supportive roles played by the DADOs in planning, implementing, and monitoring project activities in different districts; (ii) the provision of clear terms of reference; and (iii) the allocation of an annual operating budget. The project was completed on schedule and achieved its output and outcome targets at 91% of the appraisal cost. This was made possible by ADB’s close monitoring and supervision, as well as the prompt actions of the executing and implementing agencies. 33. The infrastructure and non-infrastructure subprojects demonstrated economic viability and benefited the target groups with an average economic internal rate of return (EIRR) of 23.55%, ranging from 16.02% (farm-to-market roads maintenance) to 24.05% (collection

20

Tuna Devi Bista, a poor subsistence farmer and member of the Unnati Mahila Farmers Group in Ilam, planted a 0.05 ha plot of land with tomatoes and beans. She sold these for NRs40,000 in 2013, which enabled her to start a small shop. Her family’s living situation has improved significantly since she joined the farmers group, which an NGO equipped with seed, fertilizer, microirrigation equipment, and a sprayer for the cultivation of HVCs.

21 Jun Tara Social Development Center, an NGO based in Ilam, worked with 60 groups in 14 village development committees (including 50 subsistence farmer groups and 10 landless groups). Of these, 15 groups (25%) became primary cooperatives.

22 Most landless skills training participants were not operating microenterprises on a commercial basis mainly due to the lack of support services resulting in limited access to credit, technology, and market links.

23 This data is based on a study conducted by the project completion review mission of seven HVC storing, processing, and marketing enterprises: Tankisinwari Agriculture Products Management Committee and Namuna Seed Godown in Morang; Kavita Fruits Processing Industry and Guthitar Thok Bazaar in Dhankuta; Mechi Krishak Bahumukhi Sahakari Sanstha and Shreeram Supari Collection and Processing Center in Jhapa; Laukahi Agriculture Market Center in Sunsari; and Puwa Khola Fruits and Vegetable Market Center in Ilam.

11

centers). These results are consistent with appraisal estimates, although these are lower than reported in the project appraisal.24 The results also indicate that investment in collection centers had the highest return, followed by processing and packaging (22.44%), HVC production (21.77%), irrigation scheme maintenance (19.23%), and storage (19.03%), the lowest being that of farm-to-market roads maintenance. The project’s benefit-to-cost ratio was 1.42, and its net present value was NRs236.6 million. Sensitivity tests were carried out in three scenarios: (i) a 10% cost increase, (ii) a 10% benefits decrease, and (iii) a combined 10% cost increase and 10% benefits decrease. The rests show that the subprojects are more sensitive to a benefits decrease than to a cost increase, except for farm-to-market roads maintenance. The higher than 12% average EIRR indicated by the sensitivity analysis and the project’s completion on time at a cost below the appraisal estimate (para. 16) support its efficient rating. The fact that the estimated EIRRs all exceed 12% in the first two scenarios of cost increase and benefit decrease indicates that the project investments are sound. In the more restrictive combined case, the EIRRs drop below 12% in three of the six subprojects assessed. The economic analysis is detailed in Appendix 9. D. Preliminary Assessment of Sustainability 34. The project outcomes are assessed as likely to be sustainable. The CAA, a critical network institution of agro-enterprises and groups involved in agriculture commercialization remained functional after project completion. All 502 CAA members continue to renew their memberships by paying the annual fee that is the CAA’s principal source of income, and many new commercial enterprises have applied for membership. However, due to capacity limitations, the CAA has grown cautious in processing these applications. Realizing the CAA’s important role, the government decided to allocate NRs10 million per year from 2014 to enable the CAA to provide follow-up and supplementary support to its subprojects. More than 80% of project-supported subprojects are functional and many have increased the scale of their operations. This was made possible by the project’s success in leveraging much greater cost sharing by the private sector, local government organizations, and farmer groups for partly CAF-financed subprojects, indicating higher ownership and outcome sustainability. Over 75% of the subsistence and semi-commercial farmer groups supported by NGOs are functional and increasing their production of HVCs, 31 semi-commercial groups have become member of CAA and four more semi-commercial groups are in the final stages of becoming members of the CAA.25 These groups are also provided with follow-up services by the DADOs with whom they were linked during project implementation, and some are accessing microfinancing services from NGOs. 35. The CAA is already a platform for (i) interacting among commercial producers, processors and traders; (ii) developing common strategies based on the opportunities and challenges faced by them; and (iii) sharing information among market-chain actors. However, the CAA must build its institutional capacity to (i) help its members prepare sound business plans, (ii) facilitate access to financing from banks and financial institutions to sustain and expand its operations, and (iii) coordinate with sectoral government agencies for technical

24

The higher appraisal estimates may be due to the underestimation of such costs as community contributions and indirect costs of supporting the project activities. Moreover, the estimates were based on representative cases whose calculated benefits might have exceeded the present analysis, which used field data on average incremental benefits realized by subprojects.

25 Department of Agriculture. 2013. Completion Report of the Commercial Agriculture Development Project (December). Kathmandu; CAA. 2014. Status of CAA Supported Subprojects under the Commercial Agriculture Development Project (September). Kathmandu.

12

services. The DOA’s capacity to plan and implement agribusiness projects with such diverse stakeholders as the private sector, NGOs, cooperatives, and farmer groups has also increased. E. Impact 36. The project had a significant impact because it (i) provided employment and income-generating activities to agriculture value-chain actors and the poor by increasing HVC production and promoting agribusiness, and (ii) capacitated marginalized and disadvantaged groups through social mobilization, functional and skills training, and exposure to agriculture commercialization. These measures collectively contributed to socioeconomic development, and formed a conducive environment for agriculture commercialization in the EDR. 37. Poverty. Given the project’s focus on inclusive development, poor, disadvantaged, and landless groups benefited most from participating in project activities, which has led to poverty reduction in the EDR. The average incidence of poverty in the surveyed areas of the project districts is estimated to have been reduced to 30.9% from 40.6% before the project, with the highest change among semi-commercial farmers (13.5%), followed by subsistence farmers (11.1%), landless persons (9.7%), and CAA members (8.7%).26 38. Economic. The project also contributed to socioeconomic development by increasing the earnings of tea, ginger, turmeric, and honey value-chain actors (producers, processors, and traders) due to improved production and processing technologies and increased market access. Project beneficiaries’ per capita annual income doubled to NRs38,955 in 2013 from NRs18,618 in 2006. Semi-commercial farmers achieved the highest increase (149%), followed by landless persons (136.7%).27 The project generated a total of 483,970 person-days of employment, of which 38% was applied to infrastructure and 62% to non-infrastructure subprojects. The project also generated 7,180 person-years of additional employment in HVC production, processing, and marketing activities,28 and to some extent reduced youth migration for employment.29 39. Social. The project had a positive social impact. The project’s focus on inclusive development helped small and marginal farmers participate in income-generating activities and gradually commercialized HVC production. The project (i) formed groups and cooperatives; (ii) built HVC production and marketing capacity; (iii) developed links with input suppliers, traders, processors, and service providers; and (iv) supported the leasing of land. In all, 185 women’s groups and 182 landless persons’ groups benefited from the project.30 Of the 1,582,855 CAA beneficiaries, 51% were women, 4.5% were landless, and 57% were from socially marginalized communities such as dalits and janajatis. 31 This shows the project’s contribution to social

26

NARMA Consultant. 2013. Project Results Indicator Study of the Commercial Agriculture Development Project. Kathmandu.

27 NARMA Consultant, 2013. Project Result Indicator Study of the Commercial Agriculture Development Project. Kathmandu

28 Development Vision Nepal. 2013. Market Situation Analysis of HVCs in the Commercial Agriculture Development Project Districts. Kathmandu.

29 Thapa, B.B. 2011. Effect Level Evaluation of Inclusive Development Activities Implemented through Partner NGOs, Including DEPROSC (JFPR) in the Commercial Agriculture Development Project Districts. Kathmandu.

30 A total 12,549 women and 4,656 landless people, of whom 1,750 persons (59 groups) were also supported with land leasing schemes.

31 For example, the Shree Katahardanda agriculture cooperative in Jhapa district, which was started as a small leased landholding 13-member group, has become a cooperative of 87 members (46 male and 41 female). The cooperative has NRs0.44 million share capital, leased landholding of 15 hectare and an annual sale of NRs11.00 million. This has transformed the life of the cooperative members, increased income are used for child education, family healthcare, asset creation, and savings, and eliminated outmigration for source of livelihood. Detail is in http://www.adb.org/results/nepal-farming-and-agriculture.

13

inclusiveness. Increased numbers of women moved from subsistence farming to commercial trade by establishing agriculture cooperatives or private enterprises. A shift from ad hoc production to market-oriented HVC production improved post-harvest practices (including collection, packaging, and transportation). Direct links to local and regional markets reduced post-harvest losses, reduced marketing time and costs, and increased net benefits for women, the poor, and socially excluded groups. The impact was primarily seen in (i) increased household income; (ii) increased economic opportunities; (iii) employment for women, the poor, and the landless; (iv) increased confidence and skill levels; and (v) increased investment in children's education and healthcare. The project’s social impact is detailed in Appendix 10. 40. Environmental. The project has been classified as environment category B. During operation, it mainstreamed environmental safeguards by preparing (i) an environmental assessment and review procedure, (ii) environmental safeguard guidelines, and (iii) an environmental code of practice. The project adopted environmentally friendly methods of construction and followed a labour-based and participatory construction approach. A full-time national environment specialist assisted the PMU in compliance monitoring and reporting. The project screened all subprojects for environmental impacts by using a rapid environmental assessment checklist. The safeguard measures avoided, minimized, or compensated for adverse environmental impacts. The project trained 62 and organized 404 orientation sessions on environmental safeguards. Environmental compliance monitoring was conducted with documentation and reporting. At completion, the project prepared a report on the effectiveness of the mitigation measures and an environmental compliance monitoring report. The project satisfactorily complied with the environmental safeguards covenants, environmental assessment and review procedure provisions, ADB’s environment policy 2002, and governmental policy and regulations. The project’s environmental safeguards performance is considered satisfactory and is detailed in Appendix 11. 41. Involuntary Resettlement. The project was classified as category C for involuntary resettlement. It followed subproject eligibility criteria in approving infrastructure subprojects. Subprojects requiring private land acquisition were not eligible for project funding. In all, the project constructed or maintained 76 community-based market infrastructure subprojects, including the maintenance of 22 farm-to-market roads with minor rehabilitation works to the existing road. A total of 23 market centers and 17 collections, grading, and cleaning centers were built on public land. The construction of market sheds supported the EDR’s weekly open market tradition. Efficiency of nine small irrigation systems was improved, and the improvement work was confined to the land covered by the existing systems. The other five infrastructure subprojects were related to storage, small crossings, and a cardamom nursery, which did not require additional land. The subproject eligibility criteria were guided by the use of public land and availability of existing rights of way rather than market potential. To comply with the eligibility criteria, the project made some compromises in selecting infrastructure subprojects. As anticipated at appraisal, the project had no adverse impact on indigenous peoples.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 42. Overall, the project is rated successful, relevant from design to completion, and effective in the delivery of the target outcomes, despite initial delays in establishing the CAA and procuring consultants. It is rated efficient in terms of the economic efficiency of the infrastructure and non-infrastructure subprojects, and the performance of the government and of ADB was

14

satisfactory. The project outcomes are likely to be sustainable due to the operational status of the CAA, its member enterprises, and semi-commercial and subsistence groups. B. Lessons 43. By focusing on a limited number of potential HVCs for value-chain development, project investment can (i) provide better results in securing private investment and returns from agribusinesses as well as farmers’ investments and returns from HVC production, and (ii) create employment and other income opportunities at different stages of the value chain. Strategic planning of promising value chains involving key value chain actors (producer groups, processors and traders) would help identify effective investments in production, marketing, processing, and infrastructure in future value chain projects. Market access and related infrastructure in appropriate locations further increases the possibility of investments in commercial agriculture and the likelihood of better results. Investment in standalone subprojects does not necessarily contribute to proactive value-chain development. 44. The sustainable operation of institutions like the CAA after project completion can be secured if necessary mechanisms are included in the project design and carefully executed during implementation. Institutions operated through grant funds from external sources create dependency, and mobilizing internal and external resources to sustain operations after project completion becomes challenging. 45. Especially for smallholders, access to market information is a key factor in making investment decisions, choosing crops for production, adopting a proper harvesting calendar, and storing produce. This also enhances the bargaining power of small producers and agribusiness operators, and enables them to play key roles in commercial agriculture. 46. Designing the project with mechanisms for communication and coordination between existing government institutions in project districts and project management structures can facilitate smooth project implementation and monitoring. This also ensures that sector offices will provide beneficiaries with follow-up services after project completion. 47. The timely design and execution of a results-based monitoring system is an important means of collecting and reporting project outputs and outcomes in a disaggregated way during project implementation, and carrying out an objective impact evaluation upon completion. 48. Enterprises operated by farmer groups, especially those composed of women, the poor, and disadvantaged people, should be provided with refresher skills training, access to finance, follow-up services, and ways to maintain market links to sustain operations and benefits. The provision of land lease financing serves as a good way to reach poor and landless families by helping them access productive resources and benefit from commercial agriculture. 49. Women and disadvantaged groups often do not have enough time to participate fully in project implementation and capacity development activities and thus benefit from the project. Designing the project to include targeted interventions such as intense mobilization, training, and the facilitation of access to finance, extension services, and inputs optimizes the possibility of visible improvements to their livelihoods. 50. The project may be able to secure the involvement of larger processors and traders by making large financial contributions to their business plans, as smaller contributions are not helpful.

15

C. Recommendations

1. Project Related 51. Future action or follow-up. Given the important role played by the CAA in networking with a large number of stakeholders and mobilizing private resources for agribusiness development, the government should provide the CAA with a decreasing annual budget based on a clear business plan. Semi-commercial and subsistence stakeholders who remain non-commercial and require support, especially in terms of market links and quality management (grading and packaging), should be supported through a regular DADO program. 52. Future monitoring. Many HVC producer groups and buyers breached buyback contracts because of changes in HVC prices over time. This may be due to the absence of a contract law, in which context the supply and buying contracts lacked legitimacy. The government should take steps to secure parliamentary approval of the draft Agribusiness Promotion Act, of which contract law is a key component. ADB should follow up with the MOAD while monitoring the two ongoing ADB-financed agribusiness development projects.32 53. Given the encouraging benefits derived by smallholders in particular, the project-established market information system should be maintained to provide stakeholders with sustainable benefits. The online results monitoring framework for the collection and analysis of field data and the monitoring and evaluation of projects financed by the government and external sources should also be institutionalized. 54. Covenants. The sector, social, and environmental covenants should be maintained for next 3 years because they are relevant to the ongoing ADB-financed agribusiness projects scheduled for completion in 2017. 55. Additional assistance. Given agriculture’s important role in the Nepalese economy and the need for further commercialization of this sector, further investments are required to manage and sustain the project benefits. The government and its development partners should continue to explore possibilities for future investment in agriculture commercialization, as well as ways to overcome potential funding gaps. 56. Timing of the project performance evaluation report. Preparation of the project performance evaluation report is suggested in the fourth quarter of 2018.

2. General 57. The executing agency’s capacity, particularly regarding procurement and subproject monitoring, should be assessed objectively at project design and mitigating measures should be provided to address gaps that may complicate project implementation. 58. For similar future projects, the subproject selection criteria should be designed to remain flexible to allow for the acquisition of new land and the selection of bigger regional markets to maximize the impact scale.

32

Raising Incomes of Small and Medium Farmers Project (Grant 0233-NEP), and High Mountain Agribusiness and Livelihood Improvement Project (Grant 0248-NEP).

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance

Targets/Indicators Achievements Remarks

Impact

Reduced rural poverty in 11 districts of the Eastern Development Region (EDR) of Nepal through equitable and sustainable commercialization of agriculture

Rural poverty in the EDR reduced from 44% to 40% by 2020

Poverty incidence in the EDR is estimated to have decreased to 15.93% in rural hill areas and 20.97% in rural Terai (NLSS-III, 2011).

Based on the NLSS III, the incidence of poverty decreased to 25.16% in 2012. Over-achieved. The project contributed to poverty reduction in the EDR mainly by supporting subsistence farmers and landless households. The incidence of poverty was estimated to have decreased to 30.9% from 40.6% before the project. Semi-commercial stakeholders accounted for the highest rate of poverty reduction (13.5%), followed by subsistence farmers (11.1%), landless persons (9.7%), and CAA members (8.7%).

1

Outcome

Improved efficiency in the marketing and processing of high-value crops (HVCs) such as vegetables, fruits, tea, and spices in the EDR

1. Improved quantity, quality, regularity, and value of HVCs in response to market demand and public health and environment requirements

Quality, quantity, and regularity of HVCs improved. The area covered by HVCs increased by 16% (24,758 ha) to 179,498 ha from 154,740 ha. The value of HVCs increased to NRs15,460 million in real terms, representing an increase of 58%.

This increase in area is attributed to project interventions. Two out of three project target groups perceived improvement in the regularity of HVCs supply.

2. Public and private investments in HVC marketing and processing increased incrementally

Public and private investments in HVC marketing and processing increased by an additional NRs725.8 million, an increase of 41%.

Of the total incremental investment of NRs725.80 million, the project invested NRs360.00 million, local governments NRs45.12 million, the community NRs46.97 million, and the private sector NRs273.66 million.

1 NARMA Consultant. 2013. Result Indicators Study of the Commercial Agriculture Development Project. Kathmandu.

Appendix 1 17



3. Annual growth rate of HVCs increased from 5.6% to 6.5% by project completion

Annual HVC production grew by 6.61%.

Over-achieved.

4. HVC exports to India increased by 16% by project completion

HVC exports to India increased by 26% in 2012.

2

Over-achieved.

Outputs

1. Increased public and private investments in commercial agriculture

1.1 Establishment of the Commercial Agriculture Alliance (CAA)

1.1.1 The CAA has at least 160 general members by project completion

The CAA was established on 28 September 2006. It has 502 member groups.

CAA memberships greatly exceeded the target, which indicates the positive response of commodity value-chain actors to work together in an alliance for common benefits. Over achieved.

1.1.2 The CAA has a balanced membership composition covering all districts and areas within a district and all commodities, including farmer groups and cooperatives, traders, processors, and women

Of the CAA’s 502 member groups, 55% were composed of farmers (276 members), 28.3% cooperatives (142 members), 10.2% traders (51 members), and 6.6% processors (33 members). The CAA supported key HVCs such as vegetables, fruits, tea, spices, and non-timber forest products.

The number of processors was lower than the target. However, the number of processors with CAA memberships is encouraging despite the relatively small number of members.

1.1.3 CAA annual general meetings and district meetings held

Six annual meetings in the CAA central office and 6 annual meetings in each district office held.

1.2 Community-based market infrastructure investments

1.2.1 At least 50 market infrastructure subprojects developed by project completion

A total of 76 market infrastructure subprojects have been completed.

Nine subprojects remained partly operational due to their suboptimal location. Over-achieved.

1.2.2 The supported subprojects include small collection centers, small markets, small

The CAA maintained 22 existing farm-to-market roads and nine small irrigation schemes, and constructed 23 market centers, 17

2 Commercial Agriculture Development Project. 2012. Analysis of Export Situation in Eastern Development Region.

Kathmandu.

18 Appendix 1



suspension bridges, small cold or cool storage units, and farm-to-market road improvements 1.2.3 Farmer communities are managing and maintaining the market infrastructure

collection and grading centers, 3 storage units, one river crossing, and one greenhouse nursery. All completed market infrastructure subprojects are being managed by local communities.

1.3 Non-infrastructure investments add value to agriculture products

1.3.1 At least 200 subprojects implemented by project completion

A total of 322 non-infrastructure subprojects were implemented.

Over-achieved.

1.3.2 The supported subprojects include HVC promotion; quality control; equipment for product testing; and agroprocessing technology, equipment, and machinery

Of the subprojects, 77% involved HVC promotion; 11% quality control; 11% agroprocessing technology, equipment, and machinery; and 1% equipment for product testing

1.3.3 At least 10% of commercial agriculture promotional and representational activities launched by project completion

CAA members participated in 23 different commercial agriculture promotional and representational activities: observation visits to India and Thailand (9), in-country visits (2), trade fairs participation (4), property rights training (1), cooperative development training (2), commodity workshops (5), and an intellectual property rights workshop (1)

Over-achieved.

1.3.4 The supported promotional and representational include trade fairs, intellectual property rights protection, product labelling, and certification, and industry networking

Three skills training sessions on home processing, branding, and labeling were organized for CAA members. The CAA also organized four trade fairs; skills training on home processing, branding, and levelling; and a workshop on industry networking

22 CAA members participated in the intellectual property rights protection workshop.

Appendix 1 19



2. Inclusion of poor and semi-commercial stakeholders in commercial agriculture

2.1 Development of subsistence stakeholders

2.1.1. 14 nongovernment organizations (NGOs) in association with local NGOs enter into partnership with the project and work with subsistence stakeholders 2.1.2 24 HVC production areas and marketing points identified by 2008 2.1.3 15,000 subsistence households assisted by HVC income-generating activities by project completion 2.1.4 800 primary farmer groups formed and basic marketing training undertaken by 2013 2.1.5 5,000 landless persons involved in skills based training.

The project partnered with 11 NGOs to implement inclusive development activities for subsistence stakeholders in 11 districts. 35 marketing points and 165 HVC production pockets were identified. A total of 23,379 households including subsistence farm households and landless households were assisted by HVC income-generating activities by project completion. 902 farmers groups were formed and provided with basic marketing training. 5,684 landless people were organized into groups, and provided with skill training on agroprocessing and other income-generating activities. 378 groups adopted small-scale commercial activities.

The NGOs were contracted for two years until July 2011. Remaining works were performed by project staff and consultants to meet targets. Although underachieved in terms of number of NGOs partnered, services of 11 NGOs for 11 districts were sufficient. The total membership of the groups was 23,379, including 18,723 subsistence farmers and 4,656 landless persons. Women constituted 68% of the total members Among the caste/ethnic groups, dalits constituted 12% and janajatis constituted 52%. Over-achieved. Over-achieved. Over-achieved.

2.2 Enhancement of semi-commercial stakeholders

2.2.1 Seven NGOs entered into partnership with the project and worked with semi-commercial stakeholders

11 NGOs were contracted and supported semi-commercial stakeholders.

Over achieved (1 NGO was required for each district).

2.2.2 Farmers groups graduated to marketing groups, associations, and cooperatives

255 groups formed and mobilized. All of the groups graduated as marketing entities.

Of the 255 groups, 25 were women-only, and 230 were mixed groups, with a combined total of 6,444 members, Women

20 Appendix 1



constituted 49% of all members. Among caste/ethnic groups, dalits constituted 8.6% and janajatis 41.3%.

2.2.3 120 marketing groups strengthened their capacity for accounting, book keeping, and group management; and were immersed in marketing and agribusiness concepts

138 marketing groups strengthened their capacity for accounting, book keeping, and group management; and 81 were affiliated with ginger, cardamom, and tea commodity groups

Over-achieved.

2.2.4 At least 1,800 stakeholders adopt quality improvement methods

1,704 members of 81 groups adopted quality improvement in post-harvest operations.

Slightly under-achieved.

2.2.5 Strengthened farmer groups and cooperatives helped in applying for CAA membership

31 farmer groups and cooperatives became CAA members, and another four were in the final stages of acquiring membership

2.3 Promotion of social inclusiveness among commercial stakeholders

2.3.1 Service providers contracted with the project on demand

17 training and logistics service providers were contracted as required.

2.3.2 750 commercial stakeholders receive awareness training in social, gender, and environmental issues 2.3.3 Socially inclusive behavior reflected in CAF investments

749 commercial stakeholders received orientation on gender, social mobilization, inclusion, and environment management. All CAF-financed subprojects were screened and implemented according to inclusive criteria and methods

Achieved.

3. Timely provision of market information to farmers

3.1 Farmer groups and cooperative-based market information systems and networks established and made operational

21 groups and cooperatives based market information system were established and became functional

Appendix 1 21



3.2 Farmer groups assisted in operating and maintaining the market information system

21 groups and cooperatives assisted in operating and maintaining the market information system.

3.3 Consolidated district data systematized, disseminated, and integrated with centralized systems 3.4 Mass media releases reach a wide audience of beneficiaries

District market data systemized, integrated with a centralized system, and disseminated through various means including a website (www.amis.gov.np), monthly bulletins, a daily price e-bulletin, radio, SMS mobile phone services, monthly television programs, AMIS centers (3), DCCIs (4), GMIS centers (17), and scrolling price notice boards (2).

4. Enhanced capacity of project partners to support farmers

4.1 25 project standardization training courses on project details and cross-cutting values provided to all partners

43 project standardization training courses completed.

The partner NGOs received a higher share of the project standardization training events (18) followed by the DADOs (11), CAA staff (7), and CAA members (7). NGOs received capacity-building training. Over-achieved.

4.2 42 basic marketing development training courses provided to all partners

143 basic marketing development training courses completed.

CAA members were the main beneficiaries of the market development training courses, accounting for 64 of the total training events organized. The other beneficiaries were the DADOs (41), NGOs (21), and CAA staff (17).

4.3 24 training courses provided to strengthen partner NGOs’ capacity for social mobilization, organizational growth, beneficiary monitoring, public auditing, and accounting

39 training events organized to strengthen partner NGOs.

Training events included 18 on project standardization and 21 on market development. Over-achieved.

22 Appendix 1



4.4 54 advanced training courses provided to DOA staff on products and product development, market-chain development, NGO orientation, and market and price analysis

52 training courses for DADO staff completed.

Training events included 11 on project standardization and 41 on market development. Slightly under-achieved.

4.5 33 training courses provided to strengthen the capacity CAA district staff to carry out investment analysis, project appraisal, and management

24 training courses provided to CAA staff

Training events included 7 on project standardization, and 17 on market development. Under-achieved.

AMIS = agriculture marketing information system, CAA = Commercial Agriculture Alliance, DADO = district agriculture development office, DCCI = district chamber of commerce and industry, EDR = Eastern Development Region, GMIS = group managed information system, HVC = high value crop, MIS = management information system, NGO = nongovernment organization, NLSS = Nepal Living Standard Survey, SMS = short message service. Sources: Department of Agriculture. 2013. Completion Report of the Commercial Agriculture Development Project

(December). Kathmandu; CAA. 2014. Commercial Agriculture Alliance Project Completion Report (September). Kathmandu.

Appendix 2 23

KEY OUTPUTS OF THE COMMERCIAL AGRICULTURE ALLIANCE

Table A2.1: CAA Membership

CAA = Commercial Agriculture Alliance. Source: CAA. 2014. Commercial Agriculture Alliance Project Completion Report (September). Kathmandu.

Table A2.2: Community-Based Infrastructure Subprojects Financed under the CAA

SN Category Infrastructure

Developed % of the Total 1 Farm-to-market agricultural roads and small bridges 22 28.95

2 Collection, grading, and cleaning centers 17 22.37

3 Market centers 23 30.26

4 Small irrigation systems 9 11.84

5 Storage centers (community godown) 3 3.95

6 Small bridges 1 1.32

7 Cardamom nursery development 1 1.32

Total 76 100

CAA = Commercial Agriculture Alliance, SN = serial number. Source: CAA. 2014. Commercial Agriculture Alliance Project Completion Report (September). Kathmandu.

Table A2.3: Non-Infrastructure Subprojects Financed under the CAA

SN Membership Type

CAF Contribution

Number % Amount %

1 Farmer Groups 167 51.86 61,614,954.03 37.93

2 Cooperatives 97 30.13 53,838,811.05 33.15

3 Processors 25 7.76 20,751,998.86 12.78

4 Traders 33 10.25 26,227,960.88 16.15

Total 322 100 162,433,724.82 100

CAA = Commercial Agriculture Alliance, CAF = Commercial Agriculture Fund, SN = serial number. Source: CAA. 2014. Commercial Agriculture Alliance Project Completion Report (September). Kathmandu.

Membership Type

Total Active General Members

Number %

Farmer Groups 276 55.0

Cooperatives 142 28.3

Processors 33 6.6

Traders 51 10.1

Total 502 100.00

24 Appendix 2

Table A2.4: Infrastructure Subprojects Financed under the CAA by District

Districts

Farm-to-Market Roads

Market Sheds/ Centers

Collection Centers

Storage Centers/

Community Godowns

Small Irrigation Systems

Small Bridges

Green Houses Total

Taplejung 3 - 1 - 3 - - 7 Panchthar 3 - - - 2 - - 5 Ilam 4 - 2 - - - 1 7 Jhapa 1 5 3 1 - - - 10 Terhathum 1 1 2 - - - - 4 Dhankuta 2 2 3 - - - - 7 Sunsari 2 3 1 - - - - 6 Morang 2 3 5 2 - - - 12 Udayapur 2 3 - - 2 - - 7 Siraha - 4 - - 2 - - 6 Saptari 2 2 - - - 1 - 5 Total 22 23 17 3 9 1 1 76

CAA = Commercial Agriculture Alliance. Source: CAA. 2014. Commercial Agriculture Alliance Project Completion Report (September). Kathmandu.

Table A2.5: Promotional Activities Organized by the CAA

SN Name of Promotional

Activities Date Participants Objective

1. Visit to Delhi, India 4–14 March 2013 59 CAA members To enhance the capacity of CAA members to commercialize agriculture by adopting new and modern technologies in agriculture production, processing, and trade.

2. Visit to Chandigarh, India 29 November–5 December 2012

45 CAA members To enhance the capacity of CAA members to commercialize agriculture business by adopting of modern technologies in agriculture production, processing, and trading.

3. Organized workshop/seminar on zero budget natural farming

1–5 October 2012

350 CAA members To make CAA members aware of zero budget natural farming to increase the natural growing capacity of soil for long-term sustainability without using chemical fertilizers and pesticides.

4. Organized visit to Bangalore, India

31 August–6 September 2012

129 CAA members To enhance the capacity of CAA members to commercialize agriculture by adopting modern production, processing, and trading technologies.

5. Observation visits to Thailand

15–21 March 2012, and 28

120 CAA members To enhance CAA members’ agribusiness capacity by

Appendix 2 25



April–5 May 2012 adopting efficient production, processing, and trade technologies.

6. Organized visit to the Bhagalpur Agriculture University Agriculture Fair (Bihar, India)

13–15 February 2012

150 CAA members To enhance the capacity of CAA members to adopt modern technologies for agriculture commercialization.

7. Observation tours on potato, chili, and tomato farms in India.

4 April and 7 April 2010

40 CAA members The tours focused on vegetable production and marketing to improve CAA members’ skills relating to innovative production and post-harvest technologies adopted by private and government farms, research institutions, and cooperatives.

8. Tea farmers tour in India. 1–3 April 2010 20 CAA tea producers and processors

9. Observation visit to the Agriculture Fair in Ludhiyana, India

14–19 March 2011

42 CAA members This "Visit the Fair" program impressed and capacitated participants, who used skills learned through this program to better their agribusinesses.

10. Honey producers tour in Nepal and India.

5 March and 10 March 2010

8 CAA honey producer members

11. Intellectual property rights workshops.

8 February and 9 February 2010

22 CAA general members

12. Vegetable farmers tour in Nepal.

14 December 2009–20 January 2010

40 vegetable growing CAA members

13. Interaction program on citrus nursery and orchard management technology.

23 January 2010 30 orange producing and processing CAA members

14. Workshops on problems and prospects of Chili production, processing and trade in the EDR.

15 July 2009 15 CAA members; the regional agriculture director; the CADP project manager and staff; and the CAA chair, general manager, staff, company secretary; as well as 250 general

To raise awareness of the problems and prospects of chili production, processing, and trade.

26 Appendix 2



members from all 11 project districts.

15. Workshop on problems and prospects of honey production, processing, and trade in the EDR.

8 July 2009 15 CAA members, the regional agriculture director, the CADP project manager, the CAA chair and general manager, and staff of the bee development center.

To raise awareness of the problems and prospects of honey production, processing, and trade.

16. LDO, CADP, and CAA interaction workshop

9–10 January 2009

Representatives of the MFALD, LDO, DTO, CAA, and the BOD; the CADP project manager; and the CAA general manager and staff.

To disseminate the working modality of the CAA for community infrastructure development, and to teach local governance practices.

BOD = board of directors, CAA = Commercial Agriculture Alliance, CADP = commercial agriculture development project, EDR = Eastern Development Region, LDO = local development officer, MFALD = Ministry of Federal Affairs and Local Development, SN = serial number. Source: CAA. 2014. Commercial Agriculture Alliance Project Completion Report (September). Kathmandu.

Appendix 3 27

TRAINING PARTICIPANTS BY GENDER AND SOCIAL GROUP

Type of Training Target Events 2008–2013

Stakeholder Details

Male Female Total Janajati Dalit Others

Project standardization

25

43

1,012 226 1,238 359 37 842 81.7% 18.2% 23.4% 29% 3% 68%

Basic market development

42 143 2,924 1,116 4040 1,091 81 2,868

72.3% 27.6% 76.5% 27% 2% 71%

Subtotal 67 186 3,936 1,342 5278 1,393 229 3,656

NGO partners 24

39

628 270 898 288 36 574 70% 30% 17% 32% 4% 64%

DOA staff 24

52

1,420 176 1,596 287 16 1,293 89% 11% 30.2% 18% 1% 81%

CAA staff 33

24

864 177 1,041 302 31 708 83% 17% 19.7% 29% 3% 68%

CAA members -

71

1,024 719 1,743 516 146 1,081 58.8% 41.2% 33% 29.6% 8.3% 62%

Subtotal 81 186 3,936 1,342 5,278 1,393 229 3,656

Total 148 186 74.6% 25.4% 100% 26.4% 4.4% 69.2% CAA = Commercial Agriculture Alliance, DOA = Department of Agriculture, NGO = nongovernment organization. Source: DOA. 2013. Project Completion Report of the Commercial Agriculture Development Project (December).

Kathmandu.

28 Appendix 4

PROJECT COST BREAKDOWN BY SOURCES ($ million)

Cost Appraisal Estimate Actual

ADB financed 18.0 14.88

Government of Nepal 0.8 2.42

CAA general members 4.0 3.44

DDCs 0.8 0.56

Farmer communities 0.5 0.59

Total 24.1 21.89

ADB = Asian Development Bank, CAA = Commercial Agriculture Alliance, DDC = district development committee. Sources: ADB Grant Financial Information System; Department of Agriculture. 2013. Project Completion Report of

the Commercial Agriculture Development Project (December).Kathmandu.

Appendix 5 29

ANNUAL PROJECT DISBURSEMENTS ACCORDING TO SOURCE ($ million)

Year Quarter ADB Government and Others

Total

2008

2 0.150 0.07 0.221

3 0.499 0.24 0.734

4 0.213 0.10 0.314

2009

1 - - -

2 0.465 0.22 0.684

3 0.198 0.09 0.291

4 1.547 0.73 2.275

2010

1 - - -

2 0.773 0.36 1.138

3 1.289 0.61 1.897

4 0.335 0.16 0.492

2011

1 0.696 0.33 1.023

2 0.906 0.43 1.332

3 1.331 0.63 1.957

4 0.687 0.32 1.010

2012

1 0.707 0.33 1.040

2 0.883 0.42 1.298

3 1.415 0.67 2.082

4 0.886 0.42 1.303

2013

1 0.835 0.39 1.229

2 0.641 0.30 0.942

3 0.120 0.06 0.177

4 0.237 0.11 0.349

2014 1 0.072 0.03 0.105

Total 14.884 7.01 21.894 ADB = Asian Development Bank. Source: ADB Grant Financial Information System.

30

Appendix

6

PROJECT IMPLEMENTATION SCHEDULE

Component Activity Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Component 1: Commercial Agriculture Investment Management

1 Appointment of the CAA general manager and company secretary

2 Full staffing of the CAA and district branches

3 Establishment of the CAF

4 Information dissemination aimed at a balanced CAA membership

5 CAA membership registration

6 Election of the CAA board of directors

7 Dissemination of information regarding CAF financing and eligible investments

8 Screening, verification, and approval of subproject investment proposals

- Community-based market infrastructure

investments

- Non-infrastructure investments

9 CBMI investment contracts with DDCs and implementation

10 Investment contracts with CAA members and implementation

Component 2: Inclusive Development of Stakeholders A. Development of Subsistence Agriculture Stakeholders

1 Partnership agreements with NGOs

2 Identification of HVC production areas and marketing points

3 Assistance with the production and marketing of HVCs

4 Farmer groups training on marketing

Appendix

6

31



5 Networking among farmer groups and others in the value chain

6 Skill training for landless persons in transport, packaging, production, primary processing, tool making, and servicing

B.

1 Partnership agreement with NGOs

2 Helping focus groups form associations or cooperatives

3

Strengthening the capacity of semi-commercial stakeholder groups for accounting, bookkeeping, and group management

4 Building market chain awareness and linkages

5 Improving the quality assurance system

6 Upgrading production and primary processing technology

7 Training on entrepreneurship and business planning

8 Strengthened the capacity of focus groups for applying for CAA membership and preparing sub-projects (infra, non-infra)

C. Promotion of Social Inclusiveness among Commercial Agricultural Stakeholders

1 Contract with service providers

2 Awareness training on social, gender, and environmental issues

Component 3: Market Information Dissemination

1 Establish integrated market information system

2 Provide training on market information sharing system farmer marketing groups level

32

Appendix

6



3 Collect and disseminate information on size of demand, price, and expected delivery time at different markets

4 Disseminate information through AMIS and network with others

Component 4: Project Partners Capacity Enhancement

1 Project standardization training on project details and cross-cutting values for all partners

2 Basic marketing development training for all partners

3 Training for NGOs on topics including social mobilization

4 Training for DOA staff on various commercial agriculture topics

5 Training for CAA district branch office staff on subproject proposal evaluation

6 Training for CAA members

Component 5: Project Implementation Support

1 Establishing PSC at MOAD

2 Recruiting Package A consultants

3 Recruiting Package B consultants

4 Fully staffing the PMU in Biratnagar

5 Preparing project implementation guidelines on various subjects

6 Establishing a complaints redressal mechanism

7 Procuring materials, equipment, and vehicles

8 Holding PSC meetings twice a year

9 Conducting a baseline survey of Terai

Appendix

6

33



10 Conducting a baseline survey of Hills

11 Conducting product chain studies

12 Conducting a study on markets and prices

13 Conducting a cost and benefit study of HVCs

14 Assessing annual and social and economic impact

15 Installing a notice board regarding services available, and informing procedure and contract persons for accessing services

16 Financial and project reporting and auditing

17 Establishing a results monitoring framework

Legend: Projected Q1: January, February, March Actual Q2: April, May, June Q3: July, August, September Q4: October, November, December

AMIS = agriculture management information system, CAA = Commercial Agriculture Alliance, CAF = Commercial Agriculture Fund, DDC = district development committee, HVC = high value crop, MOAD = Ministry of Agriculture Development, NGO = nongovernment organization, PMU = project management unit, PSC = project steering committee, Q1 = Quarter 1, Q2 = Quarter 2, Q3 = Quarter 3, Q4 = Quarter 4. Source: Department of Agriculture. 2013. Project Completion Report of the Commercial Agriculture Development Project (December). Kathmandu.

34 Appendix 7

STATUS OF COMPLIANCE WITH GRANT COVENANTS

Covenants

Reference in Project Grant Agreement

Status of Compliance Remarks

Particular Covenants (Grant Agreement) 1. The Recipient shall (i) maintain, or cause

to be maintained, and shall cause CAA to maintain separate accounts for the Project; (ii) have appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the Grant proceeds and compliance with the financial covenants of the Grant Agreement as well on the use of the procedures for imprest account/statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall form time to time reasonably request.

Article IV, Section 4.02 (a)

Complied

2. The Recipient shall enable ADB, upon ADB’s request, to discuss the Recipient’s and CAA’s financial statements for the Project and its financial affairs related to the Project from time to time with the Recipient’s and CAA’s auditors, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Recipient unless the Recipient shall otherwise agree.

Article IV, Section 4.02 (b)

Complied

3. The Recipient shall enable ADB’s representatives to inspect the Project, the Goods financed out of the proceeds of the Grant, and any relevant records and documents.

Article IV, Section 4.03 (c)

Complied

Particular Covenant (Project Agreement) 1. CAA shall carry out the Project with due

diligence and efficiency, and in conformity with would administrative, financial,

Article II, Section 2.01 (a)

Complied

Appendix 7 35

Covenants



engineering, environmental and commercial agriculture practices.

2. In the carrying out of the Project, and operation of the project facilities, the funds, the CAA shall perform all obligations set forth in the Grant Agreement to the extent that they are applicable to CAA and all obligations set forth in the Schedule to this Project Agreement.

Article II, Section 2.01 (b)

Complied

3. CAA shall make available, promptly as needed, the funds, facilities, services, equipment, land, and other resources, which are required, in addition to the proceeds of the Grant, for the carrying out of the Project.

Article II, Section 2.02

Complied

4. In carrying out of the Project, CAA shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB.


Complied

5. Except as ADB may otherwise agree, all Goods, Works and consulting services to be financed out of the proceeds of the Grant shall be procured in accordance with the provisions of Schedule 3 of the Grant Agreement.


Complied

6. CAA shall maintain, or cause to be maintained, records and accounts adequate to identify Goods and other items of expenditure financed out of the proceeds of the Grant, to disclose the use thereof in the Project, to record the progress of the Project and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.


Complied

7. ADB and CAA shall cooperate fully to ensure that the purposes of the Grant will be accomplished.


Complied

8. CAA shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement, or the accomplishment of the Purposes of


Complied

36 Appendix 7

Covenants



the Grant.

9. ADB and CAA shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, CAA and the Grant.

Article II, Section 2.07 (c)

Complied

10. CAA shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Grant and expenditure of the proceeds thereof; (ii) the Goods and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of CAA; and (v) any other matters relating to the purposes of the Grant.


Complied

11. Without limiting the generality of the foregoing, CAA shall furnish to ADB quarterly and annual reports on the execution of the Project and on the operation and management of the project facilities. Such reports shall be submitted in such form and in such detail and within such period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the period under review, steps taken or proposed to be taken for remedy of these problems, and proposed program of activities and expected progress during the following review period.


Complied

12. Promptly after physical completion of the Project, by in any event not later than three months thereafter or such later date as ADB may agree for this purpose, CAA shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by CAA of its obligations under the Project Agreement and the accomplishment of the purposes of the Grant.

Article II, Section 2.08 (c)

Complied

13. CAA shall (i) maintain separate accounts for the Project for its overall operations; (ii) have such accounts and related financial


Complied

Appendix 7 37

Covenants



statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualification, experience and terms of reference acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the Grant proceeds and compliance with the financial covenants of the Grant Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language. CAA shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

14. CAA shall enable ADB’s representatives to inspect the Project, the Goods financed out of the proceeds of the Grant, properties and equipment of the CAA and any relevant records and documents.


Complied

15. CAA shall at all time conduct its business in accordance with sound administrative, financial, environmental, and commercial practices, and under the supervision of competent and experienced management and personnel.


Complied

16. Except as ADB may otherwise agree, CAA shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under the Project Agreement.


Complied

17. Except as ADB may otherwise agree, CAA shall apply the proceeds of the Grant to the financing of expenditures on the Project in accordance with the provisions of the Grant Agreement and this Project Agreement, and shall ensure that all


Complied

38 Appendix 7

Covenants



Goods financed out of such proceeds are used exclusively in the carrying out of the Project.

Sector Covenants 1. The responsibilities of the Commercial

Agriculture Alliance (CAA) under the Project shall be to (i) manage and disburse the Commercial Agriculture Fund (CAF); (ii) facilitate subproject linkages; and (iii) facilitate the networking of the agricultural stakeholders within the project area. The management of CAA shall be headed by a General Manager, who shall be selected through open and competitive selection process. The General Manager shall be assisted by a company secretary, a compliance officer, a chief accountant and other support staff.

Schedule 4, Para. 7

Complied The CAA was incorporated on 28 September 2006 as a not-for-profit company. The General Manger and Company Secretary were appointed on August 2007 and other staff appointed by December 2007.

2. Within two months of the Effective Date, the CAA shall have adopted (i) business plan; (ii) standard operating procedures (SOP) which shall incorporate the principles of equitable participation of women and include provisions to prohibit any discriminatory or prejudicial measures against the minority and/or disadvantaged groups; and (iii) code of conduct which shall incorporate the conflict of interest rules for staff and members of the Board. Each of these documents must be formulated to the satisfaction of ADB.

Schedule 4, para. 8

Complied The CAA Board approved and adopted the business plan on 22 June 2008, the SOP on 30 September 2007, the code of conduct on 15 January 2008, with some delays compared with the original schedule.

3. The CAA shall recruit a compliance officer to undertake all necessary measures to prevent and address any financial irregularities and/or abuse of authority in the operations of CAA, including in its management of CAF. In the conduct of its duties, the compliance officer shall also be required to liaise with the relevant government agencies or commissions responsible for the efforts to combat corruption and abuse of authority.

Schedule 4, para. 9

Complied Compliance officer was recruited and started work from 15 January 2008.

4. Within four months of the Effective Date, the CAA headquarters shall have been fully staffed to the satisfaction of ADB.

Schedule 4, para. 10

Complied CAA headquarters was fully staffed by 31 December 2007.

5. Within four months of the Effective Date, CAA shall have established a district


Complied District branch offices were established and

Appendix 7 39

Covenants



branch in each of the project districts and appoint a branch manager to head each of the district branches. The branch manager shall be recruited through open and competitive selection process. The branch manager shall be assisted by a finance and administration officer, a monitoring and evaluation officer and other support staff.

became functional from January 2008.

6. Within five months of the Effective Date, each of the CAA district branches shall have been fully staffed to the satisfaction of ADB.


Complied All district staff recruited by 31 December 2007.

7. Within five months of the Effective Date, the CAA shall have formed an appraisal panel which shall make the final review and approval of the investments proposals to be financed under the CAF. The appraisal panel shall consist of five members, which includes (i) the General Manager; (ii) two Board members; and (ii) two external experts to be appointed by the Board from the list of experts to be prepared by the General Manager. The chair of the appraisal panel shall be selected by its members. The tenure of the Board members and the external experts as appraisal panel members shall be for a period not to exceed two years.


Complied The appraisal panel was formed on 5 July 2008.

8. Within five months of the Effective Date, the branch manager shall have constituted a district review committee (DRC) in each project district. The tasks of the DRC shall be to perform the initial screening of the proposals to be financed under CAF. The district review committee shall consist of (i) the branch manager; (ii) two CAA general member representatives; (iii) one representative from the district agriculture development office; (iv) one representative from the district development committee (DDC); (v) the women development officer from the district women development office; and (v) one external technical expert to be appointed by the General Manager from the list of experts prepared by the branch manager. There should be at least one female member in the district review committee. The district review committee may seek technical advice from external


Complied DRCs were formed by 3 October 2008, and remained fully operational

40 Appendix 7

Covenants



parties to facilitate initial screening of CAF applications. The tenure of the CAA members and the technical expert as district review committee members shall be for a period not to exceed two years.

Environmental Covenant 1. The Recipient shall ensure that the entire

implementation of the Project, including the interventions to be financed under CAF, shall be carried out in compliance with all applicable environmental laws and regulations of the Recipient and ADB's Environmental Policy (2002).


Complied ADB’s and government’s environmental requirements were addressed at appraisal and implementation of CAF subprojects.

Social Covenants 1. The recipient shall ensure that the

implementation of the Project, including the interventions made under the CAF, shall not entail land acquisition, resettlement or land donation and that no persons shall be adversely affected in terms of ADB's Policy on Involuntary Resettlement (1995) and the prevailing laws and regulations of the Recipient.


Complied

2. The Recipient shall take all necessary and appropriate measures to implement the Gender Action Plan to ensure that due consideration will be provided to women in the implementation of the Project, both as the beneficiaries of Project and staff in the Project Management Unit and the CAA.


Complied Women beneficiaries accounted for 51% of the total 1,582,855 beneficiaries of infrastructure and non-infrastructure subprojects implemented by CAA. Women constituted 49.4% of the total number of semi-commercial stakeholders (6,444). Similarly, dalits and janajatis constituted 8.6% and 41.3% of the semi-commercial stakeholders. Of the 23,379 subsistence stakeholders, women constituted 68.5%, dalits 12.3%, and janajatis 52.2%. The number of women staff in PMU was 11 (32%) out of the total 34.

Appendix 7 41

Covenants



In CAA, the number of women staff was 13 (20%) out of the total 64.

Financial Covenants 1. The CAF shall only be utilized to finance

community based market infrastructure investments and non-infrastructure investments that fulfil the following general criteria: (i) the investment must add value to agricultural products; (ii) the investment must benefit other agricultural stakeholders and the community as a whole; (iii) the investment must improve the market chain efficiency; (iv) the investment must demonstrate public goods content; and (v) the investment must have strong demonstration effects on rest of the communities.


Complied

2. The applicants for the community-based market infrastructure investments shall be limited only to DDCs and the applicants for the non-infrastructure investments shall be limited only to the general members of the CAA. The maximum amount to be financed under CAF for each community based market infrastructure investment shall be $80,000, and for each non-infrastructure investment, the limit shall be $20,000. The maximum amount that each general member can obtain on cumulative basis from CAF shall be $40,000, whereas, the maximum amount that each DDC can obtain on cumulative basis from CAF shall be $320,000.


Complied

3. In the event that any appraisal panel member or his/her immediate family members shall have fifty percent (50%) or more financial interests in an entity, such entity shall not be allowed to submit financing proposals under CAF.


Complied

4. Within five months of the Effective Date, the specific criteria for the community based market infrastructure investments shall have been formulated by the Recipient to the satisfaction of ADB.


Complied Although with some delays, specific criteria for community based market infrastructure investment was prepared and ADB’s approval was sought.

5. Within five months of the Effective Date, the specific criteria for the non-


Complied

42 Appendix 7

Covenants



infrastructure investments shall have been formulated by the Recipient to the satisfaction of ADB.

6. All information related to the application process and the investments approved under the CAF shall be made available to the communities within the project area. The applicants whose applications have been rejected shall be informed on the reasons for such rejection.


Complied

7. Within four months of the Effective Date, the Recipient shall have established a complaint redressed mechanism, to the satisfaction of ADB, to allow the intended beneficiaries of the Project to file their complaints related to the implementation of the Project and ensure that these complaints are addressed accordingly.


Complied PMU maintained a suggestions box at the office and assigned a nodal officer for complaint redressal. CAA adopted complaint redressal mechanism after approval by the CAA Board on 20 November 2007. All the CAA branch offices maintained a complaint box and a register.

8. The Recipient shall ensure that the performance audit of the CAF shall be undertaken on annual basis. The audit shall include a review of all disbursements made by the CAA to the intended recipients of the CAF and evaluate the extent to which proper and timely disbursements were made. This audit shall be conducted by an independent and external auditor having at least five years of working experience as a qualified accountant. The audit report produced by the auditor should include recommendations of measures to improve the timely and effective disbursement of CAF. The CAA shall be required to fully implement these measures within one month of its receipt of the report.


Complied

9. The general manager, the CAA appraisal panel members and CAA compliance officer shall be required to disclose their wealth prior to undertaking and upon completion of their assignments. The disclosure must be made in a manner which would allow the public, in particular


Complied The general manager, appraisal panel members and compliance officer all declared their wealth prior to undertaking and upon completion of assignment.

Appendix 7 43

Covenants



the local project stakeholders, to have access to such information

10. In order to enhance transparency and accountability in the implementation of the Project, within six months of the Effective Date, the Recipient shall have established a project website which will allow the public to track procurement and contract awards, including its amount, and the list of goods, works and consulting services procured. In addition, the website shall also provide other relevant information related to the project implementation including information related to Component 1.


Complied Two websites were created: www.cadp.gov.np as the main project website and www.caa.com.np for specific information on CAA activities.

11. Without limiting the generality of Section 6.05 of the Grant Regulations, the Recipient shall ensure that throughout the implementation of the Project, adequate budgetary allocations of the required counterpart funds are made, approved and released in a timely manner in order to ensure proper implementation of the Project.


Complied The government allocated adequate budget as counterpart fund generally on time.

Other Covenants 1. Except as ADB may otherwise agree, and

except as set forth in the paragraph below, the Recipient shall apply quality-and cost-based selection (QCBS) for selecting and engaging consulting services. The Recipient shall apply the least cost method for training, workshops, studies, and surveys and monitoring, in accordance with, among other things, the procedures set forth in the Procurement Plan. The Recipient shall recruit individual consultants for the team leader and deputy team leader positions in accordance with ADB’s procedures for recruiting individual consultants.

Schedule 3, paras 5-7.

Complied QCBS was applied in recruiting Package B consultant. Least cost method was used for training, workshops, studies, surveys, and monitoring as per the procurement plan. Team leader and deputy team leader were recruited following ADB’s individual consultant procurement procedure.

2. The Ministry of Agriculture Development (MOAD) shall be the Project Executing Agency and responsible for overall project coordination and monitoring.

Schedule 4, para. 1

Complied

3. The CAA shall be responsible for the implementation of Component 1, and the Department of Agriculture (DOA) shall be responsible for the implementation of

Schedule 4, para. 2

Complied

44 Appendix 7

Covenants



Components 2, 3, 4 and 5. 4. The Recipient shall establish a Project

Management Unit (PMU) to be located at Biratnagar to be responsible for (i) preparing annual work plans and project progress reports; (ii) recruiting consultants and award procurement contracts; (iii) supervising activities under Components 2, 3, 4 and 5 and the performance of partner NGOs and service providers under these components, and (iv) carrying out monitoring and evaluation of the activities, outputs, and expected impacts of Components 2, 3, 4 and 5.

Schedule 4, para. 3

Complied PMU was established at Biratnagar as planned.

5. The PMU shall be headed by a project manager who shall oversee the day-to-day implementation of Components 2, 3, 4 and 5. The Project manager shall be jointly selected by MOAD and ADB from among the officers of the Recipient with the necessary core competence and experience and assisted by the following staff: (i) social equity officer; (ii) accounts and financial officer; (iv) two planning and implementation officers; (v) procurement and contract officer; (vi) two technical officers; and (vii) the necessary support staff. One of these officers shall be responsible for management of a complaint cell to be created as part of the complaint redressal mechanism to be established under the Project. Within three months of the Effective Date, the Recipient shall ensure that the PMU shall have been fully staffed and with adequate representation of women staff.

Schedule 4, para. 4

Complied PMU was headed by a Class I officer of MOAD who was appointed on 26 June 2007. A new project manager was appointed on 4 October 2009. PMU was fully staffed. Out of 32 staff, 32% were women. However, all the women.

6. The Recipient shall establish a Project Steering Committee (PSC) chaired by secretary, MOAD with the Project Manager as the member-secretary. The other members of the PSC shall comprise the director general of DOA, senior officials at the joint-secretary level from MOAD, Ministry of Finance, Ministry of Industries, Commerce and Supplies, Ministry of Federal Affairs and Local Development, Ministry of Women, Children and Social Welfare, and the National Planning Commission, the executive director of the Agro-Enterprise Center and the General Manager. The PSC shall convene its

Schedule 4, para. 5

Complied PSC was constituted as planned and meet on a semiannual basis.

Appendix 7 45

Covenants



meeting at least on semi-annual basis.

7. The functions of the PSC shall be to (i) oversee the entire implementation of the Project; (ii) review progress of the Project; and (iii) resolve policy issues related to the Project.

Schedule 4, para. 6

Complied

8. The Project shall be monitored and evaluated to determine its efficiency (delivery of inputs against specified implementation targets and timeframe) and effectiveness (outputs, outcomes, and short-term impacts) as measured against baseline pocket area and product-chain data. The baseline and product-chain studies shall be undertaken in each district and shall involve quantitative and qualitative assessments in order to provide a clear understanding of the socioeconomic characteristics of the beneficiaries, including ethnicity, gender, and economic status, and an assessment of the value-chain that shall serve as a benchmark against which project progress can be measured.


Complied Baseline surveys of project's key indicators and product chain were carried out in the project districts.

9. The Project shall solicit monitoring and evaluation feedback on the Project activities from (i) producer groups; (ii) marketing groups, associations and cooperatives; (iii) Partnering NGOs and training service providers; (iv) CAA and its branch offices; (v) project studies and reports; (vi) the project-supported market information system; and (vii) any other relevant sources. The collected information will be analyzed, evaluated and aggregated to be utilized for (i) guidance into project planning and implementation decision making; (ii) inclusion into the project’s reporting framework; and (iii) utilization by institutional partners such as DOA and FNCCI.


Complied A result based monitoring framework was made functional through a website.

10. The Recipient and ADB shall undertake semi-annual review of the Project, which shall cover the review of (i) the performance of PMU, CAA, and partner NGOs and service providers; (ii) physical progress of project implementation; (iii) the extent of the inclusion of poor and


Complied There were regular project reviews with the first review mission during 5 to 14 November 2008. The missions were fielded on semiannual basis. A total of 10

46 Appendix 7

Covenants



excluded groups in project implementation; (iv) compliance with the covenants under this Grant Agreement; (v) implementation of the Gender Action Plan, and (vi) other relevant matters that may arise during project implementation.

review missions including a midterm review mission were fielded during the project period.

11. The Recipient and ADB shall also undertake a comprehensive midterm review of the Project in the beginning of the fourth year to identify problems and constraints encountered during project implementation and suggest measures to address identified constraints.


Complied Midterm review mission was fielded jointly by ADB and the government during 8 to 19 December 2010.

12. The PMU shall:(i) submit quarterly and annual progress reports to ADB on Project implementation and such other reports and information related to the Project as ADB may reasonably request; (ii) within three months of its submission to ADB, make available to the public, in particular the local stakeholders, the annual progress reports in Nepali language; and (iii) submit a project completion report to the PSC and ADB within three months of physical completion of the Project.


Complied Summary of annual progress reports were published in Nepali language. The Recipient’s project completion report was submitted to ADB on 3 January 2014

ADB = Asian Development Bank, CAA = Commercial Agriculture Alliance, CAF = Commercial Agriculture Fund, COC = code of conduct, DDC = district development committee, DOA = Department of Agriculture, DRC = district review committee, FNCCI = Federation of Nepalese Chambers of Commerce and Industry, MOAD = Ministry of Agriculture Development, NGO = nongovernment organization, PMU =project management unit, PSC = project steering committee, QCBS = Quality-and Cost-Based Selection, SOP = standard operating procedures. Source: DOA. 2013. Project Completion Report of the Commercial Agriculture Development Project (December).

Kathmandu.

Appendix 8 47

CONSULTING SERVICES UNDER PACKAGES A AND B

Position Original Contract

Revised Input

Consumed Input

Unused Input

Package A

Team Leader 36.00 36.00 29.06 6.94

Deputy Team Leader 40.00 40.00 38.70 1.30 Package B

Training Design Specialist 40.50 42.20 42.20 -

Senior Social Inclusion and Participation Specialist 40.50 35.23 35.16 0.07

Social Inclusion Specialist-1 40.50 35.27 35.27 -



Agribusiness Development Specialist-1 40.50 32.71 32.71 -



Market-Chain Development Specialist 40.50 34.83 34.83 -

Commercial Agriculture Fund Analyst and Advisor 24.00 22.24 22.24 -

Community Subproject Investment Specialist 40.50 37.22 36.85 0.37

Market Information and Promotion Specialist 40.50 43.06 43.06 -

M&E System Design and Training Specialist 36.00 37.17 37.17 -

Environmental Impact Monitoring Specialist 26.00 24.68 24.68 -

Total 531.50 500.47 500.03 0.44 DOA = Department of Agriculture, M&E = monitoring and evaluation. Source: DOA. 2013. Project Completion Report of the Commercial Agriculture Development Project (December).

Kathmandu.

48 Appendix 9

ECONOMIC ANALYSIS

1. The project supported agriculture commercialization through the increased cultivation of high value crops (HVCs) and expansion of marketing and agro-processing facilities leading to a positive economic impact in the Eastern Development Region (EDR). It created favorable conditions for farmers to benefit from market integration and participation in target commodity value chains. Supporting the improvement of critical infrastructure in rural areas such as farm-to-market roads, community irrigation systems, agriculture collection centres, and storage facilitates has helped transform subsistence agriculture operations to commercial enterprises. The non-infrastructure investment has promoted HVC cultivation and improved post-harvest operations such as processing, packaging, grading, and marketing. These measures have increased opportunities for value addition, particularly in HVCs like cardamom, tea, fruits, spices, and vegetables and enhanced links between producers and processors in commodity value chains. The project also contributed to the inclusive development of semi-commercial stakeholders, subsistence farmers, and the landless rural poor. A. Project Beneficiaries 2. The project design recognized agriculture’s important role in improving the livelihoods of majority of the rural population for whom agriculture is a principal source of income. It was necessary to transform agriculture production from a subsistence-oriented system to a dynamic and market-focused system to attain high growth and create more employment and income-generating opportunities for farmers, traders, and processors. Strengthening value-chain links among traders, agro-processors, and farmers as primary producers has been an important strategic initiative of the project in transforming the agriculture sector. 3. Farmers in the 11 EDR districts, including subsistence and women farmers, were the primary project beneficiaries. They participated in project activities supporting agro-processing and the cultivation of HVCs, including vegetables, fruits, and spices such as cardamom, ginger, turmeric. The EDR was chosen for agriculture commercialization because its relatively developed infrastructure and irrigation system created favorable conditions for a successful intervention and the achievement of intended outcomes. This approach was validated by the initial results. The project supported production and post-harvest activities of HVCs such as vegetables, tea, cardamom, and ginger, which are important agricultural exports. 4. The project target groups were farmers (commercial, semi-commercial, and subsistence), traders and processors. The commercial stakeholders included farmers groups, cooperatives, traders, and processors involved in commercial agriculture (production, processing, and trading) in the project districts. The commercial stakeholders gained access to the Commercial Agriculture Fund (CAF) through membership in the Commercial Agriculture Alliance (CAA). The semi-commercial stakeholders were farmers, traders, and processors in the early stages of commercialization producing a limited quantity of marketable surplus. The subsistence stakeholders included smallholder famers and landless agricultural households producing barely enough for subsistence and no marketable surplus. The semi-commercial stakeholders benefited from project investments in market infrastructure such as farm-to-market roads, collection centres, and storage facilities that enhanced market integration by reducing transportation costs, and improved links with traders (collectors and wholesalers). Access to processing and storage facilities incentivized semi-commercial and subsistence stakeholders to produce HVCs and allowed them to benefit from higher product prices. Non-infrastructure investments in processing and value addition activities created backward links with semi-

Appendix 9 49

commercial and subsistence farmers by developing supply-chain relationships for the processing of cardamom, turmeric, and other spices. B. Economic Analysis of Subprojects

1. Approach and Methodology 5. Economic analysis was carried out for both infrastructure and non-infrastructure subprojects to assess the project’s economic viability. The following are the major assumptions of the analysis:

• The economic life of each subproject is 15 years. • A 12% discount rate has been used as the opportunity cost of using capital to

calculate net present values (NPVs) of the net incremental benefits and to derive the benefit-cost ratios.

• Financial prices have been converted into economic prices for non-traded goods, using 0.9 as the standard conversion factor.

• All subproject benefits have been evaluated at 2013 prices. • The shadow wage rate of 0.7 of the market wage for unskilled labour has been

used. • The prices of internationally traded commodities—both outputs (rice and wheat)

and inputs (urea and diammonium phosphate)—are taken as derived economic prices that reflect border prices. World market prices, both historical and forecast, are used, and prices expressed in real 2010 US dollars are converted to 2013 prices using the Manufactures Unit Value Index.

6. Following the project design, four types of community-based market infrastructure subprojects were evaluated, including small collection centers, farm-to-market roads, small irrigation schemes, and storage facilities. The quantified benefits of small collection centres include (i) jobs created directly through increased marketing activity (transportation, loading, and unloading), (ii) an increased HVC production area attributable to improved access to marketing services, and (iii) savings from reduced post-harvest losses. The maintenance of farm-to-market roads reduced cargo handling costs due to the increased use of motorized vehicles, and contributed to savings on existing usage and generated user value (estimated at 50%). Small irrigation schemes resulted in higher incremental benefits from HVCs as compared with the “without” project situation. The main quantified benefit of the storage facilities is the timely provision of quality seed (rice, wheat, and vegetables) to farmers. Non-infrastructure subprojects were grouped into HVC production, processing, and packaging. Further disaggregation was not carried out due to the difficulty of quantifying benefits, such as those related to the agriculture extension program, promotional activities, workshops, and study tours. The main quantified benefits include increased HVC production, and higher returns from value addition activities related to cardamom, tea, oranges, and turmeric. Subproject costs include investment and operation and maintenance costs. Project benefits are calculated by deducting production and processing costs from gross revenues, and net incremental benefits are computed by comparing “with project” and “without project” situations. Overall, the incremental subproject benefits are combined, and CAA management expenditure has been included.

50 Appendix 9

2. Results of Economic Analysis 7. The economic internal rate of return (EIRR), NPV, and benefit-cost ratios have been computed for subprojects and aggregate investments. The EIRR values, which range from 16.02% (farm-to-market road maintenance) to 24.05% (construction of small collection centres), are in Table A9.1. These results show that the subprojects are economically viable and consistent with appraisal estimates, although these are lower than the appraisal estimates.1 The results also indicate that investments in market infrastructure such as small collection centres, HVC production, and post-harvest operations provide higher returns than farm-to-market road maintenance, small irrigation schemes, and storage facilities. 8. The aggregate run shows that the project is economically efficient with an estimated average EIRR of 23.55%. The project benefit-cost ratio is estimated at 1.42, and the NPV is estimated at NRs236.6 million (Table A9.1).

Table A9.1. Results of Economic Analysis

Subproject

EIRR (%)

Base Case

Cost (+10%)

Benefits (-10%)

Combined Case

a

A. Community-Based Market Infrastructure

Small collection center 24.05 20.61 20.26 17.10

Farm-to-market roads maintenance 16.02 12.55 13.47 11.31

Small irrigation schemes maintenance 19.23 14.74 14.30 10.25

Storage facilities 19.03 15.90 15.58 12.59

B. Non-Infrastructure Investment

High value crop production 21.77 18.66 18.35 15.56

Postharvest processing and packaging 22.44 17.09 16.53 11.27

C. Aggregate Run 23.55 20.11 19.77 16.62

a Combined case involves a 10% cost increase and 10% benefits decline. Further details are in Tables A9.2, A9.3, A9.4, A9.5, A9.6, and A9.7, and A9.8.

EIRR = economic internal rate of return. Source: Project completion review mission estimates.

9. Sensitivity tests were carried out in three scenarios: (i) a 10% cost increase, (ii) a 10% benefits decrease, and (iii) a combined case involving a 10% cost increase and 10% benefit decrease. The tests show that the subprojects are more sensitive to a benefits decrease than a cost increase, except in the case of farm-to-market road maintenance. The estimated EIRRs all exceed the 12% cut-off level in the first two scenarios, indicating that the project investments are sound. In the more restrictive combined case, the EIRRs dropped below 12% in three of six subprojects investments assessed. C. Capacity Strengthening and Appraisal of Subprojects 10. The subprojects were selected for funding following the procedures outlined in the Project Administration Manual. Initial screening of the proposals submitted by CAA members for

1 The higher appraisal estimates may be due to the underestimation of such costs as community contributions and

indirect costs of supporting the project activities. Moreover, the estimates were based on representative cases whose calculated benefits might have exceeded the present analysis, which used field data on average incremental benefits realized by subprojects.

Appendix 9 51

CAF grants was carried out by the district review committee, which had an external technical expert. Proposals that passed the initial screening were forwarded to the CAA for final approval. 11. The project provided subproject appraisal training to district review committee members and CAA staff. Each project district was provided with a monitoring and evaluation officer to regularly monitor subproject progress. D. Overall Project Impacts 12. The project is likely to significantly impact the country's economy by (i) increasing HVC production, (ii) creating employment opportunities, and (iii) increasing processing and value addition activities in the EDR. Improved market infrastructure has (i) increased the volume of marketed HVCs, (ii) created additional employment opportunities by expanding transportation and storage, and (iii) increased the demand for on-farm labour. Multiplier effects are likely to be significant as poor, subsistence and landless households take advantage of the opportunities created by project interventions, strengthening commodity value chains in the region. 13. Income. Participating stakeholders’ income has increased due to the increased adoption of HVCs and value addition activities. Subsistence stakeholders have benefited from participating in small agribusinesses and operating microenterprises to process agricultural products. The recent Results Indicator Survey2 showed that the per capita income of project beneficiary households increased from NRs18,619 before the project to NRs38,955 after the project (an average increase of 109%). Semi-commercial farmers accounted for the highest increase (148.8%) followed by landless persons (136.7%). Although the contribution of project-related activities to the increase in household income was not initially significant, this is expected to have increased markedly by project completion. 14. Employment. The number of employment opportunities has increased due to a higher demand for farm labour and market services resulting from an increased business volume at collection centres (loading and unloading, weighing, and transporting by tractors and other motorized vehicles), and more value addition activities. The options of subsistence stakeholders, especially landless persons, have increased through the initiation of microenterprises processing agriculture products for local markets. Expanded cultivation of HVCs promoted by the project has created employment opportunities for rural youth by increasing the demand for on-farm labour, reducing youth migration to some extent. In several cases, new employment opportunities generated by the project influenced returning migrants to remain in their original villages, while many others have undertaken agribusinesses themselves. In all, the project interventions supporting HVC production, processing, and trading created 447,430 person-days of annual employment opportunities.3 15. Marketing competitiveness. Project investments in post-harvest technologies, including improved storage, packaging, and processing, helped stakeholders improve their market competitiveness. Stakeholders were trained through various promotional activities, and participated in foreign and domestic exposure visits. These measures focused on improving the quality of operations such as handling, packaging, and transportation, which improved market competitiveness, and decreased post-harvest losses due to improved post-harvest operations.

2

NARMA Consultant. 2013. Results Indicator Survey of the Commercial Agriculture Development Project. Kathmandu.

3 Department of Agriculture. 2013. Project Completion Report of the Commercial Agriculture Development Project

(December). Kathmandu.

52 Appendix 9

Awareness of quality standards promoted vegetable exports to neighbouring Indian markets. Overall, the project interventions have improved the market competitiveness of producers and other stakeholders. 16. Poverty reduction. Nepal has made significant progress toward per capita poverty reduction during the last two decades. The poverty rate decreased from 41.8% in 1996 to 25.16% in 2011.4 This rate is even lower in the EDR, where it is estimated at 15.93% in rural hill areas and 20.97% in rural Terai. 17. The 2013 Results Indicator Survey showed that the average incidence of poverty in the surveyed areas declined from 40.6% before the project to 30.9%; however, this figure remains higher than the national average of 25.16%. The survey also showed that semi-commercial farmers accounted for the highest poverty reduction rate (13.5%) followed by subsistence farmers (11.1%), landless persons (9.7%), and CAA members (8.7%).5 Although the project interventions may not entirely account for this reduction, they have certainly played a significant role. The expansion of rural farm and nonfarm operations financed by infrastructure and non-infrastructure development subprojects has increased the access of subsistence farmers and the landless poor to employment opportunities. It is expected that the increased income of project beneficiaries, especially semi-commercial and subsistence stakeholders, will reduce poverty and improve food security among these relatively vulnerable groups.

4 Central Bureau of Statistics. 2011. Poverty in Nepal. Kathmandu.

5 NARMA Consultant. 2013. Result Indicators Survey of the Commercial Agriculture Development Project. Kathmandu.

Appendix 9 53

Table A9.2: Economic Analysis of Small Collection Centres (NRs’000)

Years

Investment Cost

O&M Cost Total Cost Total

Benefit Net

Benefit

Discounted Cost at

12%

Discounted Benefit at

12%

Discounted Net Benefits

a B c=(a+b) d e=(d-c) f g h=(g-f)

2010 28,533 778 29,311 3,250 (26,060) 26,170 2,902 (23,268)

2011 17,622 2,592 20,214 11,470 (8,744) 16,115 9,144 (6,971)

2012 72,018 5,443 77,461 25,621 (51,839) 55,135 18,237 (36,898)

2013 63,863 8,035 71,899 39,903 (31,996) 45,693 25,359 (20,334)

2014 - 8,437 8,437 42,755 34,318 4,787 24,261 19,473

2015 - 8,859 8,859 45,806 36,947 4,488 23,207 18,719

2016 - 9,302 9,302 48,662 39,360 4,208 22,012 17,805

2017 - 9,767 9,767 51,671 41,904 3,945 20,869 16,924

2018 - 10,255 10,255 54,802 44,547 3,698 19,762 16,064

2019 - 10,768 10,768 58,065 47,297 3,467 18,695 15,228

2020 - 11,306 11,306 61,465 50,159 3,250 17,670 14,419

2021 - 11,872 11,872 65,008 53,136 3,047 16,686 13,639

2022 - 12,465 12,465 68,701 56,236 2,857 15,745 12,888

2023 - 13,088 13,088 72,552 59,464 2,678 14,846 12,167

2024 - 13,743 13,743 76,181 62,438 2,511 13,918 11,407

Total 182,037 136,710 318,747 725,913 407,167 182,049 263,312 81,263

NPV at 12%

81,263

BCR at 12%

1.45

EIRR

24.05%

BCR = benefit-cost ratio, EIRR = economic internal rate of return, NPV = net present value, NRs = Nepalese rupees, O&M = operation and maintenance. Note: The collection centre was used for selling of fresh vegetables like cauli flower, cabbage, peas, radish, tomato,

beans, and radish. Source: Project completion review mission estimates.

54 Appendix 9

Table A9.3: Economic Analysis of Farm-to-Market Road Upgrades (NRs’000)

Years Investment

O&M Cost

Total Cost

Total Benefit

Net Benefit

Discounted Cost at

12%


12%

Discounted Net

Benefits


2010 37,032 360 37,392 4,748 (32,643) 33,385 4,240 (29,146)

2011 9,663 515 10,178 6,522 (3,656) 8,114 5,199 (2,915)

2012 31,782 915 32,696 11,155 (21,541) 23,273 7,940 (15,333)

2013 12,455 1,102 13,558 12,964 (593) 8,616 8,239 (377)

2014 - 1,212 1,212 13,786 12,574 688 7,823 7,135

2015 - 1,334 1,334 14,690 13,356 676 7,442 6,767

2016 - 1,467 1,467 15,684 14,217 664 7,095 6,431

2017 - 1,614 1,614 16,777 15,164 652 6,776 6,124

2018 - 1,775 1,775 17,980 16,205 640 6,484 5,844

2019 - 1,952 1,952 19,303 17,351 629 6,215 5,587

2020 - 2,148 2,148 20,759 18,611 617 5,968 5,350

2021 - 2,362 2,362 22,360 19,998 606 5,739 5,133

2022 - 2,599 2,599 24,121 21,523 596 5,528 4,932

2023 - 2,858 2,858 26,059 23,200 585 5,332 4,747

2024 - 3,144 3,144 28,190 25,045 574 5,150 4,576

Total 90,932 25,356 116,288 255,099 138,810 80,314 95,169 14,856

NPV at 12%

14,856

BCR at 12%

1.18

EIRR

16.02%

BCR = benefit-cost ratio, EIRR = economic internal rate of return, NPV = net present value, NRs = Nepalese rupees, O&M = operation and maintenance. Note: The farm-to-market road was used for transportation of cabbage, tomato, tea leaf, and fresh milk from

production clusters to local and district market centres. Source: Project completion review mission estimates.

Appendix 9 55

Table A9.4: Economic Analysis of Small Irrigation Schemes (NRs’000)

Years Investment

O&M Cost

Total Cost

Total Benefit

Net Benefit Discounted

Cost at 12%


12%

Discounted Net

Benefits

a B c=(a+b) d e=(d-c) f G h=(g-f)

2010 5,271 90 5,361 1,881 (3,480) 4,787 1,680 (3,107)

2011 6,375 297 6,672 3,543 (3,129) 5,319 2,824 (2,494)

2012 4,499 436 4,935 4,293 (641) 3,512 3,056 (457)

2013 20,264 1,258 21,522 7,229 (14,293) 13,677 4,594 (9,083)

2014 - 1,384 1,384 7,441 6,057 785 4,222 3,437

2015 - 1,522 1,522 7,709 6,187 771 3,906 3,135

2016 - 1,674 1,674 7,698 6,024 757 3,482 2,725

2017 - 1,842 1,842 7,717 5,876 744 3,117 2,373

2018 - 2,026 2,026 7,737 5,711 730 2,790 2,060

2019 - 2,228 2,228 7,757 5,529 717 2,498 1,780

2020 - 2,451 2,451 7,779 5,328 705 2,236 1,532

2021 - 2,696 2,696 7,802 5,106 692 2,003 1,310

2022 - 2,966 2,966 7,825 4,859 680 1,793 1,114

2023 - 3,262 3,262 7,848 4,585 668 1,606 938

2024 - 3,589 3,589 7,871 4,282 656 1,438 782

Total 36,409 27,720 64,129 102,130 38,001 35,200 41,244 6,044

NPV at 12%

6,044

BCR at 12%

1.17

EIRR

19.23%

BCR = benefit-cost ratio, EIRR = economic internal rate of return, NPV = net present value, NRs = Nepalese rupees, O&M = operation and maintenance. Note: Off-season vegetables such as bitter guard, garlic, potato, cauli flower, radish, bean, and peas were produced

in the irrigated area. Source: Project completion review mission estimates.

56 Appendix 9

Table A9.5: Economic Analysis of Storage Facilities (NRs’000)

Years Investment

O&M Cost

Total Cost

Total Benefit

Net Benefit

Discounted Cost at

12%


12%

Discounted Net

Benefits


2010 5,732 194 5,927 827 (5,099) 5,292 739 (4,553)

2011 5,450 389 5,839 601 (5,237) 4,655 480 (4,175)

2012 8,731 583 9,314 2,212 (7,102) 6,630 1,575 (5,055)

2013 - 642 642 6,119 5,478 408 3,889 3,481

2014 - 706 706 6,425 5,719 400 3,645 3,245

2015 - 776 776 4,967 4,190 393 2,516 2,123

2016 - 854 854 5,312 4,458 386 2,403 2,017

2017 - 939 939 5,189 4,250 379 2,096 1,717

2018 - 1,033 1,033 5,071 4,038 373 1,829 1,456

2019 - 1,136 1,136 4,958 3,821 366 1,596 1,230

2020 - 1,250 1,250 4,848 3,598 359 1,394 1,034

2021 - 1,375 1,375 4,741 3,365 353 1,217 864

2022 - 1,513 1,513 4,641 3,129 347 1,064 717

2023 - 1,664 1,664 4,549 2,885 340 931 590

2024 - 1,830 1,830 4,467 2,636 334 816 482

Total 19,913 14,885 34,798 64,927 30,129 21,015 26,188 5,173

NPV at 12%

-

5,173

BCR at 12%

1.25

EIRR

19.03%

BCR = benefit-cost ratio, EIRR = economic internal rate of return, NPV = net present value, NRs = Nepalese rupees, O&M = operation and maintenance. Note: Paddy, wheat, potato, and radish seeds produced by local farmers were stored. Source: Project completion review mission estimates.

Appendix 9 57

Table A9.6: Economic Analysis of HVC Production (NRs’000)

Years Investment

O&M Cost

Total Cost

Total Benefit

Net Benefit

Discounted Cost at

12%


12%

Discounted Net

Benefits


2010 40,964 - 40,964 8,249 (32,715) 36,575 7,365 (29,210)

2011 82,241 - 82,241 28,538 (53,703) 65,562 22,750 (42,812)

2012 119,751 - 119,751 39,928 (79,823) 85,236 28,420 (56,816)

2013 114,021 - 114,021 67,821 (46,201) 72,463 43,101 (29,361)

2014 - - - 68,518 68,518 - 38,879 38,879

2015 - - - 69,409 69,409 - 35,165 35,165

2016 - - - 69,368 69,368 - 31,378 31,378

2017 - - - 69,429 69,429 - 28,041 28,041

2018 - - - 69,491 69,491 - 25,059 25,059

2019 - - - 69,556 69,556 - 22,395 22,395

2020 - - - 69,626 69,626 - 20,016 20,016

2021 - - - 69,698 69,698 - 17,890 17,890

2022 - - - 69,771 69,771 - 15,990 15,990

2023 - - - 69,844 69,844 - 14,292 14,292

2024 - - - 71,185 71,185 - 13,005 13,005

Total 356,978 - 356,978 910,431 553,453 259,836 363,747 103,910

NPV at 12%

103,910

BCR at 12%

1.40

EIRR

21.77%

BCR = benefit-cost ratio, EIRR = economic internal rate of return, HVC = high value crop, NPV = net present value, NRs = Nepalese rupees, O&M = operation and maintenance. Note: Turmeric, tea and ginger are the high value crops involved in this analysis. Source: Project completion review mission estimates.

58 Appendix 9

Table A9.7: Economic Analysis of Post-Harvest Processing and Packaging (NRs’000)

Years Investment

O&M Cost

Total Cost

Total Benefit

Net Benefit

Discounted Cost at

12%


12%

Discounted Net

Benefits


2010 12,373 481 12,854 1,907 (10,947) 11,477 1,703 (9,774)

2011 17,238 1,598 18,836 7,084 (11,752) 15,016 5,647 (9,369)

2012 18,629 3,515 22,143 13,253 (8,890) 15,761 9,433 (6,328)

2013 20,987 5,807 26,794 21,572 (5,222) 17,028 13,710 (3,319)

2014 - 6,388 6,388 22,072 15,684 3,625 12,524 8,900

2015 - 7,027 7,027 22,269 15,243 3,560 11,282 7,722

2016 - 7,729 7,729 22,486 14,757 3,496 10,172 6,675

2017 - 8,502 8,502 22,725 14,223 3,434 9,178 5,744

2018 - 9,352 9,352 22,725 13,372 3,373 8,195 4,822

2019 - 10,288 10,288 22,725 12,437 3,312 7,317 4,004

2020 - 11,316 11,316 22,725 11,408 3,253 6,533 3,280

2021 - 12,448 12,448 22,725 10,277 3,195 5,833 2,638

2022 - 13,693 13,693 22,725 9,032 3,138 5,208 2,070

2023 - 15,062 15,062 22,725 7,663 3,082 4,650 1,568

2024 - 16,568 16,568 22,725 6,156 3,027 4,152 1,125

Total 69,227 129,773 199,000 292,440 93,440 95,777 115,535 19,759

NPV at 12%

- 19,759

BCR at 12%

1.21

EIRR

22.44%

BCR = benefit-cost ratio, EIRR = economic internal rate of return, NPV = net present value, NRs = Nepalese rupees, O&M = operation and maintenance. Note: Processing and packaging of tomato, honey, tea, and turmeric were considered. Source: Project completion review mission estimates.

Appendix 9 59

Table A9.8: Economic Analysis (Aggregate Case) (NRs’000)

Fiscal Years

Investment O&M Cost Total Cost Total

Benefit Net Benefit

Discounted Cost at 12%

Discounted Benefit at 12%

Discounted Net Benefits


2010 132,582 1,903 134,484 18,135 (116,350) 120,075 16,192 (103,884)

2011 100,053 5,390 105,443 47,384 (58,059) 84,059 37,774 (46,285)

2012 179,433 10,891 190,325 83,603 (106,721) 135,469 59,507 (75,962)

2013 161,423 16,844 178,266 132,299 (45,967) 113,292 84,078 (29,213)

2014 - 18,126 18,126 137,246 119,120 10,285 77,877 67,592

2015 - 19,517 19,517 140,533 121,016 9,888 71,198 61,311

2016 - 21,026 21,026 144,921 123,895 9,511 65,555 56,044

2017 - 22,663 22,663 149,181 126,518 9,153 60,252 51,098

2018 - 24,441 24,441 153,441 129,000 8,814 55,333 46,519

2019 - 26,373 26,373 157,958 131,586 8,491 50,858 42,367

2020 - 28,471 28,471 162,753 134,281 8,185 46,788 38,603

2021 - 30,753 30,753 167,839 137,086 7,894 43,080 35,187

2022 - 33,235 33,235 173,245 140,010 7,617 39,703 32,087

2023 - 35,935 35,935 178,992 143,056 7,353 36,625 29,272

2024 - 38,874 38,874 185,988 147,114 7,102 33,979 26,877

Total 573,491 334,444 907,934 2,033,519 1,125,584 547,188 778,800 231,612

NPV at 12%

231,612

BCR at 12%

1.42

EIRR

23.55%

BCR = benefit-cost ratio, EIRR = economic internal rate of return, NPV = net present value, NRs = Nepalese rupees, O&M = operation and maintenance. Source: Project completion review mission estimates.

Appendix 10 60

GENDER EQUALITY AND SOCIAL INCLUSION ACTION PLAN RESULTS A. Narrative Analysis

1. The project's Gender Equality and Social Inclusion (GESI) action plan included targets and activities to ensure equality and inclusion of women, dalits, janajatis, and other socially excluded groups in decision-making, employment and skills development opportunities, awareness, access to information, and networking. The GESI action plan was highly relevant as it provided a guiding framework to achieve the project outcome and outputs, particularly the inclusion of poor, subsistence, and semi-commercial stakeholders in project benefits, one of the five project components. The GESI action plan aimed to provide opportunities for women, the poor, and disadvantaged groups by ensuring their participation in (i) the selection of subprojects related to production, processing, marketing, and market infrastructure (target 50% with 30% women); (ii) leadership positions and decision-making (target 33%), (iii) capacity enhancing social mobilization (target 50% women); (iv) technical skills training courses (target 50%); (v) entrepreneurship development (target 200 women trained, at least 80% of whom went to use their new skills); (vi) access to market information systems (40% women); and (vii) employment opportunities in construction and the agricultural value chain. The increased participation of women entrepreneurs in commercial agriculture investment and management through membership in the Commercial Agriculture Alliance (CAA) was emphasized through (i) membership quotas (30% women), (ii) partnership with the CAA investment, and (iii) ensuring the representation of women in infrastructure selection and the operation and maintenance of subprojects (target 30%). 2. The design of the GESI action plan was highly relevant in that it generated employment opportunities and provided increased opportunities for women, the disadvantaged, and landless persons in high value commercial agriculture as producers, traders, and processors. It also enabled farmer groups to shift gradually from subsistence farming to commercial high value crop (HVC) production. The project promoted the participation of landless persons by supporting land leasing, social mobilization, capacity development, and income opportunities. Local NGOs grouped women, female-headed households, and landless, poor, and socially excluded persons into subsistence and semi-commercial groups to enhance their access to project benefits. The recruitment of one senior social inclusion specialist at the project management unit (PMU) and three other inclusion specialists, who remained active in project districts until completion in December 2012, ensured the full implementation and monitoring of the GESI action plan. The project completed all of the planned activities and achieved or exceeded 17 of 20 targets. The results, challenges, and lessons of the plan are discussed below.

B. Gender Equality and Social Inclusion Action Plan Achievements and Outcome

3. The project was highly successful in achieving the GESI action plan targets and outputs. Of the 1,659 groups formed by the project, 502 were CAA groups (formed of traders, processors, cooperatives, and farmers) and 1,157 were semi-commercial or subsistence groups. Of the group members, 57% were women (against a 50% target), 9% were dalits, and 41% were janajatis. Of the 502 CAA groups, 73 or 14.6% were women-only groups of which 55 were farmer groups, 15 were cooperatives, 2 held traders, and 1 held processors. Of the 449 mixed groups, women accounted for 48% of members (against a 30% target), dalits 6%, and janajatis 33%. Women-only groups and cooperatives accounted for 12% of the Commercial Agriculture Fund (CAF) investment. Within the CAA groups, and among the users and implementation committees of the 398 CAF-supported infrastructure and non-infrastructure

Appendix 10 61

subprojects, key decision-making positions such as chair, secretary, and treasurer were held by 1,489 women (59%), dalits (7%), and janajatis (35%). A total of 749 commercial stakeholders were trained on gender, social mobilization, and inclusion. Of the CAA members participating in workshops and exposure visits, 22% were women, 2% were dalits, and 35% were janajatis. CAA support enabled women subsistence farmers to establish and scale up their business operations, and join the market culture. The project helped them increase their selling capacity and fixed market prices by disseminating market information. This is seen in the case of Milan Kumari Khatri, a woman involved in the Kanchanjunga hand-made tea industry. “With the equipment (processing machine, chain dryer, rolling machine, fan, and grader) support from CAA, I was able to expand production from 100 kgs to 500 kgs of tea in a season. Besides my own production, I have also started collecting tea from local farmer groups (150 farmers), which I process and sell in the market with the price ranging from NRs100–2,500/kg. I have given employment to around 15–20 persons, mostly females, to work in my factory. I learned to do business from CAA support and recently I was approached by a foreign company with the demand for 5 metric tons of tea.” 4. Of the 1,157 semi-commercial and subsistence groups, 16% were women-only and 84% were mixed. Of the 29,793 subsistence and semi-commercial group members, 19,365 or 65% were women (exceeding the target of 50%), 11% were dalits, 49% were janajatis, and 39% were from other castes. The project formed 902 subsistence stakeholder groups, of which 185 were women-only groups and 742 were mixed. Of the total beneficiaries, 15,897 were women (68%), dalits (12%), and janajatis (52%). Of the total beneficiaries, 4,656 or 20% were poor and landless persons, of whom 74% were women, 25% were dalits, and 51% were janajatis. The project supported subsistence farmer groups in producing HVCs through land leasing schemes (59 groups with 1,750 members, of whom 58.5% were women), and skills training courses on agro-processing such as the making and packaging of pickles, jams, candles, and incense; bamboo crafts; beekeeping; and mushroom farming. About 66% of the beneficiaries of the capacity development program covering production, post-production, and marketing were women, 11% were dalits, and 52% were janajatis. Following the skills training and input support provided by the project, landless households initiated household level production and processing, but only a few actually started enterprises on a commercial basis due to a low risk-taking capacity, inability to invest, and limited access to resources. The project formed 174 semi-commercial farmer groups and 81 other stakeholder groups whose members were 49% women, 8% dalits, and 41% janajatis. The project also provided direct support in the form of inputs (seed, fertilizer, and pesticide), farm equipment (sprayers, microirrigation, and poly house materials), and capacity development training on technical and post-harvest management. The beneficiaries of these measures were 63% women, 11% dalits, and 52% janajatis. 5. Women and socially excluded groups took an active role in implementing community-based infrastructure subprojects. On average, women represented 40.5% of the beneficiaries participating in the process of identifying 54 infrastructure subprojects. Women also held 33% of leadership positions in infrastructure subproject user committees and 46% in non-infrastructure subproject user committees. Dalits composed 7% of these committees and janajatis 55%, significantly exceeding the 33% target. Women accounted for 42% of those engaged in operation and maintenance through user committees formed to implement infrastructure and non-infrastructure subprojects. 6. Of the total 1,582,855 direct and indirect beneficiaries (commercial stakeholders) of the 398 CAA-supported subprojects (76 infrastructure and 322 non-infrastructure), women constituted 51%, dalits 14%, janajatis 43%, and landless households 5.3%. Women and disadvantaged groups also benefited from direct employment opportunities created by

62 Appendix 10

infrastructure subprojects. Of the 624,744 person-days of employment created, 51% benefited women, 21% dalits, 40% janajatis, 39% members of other castes, and 6% landless households. The focus of non-infrastructure subprojects on HVCs offered higher returns to farmers and employed a significant proportion of landless persons as agricultural wage labourers. A recent study 40 showed a 62% increase in average annual household income after project implementation. 7. Women accounted for 44% of the 9,436 beneficiaries of the awareness campaign and social mobilization work carried out by the project to encourage inclusive stakeholder development. Of the technical training participants, 26.0% were women, 2.5% were dalits, and 27.5% were janajatis. The 50% targets for the inclusion of women in technical training and development activities were not met due to participants’ low literacy skills, time constraints due to household chores, and lack of information and capacity. Women accounted for about 48% (against a 40% target) of persons who benefited directly from the development of an agriculture market information system (AMIS) that (i) disseminated information on market selection and price determination; (ii) encouraged the adoption of group-based marketing; and (iii) increased bargaining and decision-making capacity through the GMIS centre, local FM radios, regional TV channels, bulletins (daily and monthly bulletins in Nepali), and 24-hour SMS services. Furthermore, of the 845 persons trained41 on the AMIS, 31% were women, exceeding the 25% target. Onsite information dissemination and facilitation at collection and market centres was found to be useful. 8. Increased numbers of women and socially excluded persons graduated from subsistence farming to commercial trade through the establishment of private agriculture cooperatives. By investing their increased income in tools and equipment the participants increased their business assets and reduced post-harvest losses. Raj Kumari Mehta, a Madhesi woman from Bogra, Sunsari, recalled, “Before joining the agricultural groups formed under the project, I used to follow traditional ways of agriculture production, but now, as a member of the Saraswoti Agriculture Group, Bhogra 1, Sunsari, we all received training from the project. The project has helped institutionalize our group and also taught all members about vegetable production and marketing, from which we have benefitted a lot.” 9. A shift from ad hoc production to market-oriented HVC production (cooperative and group production) improved post-harvest practices (collection, packaging, and transportation) and significantly reduced post-harvest losses, saving time and costs and increasing net benefits. Training participants learned the importance of post-harvest activities for raising the value of their products for better market returns. Direct links to local and regional markets encouraged the development of a market culture that significantly impacted women, the poor, and socially excluded people. This impact was largely visible in increasing (i) household income; (ii) economic opportunities and employment for women, the poor, and landless persons; (iii) confidence and skills; and (iv) investment in children's education and healthcare. Other visible impacts of the project were (i) increased youth involvement in agribusiness, (ii) decreased migration, and (iii) increased food security. Kamala Acharya, a woman from Belhara-1, Dhankuta, said, “After becoming a member of Jalpa Devi Agriculture Cooperative, I have been able to make a net profit of NRs200,000 and an annual saving of NRs40,000. With the money I replaced the thatched roof of my house with corrugated sheet metal and my son now goes to a

40

Department of Agriculture. 2012. Socioeconomic Impact Study of Non-infrastructure Subprojects under the Commercial Agriculture Alliance. Kathmandu.

41 The training includes market information collection, price analysis, market information system entry, and market and marketing related activities.

Appendix 10 63

boarding school in Dhakuta for his studies. Being a single woman I do not feel desperate anymore and believe in my abilities.” 10. The project successfully institutionalized the systemic collection of data disaggregated by sex, ethnic group, and region at the subproject level to center level and the regular uploading of this data to the project website and into the Results Based Monitoring Framework. 11. To improve the agricultural livelihoods of landless persons and poor farmers, the project also implemented a technical assistance42 financed by the Japan Fund for Poverty Reduction. This covered 12,159 poor people from 49 village development committees, of which 70% were women, 40% dalits, 50% janajatis, and 10% from other caste groups. The project also helped organize 455 new and existing self-help groups through NGOs, the leasing of land to 3,021 landless households for the cultivation of vegetables and fruits, and the provision of grants to 392 self-help groups for the purchase of tools and equipment to increase production and commercialization. The project successfully improved the livelihoods of the ultra-poor and disadvantaged people by providing necessary skills, equipment, and supplementary support measures like microirrigation units and marketing training courses, enabling them to farm commercially. C. Lessons Learned and Recommendations

1. Involving subsistence stakeholders (mostly the poor, women, and disadvantaged

persons) in commercial agriculture requires sustained social mobilization. These groups have a limited capacity to invest in production inputs and lack technical knowledge, market information, and links with other actors.

2. The NGOs were involved in social mobilization and capacity development for only two years, which was an insufficient amount of time. Subsistence and semi-commercial groups require continuous support and input from NGOs to link them with district agriculture development offices, agriculture extension services, and microfinance institutions. Groups and cooperatives were more likely to be sustainable when NGOs continued to involve them in regular activities and training programs after project completion. District agriculture officers should proactively take responsibility of these groups under their regular program.

3. Basic skills training alone does not adequately equip women, the poor, and other disadvantaged groups to undertake agro-processing and value addition activities. Creating microenterprises and managing businesses requires other services such as (i) access to finance; (ii) business support services; (iii) market development support; (iv) links to markets; (v) capacity development on leadership, financial and legal literacy, and technical expertise; and (vi) access to technical inputs on production, processing, harvesting, and marketing. These measures should be incorporated into the project design.

4. Time constraints discourage women and disadvantaged persons, including women from disadvantaged groups, from participating fully in project and capacity development activities, thus excluding them from project benefits. Interventions targeting these groups, such as intensive mobilization, training courses, measures facilitating access to finance, inputs, or other incentives should be built into the project. Such interventions visibly improve the livelihoods of these groups.

42

ADB. 2007. Improving Livelihood for Poor Farmers and Disadvantaged Groups (JFPR 9101). Manila.

64 Appendix 10

5. The project helped subsistence and landless farmer groups lease land for commercial farming, allowing them to access productive resources. Subsistence farmers and landless households benefitted greatly from the project.

6. To improve the sustainability of the project results, close support and further training on agriculture commercialization, value chain development, marketing and business planning, and linkages among CAF grantees (producers, processors, and traders) are recommended.

D. GENDER EQUALITY AND SOCIAL INCLUSION ACTION PLAN RESULTS

Activity/Measure GESI Features/Indicators and

Targets Achievements at Project Completion

1.1 Information about women entrepreneurs through the Commercial Agriculture Alliance (CAA) to facilitate their applications for CAA membership

• At least 30% of CAA members

are women

Of the 61,922 CAA members in 502 CAA groups (farmer groups, cooperatives, trader groups, and processor groups) 29,722 or 48% were women, 6% dalits, and 33% janajatis 14.6% or 73 of the total CAA member institutions (55 farmer groups, 15 cooperatives, 1 processor group, and 2 trader groups) are owned solely by women Of the 2,525 members holding key decision-making positions such as chair, secretary, and treasurer in the user and implementation committees of 398 CAF-supported infrastructure and non-infrastructure subprojects, 1,489 or 59% were women 7% dalits, 35% janajatis, and 58% from other castes

1.2 Special section on women and commercial agriculture in all workshops, seminars, and public relations activities, including CAA trade fairs

• Innovations and partnerships

formed as a result of

workshops, seminars, and

public relations activities,

including trade fairs

• Attendance in meeting and

impact efficiency in changes

• Contribution to workshop

proceedings

• Number of developed

innovations and partnerships

A partnership formed with women’s groups and cooperatives as CAA members Information dissemination, and mass meetings organised to ensure the maximum participation of women. Of the 1,196 participants in CAA-organised events, 259 or 21.7% were women, 2% dalits, 35% janajatis, and 63% from other castes An effort made to mainstream gender in the overall workshops, training events, and CAA-organised trade fairs, which was documented in reports on the proceedings

1.3 Subprojects in the area of community-based market infrastructure

• In the selection of the market

infrastructure subprojects,

women should account for not

less than 30% of persons

involved in the decision-

making process and in the

Of the 8,754 participants in 76 infrastructure subproject identification processes, 4,989 or 57% were women Of the persons engaged in operation and maintenance through the users committees that were formed for both infrastructure and non-

Appendix 10 65



operation and maintenance of

the subprojects, with a target

of 50%

infrastructure subprojects, 1,222 or 42% were women

1.4 Subprojects in commercial production, processing, and marketing

• Evidence of active women’s

participation in subprojects,

and a gradual increase to 50%

women’s participation over the

course of the project

Of the 1,582,855 persons who benefited directly and indirectly from the 398 completed infrastructure and non-infrastructure subprojects, 51% or 807,256 were women, 14% dalits, 43% janajatis, and 43% from other castes. 5.29% of the beneficiaries were landless households. Of persons in leadership roles within the 1,157 semi-commercial and subsistence farmer groups, 57.42% or 3,471 were women Of the total 624,744 working days of employment created by the project, 51% or 318,619 were filled by women, 21% by dalits, 40% by janajatis, 39% by other castes, and 6% by landless persons

2.1 Gender-disaggregated baseline survey and monitoring

• Quantitative and qualitative

household gender data

(including lineal systems,

residential pattern, inheritance

practices, decision-making

power, labor division, and need

and demand assessments) are

included in the baseline survey

and monitoring process, as

well as impact indicators

relevant to participation in the

project. The monitoring

indicators will be specifically

linked to the actions listed

below to measure attitude and

behavior changes, as well as

impacts on social and

economic assets. The process

of change and impact

effectiveness will be compared

to the gender quantitative

targets mentioned below

The project established a systematic approach to generating a database disaggregated according to gender and social class (dalit, janjati, and others) from all levels for each component or activity The disaggregated data included group membership, leadership, input support, direct and indirect beneficiaries, and project performance indicators (benefit monitoring) Using key monitoring indicators, the project established an online result based monitoring framework, which was used by implementation partners such as NGOs for progress monitoring and reporting

2,2 Project awareness campaign and social mobilization

• 50% of beneficiaries are

women

Of the 9,436 participants in the awareness campaign and social mobilization measures, 4,141 or 44% were women

66 Appendix 10



2.3 Group formation and basic technical skills training

• Groups formed are gender

sensitive and meet a target of

50% women’s participation.

• Where more appropriate,

separate groups for women will

be formed.

• Basic technical skills training

programs have gender

sensitive curriculum and meet

a target of 50% women’s

participation

Of the 1,157 groups formed involving semi-commercial and subsistence farmers, 185 (16%) were women-only and 972 (84%) were mixed. Of the 24,856 members of mixed groups, 57% or 14,229 were women Of the 29,793 subsistence and semi-commercial group members, 65.5% or 19,365 were women, 11.5% dalits, 49.8% janajati, and 38.7% from other castes Of the 23,379 subsistence farmers, 68% or 15,897 were women, 12% dalits, 52% janajatis, and 36% from other castes Of the 4,656 landless persons, 74% were women, 25% dalits, 51% janajatis, and 24% from other castes Of the 1,157 semi-commercial and subsistence farmers who benefited from various project standardization training, orientation sessions, and exposure visits at satellite, district, and group levels, 61% or 48,017 were women, 10% dalits, 50% janajatis, and 40% from other castes Of the 4,040 participants in market development training (post-harvest operation, market chain improvement, quality assessment, and agribusiness development), 27.6% were women, 2% were dalits, 27% were janajatis, and 7% were from other castes Of the 1,157 groups that benefited from input and equipment support, such as farm inputs (microirrigation), processing equipment, packaging and labeling materials, and access to services from the DADO offices, 63% were women, 11% dalits, and 51% janajatis

2.4 To reinforce women’s entrepreneurship in commercial agriculture, the project will conduct entrepreneurship training courses targeting women trainers, NGO staff, and women entrepreneurs.

• 200 new women entrepreneurs

trained by the end of the

project, at least 80 % of whom

go on to use their new skills in

commercial agriculture

• 50% of trainees are women

298 women received training in agriculture-based entrepreneurship, post-harvest, skills, and home processing (13 events); and a preliminary tracer study showed that 35% had begun to use their new skill. Of the training participants, 5% were dalits and 31% were janajatis 100% of entrepreneurship development trainees were women

Appendix 10 67



2.5 Throughout preparation and the social inclusive component, an awareness program will inform women about commercial agriculture opportunities as well as associated constraints, expected benefits, and implications in terms of participation and investment

• 50% of the women involved in

some form of commercial

agriculture in the project area

are aware of the project

objectives and opportunities

after 12 months of

implementation, and 80% after

2 years

• 50% women participation in

project activities, and the

monitoring of their participation

All women involved in commercial agriculture were made aware of the project objectives and opportunities Of the 1,582,855 commercial stakeholders involved in CAA-implemented infrastructure and non-infrastructure subprojects, 51% were women Of the 6,444 semi-commercial stakeholders, 49.4% were women, 8.6% were dalits, and 8.6% were janajatis. Of the 23,379 subsistence stakeholders, 68.5% were women, 12.3% were dalits, and 52.2% were janjatis

2.6 Participation of the district women's development offices and NGOs experienced in gender-related issues to improve women's participation in the value chain

• The integration of women into value chain, as well as more representation of and decisions made by women

• Active participation of all

women’s development officers and relevant NGOs in the Eastern Development Region

• Attendance at meetings, and

impact efficiency

A district women’s development officer was represented in DRC meetings and actively participated NGOs partnered with the project to support the inclusive development of semi-commercial, subsistence, and landless stakeholders 20% or two of the CAA board members are women and their attendance in CAA board meetings was 100% 14.28% or 11 of the 77 DRC members are women in CAA districts and their attendance in DRC meetings is 100%

3.1 Development of an integrated market information system

• All the information will be

accessible by women

Of the 887 stakeholders trained on the user-friendly online AMIS, 270 or 30% were women The project published and distributed 29 issues of a monthly bulletin in Nepali (total 34 issues), which helped disseminate market information to men and women farmers

3.2 Training in market information collection, management, analysis, and dissemination

• At least 25% of trainees are

women

Of the 845 persons trained on the AMIS, 259 or 30% were women

3.3 Dissemination of market information and notification of market trends and events

• At least 40% of persons

receiving information directly

are women

48% of stakeholders (commercial, semi-commercial, and subsistence) who accessed market information through the AMIS in project districts were women

4.1 Development of NGO capacity

• 50% of trained NGO staff are

women

Of the 898 NGO staff trained by the project, 30% were women

68 Appendix 10



4.2 Development of Department of Agriculture district staff capacity

• Government agencies should

encourage the involvement of

female district agriculture

development office staff in

project activities

Of the 1,596 DADO staff trained by the project, 12% were women

5.1 Participation of women on the CAA board of directors will encourage them to share their concerns and ensure balanced access to resources. The board will establish and guarantee a minimum amount of total investment for women.

• Women account for 20% of persons involved in CAA management with important roles in deliberations

• Women on the board represent

the concerns of the different socioeconomic groups

• Meeting minutes

Women form 18% of the CAA board, which is close to the project target. Of the 6 elected members, 2 (33%) were women. The board members have been raising and addressing the concerns of women and other social groups in the meetings. 20% of CAA staff were women (13 out of 64) Active involvement of women board members was observed

5.2 The PMU will include a professional social inclusion specialist with experience in gender and development to ensure that technical proposals consider gender balance.

• Recruitment at the beginning of the project

• Adequate female staff in the

PMU • Social and gender inputs

pragmatic enough to facilitate

and motivate women to

participate in the project, with

attached social and economic

benefits

Since the beginning of the project, the professional social and gender inclusion specialists have regularly facilitated the project inclusion strategies for the beneficiaries 32% of the PMU staff were women (11 out of 34) The project hired social and gender specialists at the beginning of the project. One senior social inclusion specialist and three other inclusion specialists worked throughout the project period until it ended in December 2012

5.3 The MWCSW will be a member of the PSC and will provide guidance to the project in promoting gender balance during implementation.

• Project steering committee

(PSC) mobilized at the

beginning of the project

• Effective contribution of the

members

• Synergies with other MWCSW

programs in the region

PSC mobilized at the beginning of the project. 25 PSC meetings held to date. The member from the MWCSW participated in PSC meetings

AMIS = agriculture market information system, CAA = Commercial Agriculture Alliance; CAF = Commercial Agriculture Fund; DADO = district agriculture development office; DRC = district review committee; MWCSW = Ministry of Women, Children and Social Welfare; NGO = nongovernment organization; PMU = project management unit; PSC = project steering committee. Source: Department of Agriculture. 2013. Project Completion Report of the Commercial Agriculture Development Project (December). Kathmandu.

Appendix 11 69

ENVIRONMENTAL SAFEGUARDS COMPLIANCE 1. Background. The project is classified as environment category B. The project’s focus on environmental safeguards is evident from its target outcome that prioritizes the safeguarding of public health and the environment. The project’s safeguards covenant and environmental assessment and review procedure (EARP) were intended to protect the environment by mainstreaming a safeguards assurance mechanism in the project cycle. Safeguards mainstreaming was begun during subproject selection and continued throughout planning, implementation, and operation. A project-specific environmental guideline was prepared to facilitate the mainstreaming of environmental safeguards in the project design and the implementation of both infrastructure and non-infrastructure subprojects.1 An environmental code of practice was also prepared to control potential hazards at all stages of the commodity value chain promoted by the project. The project adopted methods of construction and mitigation that lessened environmental damage by following a labor-based, environment-friendly, and participatory construction approach. 2. Performance. Overall, the project has complied satisfactorily with the environmental safeguards covenant, EARP provisions, the Asian Development Bank (ADB) environment policy 2002, and governmental policies and regulations. A full-time national environment specialist helped the project management unit (PMU) comply with the environmental safeguards. The environment consultant supported the PMU in effective and continued environmental monitoring, building of stakeholders’ capacity, and reporting. Although the EARP made initial environmental examinations (IEEs) mandatory for the construction of new rural roads and subprojects with civil works costing more than $50,000, none of the subprojects were required to prepare an IEE. The project made full use of ADB’s rapid environmental assessment (REA) checklist, which was customized to include safeguards screening for subproject proposals and was made an essential part of the subproject concept note. The screening checklist was also translated into Nepali for the benefit of the stakeholders. The adoption of environmental management screening and the preparation of an environmental management plan (EMP) for any potential environmental implications helped the project identify and assess potential impacts in a timely manner and prepare appropriate mitigation measures. The environmental code of practice also helped the project identify and resolve social impacts such as protecting indigenous people from any adverse impact, avoiding gender discrimination, promoting the employment of local people, and ensuring equal wages for men and women. 3. Impact. The project safeguards measures contributed to avoiding, minimizing, or compensating for adverse environmental impacts. Mitigation measures such as slope protection through bio-engineering, borrow pit operation, waste management, workers’ health and safety, compensatory plantation, employment preference for local people, and restrictions on child labor were carefully applied to the infrastructure subprojects. The promotion of bio-pesticides and bio-fertilizer, organic farming, composting of biodegradable waste through vermicomposting or anaerobic composting, adoption of integrated pest management, soil conservation, and balanced use of fertilizers were considered for non-infrastructure subprojects. The project supported the construction of 532 vermicompost and 40 organic compost pits to convert waste into bio-fertilizer and soil conditioner. Training on environmental and social management and gender development was provided to about 700 local stakeholders. About 22 training courses were organized on integrated pest management, 12 on vermicomposting, and 28 on organic

1 Infrastructure subprojects included the construction of an agriculture products collection center, market centers,

godown, and the maintenance of irrigation systems and farm-to-market roads. Non-infrastructure subprojects included processing and marketing enterprises, improved farming, post-harvest value addition, and input supply.

70 Appendix 11

farming. In addition, 404 orientation sessions were organized to enhance the capacity and knowledge of small- to medium-scale agro-entrepreneurs regarding environmentally and commercially sustainable methods of production, processing, and post-harvest management. 4. Monitoring and reporting. Environmental compliance monitoring of almost all the subprojects was conducted and properly documented, while field visit reports were prepared and attached to quarterly and annual progress reports. The project also conducted a study on the effectiveness of mitigation measures and prepared an environmental compliance monitoring report at the closure of the project. Due to the adoption of proper mitigation measures, no negative environmental impact was recorded. Hence, the project’s environmental safeguards performance is considered satisfactory.

34308-022: project completion report€¦ · completion report project number: 34308-022 grant...

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