FOR OFFICIAL USE ONLY

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 97.6 MILLION (US$ MILLION EQUIVALENT) TO THE SOCIALIST REPUBLIC OF VIETNAM FOR A CENTRAL HIGHLANDS POVERTY REDUCTION PROJECT November 18, 2013 Social, Environment, and Rural Sustainable Development Unit Sustainable Development Department Report No: VN This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective October 31, 2013) Currency Unit = Vietnamese Dong VND 21,100 = US$ 1 US$ = SDR 1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS ABs ACP AMT BDO CBRIP CDB CDD CEM CF CFMP CHPov CPC CPO CSB DA DARD DOH DPC DPI DPMU DTE ECOP EM ESMF FIRR FM GRM GoV GSO IE IDA IFAD Agro-businesses Agriculture Competitiveness Project Aligned Monitoring Tool Business Development Officer Community-based Rural Infrastructure Development Project Commune Development Board community-driven development Committee for Ethnic Minorities Commune Facilitator Community Forestry Management Plan Central Highlands Poverty Reduction Project Commune People s Committee Central Project Coordination Office Commune Supervision Board Designated Account (Provincial) Department of Agriculture and Rural Development (Provincial) Department of Health District People s Committee (Provincial) Department of Planning and Investment District Project Management Unit Department of Local and Territorial Economies (of MPI) Environmental Codes of Practice Ethnic Minority Environmental and Social Management Framework Financial Internal Rate of Return financial management Grievance Handling and Redress Mechanism Government of Vietnam Government Statistics Office impact evaluation International Development Association International Fund for Agricultural Development ii

3 IFR IPs IPF LEG M&E MARD MIS MOF MOLISA MPI NMPRP-1 NMPRP-2 NTP NTP-NU O&M ODA OP ORAF PAD PCRA PDO PIA PIM PPC PPMU PPs RP RPF SA SDV SOE SEDP TAT VHLSS VND WU interim financial report Indigenous Peoples Investment Project Financing Livelihood enhancement group monitoring and evaluation Ministry of Agriculture and Rural Development management information system Ministry of Finance Ministry of Labor, Invalids and Social Affairs Ministry of Planning and Investment First Northern Mountains Poverty Reduction Project Second Northern Mountains Poverty Reduction Project national targeted program National Targeted Program for Nutrition operation and maintenance official development assistance Operational Policy Operational Risk Assessment Framework Project Appraisal Document Procurement Capacity and Risk Assessment project development objective Project implementing agency Project Implementation Manual Provincial People s Committee Provincial Project Management Unit Productive Partnerships Resettlement Plan Resettlement Policy Framework Social Assessment Social Development network (of World Bank) Statement of Expenditures Socio-Economic Development Plan Technical Assistance Team Vietnam Household Living Standard Survey Vietnamese Dong Women s Union Regional Vice President : Country Director : Sector Director : Sector Manager : Task Team Leaders : Axel van Trotsenburg Victoria Kwakwa John Roome Jennifer Sara Sean Bradley and Son Thanh Vo iii

4

5 Socialist Republic of Vietnam Central Highlands Poverty Reduction Project TABLE OF CONTENTS Page I. STRATEGIC CONTEXT...1 A. Country Context... 1 B. Sectoral and Institutional Context... 2 C. Higher Level Objectives to which the Project Contributes... 4 II. PROJECT DEVELOPMENT OBJECTIVES...4 A. Project Development Objective... 4 B. Project Beneficiaries... 4 C. PDO Level Results Indicators... 4 III. PROJECT DESCRIPTION...5 A. Project Components... 5 B. Project Financing... 7 C. Lessons Learned and Reflected in the Project Design... 7 IV. IMPLEMENTATION...9 A. Institutional and Implementation Arrangements... 9 B. Results Monitoring and Evaluation C. Sustainability V. KEY RISKS AND MITIGATION MEASURES...15 A. Risk Ratings Summary Table B. Overall Risk Rating Explanation VI. APPRAISAL SUMMARY...16 A. Economic and Financial Analyses B. Technical C. Financial Management D. Procurement E. Social (including Safeguards) iv

6 F. Environment (including Safeguards) Annex 1: Results Framework and Monitoring Arrangements...21 Annex 2: Detailed Project Description...24 A. Context B. Geographic Targeting C. Project Components Annex 3: Implementation Arrangements...35 A. Project Institutional Arrangements B. Implementation Arrangements Annex 4: Operational Risk Assessment Framework (ORAF)...49 Annex 5: Implementation Support Plan...54 A. Strategy and Approach for Implementation Support B. Implementation Support Plan Annex 6: Findings and Arrangements to Enhance Ethnic Minority Participation...57 A. Empowering ethnic minority people in project context B. Implementation, Monitoring and Evaluation MAP...62 v

7 PAD DATA SHEET Vietnam Central Highlands Poverty Reduction Project (CHPov) (P128072) PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC EASVS Basic Information Project ID Lending Instrument EA Category Team Leaders P Project Implementation Start Date 01-Apr-2014 Expected Effectiveness Date 01-Apr-2014 Joint IFC Investment Project Financing No B - Partial Assessment Project Implementation End Date 30-Jun-2019 Expected Closing Date 31-Dec-2019 Sean Bradley and Son Thanh Vo Sector Manager Sector Director Country Director Regional Vice President Jennifer J. Sara John A. Roome Victoria Kwakwa Axel van Trotsenburg Borrower: Socialist Republic of Vietnam Responsible Agency: Ministry of Planning and Investment Contact: Do Thanh Trung Title: Head of Division, Local and Regional Economy Department Telephone No.: dotrung@mpi.gov.vn [ ] Loan [ ] Grant [ ] Other [ X ] Credit [ ] Guarantee Project Financing Data(in USD Million) Total Project Cost: Total Bank Financing: Financing Gap: 0.00 Financing Source Amount BORROWER/RECIPIENT 9.40 International Development Association (IDA) Total vi

8 ..... Expected Disbursements (in USD Million) Fiscal Year Annual Cumulati ve Proposed Development Objective(s) The proposed project development objective of the Central Highlands Poverty Reduction project is to: enhance living standards by improving livelihood opportunities in Project Communes of upland Districts of the central highlands of Vietnam. Components Component Name Cost (USD Millions) Village and Commune Infrastructure Development Sustainable Livelihoods Development Connective Infrastructure Development, Capacity Building and Communications Project Management Sector Board Social Development Institutional Data Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Co-benefits % Agriculture, fishing, and forestry General agriculture, fishing and forestry sector Health and other social services Other social services 30 Public Administration, Law, and Justice Public Administration, Law, and Justice Sub-national government administration Public administration- Other social services Total Mitigation Cobenefits % I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. Themes vii

9 ..... Theme (Maximum 5 and total % must equal 100) Major theme Theme % Rural development Rural services and infrastructure 40 Human development Other human development 30 Social dev/gender/inclusion Participation and civic engagement 30 Total 100 Policy Compliance Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ X ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 Natural Habitats OP/BP 4.04 Forests OP/BP 4.36 Pest Management OP 4.09 Physical Cultural Resources OP/BP 4.11 Indigenous Peoples OP/BP 4.10 Involuntary Resettlement OP/BP 4.12 Safety of Dams OP/BP 4.37 Projects on International Waterways OP/BP 7.50 Projects in Disputed Areas OP/BP 7.60 Legal Covenants Name Recurrent Due Date Frequency Section I of Schedule 2 X CONTINUOUS Description of Covenant The recipient shall maintain the implementation arrangements as described in Section I of Schedule 2 to the Financing Agreement. X X X X X X X X X X Bank Staff Team Composition viii

10 Name Title Specialization Unit Sean Bradley Steven M. Jaffee David Tuchschneider Senior Social Development Specialist Lead Rural Development Specialist Senior Rural Development Specialist ix Co-Task Team Leader Rural Livelihoods Peer Reviewer EASER EASER LCSAR Carolyn Turk Country Manager Peer Reviewer AFMRW Lan Thi Thu Nguyen Natural Resources Economist NRM and Forestry Link to Livelihoods EASVS Gayatri Acharya Sector Leader Peer Reviewer LCSSD Silvia Del Pilar Larreamendy Ricardo Safeguards and EMs EASVS Hisham A. Abdo Kahin Lead Counsel Legal LEGES Nina Masako Eejima Senior Counsel Legal LEGES Ngozi Blessing Obi Malife Miguel-Santiago da Silva Oliveira Program Assistant Admin. and Operational Support EASER Senior Finance Officer Disbursement CTRLN Andrew Beath Economist Impact Evaluation/Monitoring & Evaluation Christopher Paul Jackson Lead Rural Development Specialist Son Thanh Vo Cung Van Pham Senior Rural Development Specialist Sr Financial Management Specialist Co-TTL and CDD/Nat Ops Financial Management EAPCE EASVS EASVS EASFM Trang Huyen Hoang Team Assistant Team Assistant EACVF Hoai Van Nguyen Procurement Specialist Procurement EASR2 Tam Thi Do Team Assistant Team Assistant EACVF Nghi Quy Nguyen Social Development Specialist Social Safeguards and EMs EASVS Nguyen Hoai An Consultant E T Consultant EASVS Huong Thi Mai Nong Associate Counsel Legal EACVF Non Bank Staff Name Title Office Phone City Soren Theilgaard Consultant (Livelihoods) Ha Noi Aidan Gulliver Agriculture Economist (FAO) Bangkok Ida Christensen Nutrition and Food Rome

11 . Bert Maertens Taka Hagiwara Security Specialist (FAO) Dep. Country Manager (Oxfam) Livelihoods and Market Linkages Specialist (FAO) Hanoi Rome Locations Country First Administrative Division Vietnam Kon Tum Tinh Kon Tum X Vietnam Quang Ngai Tinh Quang Ngai X Vietnam Gia Lai Tinh Gia Lai X Vietnam Dac Lak Tinh Dak Lak X Vietnam Dak Nong Dak Nong X Location Planned Actual Comments Vietnam Quang Nam Tinh Quang Nam X x

12

13 I. STRATEGIC CONTEXT A. Country Context 1. Vietnam has achieved remarkable poverty reduction results over the past two decades. During the 1990 s, sustained and broad-based economic growth followed from land and market reforms as well as widespread improvements in access to basic education and health services. Reform momentum continued into the 2000 s and growth rates remained consistently high. Propoor programs became more varied to address the needs of an increasingly diversified rural population and new initiatives were introduced to address concerns about rising inequality between regions and socio-economic groups. 2. Recent evidence suggests that overall progress in further reducing poverty has slowed and there is a large and growing gap between some of the poorest households and the better off, as well as a persistent gap between different regions of the country and well as households living in urban and rural areas. While the overall rate of poverty for the country in 2012 as a whole was 9.6 percent (with an additional 6.6 percent near poor), 1 there is a marked difference between the rate of urban poverty (6 percent) and that of the rural population (27 percent). Moreover, there is a stark difference in well-being between the Kinh/Hoa majority and the country s ethnic minorities (EMs). In 2010, EMs accounted for 70 percent of individuals in the lowest income decile, up from 53 percent in 2006, even though they make up less than 15 percent of the total population. Average income among EM households is only equal to one sixth of the national average. 2 The poverty gap in the two poorest and predominantly EM regions in Vietnam stands at 15.6 percent for the Northern Mountains and 11.5 percent for the Central Highlands, compared with a national average of 5.9 percent Slower progress in the gains of ethnic minority groups is also reflected in other (nonincome or expenditure) measures of welfare. Although education levels have improved, in 2008, 45 percent of EM household heads still had not completed primary school (compared to 25 percent of Kinh/Hoa household heads) and less than 10 percent of ethnic minority heads had completed upper secondary school or tertiary education. In light of their limited education achievements, it is not surprising that most members of ethnic minority households still work primarily in agriculture and as unskilled labor. This stands in sharp contrast to the Kinh/Hoa majority who continue to move out of agriculture and into (higher paid, higher skill) industrial and service activities. According to the 2008 VHLSS, 83 percent of workers from ethnic minority households still reported agriculture as being their primary source of employment, as compared to only 44 percent of workers from Kinh/Hoa households. Nutritional outcomes also diverge. In 2010, some 37 percent of EM children less than five years old were stunted, compared with a 22 percent incidence among Kinh children. 4 1 Ministry of Labor, Invalids and Social Assistance s Decision 749/QD-LDTBXH, dated May 13, 2013 on approving of survey results for poor and near-poor households for Committee on Ethnic Minority s report to MOLISA, Vietnam Household Living Standards Survey 2010 data and calculation, Government Statistics Office. 4 According to the National Institute of Nutrition, in 2010 the Central Highlands had the highest regional incidence of underweight and stunted children under 5 years of age. The region's incidence of underweight children was 24.7 percent, compared with the national average of 17.5 percent. The region's stunting rate was 35.2 percent compared 1

14 4. In terms of landholding, ownership of assets and access to essential public goods and services such as clean water and electricity, EMs are also demonstrably lagging behind. While total landholdings of EMs are actually larger than for the majority group, the quality of their land is generally poorer and more susceptible to weather-related stresses and shocks that in turn negatively affect traditional livelihood strategies and returns. Analysis of EMs living in the extremely difficult communes shows that they are far less mobile and less integrated into labor markets than their majority neighbors, and much less likely to be producing higher value or industrial crops for which the economic return is far higher. 5 The welfare of EM households has improved more slowly than that of the general population and remains highly concentrated around the poverty line. As such, a high percentage of EM households are at greater risk of falling back into poverty as a result of financial shocks, adverse weather, family member illness, commodity price shifts or agriculture-related pests or diseases. 5. The Central Highlands (CH) of Vietnam present some specific challenges in terms of the overall welfare of the population and in particular among EM groups. The Central Highlands ranks at the top in terms of income inequality, 6 has the worst rates of stunting and wasting among children in the country, 7 the lowest rate of primary school enrollment and less than half of EM children enrolling in lower secondary school. With an estimated 73.6 percent of the CH minorities living below the Government Statistics Office-World Bank (GSO-WB) poverty line, 8 the situation for these groups in this region is considered to be the worst in the country. 9 Many EM households eke out a precarious livelihood combining various activities and, quite commonly, recurrent patterns of indebtedness. Yet, all this happens in a region that has experienced almost double the national average rate of economic growth over the past 10 years (at 12 percent), and has featured rapid growth in multiple sectors (including tourism, mining, coffee, industrial crops, and horticulture), some of which provide widespread employment opportunities. 10 The region also lies in close proximity to coastal growth poles (for instance, Da Nang for manufacturing and logistics; Nha Trang for tourism and fish processing), that represent significant opportunities. B. Sectoral and Institutional Context 6. The Government of Vietnam s (GoV) poverty reduction efforts have included targeted with the national average of 29.3 percent. Given close correlations between stunting and poverty rates in Vietnam, the proportion of under 5 children in our targeted communes who are stunted is likely to be 50 percent or more. 5 Poverty of Ethnic Minorities in Viet Nam: Situation and Challenges in Programme 135 Phase II Communes, (2011). 6 An absolute inequality measure which is the ratio of income level at the 95th percentile over the income level at the 10th percentile reveals that the dispersion of income between the top rich and the poorest is the highest in the CH. 7 According to the Vietnam Household Living Standards Survey (VHLSS) and Nutrition Surveillance data. 8 The new poverty line has been set at VND 400,000 (US$20) per person per month for rural households and VND 500,000 (US$25) per person per month for urban households. 9 As estimated by the Chronic Poverty Research Centre in Ethnic Minority Poverty in Vietnam, Working Paper No. 169 (February 2010), based on 2006 VHLSS data. 10 Several sub-sectors (including horticulture and coffee) are experiencing problems in recruiting and maintaining workers from local areas and are increasingly relying upon migrant labor from the coast and northern mountains areas. This implies a mismatch, either in skills or seasonal availability, between local EM communities and this labor demand, or there are other factors explaining the limited EM participation in this labor segment despite rising wages. 2

15 area development programs and related policies to improve the living conditions of ethnic minorities. Programs were also developed to address rising household vulnerability, such as the Hunger and Poverty Eradication Program, health insurance for the poor, and monthly social protection allowances paid to the most vulnerable under Decree 67. A new budget law went into effect in 2004 that facilitated rapid decentralization; 45 percent of public spending decisions are now made at provincial and lower levels. Equalization grants were put in place to ensure adequate funding for capital and recurrent costs in lagging provinces. For some of the poorest provinces, these grants from the central budget comprise more than 90 percent of the overall provincial budget. 7. A focal effort bridging the growth and poverty reduction agendas in the CH region fits within the context of several (past and present) programs and plans of the Government. Resolution 80, issued by the Government in late 2010 presents a common framework for sustainable poverty reduction to be coordinated by the Ministry of Labor, Invalids and Social Assistance (MOLISA). MOLISA also oversees the program to support the poorest 62 districts in Viet Nam (the 30A program). The Committee on Ethnic Minorities (CEM) has also proposed an investment program for the poorest communes in upland and ethnic minority areas, which is a follow-up of the Bank supported P-135 Phase 2 program. 11 At the same time, the Ministry of Agriculture and Rural Development (MARD) is coordinating a new national targeted program for New Rural Areas (NRA) featuring a broad set of infrastructure and access to services targets for each rural commune in the country. This multi-sectoral strategy for rural poverty reduction presents an opportunity for synergies and to leverage other complementary inputs to achieve better development outcomes Despite these and efforts, several gaps remain. One relates to the degree and quality of participation of indigenous EM groups in decisions regarding local development initiatives that directly affect them. This stems, in part, from the unique demographics of the Central Highlands in which many communes feature a mixed population of Kinh, migrant EM and indigenous EM households, with the latter frequently being underrepresented within commune leadership. A second gap is the typical lack of synergy between efforts to upgrade community infrastructure and those to strengthen livelihood opportunities. A third gap relates to the still poor connectivity between many EM communities and regional economic centers/growth poles. Physical connectivity via communal access roads and linkages between these and the broader district/provincial road network remains limited for some communities. Yet, just as important are various forms of socio-economic connectivity, such as marketplaces, product supply chains, and other linkages. Nonetheless, it is also important to note that while the Project will provide a good entry point for the Bank to engage closely with Government, communities and other stakeholders to achieve some important improvements in livelihood conditions, it will not be able to resolve some of the deeper structural, institutional and policy constraints faced by these target communities and beneficiary groups. The Project should, however, help expand 11 The CEM is a national Government agency with ministerial status that oversees policies and programs that directly target ethnic minority areas and populations. Program 135 (P-135) is Government s program of support to poor and disadvantaged communes identified based on the percentage of EM groups in each commune. The program is implemented by CEM, is in its third phase and is part of the overall National Targeted Program for Sustainable Poverty Reduction overseen by MOLISA. 12 At the same time, it presents challenges of coordination across multiple agencies at the local and provincial levels to ensure optimal use of these development resources. 3

16 understanding of the issues and binding constraints to alleviating poverty particularly among EMs and, therefore, to further influence policies and programs aimed at addressing this emerging challenge for the GoV. C. Higher Level Objectives to which the Project Contributes 9. The proposed Project would make an important contribution to the Bank s support under the Opportunity pillar of the FY12-16 CPS, by improving the provision of basic infrastructure and public services to poorer communities/districts (Outcome 3.2), and by increasing the economic opportunities available to poor EM households through various livelihood support and stabilizing interventions (Outcome 3.1). Experience gained in this Project, especially in the application of a territorial approach to link poorer communities with surrounding economic opportunities/growth poles, may then be applied by the GoV in its poverty-reduction interventions in other regions. Some of the livelihood-related interventions are likely to promote more sustainable land management and agricultural practices and thus the Project will also contribute to the attainment of objectives under the CPS Sustainability pillar. As noted above, the Project is also consistent with and contributes to the Government s own poverty reduction efforts as described in the NRA strategy, the poverty reduction framework of MOLISA, the ongoing work of CEM and the National Targeted Program for Nutrition (NTP-NU). II. PROJECT DEVELOPMENT OBJECTIVES A. Project Development Objective 10. The proposed Project development objective of the Central Highlands Poverty Reduction Project is to: enhance living standards by improving livelihood opportunities in Project Communes of upland Districts of the central highlands of Vietnam. B. Project Beneficiaries 11. The Project would target the 26 poorest districts in the provinces of Dak Lak, Dak Nong, Kon Tum, Gia Lai, Quang Nam and Quang Ngai. Current targeting strategies propose to reach approximately 120,000 households in the poorest 130 communes in this area. A majority of these beneficiaries would be members of the various ethnic minority groups from these areas. C. PDO Level Results Indicators 12. Achievement of the PDO would be measured based on the following indicators: percent change in food and non-food consumption of poor households, and proportion of poor villagers whose identified development priorities are satisfied. In addition, the Project will track the total number of direct beneficiaries as a key outcome. These key performance indicators will be measured through a robust difference-in-difference impact evaluation that will track changes in results from base-line, at the mid-term and end of project, and will compare changes between areas that receive project support and those that do not (treatment and control). All results measures will be disaggregated by gender and major ethnic groups. 4

17 III. PROJECT DESCRIPTION A. Project Components 13. The Project will have four components: village and commune infrastructure development; sustainable livelihoods development; connective infrastructure development, capacity building and communications; and project management. A summary description of these components is presented below. A more detailed description of these components and subcomponents is found in Annex COMPONENT 1: VILLAGE AND COMMUNE INFRASTRUCTURE DEVELOPMENT (consisting of two sub-components and estimated to cost US$ 54.7 million, of which US$ 52.4 million would be financed by IDA 13 ). Sub-component 1.1 would support the design, construction or repair of small-scale village and commune-level infrastructure (such as simple access roads, terracing, irrigation/water supply, basic social infrastructure, etc.) through the provision of block grants. Building upon recently completed NRA communal plans, subprojects would be prioritized through a participatory planning process and managed by commune and village authorities with the help of community facilitators. Depending on the size and complexity of the identified sub-project investments, community groups would take direct responsibility for managing construction of infrastructure (for sub-projects valued at less than VND 300 million, or US$ 15,000). This participatory process is modeled on community-driven development (CDD) approaches used effectively throughout the world and successfully adapted under local projects such as the Northern Mountains Poverty Reduction Project (1 and 2) and the Program 135, both of which have received support from the World Bank. Sub-component 1.2 would finance sub-projects for the repair, operation and maintenance (O&M) of communal infrastructure. Such sub-projects could include routine maintenance and small repair activities for both existing and new investments (which have been financed by the Project). The O&M would contribute to the sustainable use of invested infrastructure and ensure lasting impacts on improving access and connectivity in the Project areas. 15. COMPONENT 2: SUSTAINABLE LIVELIHOODS DEVELOPMENT (consisting of two subcomponents and estimated to cost US$ 35.2 million, all of which would be financed by IDA). Component 2 would support EMs and other households in the targeted areas to enhance their food security and nutrition, their productive capacities for more diversified income sources, and their linkages to selected agricultural markets. Sub-component 2.1 ( Self-reliance and Income Generation ) would target chronically poor and at risk households and include activities to: (a) strengthen household and community food security and nutrition (via improved practices for staple food crops and small livestock-raising, soil management on sloped land, home garden development, nutrition awareness etc.); and (b) sustain/diversify income sources by enhancing the productive capacities of beneficiaries (small-scale cash crop production, forestry management and development, livestock development, etc.). Sub-component 2.2 ( Market Linkage Initiatives ) would aim to develop productive partnerships (PP) between farmer groups and agribusinesses (ABs) operating in the targeted areas for proven commercially viable agriculture/agro-forestry endeavors. The Department of Agriculture and Rural Development 13 Estimates of total costs and financing per component include a proportional amount of unallocated funds under the project. 5

18 (DARD), the NTP-NU and the Women s Union (WU) would play key roles in advising on and supporting implementation of sub-component 2.1, and DARD, the technical assistance team and the private and commercial sector would be engaged as appropriate under sub-component Support and assistance under component 2 would be provided through block grants to livelihoods enhancement groups (LEGs) that would be registered legal entities and would consist of member households, depending on the nature of the livelihood activity. LEGs would prepare specific and detailed livelihoods proposals that would be assessed by district level PMU and other staff (relevant technical sections such as agriculture, forestry, trade, finance, etc.), with assistance from the Project s technical assistance team (discussed below). Financing and support under component 2 would vary by the type of livelihood activity. 17. COMPONENT 3: CONNECTIVE INFRASTRUCTURE DEVELOPMENT, CAPACITY BUILDING AND COMMUNICATIONS (consisting of three sub-components and estimated to cost US$ 53.0 million, of which US$ 51.4 million is financed by IDA). Subcomponent 3.1 would finance selective intra- and inter-commune level infrastructure that would strengthen physical connectivity within and between local economic zones (such as roads, bridges, irrigation systems, etc.). Due to the likely size and costs of these investments, districtlevel entities would manage their implementation. However, their identification and prioritization would happen as a result of the commune-level analysis and sub-project planning process. The component would prioritize investments that enhance synergies with Component 1 and/or 2 investments. While initially emphasizing productive connectivity, investments in other infrastructure (or services) deemed to be critical to expanding the networks or linkages EMs may have with areas outside their communes (such as secondary school residential facilities) could be considered. The Project would finance civil works, consultant services and operating costs associated with sub-component 3.1 activities. 18. Sub-component 3.2 would support training and capacity building at all project levels for all aspects of project management (planning, financial management, procurement, monitoring and evaluation, etc.). The sub-component would include the financing of a technical assistance team (TAT), consisting of international and national specialists in project management, livelihoods and agricultural market linkages, capacity building, M&E, etc. A summary description of the TAT is presented in Annex 3. Sub-component 3.3 would support communications activities to ensure beneficiaries, project staff, key stakeholders and the public at large are aware of the Project objectives and operational principles. These activities would pay special attention to communication and outreach activities to EM beneficiaries where it will be important to adapt the form and language of messages to local contexts and abilities. An estimated one-third of the total budget under component 3 would be dedicated to subcomponents 3.2 and 3.3. The resources and activities for these two sub-components would be managed by the provincial and district management units, except for the TAT, which would be managed by the Central Project Coordination Office (CPO). The Project would finance consultant services, operating costs and training under these two sub-components. 19. COMPONENT 4: PROJECT MANAGEMENT (estimated US$ 16.5 million, of which US$ 11.0 million would be financed by IDA). Sub-component 4.1, project coordination and implementation would include the set-up and operation of coordination structures at national level and implementation units/teams at provincial, district and commune levels, and operational 6

19 costs associated with project management. At commune level existing structures would be strengthened to support project implementation. Sub-component 4.2, monitoring and evaluation, would include the design and implementation of a simple management information system (MIS) for project monitoring, the design and contracting of a rigorous impact evaluation, the recruitment of key personnel at central, provincial and district level to support M&E activities, and would support various knowledge exchange and learning activities between participating provinces, with other similar projects in Vietnam and within the region. This would also include the set-up and maintenance of a Project website to disseminate key project documents and reports, and to provide regular updates on project activities and progress. Project financing would cover consultant services, goods, training and operating costs for this component. B. Project Financing 20. Lending Instrument. The proposed Project would be supported by the World Bank through an Investment Project Financing in the form of an IDA Credit on Blend terms (maturity of 25 years, including a five year grace period) in the amount of SDR 97.6 million, approximately US$ million equivalent. 21. Project Costs and Financing. The table below presents the total costs and indicated IDA financing for the CHPov. In addition to the proposed IDA credit, the Government would provide an estimated US$ 9.4 million in counterpart financing for the Project. Table 1.1: Total Project Costs and Financing by Component US$ (million) Project Components Project cost IDA Financing 1. Village and Commune Infrastructure Dev. 2. Sustainable Livelihoods Development 3. Connective Infrastructure, Capacity Building and Communications 4. Project Management, Monitoring and Evaluation Total Baseline Costs Physical contingencies Price contingencies ======== ======= Total Project Costs C. Lessons Learned and Reflected in the Project Design 22. Over the past three years the Bank has carried out a number of analytical activities relating to poverty, linkages and livelihoods that has informed the design of the CHPov. 14 Specifically, the CHPov task team directly oversaw three qualitative studies in preparing for the lending operation: a local level institutional analysis (assessing the patterns of leadership, participation and decision making at local levels), a labor market study for Central Highlands with specific attention to the market participation of EMs, and a livelihoods strategies and 14 This includes the World Bank/VASS Poverty Assessment, the Rural Connectivity Study and a feasibility study for sustainable cacao development. 7

20 options paper with particular reference to poor CH communities. 15 A summary of the most relevant findings of each is presented immediately below. (a) Institutional analysis highlighted that cultural biases of local (Kinh) leadership, skill gaps of EM leaders and learned passive behaviors of EM groups toward public programs represent risks to effective engagement and efforts to strengthen ownership of and commitment to local development processes. Special measures will need to be taken to ensure the participation of EM and the poor in (project) planning processes, with considerable attention needed to matters of communication and consultation. Involving local youth could be an effective way to close language and communication gaps, and involving WU representatives for better EM s participation. (b) Labor Market study showed the limits of off-farm strategies to EM livelihoods and therefore the need to emphasize measures to improve EM agricultural practices and extend skills. The study also showed that while labor shortages in several sectors (and especially during coffee harvesting) persist, there is a mismatch in vocational training supply and the demand for labor, limited job placement services, and a strong preference of local EM youth to find work in/near their residential localities. This suggests that the Project should consider how to enhance opportunities for seasonal/other employment in public works programs and through information exchange. (c) Livelihoods study showed the diverse nature of the strategies employed by poor EM households (combining crop and livestock production, use of nearby forest resources, off-farm labor, various forms of credit, transfers, etc.). The study also highlighted the relatively large proportion of staple foods that are purchased rather than selfproduced, therefore making food security a cash-liquidity issue. The study recommends an integrated approach to investments to optimize potential synergies, allowing the demand-driven aspects of the Project to respond to the diversity of livelihoods strategies and enhancing advisory services to increase production and market interface for those poor groups already active with perennial crops (coffee, pepper, fruits, etc.). 23. The Project design also draws on several lessons learned from global, regional and national-level programs of similar design and strategies. These include: (a) Regional CDD programs have been shown to be effective in reducing poverty especially when financial support is provided to communities over the course of several cycles, and the greatest level of benefits (in terms of household consumption increases) are shown to accrue to the poorest households. (b) Nationally, community groups and villages have been shown to be able to directly manage sub-project procurement and implementation, however, capacity building at all levels to ensure quality of construction is critical. 15 See summary report: Pro-poor Rural Development Initiatives for Central Highlands of Vietnam by Steven Jaffee and Son Thanh Vo; World Bank,

21 (c) Experiences with productive alliances (in Latin America) point to the importance of (i) working with existing/experienced producers, (ii) technical support to productive groups to ensure technical viability of activities, and (iii) independence of financial feasibility assessments of potential alliances. (d) Locally, under the Agriculture Competitiveness Project (ACP), where agroenterprises lack prior experience working with targeted producer groups, development of functional 'productive alliances' takes time and effective intermediation to help build trust and to work out technical difficulties. Productive alliances have developed best in circumstances where the company is willing to provide technical advisory services to farmer groups. (e) Political engagement with and commitment of the Vice Chairperson of the Provincial People s Committee (responsible for poverty reduction) is critical to ensure effective project start up, and that key partners such as DARD, DOLISA, CEM and others will support implementation. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements Institutional Arrangements 24. The Project s institutional arrangements have been designed in line with the following principles: (a) use of existing structures and procedures where possible (be they existing GoV or other structures already established by donor projects in the same locations) in order to minimize the introduction of new project-specific administrative requirements; (b) strengthen local accountability and decentralized decision-making processes by strengthening local-level governance structures (a key element of CDD principles); and (c) subsidiarity, by delegating decision-making to the lowest appropriate level of administrative unit. 25. Project design has sought to maximize the use of existing structures. However, in line with GoV norms, effective implementation of the Project s innovative features requires augmented capabilities at various levels of the Project administrative structure to ensure (cost-) effective delivery. In the majority of cases, this TA and additional structures are expected to be temporary as the existing administrative structures gradually take on the relevant responsibilities. The Project will involve a number of actions to further streamline these project management arrangements, including: (i) using existing staff of the Department of Planning and Investment (DPI) or other departments to fill a number of management unit positions, (ii) training these existing staff in specialized Bank requirements (such as safeguards) rather than hiring consultants to undertake this work, and (iii) where existing arrangements and workloads allow, consolidating existing Project Management Units (PMUs) or key functions (such as financial 9

22 management, procurement or supervision of infrastructure investments) particularly where the Project requirements are similar. 26. The Ministry of Planning and Investment (MPI) is the Project owner and implementing agency on behalf of the Government. The Department of Local and Territorial Economies (DTE) of MPI would coordinate the overall Project and ensure that provinces implement the Project in accordance with agreements reached between the World Bank and the Government. A Central Project Coordination Office (CPO) will be set up to monitor overall implementation, coordinate among the participating provinces and other key partners (such as MARD, the Nutrition Institute of Vietnam, CEM, etc.), and report on technical and financial progress of the Project to both Government authorities and the World Bank. The CPO will focus on coordination and monitoring, while management units at provincial level will ensure appropriate technical support is provided to districts (in the areas of capacity building, safeguards, financial management and procurement of works activities). Districts and communes will have the main responsibility for day-to-day implementation of project activities. The CPO is overseen by the Deputy Director of the Department, and would be staffed by a combination of appointed civil servants from MPI and consultants recruited especially for the Project. 27. At provincial level, Provincial Project Management Units (PPMUs) would be set up or combined with existing management units within the DPI to oversee the implementation of the Project. At district level, the District Project Management Units (DPMUs), established within the Division of Finance and Planning, would be responsible for the day-to-day execution of the Project in their districts and target communes. Staff of both PPMUs and DPMUs will be a combination of appointed staff from DPI, seconded staff from other relevant departments (such as DARD) and project consultants. 16 Given variations in experience and existing implementation units in a number of the target provinces and districts, the Bank and Government have agreed to allow certain flexibility in how the staffing is arranged in each locale based on existing structures and the feasibility of combining management unit activities. It was also agreed that the appointment or hiring of project staff would be the responsibility of the relevant level to ensure effective human resource management. 28. At commune level, the existing Commune Development Board (CDB) would be responsible for organizing village groups and facilitating participation in the prioritization process, consolidating and endorsing commune plans, ensuring technical input for sub-project design and implementation, and monitoring the work of contractors and village groups for investments under their control. The existing staff of the CDB (generally Chairman, Vice-chair, accountant, cadastral/infrastructure officer and agriculture officer) would be strengthened under the Project through capacity building and support on technical and project management issues. Each commune would also have a Supervisory Board (CSB), consisting of representatives of the Commune People s Committee, mass organizations (i.e., women s union, farmers union, etc.), village representatives and possibly respected local civil servants (such as the teachers), which oversees the work of the CDB and community groups who are financed under the Project. Different structures would be established at village level either project implementation groups 16 Appointed or seconded Government staff would receive an ODA Allowance paid from Government counterpart funds. 10

23 or LEGs, depending on the types of activities being supported-- and would be provided training and support to fulfill their respective project implementation responsibilities. 29. These management units referred to above are overseen by the relevant People s Committees at provincial, district and commune levels. These Committees are responsible for ensuring sufficient and timely counterpart funding, ensuring appropriate coordination across departments and integration with local development plans, and resolving technical, administrative or political constraints that may arise. Each participating district and provincial People s Committee would issue a formal decree to establish the relevant PMUs and to appoint the Director, vice-director, and key staff of the management unit. Implementation Arrangements 30. As a project that builds on a foundation of community-driven development, a process of bottom-up planning will be used to identify component 1 (commune and village level infrastructure) and component 2.1 (livelihoods) investments, and to recommend those financed under component 3.1 (connective infrastructure) investments. Component 2.2 investments that would promote livelihoods activities with market linkages will be prepared in a different manner discussed below. Sub-project investments under components 1 and 2.1 must be identified, prepared and proposed annually at village level. The process for developing and approval of these sub-project plans will involve four stages: participatory needs assessment at village level, sub-project concept identification and recommendation by villages, technical review and prioritization by communes, and district endorsement of commune plans. Once annual plans are approved by the district, communes and villages are notified and relevant technical staff would assist the CDBs or village groups to prepare detailed sub-project plans that would then be the basis for sub-project agreements, release of funds and implementation. 31. A slightly different process would apply for component 2.2, which would necessarily be more selective. Investment activities would be identified through a process where demand for support by villagers is matched by an analysis of natural resource conditions and viable commercial interest and market outlets. Business development officers (BDOs), based in each DPMU, will be responsible to appraise the sub-project concepts. The Project would finance preparation of businesses plans, organization of farmers into LEGs, development of LEG network to aggregate production for supply to agro-businesses in quantity, and technical and financial support to LEGs to improve their production capacity and quality. ABs would be identified through a competitive process that has been used under the Second Northern Mountains Poverty Reduction Project (NMPRP-2) and the ACP. The Technical Assistance Team (discussed below) would support districts and provinces in this area. District PMUs would have responsibility for prioritizing component 3.1 connective investments based on priority recommendations that emerge from the commune plans and through their own analysis of what investments could optimize connectivity in their project area. 32. These village, commune and district plans would be consolidated and submitted to the provincial and central PMUs as part of the Project management process. However, formal authorization to undertake work at a given level (village, commune or district) is only provided by the next immediate level up. Annual district plans would also be integrated into the Socio- Economic Development Plans of the district. Provincial PMUs would prepare annual capacity 11

24 building, communications, monitoring and reporting plans based on the consolidated district plans. Annually, PPMUs would also be responsible for preparing the consolidated resettlement actions plans based on a survey of the proposed sub-project investments. The CPO and the World Bank would review and approve annual Provincial Resettlement plans prior to sub-project implementation. The Project Implementation Manual (PIM) describes in greater detail and provides relevant criteria, guidelines and time-frames for the implementation of the processes summarized above. 33. Financial management, disbursements and procurement. MPI will delegate responsibilities for FM and procurement to the CPO at central level, and the PPCs delegate responsibility to the PPMUs at provincial level, and DPMUs at district levels. At commune level, the existing commune development boards would be responsible for all project management and fiduciary responsibilities. Seconded Government staff and project consultants hired at national, provincial and district level will be charged with day-to-day management of the relevant actions, systems and reporting requirements of the Project s fiduciary arrangements. The CPO and each PPMU would open and maintain a separate designated account for the purposes of the Project. Specific regulations, procedures and requirements to operationalize the fiduciary systems are described in detail in the PIM. Existing staff at commune level would be trained in the basic requirements of systems, particularly relating to community procurement and financial management, which are outlined in separate sub-manuals. Additional staff at district level would be specifically charged in assisting communes with bookkeeping and record keeping (including those relating to procurement) responsibilities and community facilitators would have basic training in these same areas so that they could assist communes and villages in their respective responsibilities. Existing, management-level Government staff at national, provincial and district levels would oversee and ensure the accuracy of the work of these project consultants. Internal audits would be conducted annually by the Inspectorate of MPI at central level and of DPI at local level, and reports submitted to MPI and the World Bank within 3 months of the completion of the internal audit. The Project would also be audited annually by an independent agency acceptable to the Bank. 34. Block grants. Financing for components 1 and 2 of the Project will be disbursed (by the DPMU) to the Commune Development Boards on a lump-sum basis upon the contract award for the sub-project, and will be categorized as sub-grants. The World Bank will account for the eligible expenditures (i.e. record that the eligible expenditures are documented) when the amounts are paid to the CDBs by the DPMU, as there are mechanism and procedures in place, overseen by the DPMU, PPMU and ultimately the CPO (with World Bank oversight), to ensure that grants are being implemented as planned and are being used for the purposes intended. All activities to be financed by the block grants will need to be completed by the Closing Date of the Project, and any funds remaining to be used by the CDB by the Closing Date would need to be refunded. 35. Safeguards. As a CDD project where, for the most part, relevant investments are demand driven and not known at the time of appraisal, the Project will apply two framework documents to ensure that World Bank and GoV safeguard policies and procedures are applied. These instruments are the Environmental and Social Management Framework (ESMF) and the Resettlement Policy Framework (RPF). MPI has experience with Bank-financed projects and is familiar with the World Bank s social and environmental safeguard policies. At central level, 12