resilient integrated food systems (rifs) in rural laos...lao people’s democratic republic (pdr) is...

Resilient Integrated Food Systems (RIFS) in Rural Laos Lao PDR | United Nations Development Programme (UNDP)

13 September 2016

Project/Programme Title: Resilient Integrated Food Systems (RIFS) in Rural Laos

Country/Region: Lao PDR

Accredited Entity: UNDP

National Designated Authority: Ministry of Natural Resources Environment (MONRE), Department of Disaster Management and Climate Change (DDMCC)

PROJECT / PROGRAMME CONCEPT NOTE GREEN CLIMATE FUND | PAGE 1 OF 28

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A. Project / Programme Information

A.1. Project / programme title Resilient Integrated Food Systems (RIFS) in Rural Laos

A.2. Project or programme Project

A.3. Country (ies) / region Lao PDR

A.4. National designated authority(ies)

Ministry of Natural Resources and Environment, Department of Disaster Management and Climate Change

A.5. Accredited entity UNDP

A.6. Executing entity / beneficiary

Executing Entity: Ministry of Agriculture and Forests (MAF)

Beneficiary: 200,000 direct beneficiaries in 6 provinces (and 500,000 indirect beneficiaries)

A.7. Access modality Direct ☐ International ☒

A.8. Project size category (total investment, million USD)

Micro (≤10) ☐

Small (10<x≤50) ☒

Medium (50<x≤250) ☐

Large (>250) ☐

A.9. Mitigation / adaptation focus

Mitigation ☐ Adaptation ☐ Cross-cutting ☒

A.10. Public or private Public

A.11. Results areas

(mark all that apply)

Which of the following targeted results areas does the proposed project/programme address?

Reduced emissions from: □ Energy access and power generation

(E.g. on-grid, micro-grid or off-grid solar, wind, geothermal, etc.) □ Low emission transport

(E.g. high-speed rail, rapid bus system, etc.) □ Buildings, cities, industries and appliances

(E.g. new and retrofitted energy-efficient buildings, energy-efficient equipment for companies and supply chain management, etc.)

☒ Forestry and land use

(E.g. forest conservation and management, agroforestry, agricultural irrigation, water treatment and management, etc.)

1 Please use the following naming convention for the file name: “[CN]-[Agency short name]-[Date]-[Serial number]” (e.g. CN-ABC- 20150101-1).

mailto:[email protected]


Increased resilience of: ☒ Most vulnerable people and communities

(E.g. mitigation of operational risk associated with climate change – diversification of supply sources and supply chain management, relocation of manufacturing facilities and warehouses, etc.)

☒ Health and well-being, and food and water security

(E.g. climate-resilient crops, efficient irrigation systems, etc.) □ Infrastructure and built environment

(E.g. sea walls, resilient road networks, etc.) ☒ Ecosystems and ecosystem services

(E.g. ecosystem conservation and management, ecotourism, etc.)

A.12. Project / programme life span

6 years

A.13. Estimated implementation start and end date

Start: 1 July 2017

End: 30 June 2023

B. Project/Programme Details

The Fund requires the following preliminary information in order to promptly assess the eligibility of project/programme investment. These requirements may vary depending on the nature of the project/programme.

B.1. Project / programme description (including objectives)

1. Lao People’s Democratic Republic (PDR) is a small landlocked country in Southeast Asia bordered by Cambodia, China, Myanmar, Thailand, and Viet Nam. Despite steady economic growth, disparities exist among the 16 provinces, with the Northern upland provinces remaining among the poorest and most vulnerable in the country. The country remains a least developed and low-income country2, and significant challenges remain with respect to food security and nutrition – an estimated 44% of under-five children with stunted growth and 27% severely underweight3. Despite much progress along all social and economic indicators, differences in access remain large between the poor and the non-poor and between provinces. For example, the pace of poverty reduction was slowed by a significant number of previously non- poor households falling back into poverty – a symptom of the high vulnerability faced by most households in Lao PDR and the fragility of development in the face of external shocks, such as global economic slowdown, reduced demand from foreign markets and tourism and climate change induced natural hazards.

2. Climate variability (both intra- and inter-seasonal) is already having significant impact on rural livelihoods and in particular on the agricultural sector, which is inherently fragile, owing to small scale nature of agriculture household plots. Approximately 80% of the total population live in rural areas, where agriculture continues to employ over 75% of the population, most of whom are subsistence farmers cultivating a single crop on an average plot size of 2.2ha.

3. Historical records of rainfall and temperatures over the past four decades show increasing trends for both 4. Climate models developed for Lao PDR indicate consistent warming trends across the country, and mean annual temperatures are expected to increase by 1 to 4oC by 2100 5 . Changes in rainfall patterns will bring variability to seasonal expectations, forcing adjustments to the crop calendar and requiring improved preparedness

2 Lao PDR is ranked 141st out of 188 countries on the 2014 Human Development Index and 57th of 78 countries on the 2012 Global Hunger Index. 3 Lao PDR Statistics Bureau, 2012, cited in UN in Lao PDR: Country Analysis for Lao PDR, 2015 4 Second National Communication (SNC), Ministry of Natural Resources and Environment, 2013 5

Second National Communication, Lao PDR.


to floods and droughts. Rainfall is expected to increase, particularly during the rainy season,

by 10-30%. This will have an impact in run-off throughout the Mekong basin, with a projected increase of 21% by 20306. The observed seasonal trends of 20th century data7 emphasize a delay in the main wet season, with a decrease in rainfall in the early wet season, in May, and an increase in rainfall at the very start of the wet season in April and the end of the wet season in October will increase. These changes in seasonal patterns will translate to the wet season shifting to June-October. However, projections also indicate that there will also be an increase in the risk of a false start to the wet season, with more rain in April but less rain in May8.

4. These climate change projections highlight the need for accurate and localized forecasts to inform agriculture planning in Lao PDR, which is highly depending on rainfall. A study of vulnerability and adaptive capacity undertaken in Lao PDR further confirmed that agricultural activities are the most vulnerable to the impacts of climate change9.

5. Damages and losses experienced also suggest different magnitudes of impact in various sectors and, hence, key vulnerabilities. Farming systems are directly impacted by extreme weather events, which increase farming household food insecurity. Among other crops, rice, the main staple crop is severely damaged by both floods and droughts, reducing household food security. In 1998 and 2003, drought events destroyed 29,202ha and 23,770ha of rice fields respectively, while in 2005, floods destroyed 54,640ha of rain-fed rice fields, flooded 4,289 fish ponds and killed 14,941 livestock.

6. This is compounded by limits on coping and livelihood strategies. Despite increasing market orientation for many farmers, subsistence farming remains widespread. Approximately 90% of rural households grow rice, with approximately one-third of households reportedly growing additional crops, cash and/or food crops. Raising a small number of livestock is common, with cattle production becoming increasingly market-oriented in the central provinces. Fishing, hunting and gathering of wild foods is central to food procurement and increasingly cash generation for a large number of households, particularly in the northern uplands.

7. Recognizing these challenges, the Government of Lao PDR per its five-year National Socio-Economic Development Plan VIII (2016-2020: 8th NSEDP, November 2015), seeks to graduate from least developed country (LDC) status through continuous, inclusive and sustainable growth, with particular focus on achieving food security, reducing malnutrition, and reducing instability of agricultural production caused by the impact of climate change and climate change induced disasters. These aims are reinforced by the 2011-2020 Strategy for Agriculture Development, which particularly underscores the modernization of lowland agriculture systems and preservation of upland ecosystems. The National Strategy on Climate Change (2010) as well as the National Adaptation Programme of Action (NAPA) (2009) highlights the importance of climate change adaptive practices in food production systems to overcome persistent food insecurity.

8. The Government of Lao has been funding several agricultural development projects. Irrigation projects are being implemented across the country with a total budget amounting to USD$ 260 million over the period 2011-2018s. In regards to agriculture and forestry, the GoL has invested a total of USD$ 5 million over the 2011-2020 period in projects focusing on the protection of forest from invasive species and deforestation (such as the Protected/Biodiversity Conservation Area Program, active since 1988; Shifting Cultivation Reduction Program, active since 1989; Land and Forest Land Allocation Programme, active since 1993; Community Forestry and NTFP Programs, active since 1993)10, but also on developing technical service centres at the provincial and local levels, capacity development for planning and budgeting at local levels. In Luang Namtha, a research and development station for rubber production and an Agri-Forestry Technical service Centre are under construction (2015-2020). Other government-funded food security programs, focusing on agricultural land management and development, rice varieties development, support for processing technical development, clean agriculture cultivation, improved livestock

6 FAO, 2011, Managing climate change risks for food security in Lao PDR, pp.10-11 7 Lefroy R., et al., Study on potential impacts of climate change on land use in Lao PDR, CIAT, July 2010 8 Lefroy R., et al., Study on potential impacts of climate change on land use in Lao PDR, CIAT, July 2010 9 SNC, Ministry of Natural Resources and Environment, 2013 10 Forest Strategy to the year 2020 of the Lao PDR, 2005


production and irrigation projects amount to a total of USD 81 million over the 2015-2020

period, upon which this project will build. However, these efforts will be jeopardized by the impacts of climate change on farming systems and food security.

9. Despite such considerable investments, especially in the past decades there has been no consideration of climate change related impacts in the design and implementation of these investment programmes. Furthermore, there has been a number of successful and localized adaptation solutions, but comprehensive solutions at a required scale are still lacking. A predominant majority of assistance in the area of food security has focused on the production side of the problem. A comprehensive food value chain approach that encompasses, pre- production, production and post-production stages and offers a farm-to-fork cycle approach will enable a paradigm shift in addressing farmers’ adaptation needs. Accessible, and evidence-based farmers’ advisories and extension is key to a knowledge-based climate resilient agriculture in future. Previous support to the government extension yielded only limited results. Due to fiscal deficit, the government extension services remained underfunded and unavailable in many remote places. Therefore an innovative approach of reaching out the farmers through the farm-based extensions – Farmers Field Schools offers a cost- effective solution to a much greater outreach and replicability. Capacities to undertake research and deliver climate services (such as forecasts, farmers’ dynamic seasonal calendars to calibrate forecasts, risk profiling, trade-off analysis and economic valuation among them) particularly at the local level will underpin and enable continuity of adaptive processes in the sector. Stewardship to natural resources at a larger landscapes is also critical to long term resilience and productivity of farmland. Bringing the farming communities at the centre of land use planning and watershed regeneration process through both on-farm and off-farm agroforestry and community forestry will help reverse the current fragmentation of forest cover and hence mitigate the exposure to the risks.

10. In order to achieve the above solution there are a number of barriers summarized below that will require addressing:

Barriers

11. Limited resources for effective extension: One of the main constraints is the limited resource available for effective extension services to the farmers, which relates to a lack of both financial and human resources. The currently weak fiscal position11 of Lao PDR prevents the government from mobilizing sufficient resources to improve public services that are not yet considered as major economic growth priorities. Ensuring a renewal of the agricultural extension service is required in order to disseminate climate-smart agricultural practices throughout the country. This renewal would require a one-time investment effort to acquire new tools and methods, and to undertake a massive campaign of technical capacity renewal among extension workers and producers alike. Moreover, due to financial constraints the institutional presence of extension services to the farmers is not uniform. Certain, geographically isolated provinces, especially upland regions, are largely underserved leaving farmers without support and guidance to cope with climate change. Although some external support from the government and development partners is provided to vulnerable villages, but there is limited continuity to such fragmented and ad hoc guidance. Cost-effective solutions to expand and sustain the presence locally are still missing. Furthermore, most of the extension support is still only requested and maintained by men and do not systematically involve women’s voices. While it is the responsibility of women to provide food for the family, the opportunities to articulate their needs and concerns about food and nutrition security as well as about maternal and child health are very rare.12

12. Lack of capital and local finance for production investment: The lack of capital for local investment is felt not only at the government level, but also at the local level. Rural populations who are still focused on subsistence agriculture cannot generate enough surplus to enable them to reinvest in their farms, diversify the production and adopt new adaptive practices. This perpetuates a situation of precariousness. Furthermore, the emerging rural credit products that are available in the country are not widespread and not as accessible as they

11 The high level of indebtedness in Lao PDR and the close dependence of the Lao Economy on the economy of neighbouring countries are preventing the government from engaging in more costly, loan-based, development programs. In order to limit the country’s debt burden, the Lao government’s policy is to use loans only for investments in large-scale infrastructure and industry, and to use grants for program that supports the fulfilment of basic development needs. 12 Women, food and land, in Risk and Vulnerability Survey 2012/13: Qualitative analysis


should be in remote rural areas. While there have been some successes in working with rural

finance institutions, micro-credit institutions and village-based savings and loans groups, the practice is not well known and there is a perception of riskiness largely owing to farmers’ financial illiteracy that prevents farmers from fully utilizing this resource. Access to finance is generally for men as they are responsible for money at the household level. Therefore it is especially marginal for women, who do not have time to access the appropriate knowledge and financial literacy, lack networks or cannot speak Lao, to access credit to invest in alternative business activities. However, NGOs and the Lao Women’s Union have been supporting the creation of savings group, which has almost 200,000 beneficiaries. This provides an important lever for unleashing the local finance for adaptation.

13. Over-reliance on low productivity monoculture: As a result of the combined pressures from above described barriers, limited extension and a field-based guidance and a lack of accessible local finance, the Lao agricultural sector is still a low productivity monoculture, over-dominated by rice cultivation. The rice value chain is a well-practiced one, and one of the rare commodities that can be traded by smallholder farmers. High demand from both internal and external markets drives production, but contract farming in many cases leads to farmers being under-compensated for their crop. Furthermore, contract farming also prevents farmers from making decisions based on climate risk management (for example, changes in rice variety) unless the client is on board. This, combined with the lack of investment for irrigation, means that rice, as a highly climate sensitive crop, continues to drive the sector, regardless of risks and potential damages from climate change. If it is to become more productive or even to maintain current levels in the face of climate change and increasing demand, rice cultivation needs to adapt to new climate realities, and systems need to be in place to ensure farmers have the ability to adapt on a day-to-day basis. This requires not only investment into the traditional cereal crops (rice, maize), but also in ensuring that farming systems are diversified, as a key element of resilience. At the household level, men have the decision making power and control over resources, therefore in addition to women’s difficult access to knowledge and extension services, they cannot choose by themselves, which leaves them and children with limited nutritious options.

14. Lack of economic incentives for ecological stewardship: It is a well-known fact that subsistence farming does not always allow farmers to implement sustainable natural resources management. Despite the important legal apparatus seeking to protect and manage the environment, there remain constraints to effective local management. Chief among these constraints is that the environment is not perceived as a contributor to productivity. A poor practice of land use planning at a local level is another important factor that precludes the identification of areas with important ecosystem services. This relationship not only requires awareness raising about ecosystem services, but also the rehabilitation of ecological services that are at the very basis of agricultural productivity, and its continuation requires the development of accessible, low-cost management systems that can be implemented at the local level. In response to government’s new Forests Law opens up the opportunity for the introduction of incentives for stewardship and ecosystem rehabilitation to serve the long term resilience and productivity of farmland Support to agroforestry and community forestry initiatives is considered by the law a critical direction towards effective rehabilitation and reversing the current fragmentation in forest cover.

15. With consideration to the above barriers, the objective of the project is to strengthen the resilience of rural livelihoods in climate-vulnerable communities. The proposed project seeks to improve food security and nutrition while improving livelihoods in a sustainable and resilient manner. The project is structured across three complementary outputs:

Output 1: (enabling services): Institutions strengthened to deliver gender-responsive climate services to village communities to improve their risk preparedness and adaptive capacity. Output 2: (climate resilient value chain strategy): Investment in climate-resilient and sustainable agriculture value chains delivered to support food and nutrition security. Output 3: (supportive ecosystem services). Watershed management practices to sustain land productivity in the face of climate change


16. The proposed project will channel substantive investments in the resilience of food

systems through a value-chain approach, while strengthening agricultural support climate services and ensuring the continuity of ecosystem services. This will include upscaling proven successful approaches and technologies in the agriculture-based rural livelihoods in six of the most vulnerable provinces of the country: Oudomxay, Huaphanh, Luang Namtha, Phongsaly, Savannakhét and Saravan.

17. These provinces are highly susceptible to hydro meteorological disasters, such as floods and droughts due to their topography. Further, ethnic minorities living in the uplands are usually non-Lao-Tai ethnic groups, which are found to be more vulnerable, as they are engaged in upland farming on steep slopes and live in remote villages with very little infrastructure and limited access to resources.

Output 1 (enabling services): Institutions strengthened to deliver gender-responsive climate services to village communities to improve their risk preparedness and adaptive capacity.

18. Under this output, the project will strengthen the institutions involved in providing support to agriculture and food production at national and local levels. The project will ensure that sustainable and lasting capacity exists within the agriculture research and extension services to support resilient production. The project builds on the successful outcomes of previous projects, such as “Improving Resilience in the Agricultural Sector (IRAS)” (UNDP)13 and the “Upland Food Security Project” (World Bank). This will include the following activities:

Activity 1.1. Production and dissemination of climate information services and advisories on cost-effective adaptation solutions for food and nutrition security at national and provincial levels

19. Effective dissemination of climate information requires inter-ministerial collaboration. The proposed project will support standard operating procedures to tailoring and disseminating climate information in a manner that supports the agriculture sector, from the national to household level. Climate information will provide seasonal forecast to inform planning, as well as warnings to extreme events (i.e. probability of flood/drought) in anticipation of the necessary actions related to preparedness.

20. Under this activity, the proposed project will enhance the data repository by introducing tested methods for data collection to inform planning, namely gender-disaggregated household surveys and participatory vulnerability assessments (such as, HHBAT/SHARP tool, Pro-VIA, or MPAT14). The project will also support the government through training and technical capacity building in order for NAFRI/MAF and DDMCC/MONRE to deploy an array of climate information services, such as: climate risk profiling for key agri-food value chains, economic valuation methodologies to establish cost-effective adaptation solutions, climate- based crop modelling under different climate change scenarios to provide farmers with necessary adjustments throughout the crop growth cycle.

21. The project will also train existing extension workers on gender-responsive extension services, using, among other materials, the Climate Change Training and Adaptation Modules (CCTAMs), developed under the IRAS project to ensure that extension staff are up to date on climate-smart agricultural practices. Adding gender-sensitive elements to extension services will provide extension staff with an understanding of the different gender roles at the household, farm and community levels in terms of agricultural activities.

22. To ensure adequate monitoring of natural resources, and healthy function of ecosystem services, an information system for monitoring and reporting on forest resources and land use changes will be developed at the local level, which will feed into the national forest monitoring system. A system to monitor carbon emissions will also be developed to measure the project’s progress on emission reductions. In order to be sustainable, this carbon emission

13 Please see Pre-feasibility for more information. 14 HH-BAT: Household Baseline Survey / Self-evaluation and Holistic Assessment of climate Resilience of farmers and Pastoralists; Multidimensional poverty Assessment Tool (MPAT); Global Programme of Research on Climate Change Vulnerability, Impacts and Adaptation (Pro-VIA)


monitoring system will be integrated into the monitoring, reporting and verification (MRV)

system implemented through the INDC in 2015. Activity 1.2 Strengthened gender-responsive community services to enable climate-smart livelihood development.

23. While Activity 1.1 focused on national-level enabling climate services, this activity will focus on the dissemination of relevant and accessible information to local level producers and key stakeholders (eg. PAFO, DAFO and extension services). Dissemination of climate services will be conducted through the training of trainers (ToT) on climate-smart practices through the Farmer Field School approach (FFS) or Climate Farmer Field School (CFS), with the aim of deploying a farmer-to-farmer extension, also called farmer-based extension.

24. Training of trainers will target the most vulnerable communities and will ensure that women, who play an important role within the household and agricultural activities, have a facilitated access to the training – so that both men and women have equal access to climate information services. To strengthen viability of agriculture livelihoods, this training will be supported by the preparation and dissemination of guidance in the form of videos and posters for local producers on the climate-smart management of selected value chains, as well as on improved seasonal and production-relevant forecasts to farmers, including through the dissemination of dynamic crop calendars (DCC), expanded in a fully operational SMS application such as CLICC. Partnerships with NGOs such as Access Agriculture or Digital Green will be sought for to develop videos for farmers’ training, including one video per value chain stage.

25. The project will also strengthen crop monitoring at the local level, to support the documentation of best adaptive practices and to ensure crop production data is appropriately linked to climate data. In addition, a partnership between NAFRI and IRRI will be developed to conduct research and further develop the best technologies for climate-smart rice production in Lao’s lowlands and uplands. Further strengthening the NAFRI research capacity will enable a science-based solutions to adaptive farming and food production practices in Laos. Therefore, facilitation of such research partnership will lay a foundation for sustainable expert capabilities. Finally, in order for climate information services to reach the highest number of beneficiaries, through the Climate Change Research Centre within NAFRI, a network of research farms as a method to test, scale-up and transfer adaptive technologies through the Farmer Field School (FFS) approach15 (Output 2) will be established.

Output 2 (climate resilient value chain strategy): Investment in climate-resilient and sustainable agriculture value chains delivered to support food and nutrition security.

26. This output is aimed at addressing resiliency gaps at each step of the production value chains, from input management to post-harvest and marketing. The expected result of activities under this output is a reduction in the number of food insecure, with particular focus on women and children. To achieve this result, the project will implement the following activities:

Activity 2.1: Introduction of climate-smart agricultural input management practices into food production systems.

27. In this activity, “input” is understood to encompass all agricultural inputs, including sustainable land and water management, seeds, and relevant agro-chemicals. The project will support the organization of seed multiplication systems using local farmers and producers’ seeds in order to improve the supply chain for a diversity of climate resistant crops as well as increase agro-biodiversity. Seed multiplication systems will be set up within Farmer Field Schools and will be farmer-based in order to increase ownership over the value chain approach from farm-to-fork.

15 The FFS approach will be used as an implementing mechanism across all outputs of this project. This will therefore need technical backstopping from FAO as well as a partnership with the Department of Agricultural Extension for them to increase their ownership over the FFS approach while reforming the current system and institutionalizing FFS in order to up-scale the approach and ensure sustainability of the project’s outcomes.


28. Climate-smart input management will be disseminated through guidance developed

under Output 1, through farmer-based and traditional extension services of land preparation, water conservation techniques and water use efficiency methods – to improve crop performance and productivity under increased variability and climate uncertainty. Although the government carries out significant investment into the expansion of the irrigation networks. Some of the targeted remote areas with complex mountain topography remain outside the scope of these investments. While some farmers already irrigate their land, the cost of electricity to pump water to the fields is a barrier to expanding this practice, therefore the project will promote the use of solar powered pumping systems to generate electricity and allow farmers to pump water to their fields at a lower cost.

29. In line with challenges in Lao PDR related to environmental degradation and its link to ecosystem services, the project will also support the dissemination of integrated pest management (IPM) and the safe use of organic methods of pesticides and herbicides management. This will be done through farmer-based extension services. While traditional pest control involves regular application of pesticides, IPM enhances pest prevention and the use of pesticides as needed. Its benefits include a reduction in the number of pests and in the number of application of pesticides, as well as cost savings, healthier soil and protected human health. As climate change will affect IPM strategies the project will support NAFRI and other research entities under MAF to carry out collaborative research and surveillance to evaluate the changes in cropping systems and production practices affected by climate change and to find out which cropping systems are the most vulnerable to increased threats from pests and disease due to climate change. The project will also a monitoring system to detect and analyze climate change effects on threats to soil biodiversity and plant and soil health16, In addition to IPM, the project will introduce the use of compost and farmyard manure to replace the use of chemical fertilizer, further reducing the cost of inputs for farmers.

Activity 2.2: Diversification and integration of farming systems in order to increase productivity and incomes in the vulnerable provinces.

30. Under this activity, the project will reach 200,000 direct beneficiaries over the six selected provinces through a farmer-based extension strategy, using for example FAO’s FFS methodology to increase the dissemination and adoption of resilient and sustainable agricultural practices with the aim of increasing production while conserving the environment. Using a crop-livestock integrated system aimed at reducing erosion, increasing crop yields, nutrient cycling and intensifying land use to improve profits while preserving the environment, the project will work within existing food value chains and introduce new ones for diversification of income and nutrition sources. These will include for example the introduction of small livestock, poultry, frog rearing and fishponds, as well as practicing crop rotation using legumes and rice-vegetable combinations, commercial agro-forestry for increased income and soil stabilization. These methods of diversified and integrated farming systems have been successfully tested and increase in yield and incomes demonstrated through the IRAS project. Expansion in coverage of this practice will constitute the main investment of the project. Best practices and technologies for resilient rice production researched under Activity 1.2 will be introduced as climate-smart rice production practices, such as system of rice intensification (SRI), model for integrated rice resilience (MIRR), contributing to adaptation, mitigation and production benefits. While this integrated system will allow for an increase in locally available diverse foods, as well as increased incomes from potential commercialization and local exchanges, awareness raising on nutrition and cooking practices will be provided to ensure diversification impacts dietary diversity and increase nutrition security. To support the crop-livestock integrated system, the project will also undertake improved livestock feeding and breeding techniques to reduce emissions from livestock, which will aim at slightly increasing the number of livestock heads for household food security, while enhancing livestock productivity within the several possible value chains and increasing GHG benefits in becoming more emission effective.

31. In order to better handle post-production, the project will also support villages in developing plans for reducing post-harvest losses as a result of climate change and related disasters, including phyto-sanitary handling and protection and the provision of climate- proofed storage and bulking facilities. Furthermore, the project will establish producer groups

16 On-going CGIAR work on models and mapping tools for pests and diseases, natural enemy forecasting, and species distribution and adaptation studies, provide a solid foundation to build upon.


towards value addition and transformation of key agricultural products, on the basis of a

market analysis and of the crop models/risk profiles produced under Output 1. Access to markets will also be strengthened not only through enhanced infrastructure, such as building roads linking communities to nearest village markets, but also through timely dissemination of price information, bulking and other stock management.

Activity 2.3 Strengthened mechanisms to enable local finance for multiplication of integrated farming practices.

32. This activity focuses on establishing the conditions for the long-term viability and sustainability of resilient food systems by supporting access to rural finance further up-scaling integrated farming practices. The project will work with existing microfinance institutions by building on past experiences, driven by GIZ with the Bank of Lao and the Lao Women’s Union and other provinces to establish village banks in the selected sites. A financial sustainability strategy through government programs will be sought for, including for example the dissemination at local level of performance grants, cooperative savings and loans schemes, and micro-finance. This will allow local producers to gradually mobilize productive assets outside of project-based finance, and for the progressive professionalization of food production systems and producer groups. In addition, the project will work with established partners and on the basis of experience conducted by the GIZ, IFC and ADB, to deliver training on financial literacy, value added product development and marketing to farmer organizations (FOs). These trainings will be implemented through extension services to also increase awareness among local authorities and villagers on contract farming arrangements. Finally, the project will elaborate a strategy with the Department of Land Management to formalize land rights and land titles in the project sites to support more appropriate contract farming and promote rural finance. While land titling has been conducted in more urban and peri-urban areas of the country, it still needs improvement at the rural level and will directly link to food security.17

Output 3 (supportive ecosystem services) Watershed management practices to sustain land productivity in the face of climate change

33. This output responds to the fact that environmental degradation creates an additional and increasingly difficult barrier to agricultural production and greater vulnerabilities to climate change impacts. Land degradation, soil erosion, floods and deforestation are all gradually contributing to an impoverishment of productive landscapes and to GHG emissions. Healthy and sustainably managed ecosystems are a pre-requisite for continued agricultural production in the vulnerable areas. The output will also contribute to achieving objectives in terms of mitigation of emissions resulting from land use change and reforestation, leveraging multiple benefits for the country and globally. The output will be achieved through the following activities:

Activity 3.1 Participatory and climate resilient land use planning at the watershed / micro- catchment level, introduced as part of the decentralized adaptive land use decisions.

34. The project will work with communities and relevant stakeholders to identify previous impacts from climate variability and current vulnerabilities. This will be complemented by integrating climate change data to conduct GIS based climate risk modelling to project future impacts of climate change affecting land use and determine the land use strategies to minimize the risks and adverse impacts.

35. Within the framework of ongoing national efforts to develop land use plans, the project will support and mobilize communities in undertaking participatory land use mapping of catchment areas that will allow for better knowledge of degradation trends and climate risks. In this activity, the roles and governance mechanisms of village structures such as user groups and village forestry units, will be strengthened as a means to enhance and maintain tree cover in vulnerable areas. These land use plans will integrate the adaptation strategies determined under Output 1 and will set out the planning requirements for Output 2.

Activity 3.2. Drainage and water supply mechanisms in the areas of high rainfall variability established at a micro-watershed level.

17 Linking food and land tenure security in the Lao PDR (Land Issues Working Group, 2015)


36. Under this activity, the project will seek to achieve an increase in agricultural water availability in the dry season, both as a means to control flooding and to increase production. This will include setting up and / or rehabilitating water retention earth ponds through landscaping methods. Apart from the water retention functions, ponds can be seeded with fish (see Activity 2.2) to provide local livelihood benefits. These water retention earth ponds and connected irrigation canals will be established based on an analysis of needs and feasibility at the local level. The project will also setup drainage and irrigation systems and renew the associated fee-based community management arrangements. This will also be accompanied by efforts to mobilize groundwater in drought prone areas to complement water supply from ponds for crop production, on the basis of targeted site-specific feasibility studies.

Activity 3.3. Address forest cover fragmentation in the vulnerable watersheds through village forestry and agroforestry solutions.

37. The activities above will also be complemented by efforts targeted at the broader landscape (i.e. around agricultural lands) to restore soil cover in the most productive, resilient and sustainable manner. This will include mobilizing communities to implement terracing, where relevant, using crops and fruit trees, to reduce erosion, sediment runoff and siltation of water bodies and irrigation canals as well as to create sustainable carbon stocks. The project will work through women’s unions to set up self-sustaining seedling nurseries to support commercial agro-forestry both on- and off-farm. Forest restoration including through assisted natural regeneration (ANR) will be undertaken around headwaters and in critically degraded areas in order to improve hydrological functions, nutrient cycling, and increase soil organic carbon as to contribute to climate resilience of land systems and long term productivity of farmlands. The village forestry approach (promoted in 3.1), which has already been tested and implemented successfully in Lao PDR, will be used to encourage communities to enhance and maintain tree cover through the identification of local economic incentives. Finally, this activity will further reduce carbon emission and pressures on forest resources used for charcoal production, the project will upscale renewable energy and energy-saving technologies to promote the use of biogas, improved cook stoves, biochar briquettes, and solar energy for electricity, among others.

B.2. Background information on project/programme sponsor

38. The Ministry of Agriculture and Forestry (MAF) is mandated to assume a function of “secretariat body to the Government with regard the macro-management of agriculture and forestry development in order to ensure food security, to create sources of raw materials to be supplied to processing industries and commercial production following the direction of sustainable, clean and modernized development, to provide permanent occupations to multi- ethnic population in view of shifting cultivation stabilization and poverty alleviation in the whole country”18.

39. MAF is responsible for managing agricultural domestic investments that amounted to US$187million, while foreign investments were of US$2billion in 2014-2015, distributed across four sectors: crops, forestry, livestock & fisheries, and agriculture services. Recent key donor supported projects include, IRAS (2011-2015, US$ 4,45,450), which was funded by LDCF and UNDP and implemented by NAFRI and MAF. The GMS Flood and Drought Risk Management and Mitigation Project in Lao and Vietnam (2012-2019: US$ 12.5 million) funded by the Asian Development Bank, and implemented by MAF, with the aim of reducing economic losses resulting from floods and droughts. And Mainstreaming Biodiversity in Lao PDR's Agricultural and Land Management Policies, Plans and Programmes (April 2011- December 2016: USD 2,478,000) funded by the GEF and is being implemented by MAF’s Department of Planning and Cooperation (DOPC) and UNDP with technical assistance from FAO.

40. UNDP has a long standing cooperation with the MAF in the areas of agriculture sector resilience, land and forest management and food and nutrition security. The most recent collaboration resulted in setting up a Climate Research Centre under its Agriculture and Forestry Research Institute. This a significant step forward to enabling a science-based solutions to climate responsive development of agriculture and forestry sector in the country.

18 DECREE No. 262/PM: Regarding the Organization and Activities of the Ministry of Agriculture and Forestry, Vientiane Capital, date 28.6.2012


41. The MAF, as Executing Entity/Implementing Partner (IP) for the proposed GCF project

will provide project management support and in-kind contribution to project implementation through its technical staff and institutional system. A micro capacity assessment (HACT) for the IP was undertaken by UNDP for the purpose of a previous project IRAS, for NAFRI (MAF) and DDMCC (MONRE). The results indicated a moderate overall risk and both MAF and MONRE are currently successfully implementing UNDP projects with no qualified audit opinions in financial year 2015. A new micro capacity assessment (HACT) will be planned for the proposed GCF project. The main concerned departments under the purview of the MAF include:

• National Agricultural and Forestry Research Institute (NAFRI) • Department of Agriculture (DOA) • Department of Forestry (DOF) • Department of Planning and Cooperation (DOPC) • Department of Agricultural Extension and Cooperatives (DAEC) • Department of Agricultural Land Management (DALaM)

42. In addition, the Department of Disaster Management and Climate Change (DDMCC) under the purview of the Ministry of Natural Resources and Environment (MONRE) will also be engaged in the implementation of this project.

B.3. Market overview

43. Agriculture is the mainstay of the economy, contributing 25.5% of the GDP and engaging 75% of the workforce. The proposed GCF project intends to focus on a selected set of agricultural value chains, such as: rice, beans and vegetables, small livestock, fruit trees and non-forest timber products (NTFPs). While rice forms a long-tested commercial value chain, others are often limited to self-consumption and local markets. As the project’s objective is to increase food security, it will work first and foremost to ensure local supply and trade, without however ignoring the pull of external markets in border areas (e.g. Thailand, Viet Nam, China).

Prices, Price Control and Subsidies in the Agricultural Sector 44. There are no systematic price subsidies or subsidized food sale programmes in Lao PDR. And there is no specific law, regulation, or institution dealing with food price stabilization. The movement towards a market economy following the promulgation of the New Economic Mechanism (NEM) in 1986 limited the extent to which the government could intervene in the market. The Prime Minister’s Decree on Goods Price Control in October 2001 reaffirmed the central role of the market in setting prices. However, it also stated that the Ministry of Industry and Commerce was to be directly responsible to the government for the control of the prices of some consumer goods and raw materials including some imports, agricultural produce, industrial products, some domestic products, and natural resources for export.

45. The Ministry of Industry and Commerce produces lists of the average prices of goods in each period and is charged with coordinating with other agencies to ensure that there is an adequate supply of domestic goods to meet consumer demand. In principle, on the production side, the Government of Lao PDR sets the minimum farm-gate price to keep prices stable in conjunction with the Ministry of Industry and Commerce.

46. The government also encourages private initiatives, including those by foreign investors from neighbouring countries, to promote contract farming. This may help to stabilize prices, as contract firms usually agree to purchase a specific commodity at an agreed-upon price and time, while the farmer agrees to supply the contracts to specified quality standards. However, not all farmers gain from contract farming. Many are unable to negotiate fair prices for their goods and need help to enhance their value-added products through processing, sorting, and packaging.19 The proposed GCF project will support farmers to become more competitive in the market.

B.4. Regulation, taxation and insurance

47. Any licenses or permits required for the implementation of the project will follow the established policies and processes by the government.

Tax Considerations for UN-supported Projects

19 ASEAN, WB (2012) Country report of the ASEAN Assessment on the Social Impact of the Global Financial Crisis: Lao PDR.


48. UN-supported projects are currently tax-exempt in Lao PDR. However, new regulations

are currently being drafted on the taxation of the development projects, including the taxation for the procurement of international and national experts.

Foreign Exchange and Insurance Policies 49. UNDP’s currency hedging policy is based on the use of natural hedges (matching cash flows (i.e. revenues and expenses) in non-USD currencies) to the extent possible. UNDP Country Office bank account balances are managed not to exceed approximately one month’s disbursement requirements to minimize risk.

50. The Government signed a Standard Basic Assistance Agreement (SBAA) with UNDP in 1975. Consistent with the SBAA, the responsibility for the safety and security of the Implementing Partner (executing entity) and its personnel and property, and of UNDP’s property in the Implementing Partner’s custody, rests with the Implementing Partner (executing entity).

B.5. Implementation arrangements

51. The project will be implemented following UNDP’s National Implementation Modality (NIM), according to the Standard Basic Assistance Agreement between UNDP and Government of Lao PDR, the Country Programme Action Plan (CPAP), and as policies and procedures outlined in the UNDP POPP (see https://info.undp.org/global/popp/ppm/Pages/Defining-a-Project.aspx).

52. The national executing entity - also referred to as the national ‘Implementing Partner’ in UNDP terminology - is required to implement the project in compliance with UNDP rules and regulations, policies and procedures, including the NIM Guidelines. These include relevant requirements on fiduciary, procurement, environmental and social safeguards, and other performance standards. In legal terms, this is ensured through the national government’s signature of the UNDP Standard Basic Assistance Agreement (SBAA), together with a UNDP project document, which will be signed by the Implementing Partner to govern the use of the funds. The (national) Implementing Partner for this project will be MAF who will be accountable to UNDP for managing the project, including monitoring and evaluation of project interventions, achieving project outcomes, and for the effective use of UNDP resources.

Project Organization Structure

Project Steering Committee

Senior Beneficiaries Executive Senior Supplier DIC, MAF, NAFRI, MONRE, MAF UNDP Local government authorities

Project Assurance Project Implementation National Project UNDP Unit Director

(PIU) MAF

Responsible Party Responsible Party Responsible Party M&E Officer Project Manager Finance and

Administrative Officer

53. A Project Steering Committee (PSC) will be constituted and will be comprised of designated senior-level representatives of the MAF, NAFRI, MONRE, and the Local Government Authority as well as the National Designated Authority and other key stakeholders such as the Department of International Cooperation in the Ministry of Planning and Investment and UNDP Country Office.

54. The Project Steering Committee is responsible for making, by consensus, management decisions when guidance is required by the National Project Director. Project Steering


Committee decisions will be made in accordance with standards that shall ensure

management for development results, best value money, fairness, integrity, transparency and effective international competition. In case a consensus cannot be reached within the Board, final decision shall rest with the UNDP Resident Representative or his designate. The Project Steering Committee will meet at a minimum of every six months.

55. UNDP’s overall role as an Accredited Entity is to provide oversight and quality assurance through its Headquarter, regional and Country Office units. This role includes: (i) project preparation oversight; (ii) project implementation oversight and supervision, including financial management; and (iii) project completion and evaluation oversight. It also includes oversight roles in relation to reporting and knowledge-management. The ‘project assurance’ function of UNDP is to support the Project Steering Committee by carrying out objective and independent project oversight and monitoring functions. This role ensures appropriate project management milestones are managed and completed. Project assurance has to be independent of the Project Manager; therefore, the Project Steering Committee cannot delegate any of its assurance responsibilities to the Project Manager. A UNDP Programme Officer, or M&E Officer, typically holds the Project Assurance role on behalf of UNDP. The ‘senior supplier’ role of UNDP is to represent the interests of the parties, which provide funding and/or technical expertise to the project (designing, developing, facilitating, procuring, implementing). The senior supplier’s primary function within the Board is to provide guidance regarding the technical feasibility of the project. The senior supplier role must have the authority to commit or acquire supplier resources required. If necessary, more than one person may be required for this role. Typically, the implementing partner, UNDP and/or donor(s) would be represented under this role.

56. The MAF will appoint a National Project Director (NPD), who will be designated over the course of the project’s inception phase. The National Project Director is a senior Government staff who will provide quality assurance in terms of ensuring project management milestones are managed and completed, supporting the Project Implementation Unit (PIU).

57. The Project Manager (PM) will lead the Project Implementation Unit and run the project on a day-to-day basis on behalf of the MAF within the constraints laid down by the Project Steering Committee. The Project Manager function will end when the final project terminal evaluation report, and other documentation required by the GCF and UNDP, has been completed and submitted to UNDP. The Project Manager is responsible for day-to-day management and decision-making for the project. The Project Manager’s prime responsibility is to ensure that the project produces the results specified in the project document, to the required standard of quality and within the specified constraints of time and cost. The PM will be a local staff contracted by UNDP and located at MAF. Both Project Manager and National Project Director will both be represented in the Project Steering Committee.

58. Project Support: The PM will be supported by a core team of technical and support staff forming the Project Implementation Unit (PIU) located at the MAF to execute project activities, including day-to-day operations of the project, and the overall operational and financial management and reporting (finance and administrative officer and monitoring and evaluation officer).

C. Financing / Cost Information

C.1. Description of financial elements of the project / programme

59. The proposed project seeks to increase agriculture production and increase climate resilience of resource-dependent agriculture households. Revenue generated as a result of project interventions apply directly to the beneficiaries, and does not lend itself to significant reflows back to the government or the GCF. The proposed project is therefore structured as 100% grants.

60. As the proposed project is non-revenue generating, a financial model is not appropriate.


Please explain the potential of the Project/Programme to achieve the Fund’s six investment criteria as listed below.

Financial Instrument

Amount

Currency

Tenor

Pricing

Total project financing (a) = (b) + (c)

GRANT

40.78920

million

USD ($)

(b) Requested GCF amount

(i) Senior Loans

(ii) Subordinated Loans

(iii) Equity

(iv) Guarantees

(v) Reimbursable grants *

(vi) Grants *

…………………

…………………

…………………

…………………

…………………

40.000

Options

Options

Options

Options

Options

million USD ($)

( ) years

( ) years

( ) %

( ) %

( ) % IRR

C.2.

* Please provide detailed economic and financial justification in the case of grants.

Project

financing

information Total Requested

(i+ii+iii+iv+v+vi)

40.000 million

USD ($)

(c) Co- financing

Financial Instrument

Amount

Currency Name of

Institution

Seniority

Grant

0.289

million

DFRM

Options

Grant 0.500 USD ($) GoL Options Options ………………… Options ………………… Options Options ………………… Options ………………… Options

Lead financing institution: N/A

(d) Covenants

N/A

(e) Conditions precedent to disbursement

N/A

20 Further consultations are needed with government counterparts to calculate and confirm co-financing amounts. Additional co-financing is expected, particularly related to long term sustainability of project results.

D. Expected Performance against Investment Criteria


61. The project expects to achieve the following adaptation and mitigation impacts: Adaptation impacts 62. The project will reach 200,000 direct beneficiaries, of which an estimated 50% are women and 50% are men (3% of the total population) as well as a broad estimate of 500,000 indirect beneficiaries over the six selected provinces, therefore a total of 10% of the total population will be directly or indirectly impacted by the project interventions. Direct beneficiaries can be defined as those who will participate directly in the project, while the indirect beneficiaries are those living within the zone of influence of the project (which can range from 5km to 30km radius, depending on the type of intervention). 63. The project expects to increase resilience and enhance livelihoods of the most vulnerable people, communities, and regions: a 25% reduction in the number of people affected by climate- related disasters, of which 40% are women and 30% are children and at least 60% of beneficiaries adopting a wider variety of livelihood strategies (420,000 people), of which 50% are women and 50% are men. 64. The project expects to reduce vulnerability to climate change by investing in climate-resilient value chains, introducing new food and commercial value chains by adopting climate-smart agriculture practices to improve productivity and diversify farming systems while strengthening mechanisms providing farmers with micro-credit. Therefore, the number of food insecure individuals is expected to reduce by 15%, of which 40% are women and 30% are children. 65. The project will strengthen village irrigation infrastructures to improve local food production and secure water inputs. This will be done through the construction and rehabilitation of irrigation and drainage canals, as well as through the construction of 6 water retention ponds in each province. Over time, these pond systems set up through landscaping methods will also contribute

D.1. Climate impact potential

to the recharge of ground water and improve both availability and quality of water. With these investments, the project anticipates to achieve an increase of 20% in off-season agricultural water availability in project sites during the dry season at the end of the project, which will allow for a yield

[Potential to achieve the GCF's objectives and results]

increase of at least 15%, when combined with other sustainable land use and cultivation practices. 66. To support ecosystem services, the project expects to restore a total of 60,000 hectares per province per year of the project implementation, of which 15,000 hectares through assisted natural regeneration (ANR), 15,000 hectares through reforestation or afforestation, and finally 30,000 hectare through agroforestry.

67. The project expects to develop at least 5 gender-responsive policy advisories on cost-effective adaptation solutions for food and nutrition security at national and provincial levels. This may include advisories on best available technologies and practices for resilient rice production, variety selection, climate risk management, land tenure and land management. Institutions at the provincial and local levels will be strengthened to provide an enabling environment to address climate change impacts. The government will provide smallholder farmers with reliable climate information services for the entire value chains of key crops to increase productivity, while restoring forest cover through community forestry and agroforestry and reducing carbon emissions and pressures on forest resources. These will include climate risk profiling, economic valuation methods and studies, crop modeling, extension packets, and the collection of loss and damage data to support evidence- based decision-making. 68. The project expects to provide, through farmer-based extension or climate farmer field school, several types of climate information services, such as crop models, dynamic crop calendars, and annual agro-meteorological bulletins, including rainfall forecast for the coming seven days, rainfall variability at the onset, as well as information on best technologies to adopt climate-smart production practices. An estimated 1000 farmer field schools will be operationalized annually in each province, each bringing together an estimated 15 farmers, of which at least 40% would be women. This will allow the project to reach an estimated 90,000 vulnerable farmers, some of whom will also be trained as FFS facilitators, and who will be able to upscale and disseminate knowledge beyond the duration of the project. 69. Through awareness raising and dissemination of climate information on best practices for climate smart rice production and other sustainable land management practices, the 200,000 direct beneficiaries (of which 50% are men and 50% are women) will be made aware of climate threats and the best practices to cope and adapt to climate change impacts.


Mitigation impacts

70. Project interventions are expected to result in carbon sequestration co-benefits. These will be quantified during proposal development.

D.2. Paradigm shift potential

[Potential to catalyze impact beyond a one-off project or programme investment]

71. This project consists of a scaling up of successful technologies and approaches. As such it intends to catalyze a change in the way agriculture and food systems are approached in the Lao PDR. The project will support more integrated farming systems and climate responsive food value chains, enabled by adequate government sponsored climate services and well-recovered and maintained ecosystem services. Such approaches will be implemented for both upland and lowland production systems with the conditions to scale up in the entire country. It is estimated that the direct benefits of this project will reach 12% of the country area, and 10% of the total population with an immediate replication potential to reach 35% of the targeted province areas, and 25% of the population.

72. Mechanisms will be put in place in order to leverage up-scaled impact. These include:

• While previous approaches have been focused on the production side of livelihoods, this project will focus on climate change adaptation strategies across the entire food value chain, by climate-proofing each step of the value chain from farm-to-fork, and promoting climate-resilient and sustainable diversification activities.

• The mobilization of farmer-based extension services that enables the direct access to adaptation advisories to the farmers and allows for the identification of direct economic benefits of climate-smart agriculture by local populations themselves and to benefit from the field-based evidence of their neighbor’s successes.

• The development of skills at local level that can be leveraged in professional agricultural value chains, including business planning skills, land use planning, climate risk management and access to finance. This can assist in upscaling by creating a new type of employment, whereby trained farmers provide others with knowledge, beyond the traditional channels of state sponsored extension. Dissemination based on visible evidence is expected to speed up the upscaling process and allow for farmer- based autonomous adaptation.

• The deployment of a set of broad-based climate information services that can be applied to the entire country through existing institutions and mechanisms, chief among which the Extension service and the Agricultural Research Institutions.

• The watershed regeneration and maintenance is part of a landscape approach that recovers and reinforces ecosystem services and enables greater resilience and productivity of broader landscapes. This approach will be operationalized through participatory land use planning conducted at the watershed level for all land users to collaboratively make sustainable decisions for both the environment and their livelihoods. This long-term strategy will promote climate-resilient land use changes while also strengthening village structures and governance mechanisms, ensuring land tenure security and preventing land-related conflicts.

Potential for knowledge and learning 73. The project is based on an approach that integrates research to development processes. This includes for example the provision of targeted training for government staff at national and decentralized levels, the establishment of a network of research farms, development of a data collection system that will cover losses and damages, socio-economic benefits (including income and food security), ecological services, and value chain monitoring.

74. All three main outputs include elements related to the dissemination of best available information, technologies and practices, but also provide the flexibility, through farmer-based extension approaches, to leverage farmer innovation. Through awareness raising on the economic, social and environmental benefits of the value chain approach disseminated from farmer to farmer, the project’s interventions will reach remote communities and most vulnerable areas and promote, among others local seed multiplication, providing a behavioral change for farmers used to rely on seeds provided by local government. The project will implement an aggressive knowledge management approach so that all project results are effectively documented, barriers are addressed, and policy change is leveraged.


Contribution to the creation of an enabling environment

75. The project’s first output is entirely dedicated to the creation of an enabling environment for resilient agriculture. While many of the enabling policies are currently in place, their implementation is sometimes lacking owing to the lack of institutional and technical capacity to provide services at local level. Therefore the project will create enabling conditions first by strengthening the government’s capacity and second by providing the products and services locally that farming communities need. The former will include preparing a package of policy advisories for the implementation of evidence-based adaptation measures, land tenure governance policy measures, an information system for monitoring and reporting on forest resources and land use changes at the local level to feed into the national forest monitoring system. The latter will aim at providing adequate, timely and relevant climate information services to local land users, including the dissemination of technical guidance on climate-smart agricultural practices, dynamic agricultural calendars as mechanisms to cope with climate variability and change. In addition, the project will support participatory land use planning to identify land use strategies reducing climate change impacts. Finally, through the value chain approach, the project will support linkages to markets, which is expected to create economic incentives for continued environmental stewardship.

D.3. Sustainable

development potential

[Potential to provide wider development co-benefits]

76. Lao PDR has expressed its commitment to the Sustainable Development Goals (SDGs) being SDG localization country. To that end the 8th NSEDP has considered the SDG’s with more than 50% of the indicators being aligned to SDG indicators. The project intends to create the following economic, social and environmental benefits, directly contributing to the Sustainable Development Goals.

Economic co-benefits 77. Interventions from the IRAS project resulted in an increase in rice yield from 2.7 t/ha to 4 t/ha by the end of the project and an increased seasonal profits by 78% and 3% under rain-fed and irrigated conditions respectively, thanks to improved rice seed. 21 This project will use IRAS’ achievement, however, as opposed to only focusing on the production cycle, as in the IRAS project, this project will focus on the entire value chain, which will make these adaptive strategies transformative and truly scalable. Farmers will be engaged in each cycle of the chain, namely pre- production, production, harvest, storage and getting access to markets to strengthen their networks contributing to the increase of social capital. The investment in climate resilient value chains will improve agricultural productivity, by improving access to sustainable agricultural inputs, supporting the growth cycle and ensuring reliable post-harvest management through climate-proof storage facilities. In addition, thanks to the introduction of new agricultural value chains promoting climate- smart practices such as agro-forestry, conservation agriculture, crop rotation, but also the introduction of a crop-livestock integrated system with small livestock, such as goats and chickens, smallholder farmers will expand their livelihood portfolio and further mitigate the impacts from droughts and floods. These interventions will contribute to an estimated increase of 15% in all season income for agricultural households in project sites, for an estimated 60% of beneficiaries (420,000 people), of which 40% are women (SDGs 1, 8, 10 and 13).

78. Farmers will benefit from the reduction of the initial investment costs for farming inputs, thanks to the introduction of the use of compost and farmyard manure instead of chemical fertilizer. The introduction of solar power used to generate electricity and pump irrigation water to the fields will also alleviate the costs of electricity for farmers.

Social co-benefits 79. Stronger institutional services and more sustainable extension services will provide better access to new agricultural technologies, contributing to higher human capital on climate-smart practices. Institutional services will also provide climate information services, directly benefiting smallholders in planning their crop production systems. Women will be especially targeted to ensure they also benefit from climate information services and can apply climate-smart practices along the whole value chain to increase their household food and nutrition security. Farmer-based extension services will increase knowledge exchange on lessons learned and overall social capital between and among communities, leading to better ownership and up-scaling activities at the wider landscape level (SDGs 11 and 12).

80. Improvements in land tenure governance at the district level through participatory land use planning at the watershed level will be achieved through the formalization of land rights and land titles, contributing to farmers’ natural capital. In terms of physical capital, the project interventions will ensure a sustainable availability and closer access to water resources thanks to infrastructure

21 IRAS, PIR. (Results and lessons learned from IRAS, compiled by national consultants from the final year PIR).


building including irrigation canals and drainage infrastructure that will be connected to water

retention ponds, in turn contributing to gender equality, by reducing the burden on women to collect water (SDGs 5 and 6).

81. Interventions introducing climate-smart practices will directly contribute to a higher food security, with an estimated reduction of 15% in the number of food insecure people, of which 50% are women and 50% are children. In addition to contributing to food security, climate-smart practices will also lead to a higher nutrition security thanks to diversified farmers livelihood portfolio to provide food at the household level, such as buying food from local markets with cash earned from livestock or NTFPs. Improved health and nutrition are estimated to reach 420,000 people, of which 40% are women and 30% are children. As opposed to only focus on the production cycle, as in the IRAS project, this project will bring transformative change thanks to a value chain approach, which will engage women in each cycle of the chain, namely pre-production, production, harvest, storage and getting access to markets to strengthen their networks contributing to the increase of social capital (SDGs 2 and 3).

82. The Lao Women’s Union will facilitate access to micro-credit for women to engage in new value chains promoted by the project. This access to credit will come with training in financial literacy, which will further increase opportunities for women to engage in other income-generating activities. Farmers will also benefit from training on contract farming arrangements.

Environmental co-benefits 83. The main environmental co-benefits will stem from watershed rehabilitation and the regeneration of forest cover and will include reduced runoff, reduced sediment transport and increased infiltration, hence limiting flooding and storm potential impacts on crops and surrounding watersheds.

84. The following climate-smart agriculture practices will be explored, among others, during the project, based on feasibility and baseline studies. These will aim to bring the following environmental co-benefits along the different value chain cycles:

• No-till farming combined with mulch and diversified crop sequences (crop rotations, intercropping) will provide a good protection of the soil, help retain moisture and reduce erosion and nutrient runoff.

• Thanks to an integrated crop-livestock system, the use of farmyard manure and compost instead of chemical fertilizers on crops will, not only reduce costs of inputs for farmers but also hold and sequester carbon dioxide, reduce soil erosion and replenish exhausted soil.

• Reduce water pollution by practicing integrated pest management and biological pest- control methods to ensure crops are protected during all growth stages in a safe manner.

• Thanks to innovative water management practices established to sustain land productivity in the face of climate change, such as landscaping drainage control and improved irrigation, water retention ponds and a reduction in flooding event damages, water availability will increase by 20% during the dry season, further increasing agricultural productivity, but also reducing potential damages from flooding events (SDGs 6 and 15). While increasing water resources availability and soil quality, these interventions will also contribute to improving biodiversity (SDG 15).

• In addition, in the areas of high rainfall variability, the project interventions will increase soil quality and productivity thanks to the adoption of agroforestry solutions, such as implementing terracing using crops and fruit trees to reduce erosion and sediment transport. Agroforestry activities will also contribute to a carbon sink of 774,108 million tons of CO2-eq per year (see EX-ACT simulation) (SDGs 6, 13 and 15).

• The system of rice intensification (SRI) creates a triple-win situation for agriculture as it contributes to the three pillars of climate-smart agriculture: food production increase, climate change adaptation and mitigation. SRI will, not only enhance carbon sinks and reduce GHG emissions, but it will also contribute to a higher water productivity and higher nutrient use efficiency, therefore improving drought resistance and reducing pressures on water resources22 (SDG 13).

D.4. Needs of recipient

85. With more than a quarter of the population living under the poverty line, and nearly half of the country’s rural children suffering from anemia, malnutrition or stunting, the country’s food systems

22 The System of Rice Intensification (SRI) is climate-smart rice production (sri.cals.cornell.edu)


[Vulnerability are in dire need of strengthening. Climate change is having significant impact on food security in

Lao PDR. In 2015, the Global Hunger Index for Lao PDR was 28.523, considered “serious”. 86. A recent study completed under the aegis of the Economy and Environment Program for South-East Asia determined the level of vulnerability for all provinces of Lao PDR. It assigned a vulnerability index to each province, according to the IPCC framework, in which vulnerability is a function of exposure, sensitivity and adaptive capacity. It determined that 6 provinces belong to the top 25% of the most vulnerable regions in Southeast Asia. Low adaptive capacity is the dominant factor of vulnerability in Lao PDR, due largely to poverty. The three most vulnerable provinces here are Phongsaly, Houaphan, and Louang Namtha where the frequency of droughts is relatively high. They are followed by Oudomxay, and Saravan. In addition, the province of Savannakhet, while not appearing among the most vulnerable, contains the higher concentration of vulnerable people, owing mostly to high population density and reliance on rice24.

87. The proposed project will thus focus on the indicated six provinces. In the North, Oudomxay, Huaphanh, Luang Namtha, Phongsaly; in the Central region, Savannakhét, and in the South, Saravan. These provinces were selected based on a risk and vulnerability survey, as well as the food and nutrition security profiles, including the degree of physical and socio-economic vulnerability. Selection criteria are defined as follows:

• Physical vulnerability:

- The frequency and intensity of droughts, floods and cold spells impacts on agricultural production and food security

- Observed trends of incremental change, - Degradation of forest cover and watershed conditions.

• Socio-economic vulnerability:

- The highest level of food insecurity at the household scale, and the highest level of stunted children,

- Poverty incidence, - Population density, - Percentage of ethnic groups within the population, - Degree of isolation and access to services (electricity, water and sanitation, irrigation,

roads), - Prioritized provinces by the government development strategies in service provision

and poverty reduction efforts.

to climate change and financing needs of the recipients]

88. The proposed project is fully aligned with national priorities and adaptation objectives. 89. The project contributes to implementing the policy priorities as set out in the 8th National Social and Economic Development Plan (NSEDP, 2016-2020), and in particular to the Vision

D.5. Country ownership

2030 which seeks graduation to a middle-income country in which “agriculture and forestry sector are sustainably developed for food security; environmental protection and use of natural resources are more effective; local production is encouraged which, while shifting to industrialization and

[Beneficiary country ownership of project or programme

modernization, is also green and environmentally friendly”. In particular, the project contributes to achieving the 3rd Outcome of the NSEDP, which requires that “Natural resources and the environment are effectively protected and utilized according to green-growth and sustainable principles; there is readiness to coping with natural disasters and the effects of climate change and for reconstruction following natural disasters”.

and capacity to implement the proposed activities]

90. The proposed project also supports priorities highlighted in the Agriculture Development Strategy (2011-2020), which has, as a high-level goal, the intention of increasing production from modernized market-oriented agricultural production, adapted to climate change and focused on small holder farmers, and to promote the conservation of upland systems, in order to provide food

security and improve livelihoods25. The agriculture strategy recognizes the specific challenges posed by climate change and climate variability on smallholders, and their inability to adapt or cope with such rapid changes.

23 the Global Hunger index combines the proportion of undernourished, the prevalence of wasting and stunting in children under 5, and the child mortality rate. See http://ghi.ifpri.org/trends/ 24 Hotspots ! Mapping Climate Change Vulnerability in South East Asia. EEPSEA, 2010. 25 MAF, Lao PDR, Agriculture Development Strategy.

http://ghi.ifpri.org/trends/


E. Brief Rationale for GCF Involvement and Exit Strategy

91. The project is further guided by the Lao PDR National Climate Change Strategy, prepared

in March 201026, with the goals of reinforcing the achievement of the “Sustainable Development Goals of the Lao PDR, including measures to achieve low-carbon economic growth” and to “increase resilience of key sectors of the national economy and natural resources to climate change and its impacts”. Specifically the NCCS highlights key adaptation strategies that have been integrated in this project, such as: “increasing productivity through conservation agriculture”, “improving and monitoring water resources and water supply system, and rehabilitation of the flood control system”, “strengthening the financial instruments and capacity development for farmers; improving the development of small and medium size farming in the rural areas; and supporting community based adaptation measures”, and “Enhancing information dissemination and extension support to technical staffs and Lao farmers in regard to climate change preparedness and responses”.

92. The NAPA, released in April 2009, contained 45 priority projects within four identified sectors of priority for climate change namely, agriculture, forestry, water resources and health. Among these, 12 projects have been rated as “priority one”, meaning they are the most urgent to implement. These include six projects in the water sector and two projects in agriculture, forestry and health sectors. NAPA priority projects all contribute directly or indirectly to improving food security, such as promoting secondary professions in order to improve farmers’ livelihoods that are affected by climate change, raising awareness on water resources management, mapping flood- prone areas, establishing EWS for flood prone areas, surveying underground water resources in drought prone areas, and improving food processing techniques and storage.

93. The proposed project will build on best practices and benefit from lessons learned, thereby minimizing risk and improving efficiency. The project is aligned with national development plans. 94. During project development, the potential for carbon sequestration will be further assessed. Emissions reductions are expected to be cost-efficient thanks to the multiple interventions aimed at reducing carbon emissions. With the Fund’s support, the estimated cost per t CO2 eq is US$ 14

D.6. Effectivenes s and efficiency

per hectare and will result in carbon stocks of 178 tonnes of CO2-eq per hectare over the project implementation and capitalization phase (a total of 16 years), or 11 tonnes of CO2-eq per hectare per year. Without the Fund’s support, carbon emissions would continue to amount to more than 1 tonnes per hectare per year.

[Economic and financial soundness and effectiveness of the proposed activities]

95. In terms of efficiency, the combination of interventions related to natural capital and physical infrastructure has been shown to lead to significantly higher improvements in productivity than if the project included only a single approach. Based on previous experience and lessons, consolidated during the feasibility assessment, the project addresses the fundamental barriers to achieving resilience by allowing for the provision of enabling services by the government as well as by localized alternative arrangements (e.g. FFSs). This combination has also proven to be more effective in the context of Laos, where the costs of state-supported extension remain high and there are difficulties in reaching the population groups in need. Thirdly, this project could have selected only parts of the food value chains, or only selected commodities for climate risk reduction

measures. This would have addressed only partial aspects of the problem, leading to increased yields, but not necessarily to the improvements in food security in the face of climate change. In terms of efficiency, the proposed activities and interventions will reach 10% of the total population over six provinces, represents a cost of US$ 200 per direct beneficiary. 96. A more thorough economic analysis will be conducted during the proposal development stage.

26 UN Habitat: http://mirror.unhabitat.org/downloads/docs/12679_1_595432.pdf

Rationale for GCF Involvement

97. The GCF contribution is critical for this project, because Lao PDR is experiencing additional climate change risks and impacts, which need to be addressed continuously. While the government can no longer enter into debt to transform its agricultural and natural resources management sectors, the scale of investment the GCF offers will allow for a transformative change of the food systems landscape, using lessons learned from previous pilot projects conducted in the country, such as IRAS. Finally, the scale of this GCF investment will also be crowding in the support from government and private sector in climate change adaptation interventions.

http://mirror.unhabitat.org/downloads/docs/12679_1_595432.pdf


Exit Strategy

98. The project’s sustainability strategy is ingrained in the activities. First, a distinct aspect of this project is that it builds on, and develops, national capacity in the natural resources management and agriculture sectors. This includes national capacity to deliver gender-responsive and adaptation advisory services to local producers, in order to better achieve the policy priorities of increased resilient production and food security. The project builds on institutions that were supported by previous projects, contributing to an iterative approach to capacity building. However, this project intends to innovate in certain manners, particularly as regards to circumventing any potential institutional shortcomings that could prevent long-term sustainability. For example, there is uncertainty as to the viability of the national extension service, at a time of contracting public expenditure. Therefore, the project will build on previously successful experiences and will seek to institute a system of farmer-based extension. This system allows farmers to learn from best available practices and through demonstration showcased within a network of research model farms to act as extension focal points in their own villages or districts. Farmer-based extension also provides a low-cost, feasible, and home-grown approach to the dissemination of agricultural information, which is more likely to be sustained in the long-term, as recipients of the advice can identify its economic benefits more readily through the establishment of a crop and yield monitoring to document best adaptive practices and high performing techniques. Furthermore, these model farms set up both in upland and lowland agro-ecological zones will generate locally specific changes in climate variability and generate a field-based evidence for effective adaptation. As more gradual shifts in climate conditions are expected in the long term these network of model farms will serve as homologues for incremental adaptation.

99. Second, within the value chain approach promoted here, the project will provide farmers with an access to knowledge and technologies to successfully adapt to climate change, at each cycle of the value chain from farm-to-fork, namely, pre- production, production, harvest, storage and marketing. As opposed to the usual piecemeal approach addressing only one aspect of the value chain, this will allow farmers to take control over each cycle, selecting climate resistant inputs materials, conducting seed multiplication, using climate proof storages facilities, getting easier access to microfinance and to markets. The project intends to promote the use of financial instruments that local producers can access in order to build their own productive assets. This builds on recent legal reforms in the credit market, which allows for example applicants to submit mobile goods as collateral. Combined with a micro-credit approach, this can allow farmers to gradually access increasing resources to invest in resilient value chains and other income generating activities, while minimizing risks. In addition, by taking a value chain approach, the project will also provide awareness raising on nutrition, hygiene and cooking practices in order to ensure that livelihood diversification has a long-term impact on food and nutrition security. It is anticipated that the project will demonstrate the direct local economic benefits of environmental stewardship and rehabilitation, and this will contribute to accelerating uptake of climate-smart practices and ecosystem-based adaptation, while increasing carbon sequestration.

100. Third, the project will reinforce ecosystem integrity and long-term productivity of land, thanks to participatory land use planning, engaging communities and relevant stakeholders in land use decision-making. Regarding the sustainability of environmental rehabilitation and infrastructure components of the project, such as drainage infrastructure and irrigation canals/troughs which will be linked to water retention ponds (earth ponds), terracing and anti-erosion works, feeder roads, crop storage infrastructure, livestock infrastructure, and market structures, specific provisions for autonomous management will be instituted. This will include fee-based, community-owned management systems for forests and water. Finally, the project ties into ongoing land use planning and local governance processes. This will entail working with district and village authorities to ensure appropriate understanding of the costs and benefits of adaptation, and of the potential avenues available to pursue resilient agriculture. It is expected that after the project, villages will be able to sustain most project activities and outcomes independently of project-based funding.

F. Risk Analysis 101. The following table describes potential risks identified during development of the concept note. A more extensive risk analysis will be conducted during proposal development.

Description Type Probability & Impact (1–5) Mitigation measures / Countermeasures

Lack of funds after project may reduce sustainability of project outcomes

Financial Financial instability may undermine the efforts established during the project implementation, leading back to maladaptive practices (institutional and social) due to lack of funding. P = 2 I = 4

• The project will support the development of farmer-based extension services, which will provide opportunities to exchange knowledge and lessons learned.

• Activity 2.3 will focus on establishing the conditions for long-term viability and sustainability of resilient food systems by supporting access to rural finance further upscaling integrated farming practices (micro- credit).


• A financial sustainability strategy through

government programs will be sought for, including for example the dissemination at local level of performance grants, cooperative savings and loans schemes, and micro-finance.

• Related co-financing will be further discussed during project development

Poverty and other social factors prevent local communities from adopting climate- resilient adaptation measures for the long- term, instead opting for maladaptive activities for short-term benefits

Social, environmental

If local communities do not fully get involved in the project due to social factors, they will perpetuate maladaptive practices that will result in a spiraling of the root causes underlying what the project seeks to address – i.e. over- reliance on monoculture and unsustainable agricultural practices, which will then lead to further degradation of ecosystems. Consequently, the community will continue to be vulnerable to climate- induced natural hazards. P = 2 I = 4

• Foster a bottom-up, grassroots approach throughout the project’s development and implementation phases.

• Community stakeholders have been engaged from the very start of the project design to strengthen their buy-in into the proposed project.

• Through a farmer-based extension services or FFS, the project will carry out information dissemination activities at the local level ensuring that communities are aware of the benefits of ecosystems and adaptation.

• Inclusive interventions such as developing participatory and climate-resilient land use planning and the establishment of a farmer- based extension services or FFS will ensure that individuals have a role and stake in the project.

Staff turnover or lack of technical capacity with the executing entity

Institutional Project activities are delayed or sustainability of interventions at risk. P=1 I=3

• Capacity needs assessments will be undertaken to identify needs and gaps, with support, including training using a ToT approach, during implementation to be provided by UNDP and technical project staff as appropriate.

G. Multi-Stakeholder Engagement

102. The GCF project concept was developed in close collaboration with the National Designated Authority (NDA) and informed by stakeholder consultations. Consultations thus far have included the following:

• Initial discussions on the concept framework with Ministry of Agriculture and Forestry • Detailed bi-lateral consultations with development partners, government ministries, multi-lateral organizations and

UN Agencies • Specific provincial consultations in target provinces and village meetings • Inter-departmental consultations within Ministry of Agriculture and Forests • National consultation • Validation Workshop

103. In January 2016, a broad consultation chaired by the NDA sought to share information and raise awareness on the GCF and to discuss potential areas for programming.

104. The UNDP Country Office facilitated initial consultations on the conceptual framework began with the Ministry of Agriculture and Forestry, which included the Vice Minister of Agriculture and Forestry, staff of the Agriculture Research Centre for Climate Change and project staff of the UNDP-GEF Project entitled “Improving the Resilience of the Agriculture Sector in Lao PDR to Climate Change Impacts” (now closed). This was followed by more targeted consultations and bi- lateral meetings with various departments within the Ministry of Agriculture and Forestry; other Ministries including the Ministry of Natural Resources and Environment; and intergovernmental organizations such as the Mekong River Commission and UN Agencies including FAO and WHO.

105. At the request of government to further develop the concept, additional consultations with bilateral and multilateral development partners, sought to gather data, lessons learned and recommendations on technical aspects of the conceptual framework, as well as to identify potential synergies with existing or planned initiatives. This round of bi-lateral meetings ended with project design workshop, which gathered all relevant government stakeholders in Vientiane, to present the preliminary findings from the meetings and discuss an initial project framework and to agree on an initial geographic scope.


H. Status of Project/Programme

J. Supporting Documents for Concept Note

106. In May 2016, provincial consultations were held in two representative target provinces. The hilly northern uplands in Oudomxay Province and the dry lowland plains of Savannakhet in the South. Consultations in these provinces included meetings with the Provincial Office of Agriculture and Forests, site visits to observe watersheds, landscapes and farming activities; and a community meeting with the Village Chief and villagers. These consultations served to highlight some of the key issues in the provinces such as watershed degradation; slash and burn practices; impacts from recent floods, storms and droughts and also to get inputs from villages and issues they faced and areas in which they would like to receive support though the GCF.

107. A consultation workshop with the National Agricultural and Forest Research Institute was held on June 28, 2016, facilitated by the national consultant to receive feedback on proposed activities and implementation arrangements. All feedback received is documented and integrated into the project development process.

1) A pre-feasibility study is expected to be completed at this stage. Please provide the report in section J.

2) Please indicate whether a feasibility study and/or environmental and social impact assessment has been conducted for the proposed project/programme: Yes ☐ No ☒

(If ‘Yes’, please provide them in section J.)

3) Will the proposed project/programme be developed as an extension of a previous project (e.g. subsequent phase), or based on a previous project/programme (e.g. scale up or replication)? Yes☐ No ☒

(If yes, please provide an evaluation report of the previous project in section J, if available.)

Please refer to the IRAS FINAL EVALUATION, provided in Section J.

I. Remarks

☒ Map indicating the location of the project/programme

N/A Financial Model

☒ Pre-feasibility Study

□ Feasibility Study (if applicable)

□ Environmental and Social Impact Assessment (if applicable)

□ Evaluation Report (if applicable)


Annex I: Map Indicating the Location of the Project

The six following provinces were selected because of their high degree of vulnerability to climate change.

Four provinces in the North: • Oudomxay • Huaphanh • Luang Namtha • Phongsaly

One in the central region:

• Savannakhét And one in the South:

• Saravan


Annex II: Pre-feasibility Study See attached document

Annex III: Indicative Timetable

Key activity Expected achievement

Activity 1.1: Production and dissemination of climate information services and advisories on cost-effective adaptation solutions for food and nutrition security at national and provincial levels.

Completed by Year 2

Activity 1.2: Strengthened gender-responsive extension services, to enable climate-smart livelihood development

Completed by Year 4

Activity 2.1: Introduction of climate-smart agricultural input management practices into food production systems (e.g. land, water, seeds, agro-chemicals)

Completed by Year 2

Activity 2.2: Diversification and integration of farming systems in order to increase productivity and incomes in the vulnerable provinces, benefitting 200,000 direct beneficiaries.

Completed by Year 5

Activity 2.3: Strengthened mechanisms to enable local finance for multiplication of integrated farming practices

Completed by Year 5

Activity 3.1: Participatory and climate resilient land use planning at the watershed/micro-catchment level, introduced as part of the decentralized adaptive land use decisions.

Completed by Year 1

Activity 3.2: Drainage and water supply mechanisms in the areas of high rainfall variability established at a micro- watershed level.

Completed by Year 4

Activity 3.3: Address the forest cover fragmentation in the vulnerable watersheds through village forestry and agroforestry solutions for increased resilience for soil enrichment and stability

Completed by Year 5