Supervision report 2017 Main report and appendices Mission Dates: 1-10 March 2017 Document Date: 10-Mar 2017 Project No. 1100001663 Report No: 4404 - VN Asia and the Pacific Division Programme Management Department
Contents Abbreviations and acronyms ii A. Introduction 1 B. Overall assessment of CPRP implementation 1 C. Outputs and outcomes 2 D. CPRP implementation progress 7 E. Fiduciary aspects 9 F. Sustainability 10 G. Other (impact) 11 H. Conclusion 12 Appendices Appendix 1: Summary of project status and ratings 13 Appendix 2: Updated logical framework: Progress against objectives, outcomes and outputs 15 Appendix 3: Physical progress measured against AWP&B, including RIMS indicators 21 Appendix 4: Progress Against Previous Mission Recommendations 33 Appendix 5: Financial: Actual financial performance by financier; by component and disbursements by category 42 Appendix 6: Compliance with legal covenants: Status of implementation 44 Appendix 7: Knowledge management: Learning and Innovation 47 i
Abbreviations and acronyms AWPB CC CDB CPC CPRP CPMB CIG DARD DONRE DOTI DPC DPI DPPR DPSG FU GACA IFAD KM M&E MOF MPI NTP-NRD PCO PIM PPC P-PC PSC RIMS MOSEDP SIP SCG TOT USD VCAP VNĐ WU WDSF Annual work plan and budget Climate change Community Development Board Commune People s Committee The Commodity-oriented Poverty Reduction Programme Commune Programme Management Board Community interest groups Department of Agriculture and Rural Development Department of Natural Resource and Environment Department of Trade and Industry District People s Committee Department of Planning and Investment Decentralized Programme for Poverty Reduction District Programme Support Group Farmer s Union Government Aid Coordination Agencies International Fund for Agriculture Development Knowledge Management Monitoring and Evaluation Ministry of Finance Ministry of Planning and Investment National Target Programme on New Rural Development Programme Coordination Office Programme Implementation Manual Provincial People s Committee Public Private Collaboration Programme Steering Committee Results and Impact Management System Market-Orientated Socio-Economic Development Plan Strategic Investment Plan Savings and Credit Group Training of trainers US Dollar Value Chain Action Plan Vietnam dong Women s Union Women s Development Support Fund ii
A. Introduction 1 1. The Commodity-oriented Poverty Reduction Programme (CPRP) in Ha Giang province of Northern Vietnam came into force on 30 March 2015 and is due to be completed on 31 March 2020 2. The Project Overall Goal is: Sustainably improved income and reduced vulnerability of rural poor households in targeted Ha Giang communes. The Project Development Objective is: Targeted private agricultural enterprises, cooperative groups and farm households collaborating profitable and sustainably in a climate adapted, market oriented new provincial rural economy. The total programme cost is USD32.7 million, of which the IFAD loan is USD19 million, Government of Vietnam contribution USD9.5 million and beneficiary contribution USD4.2 million. Project activities cover 30 communes in 5 districts. 2. The second IFAD Supervision Mission of CPRP was undertaken in partnership with the Provincial Project Coordination Office (PCO) during 1-10 March 2017. The whole duration of the mission was spent at the field, at provincial, district and commune levels. A draft Mission Report was consolidated 9 January, and a formal wrap up meeting was held 10 January. The mission objectives were to: (i) review the project progress in the project implementation as per project design document and identify issues and solutions for improvement of activities; (ii) review follow up actions after the 2016 supervision; (iii) provide technical support to the PCO and implementing partners to the extent possible and as required; and (iv) agree with the provincial authorities and the PCO on prioritized actions to ensure project's right direction prior to its mid-term review foreseen to take place Q3/2018. 3. At provincial level, the Supervision Mission met with staff of PCO and partner agencies including Department of Agriculture and Rural Development (DARD), Department of Planning and Investment (DPI), Women s Union (WU) and Farmers Union (FU). In addition, the mission visited eight communes in four districts of Vi Xuyen, Hoang Su Phi, Quang Binh and Bac Quang. During these visits, the mission met with District Peoples Committees, District Programme Support Groups, Commune Programme Management Boards, local DARD, FU and WU representatives, value chain lead enterprises, farmers Common Interest Groups (CIG), and Savings and Credit Groups (SCG). 4. The Supervision Mission would like to extend sincere thanks to the Ha Giang Provincial People s Committee (PPC), PCO, representatives of line agencies, local governments at the district and commune levels, rural households and private enterprises for their kind support and cooperation. B. Overall assessment of CPRP implementation 5. The likelihood of achieving development objectives of the CPRP in Ha Giang is ranked as moderately satisfactory. This rating is influenced by the fact that the project, despite adequate capacity and commitment, did not have sufficient funds to implement its work plan for 2016. This in turn is due to the budget caps issued by the Central Government. The annual implementation progress is also assessed as moderately satisfactory. The mission appreciates efforts made by the provincial agencies and the project management units of the CPRP for the past two years. Progress is noted in the following areas: (i) Market-oriented and CC adapted planning mechanisms established for agricultural commodity development by the CPRP, including VCAP and MoSEDP processes at commune level and SIP at provincial level. These processes are being up-scaled for province wide application; (ii) Community investment. Total 53 civil works designed and approved and 10 completed. Following documented best practice models, farmer group establishment and farmer trainings, 77 CIG co-investmnets started implementing; (iii) Private Sector Engagement. The P-PC Fund has been established and through co-financing it has initially engaged 5 enterprises for 1 Mission composition: The mission comprised: Mr. Henning Pedersen, IFAD Country Director and Team Leader; Mr. Nguyen Thanh Tung, IFAD CPO, Microfinance, Institutions and Project Management specialist; Mr. Sauli Hurri, Private Sector Engagement and Value Chain Specialist; Mr. Nguyen Ngoc Quang, SEDP, Targeting, Monitoring and Evaluation Specialist; Ms. Nguyen Thu Hoai, IFAD Financial Specialist; Mr. Phan Duy Toan, Procurement and Civil Works Specialist; Ms. Doan Lien, Interpreter. In addition, Ms. Nguyen Yen Hai, MPI Deputy Director General, and the incoming IFAD Vietnam Country Director Mr. Thomas Rath joined the mission during its final stages. 2 Important dates include:. Project effectiveness 30 March 2015 Project Completion 31 March 2020 Loan closing date 30 September 2020 1
development of inclusive value chains in rural areas; (iv) Rural Finance. WDSF established at the province capital with the district and commune networks; mobilized 2,069 villagers (70% poor HHs) to join 167 Savings and Credit Groups; (v) NRD-CPRP Coordination. For the financing of commune level investments a coordination mechanism has been established between CPRP and NTP-NRD, effectively mobilizing government contribution. 6. As at 28 February 2017, the total disbursement stood at 14% or SDR 3.4 million (equivalent to approximately USD4.6 million) against a total approved project cost of SDR 23.5 million (US$32.7 million). This included a disbursement of 14.5% of the approved loan amount of SDR 13.6 million (US$19.0) million by IFAD. To improve the moderately unsatisfactory CPRP disbursement status by MTR 2018, it is of outmost importance that the project receives sufficient fund authorization to implement the approved 2017 AWPB. This will enable a disbursement rate of about 38% by end of 2017 as projected. 7. In addition to the detailed agreed actions by this Aide Memoire, the mission recommends that the following main issues receive specific attention: (i) Budget allocation. For AWPB 2016 about half of the ODA budget was authorized as late as 30 December 2016. This budget condition seriously impeded project implementation and timely completion of activities; (ii) Simplification of procedures. For the implementation of most project instruments including MoSEDP, CIF, VCAP, CIG and PP-C the formal requirements remain complicated and require further simplification, the details of which are outlined in the respective sections below; (iii) Commercialization of Value Chains. Many CPRP communes are remote and face difficulties in identification of lead enterprises for value chain development. Districts are yet to be fully engaged to facilitate market-oriented planning and investments; (iv) Rural finance. The subsidiary agreement between MOF and PPC for WDSF support was delayed, causing liquidity shortage for the microfinance operations. Furthermore, professional fulltime managers for WDSF are yet to be recruited. Agreed action Responsibility Agreed date Budget allocation. To fully implement the approved AWPB 2017, PPC and DPCs to advance financing for the project activities as required, to PPC, DPCs, PCO, IFAD ICO, Q2/2017 onwards be reimbursed by IFAD funds. Furthermore, consultations to be continued with MOF/MPI to timely obtain adequate budget authorizations. MPI/MOF Simplification of procedures. Streamline guidelines of the various PCO Q2/2017 project instruments with the aim of simplicity, relevance and practical application. See details in below sections for MoSEDP, VCAP, CIF, CIG, P-PC. Commercialization of Value Chains. Increase efforts to engage enterprises for value chain development especially in the remote areas. To this effect, engage district units as facilitators and recruit qualified technical assistance for specific commodities. PCO 2017 Rural Finance. Urgently finalize all procedures for transfer of funds to WDSF. Recruit professional fulltime WDSF managers. PCO, PPC, WDSF Q1-Q2/2017 C. Outputs and outcomes Component 1: Capacity building for market-led development Overall assessment of the component is rated moderately satisfactory Sub-Component 1.1: Commodity-based investment planning 8. The subcomponent is rated moderately satisfactory. Target is to develop, approve and implement at least (i) eight provincial commodity-specific Strategic Investment Plans and (ii) thirty commune level Value Chain Action Plans (VCAP). The purpose of these is to prepare for an informed framework for commercial and climate change adapted agricultural investments of the CPRP. 9. Progress so far includes: (i) DARD Board is established to develop SIPs and to support communes with VCAP development; (ii) Six SIPs were drafted by PCO and DARD for commodities Tea, Orange, Timber, Cattle/Buffalo, Honey bee and Cardamom, each proposing some key activities for upgrading of the commodity chains. Out of these, the three first SIPs are approved for implementation; (iii) A VCAP guideline was developed by DARD. To disseminate the guide, 9 training 2
courses were organized for 313 staff; and (iv) District and commune units completed 30 VCAPs for implementation, and these were used as inputs to commune level Mo-SEDP and AWPB development. 10. For basic technical requirements the SIP and VCAP quality is sufficient. Especially, the financial analysis of farmer households is done satisfactorily, and the province/district/commune staff and stakeholders have been adequately trained in market-orientation. However some issues remain for practical functionality of these planning tools: (i) The development of SIPs is late which has caused some delays in overall project progress especially regarding P-PC investments; (ii) The SIPs have yet to identify partner enterprises for new value chain development in less commercial districts; (iii) The SIPs have yet to include strategies for upgraded final products and improved market access in existing commercial value chains; (iv) The SIPs have not yet been sufficiently operationalized at the district level; (v) The VCAPs have not been able to identify partner enterprises in most communes; (vi) The VCAP administrative approval process at the district level is lengthy and complicated. Agreed action Responsibility Agreed date Regarding SIP: (i) Operationalize the existing SIPs and initiate drafting of two additional SIPs within Q3/2017; (ii) Each SIP to identify potential VC partner enterprises including in districts with difficult market access; (iii) For existing commercial value chains especially tea, SIP upgraded to propose strategy for improved final products and markets, (iv) Operationalize the SIP documents through district commodity workshops. PCO, DARD, DPCs, PPC Q3/2017 and onwards Regarding VCAP: (i) As priority, the VCAPs to identify potential partner enterprises for value chain development where possible, (ii) VCAPs to be approved at the commune level as technical appendix to the MoSEDP document and need no separate approval process. The districts are to receive some budget allocation (i) for operationalization of the SIP documents through commodity workshops, and (ii) for TA and coordination of communes VCAP development in strategic commodities. Sub-Component 1.2: Commune MoSEDP Communes, Districts, PCO PCO, DPCs Q1/2017 onwards Q1/2017 and onwards The subcomponent is rated satisfactory. The progress to date includes: (i) Climate-informed MoSEDP guideline developed and distributed to related agencies and communes for implementation; (ii) Five district MoSEDP lessons learnt meetings organized with participation of 162 staff from all levels, including 41 women; (iii) Organization of 27 training courses on MoSEDP implementation for 921 planning staff including 244 women; (iv) Development of 30 VCAPS as key inputs for MoSEDP; and (v) Climate-informed MoSEDP deployed in 106 communes including 30 project communes, with participation of 27,224 villagers including 16,931 poor and near poor and 11,236 women. In 2017, DPI will roll out the climate-informed MoSEDP to all 193 communes/wards of the province and an action plan has been developed to that effect. 11. The remaining issues for this sub-component are: (i) Some MOP-SEDP tools including commodity analysis and CCA risk assessment are new and difficult for commune staff to comprehend; (ii) The quality of MoSEDP plans varies from commune to commune, and the MoSEDP guideline is still complicated requiring simplification prior to PPC approval for province-wide application; (iii) Apart from the project and the NTP-NRD budgets, additional financing resources at commune level are yet to be comprehensively integrated into MoSEDP; (iv) Action plan for province wide MoSEDP upscaling is yet to be approved by PPC. The mission agreed on following actions: Agreed action Responsibility Agreed date DPI and DPCs to provide further capacity building for project and nonproject communes in MoSEDP rollout and PCO to organize MoSEDP PCO, DPI, DPCs, communes experience exchanges between non-project and project communes. Assess the MoSEDP mechanism. Subsequently, revise the MoSEDP PCO, DPI, PPC May/2017 manual and its various tools, with the aim of simplicity, relevance and practical application. PPC to approve MoSEDP action plan and respective budget for implementation in non-project communes. 3
Sub-Component 1.3: Climate adaptation technologies The subcomponent is rated satisfactory. This sub-component focuses on identification and assessment of climate change adaptation models for replication in the project areas. Led by PCO, in cooperation with key partners including FU, DARD, and district agencies, a series of consultation meetings and field visits have been made to identify the existing agricultural models which are cost efficient and adaptive to climate change. As a result, 60 agricultural models were identified. Five meetings with participation of 215 staff from province, district and commune levels were organised to analyse the identified agricultural models. Thirty models were shortlisted and introduced to the CIG Fund for replication by farmer groups. To ensure wide replication of the selected models, 30 lead farmers were selected and trained. Subsequently these lead farmers together with project staff organised 26 CIG training courses on model application with 1,455 participants. To date, 15 models have been replicated in the field through the CIG fund. 12. The following issues were noted: (i) Identification of existing CCA and poverty reduction practices has been limited to responsibility of provincial DARD and FU, and has not yet involved other agencies such as District FU, District DARD, DOST, DOIT, DONRE, and private sector (enterprises, households); (ii) Agro-forestry and non-agricultural models are not yet systematically analysed, and an action plan to roll out these models is yet to be developed; (iii) The 30 selected models are yet to be comprehensively documented and used as a training material for replication. Agreed action Responsibility Agreed date Further identify and select appropriate CCA models for replication. Involve further potential stakeholders in this process. PCO, DARD, FU, DOST, DOIT, DONRE 2017 Assess the agro-forestry and non-agricultural models proposed by technical agencies and private sector. Develop action plan for roll-out of these models. Properly document the selected models, to be used as training material for replication. Refer to IFAD provided examples. Component 2: Building pro-poor commodity investment Overall assessment of the component is rated moderately satisfactory PCO and relevant agencies 2017 PCO April 2017 Sub-Component 2.1: CIF and CIG co-financing. The subcomponent is rated moderately satisfactory. The sub-component consists of two physical investment instruments, Commune Investment Fund (CIF) and farmers' Common Interest Group (CIG) co-financing. 13. The Community Infrastructure Fund. The main results include: (i) A total of 53 infrastructure schemes including 51 concrete roads of total 70 km length and 2 bridges were selected for implementation under the AWPB 2016 based on commune VCAP and the MoSEDP process. The total investment cost of 53 CIF works is VND79 billion including NRD Program financing of VND21.4 billion and community contribution of VND5.4 billion; (ii) By February 2017, 10 schemes were completed and put in use. The remaining 43 schemes are under construction; (iii) Community supervision boards were established for supervision of CIF schemes; (iv) Fifteen vocational training classes on construction works for 472 peoples were organized in 2016. After the training, over 50% of trainees participated in construction of CIF schemes for income generation; (v) Force Account method was applied for 26 infrastructure schemes. 14. The main constraints and challenges for CIF implementation are: (i) Implementation progress of CIF works is still slow. By February 2017, 43 schemes of the AWPB 2016 are still under construction; (ii) Commune staff has limited experience for carrying out competitive procurement procedures. Retendering had to be done for several works; (iii) The force account method was applied for limited number of IFAD-financed CIF schemes since many contracts exceeded the force account threshold of USD30,000; (iv) Two different investment procedures are applied for CIF works, one for NRD Program financing and the other for IFAD financing. Some roads were constructed with two separate contracts, one for NRD and one for IFAD financing. Under the NRD, a special mechanism for infrastructure investment in Ha Giang (Decision 1670/QĐ-UBND) is applied for small infrastructure such as village roads and irrigation canals. Preparation of cost estimation of works is based on standard designs, and thus technical-economic report is not required. Community groups are directly contracted for implementation of construction works. This special mechanism saves costs and time, 4
and the mission strongly supports that IFAD and NRD procurement methods for small works should be unified to the extent possible. 15. The CIG co-financing instrument is to support commodity upgrading of at least 300 CIGs with total amount of 1.5 million USD. The CIG fund has progressed significantly since the last supervision mission in 2016. Results to date include: (i) CIG guideline has been finalized, broadly disseminated to government agencies and local communities; (ii) Thirty agricultural investment models were selected and used as basis for replication; (iii) Capacity building on CIG development and management was carried out for all related project staff, implementing partners, and lead farmers; (iv) Business/production planning training was carried out for 1,454 villagers; (v) Total 282 CIGs were established with 3,607 households (1,859 poor and near poor, 759 women); (vi) CIG Fund boards were established in all five project districts, and to date 77 CIGs (896 HHs, 619 poor and near poor) have received CIG co-financing from the project with total amount of USD190,000. 16. The following issues were noted: (i) In remote communes, the farmer groups still have insufficient capacity to develop CIG investment proposals, due to complexity of the template and limited planning experience. Furthermore, the phased disbursement of grant amount (50-50) has proven cumbersome for a number of groups; (ii) Joint procurement by CIG members as wells as revolving fund establishment are yet to be introduced for most groups, which limits sustainable collaboration; (iii) One third of the proposed CIG co-investments are for buffalo and cow breeding, despite high initial investment cost and relatively low cost-efficiency; (iv) Coordination between the CIG Fund and other instruments, especially PP-C, is still limited which impedes market access improvement. Agreed actions for Commune Investment Funds Responsibility Agreed date Increase the threshold for applying force account method for CIF work CPCs, DPCs, March 2017 contracts that can use intensive un-skilled labour and simple techniques from USD30,000 to USD100,000. IFAD to revise the LTB accordingly. PCO, IFAD onwards Apply the special mechanism for infrastructure investments under NRD CPCs, DPCs, March 2017 Program in Ha Giang (Decision 1670/QĐ-UBND) for implementation of PCO onwards small CIF works that can use intensive un-skilled labour and simple techniques (such as village roads, irrigation canals). Agreed actions for CIG co-financing Simplify the CIG proposal template and subsequently organize intensive PCO, FU, DPCs, June 2017 training, coaching and exchanges to improve CIGs' co-investment planning skills. Where appropriate, flexibly change phased grant disbursement method to single upfront payment. CPCs Improve group practices especially for joint procurement of inputs and establishment of revolving funds by CIG financing. PCO, FU, DPCs, CPCs 2017 Assess the financial and CCA viability of investment models, and subsequently modify or cease investing in models with weak CC adaptability and/or low financial returns. Increase efforts to coordinate the CIG, P-PC and CIF investment instruments, to improve smallholder market access. Sub-Component 2.2: Rural Financial Services PCO, FU, DPCs, CPCs July 2017 PCO, FU, DPCs April 2017 17. The subcomponent is rated moderately satisfactory. In 2016 the project has continued to assist the Women s Development Support Fund (WDSF) in establishing Women s Savings and Credit Groups (SCGs) for the provision of microfinance services to the SCG members. The following key activities were implemented: (i) The organization of communication workshops in 170 villages on the advantages of SCG membership and concept; (ii) Nine training courses for total 96 Women s Union staff, 90 SCG leaders and 78 accountants on the SCG operations; (iii) Five training courses for 174 SCG members on household financial planning. Due to these efforts, 167 SCGs with 2069 members (70% poor, 22% near-poor) have been established. Total 374 members from 45 SCGs have accessed to WSFD loans in value of VND1.447 billion and accumulated savings of VND62.27 million. 18. Furthermore, the WDSF has been supported for its planned registration as a social fund in 2018 through: (i) IFAD-financed international consultancy to assist formulation of WDSF s strategy and associated business plan 2016-2020; (ii) Consolidation of WDSF operational manual; (iii) Training courses for WDSF management staff; (iv) Study tours for WDSF staff to advanced WDFs in other IFAD-supported provinces; and (v) A survey of SCGs established under DPPR project. 5
19. However the mission found the following issues and challenges: (i) The subsidiary agreement between MOF and PPC of Ha Giang was signed in March 2017 after long delay. To start lending operations the project advanced VND1.4 billion to WDSF, however this amount is insufficient; (ii) The maximum loan size of VND4 million per household is viewed as insufficient by SCG members. On the other hand, the level of compulsory savings is low, VND10,000 per member, limiting WDSF liquidity generation; (iii) Both provincial and district WDSF offices have no professional managers or fulltime credit officers/ accountants in place; (iv) Remote districts of Hoang Su Phi and Xin Man have difficulties in loan disbursement, requiring special consideration in terms of SCG roll-out strategy and staff structure/ incentives; (v) SCG members have limited access to agricultural and market linkage services provided by the project; (vi) SCG leaders have a fixed allowance level instead of performance-based mechanism; and (viii) PPC yet to issue a decision to integrate the DPPRgenerated SCGs into WDSF. The mission therefore recommends the following priority activities: Agreed action Responsibility Agreed date Urgently finalize all procedures for transfer of funds to WDSF. PCO, WDSF March 2017 Increase maximum loan size from VND4 million up to 10 million and the MOF; PCO; April 2017 compulsory saving level to VND20,000. WDSF; PPC Project to support recruitment of a fulltime professional manager for WDSF; PCO April-May 2017 WDSF Province Office and a fulltime credit/accounting officers for each district office. Revisit staff incentive framework and SCG roll-out strategy for remote districts HSP and XM to increase outreach. WDSF; PCO April-June 2017 Introduce performance-based allowance system for SCG leaders, following examples from other provinces. WDSF; PCO Q2/2017 onwards Integrate the DPPR-generated SCGs into WDSF. Make reference to Ha Tinh experience. PPC; PCO; WU Q2-3/2017 Sub-Component 2.3: Public-Private Collaboration 20. The subcomponent is rated moderately satisfactory. The P-PC fund is established for a competitive co-investment programme to support pro-poor value chains. It is to finance minimum 43 value chain lead enterprises, cooperatives and business households. At least 4,000 households are expected to have contracts in the P-PC schemes and increase their incomes by at least 30%. 21. The progress so far: (i) P-PC operating guidelines and implementation structure have been established and staff trained accordingly; (ii) Six P-PC communication workshops were held by the PCO and DPSGs with total 388 participants including potential partner enterprises; (iii) So far, total 11 enterprises/cooperatives and 10 business households have submitted P-PC investment proposals to the PCO; (iii) After shortlisting, PCO and DPSGs supported finalization of 11 proposals following IFAD requirements. The completed documents are appropriately prepared, including technical assessments of invested activities. Furthermore, comprehensive supply chain financial analysis is made and shows projected farm income increases beyond the targeted 30%; (v) As of now 5 proposals in total value of USD516,000 are approved and implementing, including CPRP financing of USD205,000. 22. The mission noted following issues: (i) Identification of potential lead enterprises has been slow and some districts have no P-PCs so far; (ii) All ongoing and upcoming P-PC investments are only in two value chains: tea and rice, although in the design phase potential was identified in multiple value chains; (iii) The investments visited by supervision were mostly to expand existing business models, to bring more households into the value chains. New innovative technologies or improved product quality (certification, product development, production line improvement, packaging, marketing, CCA in supply) were still largely missing; (iv) The P-PC proposals include a proper financial analysis at the farm level. However at the enterprise level only a rapid financial assessment is conducted, which not yet covers cash-flow or profitability analysis. This causes a potential sustainability risk of investments; (v) Procurement made through P-PC fund still follows public bidding procedures, which is complicated and not necessary for private sector-led implementation in IFAD projects. 6
Agreed action Responsibility Agreed date With IFAD assistance, engage TA providers to: (i) identify more potential PCO, IFAD Q3/2017 lead enterprises especially for difficult market access districts, (ii) support innovation and product quality improvement strategies in P-PC proposals. The TA is suggested to be commodity-specific and combined with TA for SIP. Include more detailed enterprise financial analysis to P-PC proposals PCO, IFAD 2017-2018 including cash-flow and profitability projections. Use financial assessment service provider (e.g. auditor) as required. Simplify P-PC procurement method following IFAD procedural guidance letter sent to Ha Giang People s Committee. PCO, IFAD Effective as of now D. CPRP implementation progress 23. Project management performance. Rated as satisfactory. The management performance is overall high quality. Especially: (i) The CPRP to a large extent coped with the very difficult budgetary situation in 2016; (ii) CPRP and NTP-NRD planning and resources are well coordinated; (iii) All project management arrangements are in place, required guidelines issued, and the project staff/ stakeholders trained accordingly; (iii) The decentralized management approach is applied where project units PCO and DPSGs facilitate, the provincial line agencies provide technical assistance, and the DPCs/CPCs actually implement the activities on the ground. KM systems, accountabilities and resource allocations are well defined to this effect. 24. However the mission identified the following challenges and issues: (i) Some implementation guidelines (i.e. CIF civil works, CIG, P-PC) are still too complicated; (ii) The project is facing liquidity issues due to budget caps on ODA disbursement by the Central Government; (iii) The district line agencies did not yet receive sufficient resources to facilitate/operationalize the market-oriented planning instruments VCAP and SIP; (iv) The Farmer Union has been engaged to develop CIGs however it yet to be recognized as a CPRP implementing agency; (v) The Deputy Project Director is soon to retire however his capacities and experience remain essential for project performance. Agreed action Responsibility Agreed date Simplify project guidelines in view of experiences and as detailed in the PCO, line Q2-3 2017 above sections. agencies Districts to receive some resources for VCAP and SIP facilitation and PCO, DPCs Continued operationalization. Farmer Union to be recognized as implementing agency and to receive PPC, PCO, FU Q1-Q2/2017 financing for project activities through a results-based framework. Deputy Project Director suggested to be recruited as Project Management Adviser after his retirement. PSC, PCO April 2017 25. Coherence between AWPB and Implementation. Rated as moderately satisfactory. The 2016 AWPB of VND132 billion (including 75 billion IFAD financing) was approved by the PPC in February 2016, and IFAD provided no objection. The AWPB was revised in September 2016 reducing the total budget to VND125 billion (70 billion from IFAD). However, in April 2016 the project was authorized by Central Government/National Assembly to disburse an initial amount of only VND32 billion. A second authorization of additional VND35 billion was received by the project on 30 December 2016. The delayed authorization of ODA budget clearly had serious implications for project progress, efficiency and impact during the reporting period. PCO reports that 75% of 2016 planned activities could be completed by end of January 2017. 26. The mission is concerned about the financing of 2017 AWPB. While PPC has approved and IFAD has given a NOL to the 2017 AWPB with a budget of USD6 million (not including USD2.350 million from beneficiaries contribution and NRD programme), GOV to date has only authorized USD2.250 million (38% vs AWPB). As required, the Provincial Government has indicated commitment to pre-finance project expenditures awaiting further authorization. Agreed action Responsibility Agreed date To fully implement the approved AWPB 2017, PPC and DPCs to advance financing for the project activities as required. The advance to be reimbursed by IFAD funds. PSC, PCO DPSGs Q2/2017 7
27. Monitoring and Evaluation. Rated as satisfactory. The project has implemented its M&E system satisfactorily although some staff rotation has taken place. To date the achievements include: (i) Finalisation of M&E manual with monitoring tables, and distribution of the manual to districts and communes for implementation; (ii) Organisation of M&E trainings for M&E staff at all levels; (iii) Implementation of M&E activities including RIMS baseline, RIMS annual reports, cost-benefit analysis of 53 infrastructure schemes and agricultural models, and update of the poverty reduction database. In order to further improve the M&E system and to prepare for the MTR 2018, the following M&E activities require attention: (i) Results-based management system for measurement of project outcomes and impact; (ii) IFAD requirements in the annual RIMS reporting, and (iii) Poverty outreach in deployment of project activities. 28. Gender focus. Rated as moderately satisfactory. In Ha Giang, women play an important role both as beneficiaries and actors in project implementation. The project gender mainstreaming manual has been developed and updated, and a gender mainstreaming training was organised for project staff and key partners. Gender focus is adopted by the project through the target of 50% women participation in project activities. To date, overall participation of women in project activities is 38%, which is slightly short of the design target. Specifically, (i) 41% of MOSEDP group members are female; (ii) Women account for 21% in all capacity building activities of the project; (iii) 100% of SCG members are women; and (iv) Women account for 21% among the beneficiaries from CIG implementation. 29. Poverty focus. Rated as satisfactory. Poverty reduction is primary objective of the project and this goal has been mainstreamed throughout all the project components and activities. The project closely monitors poverty rates and their changes in project and non-project communes in order to follow the project outcomes and impacts to the poor households. The project M&E also sufficiently delivers statistics reflecting a satisfactory level of participation by the poor and near-poor households in all project activities as illustrated in the below table: Instrument Quantity Number of Beneficiary Households % out of total Total Poor Near-Poor Ethnic Poor Near-Poor Ethnic SCG Total SCGs 167 groups 2 069 1 449 457 1 965 70% 22% 95% established Disbursed 45 groups 374 112 150 374 30% 40% 100% SCGs Borrowing 374 members 374 112 150 374 30% 40% 100% Members CIG Total CIGs 276 groups 3 607 1 313 563 3 607 36% 16% 100% established Disbursed CIG 77 groups 896 433 186 896 48% 21% 100% grants CIF Approved 53 works 5 500 2 504 936 5 461 46% 17% 99% schemes MoSEDP Participants in 30 communes 27 224 11 981 4 950 26 44% 18% 97% MoSEDP 290 villages 407 P-PC Contracted PPCs 5 P-PC 4 189 1 297 950 4 169 31% 23% 100% 30. Effectiveness of targeting approach. Rated as satisfactory. The project targeting strategy is primarily based on geographical selection of target communes which have higher poverty incidence. 30 selected project communes are among the poorest and most difficult communes with poverty rates considerably higher than the average poverty rate of the same district. The above table shows that project activities are reaching out to the marginalised groups including poor and near-poor households, and also the ethnic minorities. At this early stage it is yet not possible to measure effectiveness of the targeting approach. However the positive indicators of participation by the target groups within the project activity beneficiaries have showed that the project targeting approach is relevant to the context. 31. Climate and environment focus. Rated as moderately satisfactory. Climate change adaptation and environment protection are among the key objectives of the project. Throughout the project document, most of instruments including CC-MOSEDP, CCA model identification, CIF, and CIG are proposed to deliver the CC adaptation and environmental protection objectives. To date, 30 CCA models have been identified, and 77 CIG grants have been initiated with CIGs in the project communes. The grants focus on environmentally friendly and safe agricultural production models 8
including: (i) fodder plantation for intensive cattle raising; (ii) organic tea production; and (iii) System Rice Intensification (SRI) model. These initial good practices, along with the continuous CIG and PP- C grants in the coming years, will ensure the achievement of project s objectives in terms of climate and environmental focus and simultaneously contribute to the provincial agricultural development strategy towards high-quality and safe agricultural production. 32. Innovation and learning. Rated as moderately satisfactory. The project design introduces a number of innovative rural development instruments to the Ha Giang province. MoSEDP and SCG/MFI approaches have been initiated successfully, followed by other innovative instruments including SIP, VCAP, CIG co-investments and P-PC co-investments. An exceptional innovation in Ha Giang is in the practical solutions for integrated IFAD and NTP-NRD investment planning at the commune level. This is recommended to be documented for scaling-up at national level. 33. Regarding learning, the PCO as well as all various line agencies have rolled out a number of training programmes at districts and communes. These have been effective, however to improve coordination a comprehensive capacity building plan is to be developed encompassing all project layers and topics. 34. Partnerships. Rated as satisfactory. The CPRP Coordination Office has made significant efforts to integrate various project processes with the National Target Programme for New Rural Development. This partnership has strategic relevance to the IFAD Vietnam operations. Also, in activity implementation, the PCO is closely partnering with all relevant line agencies including DARD, FU and WU at provincial, district and commune levels. Partnership with private sector including enterprises, cooperatives and business households for VC development has been initially built up through the first CIG and PP-C co-investments. E. Fiduciary aspects 35. Financial Management rating is moderately satisfactory while noting the low disbursement level indicated above. The project financial management system has been established at provincial, district and commune level as required. However, there is still room for improvement with regard to the internal control system, especially at the PCO. 36. Withdrawal Application: The project has submitted six Withdrawal Applications (WAs) to IFAD of which three for advance payments and the remaining for replenishment. Two WAs were chosen by random sampling method for review. Spot checks were also conducted of the financial management documents maintained by the PCO, IAs and the districts, including statements of expenditure (SOEs), Designated Account reconciliations and other financial records. The mission notes that VAT has been claimed for some invoices as part of the three WAs submitted to IFAD. The PCO is requested to review all expenditures claimed under the three WAs and disaggregate relevant amounts for taxes. Any taxes incorrectly claimed shall be charged to GoV and refunded to IFAD. 37. Internal control system: The mission identified several outstanding weaknesses in the internal control system which needs immediate improvement as follows: Filing system. The project filing system is not well managed and needs upgrading. Currently, supporting documents are recorded inappropriately, which hinders a smooth check or verification of payments. In addition some payment vouchers do not have the appropriate approval signature by authorized person. Asset management: The project register of assets is still to be established and subsequently no assets were labeled. A register should be established, which includes information like asset number, description, identification, location, purchase reference and status of the asset. The mission noted that a project laptop has been located at DONRE which currently is not involved in project implementation. This asset should be retrieved as soon as possible. Accounting software: The PCO has installed new accounting software which is already being used by several other IFAD projects in Vietnam. The software has been in operation since October 2016 and allows accounting staff to generate reports that meet the requirements of GOV and IFAD, produce WAs, manage and track contracts, and budget versus actual. The accounting staff has entered data from project start into the electronic record system. The software however needs some feature upgrade including password protection and segregation of account users. The project should request these upgrades as soon as possible from the software provider. Data backup should be done more frequently and hard copy reports generated on a weekly/monthly basis for safe storage purpose. 9
38. Disbursement is moderately unsatisfactory. As at 28 February 2017, the total disbursement stood at 14% or SDR 3,4 million (equivalent to approximately USD4.6 million) against a total approved project cost of SDR 23.5 million (US$32.7 million). This included a disbursement of 14.5% of the approved loan amount of SDR 13.6 million (US$19.0 million) by IFAD. To improve the CPRP disbursement status by MTR 2018, it is of outmost importance that the project receives sufficient fund authorizations to implement the approved 2017 AWPB. This will enable a disbursement rate of about 38% by end of 2017 as projected. 39. Counterpart funds rating is moderately unsatisfactory. The disbursement of counterpart funds to the project account was about USD1.620 million, stands at 17.08% of total commitment. This to some extent is related to the budget caps elaborated above. 40. Beneficiary contribution rating is moderately satisfactory. The current records show that contribution from beneficiaries is 9.1% of the allocation. The mission however notes that the beneficiary contribution has not been updated in the financial system and therefore suggests that finance officers coordinate with M&E staff to update the records accordingly. 41. Compliance with loan covenants is moderately satisfactory. The loan covenants are complied with except for the counterpart funding condition under FA Section B and LTB Paragraph 21, which is not fully compliant. 42. Audit is rated as satisfactory. An audit for 2015 was conducted timely by AASC Auditing Company. The auditor's opinion was unqualified and separate opinions were provided on project financial statements, SA and SOEs as required by IFAD. The Management Letter presented some internal control issues that required actions by the project at PCO. The project requested IFAD NOL for the 2016 audit ToR and this exercise will commence in May 2017 with the submission of the audit report to IFAD by June 2017. 43. Procurement. Rated as moderately satisfactory. Procurement Planning: The AWPB 2016 procurement plan was prepared in detail. The force account method has been applied for 26 works contracts, and 19 works contracts were subject to prior review. Procurement Processes and Procedures: Random checks by the mission of procurement and contract documents at PCO and visited communes show that procurement activities were carried out in compliance with IFAD project procurement guideline and national regulations. In order to attract diverse applications for consultant selection, the project should advertise procurement notices on selected media (such as www.ngocentre.org.vn and/or Dau Thau Newspaper) in addition to sending direct invitation letters to potential candidates. Contract Management: The contract logs were appropriately prepared and updated. There were delays in implementation and disbursement of CIF works CIG co-investment and P-PC activities under the AWPB 2016. Record Management: Procurement records and contract documents are maintained and updated. Agreed actions Responsibility Agreed date Withdrawal Applications: PCO to review WAs. Segregate VAT PCO Q1/2017 where applicable and refund to IFAD. Asset management: Create an asset register comprising information PCO Q2/2017 on asset number, description, identification, location, purchase reference and status. Filing system: Upgrade the system in terms of proper recording of supporting documents and use of appropriate authorized signatures. PCO March/April 2017 Procurement: Advertise procurement notices on public media (such PCO, Implementing March 2017 as www.ngocentre.org.vn and/or Dau Thau Newspaper) in addition to sending directly invitation letters to potential candidates for individual consultant selection. agencies onwards F. Sustainability 44. Institution building. Rated as moderately satisfactory. Institution building is an integrated part of the CPRP design in terms of development of community-based institutions and enhanced institutional capacities of the local government agencies, private sector and farmer associations. In the coming period, the project should consider sustainability frameworks for the following institutions: CIGs, collaborative groups, SCGs, Village Management Boards, Infrastructure Community 10
Supervision Boards, the Commune-level MoSEDP planning implementation groups, WSDF, and the PP-C supported private sector value chains. 45. Empowerment and social sustainability. Rated as moderately satisfactory. The project instruments including MOSEDP, CIF, CIG, PP-C and SCG play important role in engaging and empowering local communities in decision making processes. Specifically, MOSEDP plans and the subsequent CIF investments have (i) facilitated the participation of the local communities to communicate their needs and difficulties to decision makers, (ii) strengthened the capacities of the HHs in climate change adaptation, market access, and economic development, and (iii) consolidated poor HHs and ethnic minority position within society through involvement in the decision making process. The initiation of CIG, PP-C and SCG through group establishment, and provision of technical and financial support has improved the social cohesion and promoted collective actions within the communities. However, the mission notes that (i) many CIGs still lack management capacity, (ii) a significant amount of non-cig people are left out of most project support, and (iii) the number of poor, near poor-and ethnic minority households that benefit from project activities is still limited, requiring more attention from the project in the coming period. 46. Quality of beneficiary participation. Rated as moderately satisfactory. Project records show that approximately 30,000 people actively participated in project activities so far. As mentioned in the above empowerment paragraph, the MOSEDP process has created a space for participation of people, especially the poor (62%) and women (41%). Also the awareness raising and capacity building processes have involved a significant number of participants (12,000), and the initial implementation of SCG, CIG, and PP-C reached out to about 4000 rural people. These activities helped to raise the voices of beneficiaries in setting investment priorities and to engage communities directly in planning, implementation and monitoring of activities. The mission expects that the implementation of all project instruments in the coming time will ensure continued quality of beneficiary participation. 47. Responsiveness of service providers. Rated as satisfactory. Local public sector service providers have been engaged and partnerships function well: (i) Farmer Union has responded to local needs of farm planning support, (ii) DARD has established a specific Project Management Board for CPRP activities, (iii) Women's Union is committed to development of the WDSF, and (iv) PPC is in overall committed to support the project. However, it has been challenging to engage high quality national/international technical assistance for market orientation and climate change adaptation. 48. Exit strategy. Rated as moderately satisfactory. At the second year of project implementation exit strategy not yet required. Regarding PPP and CSA investments, project should already at planning stage pay attention to exit strategy issues including assets management and shifting of full ownership to implementing partners. 49. Potential for scaling-up. Rated as moderately satisfactory. (i) The MoSEDP planning mechanism including commodity and CCA plans are to be scaled-up for implementation in all communes in Ha Giang and nationally through the NTP-NRD and the NTP-SPR. (ii) Farmer-to-farmer extension approach with FU support has significant scaling up opportunities for provincial, national and regional levels. (iii) The CPRP practices of integrating project and NTP-NRD funding are to be documented for scaling-up in the national context. In overall, the Ha Giang People s Committee is committed to the project implementation and scaling up of its innovative, successful practices. G. Other (impact) 50. Impact on physical and financial assets. Rated as moderately satisfactory. A total of 53 CIF works including 70 km of roads and two bridges with total investment of VND79 billion was implemented for benefit of 5,500 households including 46% poor households. Benefiting communities contributed 10% of construction costs. The CIF works were identified and selected based on commune VCAPs and MoSEDP processes to ensure supports for VC development and benefit to the poor. 51. Impact on food security. Rated as moderately satisfactory. The mid-term RIMS survey will be implemented in 2018. Since the benchmark RIMS survey in 2015, there is no updated database on project impact on food security. The 2015 RIMS survey results show that among the CPRP target 11