document of the world bankdocuments1.worldbank.org/curated/ru/540691468197078462/...2016/11/30 ·...

Document of The World Bank

Report No: ICR00003537

IMPLEMENTATION COMPLETION AND RESULTS REPORT (COFN-C1320 and TF-94764)

ON A

GRANT (TF-94764 UNDER THE MULTI DONOT TRUST FUND-NORTHERN SUDAN)

IN THE AMOUNT OF US$ 7.0 MILLION

AND

A GRANT (IFAD COFN-C1320)

IN THE AMOUNT OF SDR 1.932 MILLION

(US$ 3 MILLION EQUIVALENT)

TO THE

REPUBLIC OF SUDAN

FOR A

REVITALIZING THE SUDAN GUM ARABIC PRODUCTION AND MARKETING PROJECT

June 20, 2016

Agricultural Global Practice AFCE2 Africa Region

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CURRENCY EQUIVALENTS Currency Unit = Sudanese Pound (Sudanese Guinea = SDG)

At Appraisal (February 2009)

US$1.00 = SDG 2.0 At Completion (June 2015)

US$1.00 = SDG 5.9

FISCAL YEAR October - September

ABBREVIATIONS AND ACRONYMS

AFD Agence Française de Développement (French Development

Agency) CBS Central Bank of Sudan CIF Cost including Freight CPA Comprehensive Peace Agreement CSOs Civil Society Organizations ESMF Environmental and Social Management Framework FNC Forest National Corporation FOB Free on Board FPP Final Project Proposal GA Gum Arabic GAC Gum Arabic Company GAMIS Gum Arabic Marketing Information System GAPA Gum Arabic Producers Association GDP Gross Domestic Product GoNU Government of National Unity IBRD International Bank for Reconstruction and Development ICT Information and Communication Technology IDA International Development Bank IFAD International Fund for Agricultural Development IGAD Inter-Governmental Authority on Development IMF International Monetary Fund IPF IGAD Partner Forum for Peace JAM Joint Assessment Mission LIU Locality Implementation Unit M&E Monitoring and Evaluation MDTF-N Multi Donor Trust Fund for North Sudan MoFNE Ministry of Finance and National Economy (federal) MIS Management Information System MFT Ministry of Foreign Trade NGO Non-Governmental Organizations NPV Net Present Value PC Project Coordinator

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PCU Project Coordination Unit PDO Project Development Objective PIM Project Implementation Manual PSC Project Steering Committee QER Quality Enhancement Review RRC Rapid Response Committee SDG Sudanese Pound SPLM Sudan People’s Liberation Movement TA Technical Assistance TTL Task Team Leader

Senior Global Practice Director: Juergen Voegele Practice Manager: Mark Cackler

Project Team Leader: Omar Lyasse ICR Team Leader: Omar Lyasse

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SUDAN Revitalizing the Sudan Gum Arabic Production and Marketing

CONTENTS

1. Project Context, Development Objectives and Design ............................................... 12. Key Factors Affecting Implementation and Outcomes ............................................... 53. Assessment of Outcomes ........................................................................................... 104. Assessment of Risk to Development Outcome ......................................................... 215. Assessment of Bank and Borrower Performance ...................................................... 226. Lessons Learned ........................................................................................................ 257. Comments on Issues Raised by Grantee/Implementing Agencies/Donors ............... 26 Annex 1. Project Costs and Financing .............................................................................. 27Annex 2. Outputs by Component...................................................................................... 28Annex 3. Economic and Financial Analysis ..................................................................... 34Annex 4. Grant Preparation and Implementation Support/Supervision Processes ........... 38Annex 5. Beneficiary Survey Results ............................................................................... 39Annex 6. Stakeholder Workshop Report and Results ....................................................... 40Annex 7. Summary of Grantee's ICR and/or Comments on Draft ICR ............................ 44Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ........................... 49Annex 9. Summary of Gum Arabic Policy Dialogue and Policy Reforms ...................... 50Annex 10. List of Supporting Documents ........................................................................ 53MAP .................................................................................................................................. 54

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A. Basic Information

Country: Sudan Project Name: Revitalizing the Sudan Gum Arabic Production and Marketing

Project ID: P110588 L/C/TF Number(s): COFN-C1320,TF-94764

ICR Date: 10/25/2015 ICR Type: Core ICR

Lending Instrument: SIL Grantee: GOVERNMENT OF NATIONAL UNITY OF SUDAN

Original Total Commitment (TF 94764):

USD 7.00M Disbursed Amount: USD 6.996M

Revised Amount: USD 6.996M Original Total Commitment (COFN C1320):

USD 3.00M Disbursed Amount: USD 2.84M

Revised Amount: USD 3.00M Environmental Category: B Implementing Agencies: Forest National Corporation Cofinanciers and Other External Partners: International Fund for Agricultural Development (IFAD) B. Key Dates

Process Date Process Original Date Revised / Actual Date(s) Concept Review: 01/30/2008 Effectiveness: 09/30/2009

Appraisal: 07/07/2008 Restructuring(s): 06/23/2011 06/14/2012 11/20/2012

Approval: 07/10/2009 Mid-term Review: 09/20/2011

Closing (TF 94764):

06/30/2011 05/31/2013

Closing (COFN C1320):

06/30/2015

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory

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Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Grantee Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Moderately Satisfactory

Overall Bank Performance: Moderately Satisfactory

Overall Borrower Performance: Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators

QAG Assessments (if any) Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Crops 64 Public administration- Agriculture, fishing and forestry 36

Theme Code (as % of total Bank financing) Export development and competitiveness 28 Other financial and private sector development 22 Rural markets 22 Rural policies and institutions 28 E. Bank Staff

Positions At ICR At Approval Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Carolyn Turk Kenichi Ohashi Practice Manager/Manager:

Mark E. Cackler Karen Mcconnell Brooks

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Project Team Leader: Omar Lyasse Assaye Legesse ICR Team Leader: Omar Lyasse ICR Primary Author: Melissa Brown F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) To help increase the income of small-scale gum arabic producers in selected areas of the Recipient's gum arabic belt through improved performance of gum arabic production and marketing system. (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Percentage change in the income level of beneficiary households from Gum Arabic production after project intervention Value quantitative or Qualitative)

8,410 SDG, average income 20% 65%

Date achieved 07/11/2009 07/11/2009 03/31/2015

Comments (incl. % achievement)

325% achieved. If general rise in project income among both project beneficiaries and non beneficiaries is incorporated (with and without scenarios) and discounted to real terms, actual increase in incomes is 21% (or 105% of original target).

Indicator 2 : Direct project beneficiaries Value quantitative or Qualitative)

0 12,275 16,439 to 23,895

Date achieved 07/11/2009 06/23/2011 03/31/2015 Comments (incl. % achievement)

205% achieved. 16,439 beneficiaries of matching grants and total of 23,895 beneficiaries of matching grants and training, capacity building services

Indicator 3 : Direct project beneficiaries of which female Value quantitative or Qualitative)

0 25% 24%


96% achieved

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(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : % change in quantities of gum Arabic marketed by GAPAs Value (quantitative or Qualitative)

0 25 25


100% achieved

Indicator 2 : % Change in the number of new entrants to the market (exporters) Value (quantitative or Qualitative)

0 200% 80%


40% achieved

Indicator 3 : % of targeted GAPAs with effective saving and credit systems Value (quantitative or Qualitative)

2.4% 135 GAPAs 100% 97%

Date achieved 07/11/2009 07/11/2009 06/23/2011 03/31/2015 Comments (incl. % achievement)

97% achieved

Indicator 4 : % of women in targeted GAPAs Value (quantitative or Qualitative)

0 25 25


100% achieved

Indicator 5 : Number of Hashab seedlings produced by project nurseries (000') Value (quantitative or Qualitative)

0 1,950,000 2,708,000


139% achieved

Indicator 6 : Number of GAPA members who received training on financial Management

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Value (quantitative or Qualitative)

0 350 470


134% achieved

Indicator 7 : Number of GAPA members who received training on business Management Value (quantitative or Qualitative)

0 600 642


107% achieved

Indicator 8 : Number of Agro forestry training session for GAPAs conducted by extension officer Value (quantitative or Qualitative)

0 230 280


122% achieved

Indicator 9 : Number of in-country and exchange visits of GAPAs conducted to share experience Value (quantitative or Qualitative)

0 16 11


69% achieved

Indicator 10 : Number of Matching Grants for Marketing: For Media Promotion Value (quantitative or Qualitative)

0 10 1


10% achieved

Indicator 11 : Number of Matching Grants for Marketing: For Research and Technology Value (quantitative or Qualitative)

0 9 6

Date achieved 07/11/2009 06/23/2011 03/31/2015

x

Comments (incl. % achievement)

67% achieved

Indicator 12 : Number of Matching Grants for Marketing: For Infrastructure support Value (quantitative or Qualitative)

0 30 56


187% achieved

Indicator 13 : Percentage of the FOB price received by small scale gum producers after project intervention Value (quantitative or Qualitative)

10% - 15% 60% 65%


108% achieved. Further ICR analysis finds 71% instead of 65%.

Indicator 14 : Percentage change in domestic use compared to export Value (quantitative or Qualitative)

0 10% 12%


120% achieved

Indicator 15 : Number of visitors to the dynamic website of MoFT Value (quantitative or Qualitative)

0 9,000 10,810


120% achieved. System not fully functional

Indicator 16 : Number of SMS text messages communicated to producers Value (quantitative or Qualitative)

0 1200 0


0% achieved

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G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP Actual

Disbursements (USD millions)

1 05/26/2010 Moderately Unsatisfactory Moderately

Unsatisfactory 0.75

2 06/03/2011 Moderately Satisfactory Moderately Satisfactory 3.58 3 03/11/2012 Satisfactory Moderately Satisfactory 5.47 4 11/02/2012 Satisfactory Moderately Satisfactory 6.83 5 05/29/2013 Satisfactory Satisfactory 7.00

H. Restructuring (if any)

Restructuring Date(s)

Board Approved

PDO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made DO IP

06/23/2011 N MS MS 3.80

Level 2 restructuring, encompassing an extension of the closing date and revisions to the results framework. Closing date revised from June 30, 2011 to June 30, 2012.

06/14/2012 N S MS 6.41

Level 2 restructuring to extend the project's closing date from June 30, 2012 to December 31, 2012.

11/20/2012 N S MS 6.83

Level 2 restructuring to extend the project's closing date from December 31, 2012 to May 31, 2013.

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I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal 1. At the time of appraisal, Sudan was in the process of implementing the provisions of the Comprehensive Peace Accord (CPA)1. The CPA included a strong focus on rural economic development in an effort to sustain peace and expand economic recovery. Around 64 percent of the population in North Sudan was classified as rural and agriculture was the major source of livelihood. Poverty in rural areas was high, particularly for those practicing traditional farming in rainfed areas and was estimated at 57 percent. 2. Gum Arabic has long been a strategic agricultural commodity for Sudan and the country has historically been the world’s leading producer. Gum Arabic is a non -wood forest product used as a natural emulsifier in food and drinks that is harvested from acacia trees throughout the Sahel zone of Africa2. To harvest gum arabic, acacia trees are manually tapped and the gum exudate collected over the course of a two month period. In Sudan the harvest period occurs in the height of the dry season and is an off-season activity highly complementary to livestock and crop production. Most gum production in Sudan is sourced from smallholders located within isolated rural communities within the “Gum belt” – an area that roughly spans the southern part of the Sudan including West, Southern and Northern Darfur; North and South Kordofan; Sennar; Blue Nile and White Nile States. 3. Export earnings from Gum Arabic had reached up to US$100 million in 2005, however by 2009 the sector had experienced steep declines in production. By 2009 Sudan lost its place as lead producer and gum arabic exports earning totaled only US$ 33 million. Declines were attributed to a number of challenges in the sector, the most important of which was low producer incentives due to Sudan’s domestic pricing policy and monopoly marketing system through the government owned Gum Arabic Company. To a lesser extent the sector also suffered from quality issues due to harvesting techniques and the need to renew the stock of Acacia trees. Following dialogue amongst stakeholders within the sector, a series of policy and institutional reforms were agreed and initiated starting in 2008. 4. The project was financed by IFAD and the World Bank administered Multi Donor Trust Fund for North Sudan (MDTF-N), both of which sought to support the consolidation of peace and pro-poor growth within Sudan. The project was part of the IFAD country program strategy and responded to its country program strategic objective of increased access of poor rural women and men to markets and microfinance. The project was also one of 15 projects financed by the MDTF-N, a US$249 million fund financed by 10 donors including the World

1 The Sudan Comprehensive Peace Agreement was signed in early 2005 and ended Sudan’s lengthy civil war. The CPA mandated a six year interim period under a Government of National Unity. Following the end of the interim period, Sudan ultimately separated into two independent states in July 2011. 2 Gum arabic is used in the food industry as a flavor fixative and emulsifier with viscosity and adhesive properties that prevent crystallization of sugar in confections or liquids (approximately 70% of gum arabic demand is for this purpose) but can be used as a stabilizer in other food products as well.

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Bank. The project was directly linked to three of the five priority focus areas of the MDTF-N: supporting state- and locality-level investment programs with high visibility in war-affected zones in the Northern States and the Three Areas; making rural development pro-poor with support for micro/small-enterprises; and laying the groundwork for good governance, in particular by opening up the private sector. A World Bank Policy Note on the gum arabic sector was also issued in 2007 and played a role in analyzing the sector and summarizing the reform agenda.3 The Project was seen as a mechanism to implement many of these findings and recommendations.

1.2 Original Project Development Objectives (PDO) and Key Indicators 5. The PDO for the project was “to help increase the income of small-scale gum arabic producers in selected areas of the Recipient’s gum arabic belt through improved performance of gum arabic production and marketing system.” The project intended to target improvements in the gum arabic production system through better tree management, improved harvesting techniques, and renewing the stock of gum arabic trees. Improvements to the marketing system were to be gained through improvements to producer association organization and capacity building and adoption of policy reforms to increase market participation and market functioning. 6. The project’s original intermediate results anticipated an increase in equality of opportunity and competition available to market actors; better organized and empowered Gum Arabic Producer Associations (GAPAs); improved market conditions; reduction of environmental degradation issues in target areas; and better management and coordination of the sector at national, state and locality levels.

1.3 Revised PDO and Key Indicators 7. No changes were made to the PDO during implementation. A June 2011 restructuring extended the closing date of the project and revised the results framework. All original PDO level indicators were retained but two were re-classified as intermediate results indicators. A core indicator measuring direct project beneficiaries was added at PDO level. Intermediate results indicators, however, were substantially changed in the June restructuring to capture a focus on functioning of the gum arabic market and capacity building for GAPAs and related institutions at locality and central levels. Original intermediate results indicators on policy reforms, functioning of microcredit/revolving fund systems and project management were dropped. These changes were motivated by a need to simplify a complicated results framework, adjust to the changing policy environment and reflect the core focus of the project on supporting small scale producers and their organizations.

3 World Bank. 2007. Policy note: Export Marketing of Gum Arabic from Sudan. Washington, DC: World Bank. http://documents.worldbank.org/curated/en/2007/03/8497676/policy-note-export-marketing-gum-arabic-sudan

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1.4 Main Beneficiaries 8. The primary target group for the project were small scale producers located in the localities of Bara, Um Rawaba and En-Nahud in North Kordofan State; Dilling, Talodi and Abu Jabaiha in South Kordofan State; Tendalti in White Nile State; Dali in Sennar State; and Boutt, Baw and Gaissan in Blue Nile State. Eight localities were originally listed in the MDTF-N Final Project Proposal (FPP) and an additional 3 localities (Talodi, Baw, Gaissan) were added in the IFAD Project Document. These latter three localities were also previously under the control of the Sudan People’s Liberation Movement (SPLM). Although the project did generally try to avoid areas where major conflict existed, renewed conflict took place during project implementation in these last three localities. Specific sites within localities were selected based on a criteria focused on presence of productive gum arabic trees, presence of producers associations, and geographic proximity between localities to reduce implementation costs. 9. It should be noted that project documents and reports interchangeably refer to beneficiaries as small scale producers or as members of GAPAs. This is due to the nature of gum arabic production, which is almost exclusively collected by smallholders. Large scale production is confined to forests maintained by the Forest National Corporation (FNC). Therefore beneficiaries of the project are small scale producers supported with project interventions targeted through their producer organizations.

1.5 Original Components Component 1: Gum Arabic Sector Reform and Support (US$1.70 million; phase 1: US$1.22 million, phase 2: US$0.48 million) 10. The first component was designed to finance interventions aimed at further improving the broader gum arabic sector by increasing knowledge of the local and international market opportunities, identifying further areas of policy or institutional reform and establishing a locally and internationally accessible market information system. In terms of knowledge products, the project was to finance studies to identify barriers to domestic trade and investments, analyze market opportunities and undertake research based on proposals from stakeholders in the sector. The original design anticipated the project would identify a further set of policy or institutional reforms in the sector derived from on-going policy dialogue in the sector and any recommendations emerging from the studies and analytical work financed by the project. The project was also to finance the establishment of a gum arabic market information system and a dedicated website for the Sudanese gum arabic sector. Component 2: Institutional Capacity Building and Support to Gum Arabic Producers Associations (planned: US$5.52 million; phase 1: US$4.26 million, phase 2: US$1.26 million) 11. The project’s second component focused its financing on direct support to gum arabic producers with the aim of improving incomes through investments in capacity building, productive infrastructure and inputs. The component was designed to finance capacity building activities to strengthen the management and skills of GAPAs in savings, credit, marketing, quality control and production. The primary implementing modality was matching grants to

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GAPAs to supplement revolving savings and credit schemes to be set up and managed by the GAPAs, or for infrastructure or related inputs (such as tractor transport). Component 3: Project Management and Supervision (US$2.77 million; phase 1: US$1.36 million, phase 2: US$1.41 million) 12. The third component was to finance costs associated with project management including the day-to-day management of project activities of the primary implementing agency Forest National Corporation (FNC) a semi-autonomous parastatal responsible for ensuring the protection and the development of Sudan’s’ forest resources. FNC was to establish a project coordinating unit (PCU) at national level, coordination at its state level FNC offices and at locality levels through locality implementation units (LIUs). The component was also to finance M&E activities and associated baseline, mid term review and final project assessments.

1.6 Revised Components 13. No adjustments were made to component activities through restructuring.

1.7 Other significant changes 14. Project implementation largely followed the original design, however, changes did occur in the project’s planned implementation period, approach to phasing, and final allocation of funds between components. Conflict in some project areas also affected implementation. 15. Phasing. As originally designed the project was to have a phased implementation arrangement to facilitate the gum arabic market reform and allow expansion to all project areas. The first phase with two years duration – to be funded by MDTF-N – was to support sector reform measures based on the recommendations of the analytical studies and strengthening GAPAs to benefit from the market reform measures. Implementation of the second phase – to be funded by IFAD – was to be contingent on the implementation of the reform measures to create equal opportunity and competition among market actors and allow for expansion of project activities in additional localities. 16. Significant reform took place in the sector immediately prior to project approval as a result of a Presidential Directive issued in June 2009. The Directive abolished all taxes and fees that related to gum arabic production and marketing, eliminated the Gum Arabic Company monopoly on trading and export of raw gum, and abolished the floor price policy. This represented a major liberalization of the sector and while a few additional sector reforms were identified they were not tabled during project implementation as a formal trigger for a second phase. Instead the second phase became primarily associated with continuation of project implementation and expansion to additional localities and GAPAs using IFAD funds. 17. Conflict within the project area. Although the project had initially targeted implementation areas outside of conflict zones, project implementation was affected by new conflicts in Blue Nile and South Kordofan States in 2010 and 2011. This led to a halt to activities in sites affected by the violence (Gaissan, Baw and Talodi localities) and the loss of some project

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assets. Project activities were subsequently re-started in some cases but full fledged implementation remained difficult in those localities as the underlying conflict remained active. 18. Implementation period. The original project design envisioned an implementation period of four years. The original grant agreement established a closing date of December 31, 2011 (approximately two years of implementation) due to the closing date of the parent MDTF-N, which anticipated an extension but was not formally in place. Three Level 2 restructurings were subsequently processed to extend the project’s closing the date to June 30, 2012; December 31, 2012; and finally to May 31, 2013. All MDTF-N funds were disbursed by May 31, 2013. IFAD funds were originally scheduled to be used in 2012/13 and were utilized between mid 2013 and June 30, 2015. The total implementation period became approximately 5.5 years. 19. Allocation of funds to components. Actual expenditures by end of project were higher than expected in project management costs, due in part to the longer implementation period, and lower expenditures under the sector reform component. Final expenditures under component 1 were approximately 50 percent below appraisal estimates; component 2 expenditures were 91 percent below appraisal estimates and component 3 expenditures were 144 percent above appraisal estimates.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry 20. Project design, preparation and approval followed an accelerated timetable in use for the MDTF-N financed projects. The project was prepared and approved following procedures put in place under the MDTF-N including accelerated processing procedures under OP 8.0. Project preparation was initiated in 2008, a Rapid Response Committee (RRC) decision meeting was held in March 2009 for a set of MDTF-N projects and final approval took place in July 2009. The grant agreement was signed in August 2009 and the project became effective the following month. The project experienced some pressure to finalize preparation due to the timelines associated with the MDTF-N and the need to commit resources and launch implementation. 21. Project implementation and policy dialogue was embedded in the larger dialogue around the MDTF-N, the CPA and the Government’s Five Year Plan. The project benefited from the larger policy dialogue launched around the gum arabic sector through previous analytical work and engagement with stakeholders in the sector by IFAD, the World Bank and international partners. Although there was limited time available for consultation and design around MDTF-N financed projects, IFAD, World Bank and other donor engagement on the implementation of the CPA, MDTF-N, and Government Five Year Plan also contributed to consensus around policy reform process and project design. Reform of the gum arabic sector was an explicit recommendation of the Joint Assessment mission4 and followed up through CPA

4 The 2005 Joint Assessment Mission provided an assessment of Sudan’s rehabilitation and transitional recovery needs and outlined a framework for reconstruction and recovery through 2010. The JAM was co-led by the United

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implementation. These higher level efforts appear likely to have contributed to relatively strong ownership of the project at various levels. 22. Lessons learned from similar efforts to liberalize markets were identified. Project design incorporated lessons learned from other countries that liberalized commodity markets and moved away from government controlled monopsony arrangements. The structure of the project with its focus on sector reform, analytical work and support to organizing and capacitating producer associations was linked to lessons learned in other countries and similar projects. 23. Certain elements of project design were relatively complex given the capacity of the implementing agency and country context. Project design under the second component called for support to GAPAs through a matching grant mechanism for productive investments and GAPA savings and revolving credit schemes. FNC had a few experiences in administering micro-credit to GAPAs in the previous decade through pilots but it was a generally new approach that required the development of detailed operational procedures, modalities and testing. As part of preparation process, a micro-credit consultant provided input into project design and implementation manual. The choice to include micro-credit was a response to the sheil system, an informal lending system used in the agriculture sector that led to extremely low prices for producers. While the choice of matching grants and micro-credit was considered appropriate given the development objective and beneficiary targets, it did represent a risk to the project.

2.2 Implementation 24. Although project implementation coincided with significant market liberalization some uncertainty existed around the direction of policy reform in early days and the project contributed to consolidation of reforms. Project design was finalized while sector reforms were still under discussion. Although the issuance of the Presidential Directive ultimately occurred immediately prior to project approval there remained some uncertainty as to whether it would be fully implemented or adjusted over time. This was particularly the case for abolition of taxes and fees, which were collected at various levels and a key recommendation for policy reform. An estimated 18 different taxes and fees were levied on gum arabic at national, state and locality levels. Their removal was variable and subject of policy dialogue with the Ministry of Finance and National Economy in the first half of the project. Project implementation was also sufficiently flexible to allow the sequencing of the studies financed by the project, which took place over a period of time and accommodated the sector’s knowledge needs and policy dialogue requirements. 25. Once initial reforms were consolidated, however, there was less consensus around second generation reforms. The reform agenda in the middle to latter stages of project implementation was less clear due to more complex policy and institutional issues around the remaining taxes and fees being collected at state or locality level, the structure of the gum arabic auction market, export licensing arrangements, access to finance under Islamic banking principles, promotion of

Nations and World Bank, working in partnership with the Sudanese parties and the IGAD Partners Forum for Peace (IPF).

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local value addition and processing, and accessing global market opportunities. Many of these issues were analyzed and discussed through project financed studies but consolidation into a concrete reform agenda was more difficult to attain. The project did invest significantly in communication and promotion activities in the latter half of implementation, one of the recommendations emerging from project supported analytical work. 26. The project invested significant resources in supporting GAPAs even in the face of conflict within the project implementation area. The core of the project was its support gum arabic producers and their communities. The project allocated resources to expand access and participation by GAPAs in the project through matching grants and through access to gum arabic seedlings. The project exceeded original targets in this area (see discussion below on number of beneficiaries). Conflict re-emerged in South Kordofan in 2010 and in Blue Nile state in 2011 and impacted the project’s ability to operate in some localities. 27. Multiple layers of project coordination led to some implementation delays as the project management structure was established but eventually became quite strong. The PCU was staffed by assigned FNC staff and hired consultants, but staffing took some time to put in place at federal, state and locality levels. Initially the project was rate moderately unsatisfactory (MU) for delays in establishing the structure needed to carry out activities, particularly at the locality level. 28. Implementation of activities related to the Gum Arabic Market Information System were affected by delays and implementation bottlenecks. As part of support to sector reforms, the project anticipated support for and launching of a market information system available to producers, processors, exporters and importers. Implementation of this activity was allocated to the Ministry of Foreign Trade (MFT). A study on the design of the market information system was commissioned and completed in 2013 following significant delays. The basic architecture of the system was developed and launched online in 2015. As of project closure, however, the market information system was not functional as no price, production or other data was collected or disseminated through the system and there appeared to be a lack of consensus on the utility of the proposed design between FNC, MFT and other stakeholders. 29. Combining two sources of funding under single project umbrella was useful but was not seamless. The use of MDTF-N and IFAD sources of funds in sequential order allowed for continuity in project design and support for a longer implementation period. Although IFAD funds were committed to the project early on in 2010 through a cooperating agreement, issues arose around the details of the legal agreements (the Letter of Appointment) and the mechanics of disbursement, which took a long time to resolve. As a result, the initial disbursement of IFAD funds to the project was significantly delayed and contributed to the fourth and final extension of the closing date for the project.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 30. Definition of a relevant set of results indicators represented a challenge throughout implementation. Restructuring of the results framework was required early on. The short timeframe between the RRC decision meeting, negotiations and approval (in line with the

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provisions of OP 8.0) affected the ability of the team to incorporate recommended changes to the results framework. As a result, the project was approved with a results framework that the task team and implementing agency acknowledged required immediate adjustment. The first supervision mission in May 2010 proposed adjustments and additions to the results indicators, which were formally adopted in the 2011 restructuring. Additional changes in the results framework were discussed in 2013 but ultimately not pursued. These latter changes were proposed to better capture outputs and performance from matching grants at the intermediate result level. 31. Other aspects of M&E framework were well designed particularly data collection tools. Adequate provision was made for a management information system and for a frequent set of impact assessments to cover both the MDTF-N and IFAD financed phases. Human resources required to carry out M&E functions were in place. Higher level MDTF-N related monitoring took place as well including the MDT-N monitoring agent. Initial baseline surveys also accommodated IFAD core indicator reporting requirements. 32. M&E implementation and utilization of results. While the results framework changed substantially over time, the higher level indicators remained relevant throughout and generally provided guidance in terms of monitoring project implementation and achievement of the project objective. A baseline survey was launched within six months of effectiveness and completed in the project’s first year. Interim impact assessment and final impact assessment studies were also undertaken based on household surveys targeting. Technical progress reporting was consistent throughout the project implementation on a quarterly basis. M&E was rated moderately satisfactory for the duration of implementation.

33. A mid term review was discussed but delayed in part due to the frequent turnover in TTLship and uncertainty around the closing date of the project. Following the passage of time, it was felt more practical to pursue implementation closure related assessments.

2.4 Safeguard and Fiduciary Compliance 34. Safeguards. The project was initially rated as category C at appraisal stage, triggering OP4.01 Environmental assessment because it was not expected to generate significant environmental and social impacts. In all ISRs and internal Bank systems, however, the project was rated Category B. Both the Bank task team and FNC as the implementing agency operated under the assumption that the project was rated C throughout the project implementation period. A 2013 implementation support mission did raise questions as to whether the project was mis-classified as a category C but the issue was not resolved. 35. Although there remains some confusion around the classification, in practice the project was governed by safeguards instruments at the category B level - the procedures and guidelines laid out in the umbrella Environmental and Social Management Framework (ESMF) for Natural Resources Projects in Sudan. This framework was utilized for project implementation and identified specific mitigation measures that could be utilized if any of the matching grants were found to include substantial environmental impacts. No matching grant activities were formally flagged as having negative impacts during implementation and the project was rated as being in

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compliance with applicable Bank policies and safeguards instruments by Bank implementation support missions. An external safeguard review for MDTF-N projects found no major issues and safeguards implementation was rated moderately satisfactory for the duration of the project. 36. Financial Management. At appraisal FNC was judged to have acceptable financial management systems to implement the project. Financial management compliance was rated moderately satisfactory or satisfactory for most of the implementation period. The project started with a manual accounting system and relatively limited use of software but ultimately moved towards a fully electronic accounting system to manage funds. Audits were provided on time and no major issues identified. Capacity to manage funds increased over time and the ceiling of the designated account was raised to support scaling up of matching grants activities. 37. Procurement. Procurement risk was rated high at appraisal due to systemic country issues as well as capacity issues at FNC and project level. These were to be corrected through early capacity building and training for the Procurement Officer appointed for the project. Procurement was rated moderately satisfactory and satisfactory for most of project implementation with delays in procurement as the primary reason for the moderately satisfactory rating. Most procurement was centralized at PCU level, with LIUs responsible of some small shopping (office furniture and stationary). Training was provided at both PCU and LIU levels. 38. Communities undertook a number of small scale procurement activities as part of their matching grants through community procurement committees. The total amount of community procurement was estimated at 4.3 million SDG5, of which 1.9 million SDG was for the procurement of works and 2.4 million SDG for the procurement of goods. An external assessment of performance of the community procurement in 2014/15 and rated overall performance as 86 out of 1006.

2.5 Post-completion Operation/Next Phase 39. An institutional architecture is in place to sustain project investments through FNC and GAPAs. The project developed a formal exit strategy and FNC will continue to operate and maintain training centers and nurseries financed by the project, all of which are located within larger FNC stations or centers at state and locality level. GAPAs will be responsible for the operations and maintenance of productive investments (water points, pumps, tractors) and have received training as part of their matching grant. The Gum Arabic Board, which is Sudan’s umbrella organization for gum arabic producers, processors and exporters, will also continue to provide an institutional home for dialogue around the sector although producers have also indicated interest in formation of independent higher level producer organizations.

5 Around US$1 million based on an average exchange rates over the project life - matching grants provided by the project totaled US$0.86 million but were accompanied by 20% additional contribution from GAPAs 6 The procurement assessment was based on ten standard compliance indicators rated as follows: organization and functions of the system (rating: 95 out of 100); defining plan and requirements (96.5); preparation of specifications (68); assessment of procurement options (85); preparation of the bid documents (73); bid evaluation & contract award (90.5); contract management (80); basis for transparency (85); basis of accountability (94); and record keeping (95).

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40. Additional support for gum arabic sector reform and producers is proposed through Government and other donor resources but there remains scope for mobilizing additional funding to scale up project achievements. Government counterpart funds have been provided to finance the PCU for the remainder of 2015 following closure of the IFAD grant but further funding is not yet certain. The project’s model of capacity building and matching grant investment support to GAPAs will be replicated in additional localities through new funding from Agence Française de Développement (AFD) with implementation by FNC. Although this project will only cover a small number of GAPAs it represents a successful upscaling that FNC would like to replicate a larger scale. FNC has also proposed an additional Gum Arabic Commodity exchange and Warehouse Receipt System project to further develop the gum arabic value chain and support higher level producer organization development. Financing has yet to be secured at the time of ICR development.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation 41. Gum Arabic policy reform and sector revitalization was relevant to the country’s development priorities and remained so over the implementation period. The project directly responded to the Government’s own initiatives within the agriculture sector and the Government’s Executive Program for Agricultural Revival which was launched in April 2008. As a source of consistent export earnings, gum arabic also represented a strategic agricultural commodity and was aligned with Government strategies to expand and diversify its export base, which remains highly reliant on oil. In 2014 gum arabic exports were valued at approximately US$97 million and were Sudan’s third largest agricultural export earner after livestock and sesame. 42. Project implementation also spanned a period of intense change for Sudan, including the implementation of the CPA and Government of National Unity (GONU), the separation of the country into two sovereign nations, renewed conflict, and international economic sanctions and isolation. Sudanese gum arabic is currently exempt from sanctions and represents one of the few economic sectors around which widespread international engagement and dialogue currently takes place. 43. The project was highly relevant to IFAD and MDTF-N objectives to support economic growth and poverty reduction among poor and conflict affected populations. The project responded directly to the objectives of the IFAD country strategy and MDTF-N objectives through its target group of beneficiaries and focus on rural economic growth and market development. The project was also complementary to other initiatives within the MDTF-N agricultural portfolio – including the MDTF-N financed Improving Livestock Production and Marketing Project. 44. While not the main source of livelihood for many producers, gum arabic is an important source of cash income in the off-season. The project’s development objective and focus on increasing income for producers was relevant to the livelihood priorities of producers. Most gum arabic producers rely on a mixture of livestock and crop production for their primary

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livelihood. Gum arabic harvesting is a complementary off-season activity to crop production and for some producers, can contribute up to 50 percent of total household cash earnings during the year.

3.2 Achievement of Project Development Objectives 45. Achievement of the PDO is based on three inter-related outcomes –increased income, improved production, and improved marketing among small scale producers targeted by the project. Change in incomes among gum arabic producers PDO Indicator: Percentage change in the income level of beneficiary households from Gum Arabic Production after project intervention. 46. The target is considered fully achieved. The change in beneficiary household income was the most direct measurement of the project’s development objective. Analysis of the baseline survey and end of project survey in the impact assessment indicate that the original target of 20 percent was met. The 65 percent increase in gum arabic income reported by the project, however, should be adjusted downward so that it reflects the actual net impact of the project given income changes in the control group (including both “before and after” and “with and without” scenarios). 47. Incomes among gum arabic producers rose across the board among both project and non project beneficiaries during implementation due to liberalization in the sector. There was a consistent and gradual increase in producer prices during project implementation as producers were no longer required to sell at fixed prices to the Gum Arabic Company and taxes and fees were reduced. As a result both control and project beneficiary income increased. ICR analysis on the net increase in incomes among direct project beneficiaries after discounting the general rise in income for all gum arabic producers shows the increase is approximately 21 percent in real terms. This is still above target levels established by the project. Table 1: Changes to gum arabic price and incomes among project and non-project beneficiaries

2010

2014 Control group Project beneficiaries

Net benefit to project

beneficiaries SDG

% change from 2010

SDG

% change from 2010

Average price of gum/kantar

57.4 to 74.5 SDG

704 (236 in

2010 SDG) 390%

854 (286 in

2010 SDG) 494% 104%

Average income from gum arabic in current SDG

6,026 to 10,867 SDG

21,417 (9,823 in

2010 SDG) 16%

25,283 (11,596 in 2010 SDG)

37% 21%

Source: Gum Arabic Project Baseline and Impact assessment, real SDG calculations based on CPI

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Change in gum arabic production 48. Change is gum arabic production contributed to increases in income realized by project beneficiaries and is based on the following: 49. Increased utilization of tree resources. Increases in household income among project beneficiaries were also generated by increases in the volume of gum arabic production. Data from beneficiary studies indicates significant increases in the amount of gum arabic harvested from producer fields and that project beneficiaries used more land and tapped more trees than non-beneficiaries7. 50. Access to inputs and finance to mobilize labor. Increases in production experienced by project beneficiaries were also directly related to the ability of producers to mobilize labor for gum arabic harvesting. Casual or household labor is needed to tap trees and collect gum, however producers often face a number of constraints due to limited availability of cash for daily wages and access to the transport and water necessary to sustain work in fields located far from village centers. Matching grant investment in tractors and water points allowed GAPA members to organize transportation of both labor and water to the field, while increased savings or access to credit could be used to finance wage costs of casual labor8. Table 2: Changes in Gum Arabic production, marketing and profitability

2010 Baseline Survey

2014 Impact Assessment Survey Control group

Households Project

beneficiaries % of respondents indicating price of gum arabic was profitable

3.5% 54% 71%

% engaged in collective marketing of gum arabic

8.1% 12% 62%

% of gum sold that was cleaned and sorted 20% 13% 23% % of utilization of owned (gum arabic) land 43% 44% 79% % of gum arabic marketed directly no data no data 68%

Source: Project Impact Assessment Original PDO Indicator/Restructured Intermediate Results Indicator: Number and percentage of GAPAs with effective savings and credit systems. 51. This target is considered mostly achieved, however the definition of effective savings and credit systems does not appear to have been formally defined at appraisal or during implementation. In practice the definition used by the project was whether a functional revolving savings and credit system continued to operate over multiple seasons. In this respect the project reported attaining 97 percent of the 100 percent target. The impact assessment survey found that of the 194 GAPAs that benefitted from the project, 97% or 188 had functional savings

7 Acacia trees mature over a five year period therefore any increase in gum production in the project period is due to increased utilization of existing trees. In general estimates of maximum yields are not known and yields are dependent on the number of trees tapped, tapping technique, tree age and other environmental factors. 8 Microfinance grants to GAPAs totaled US$ 2.8 million under the project.

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and credit systems that either utilized funds own funds or the seed grant for microfinance provided by the project. 52. Project investments in microfinance grants and training appears to have increased access to and use of banking services. The baseline survey found relatively few GAPAs had formal savings in Banks (2.2%) or access to credit (around 17% - 20%), which subsequently increased among project beneficiaries. According to the impact assessment survey the average capital of GAPAs increased from SDG 46,478 in 2011 to SDG 104,571 in 2014. Table 3: Change in access to credit and savings


2014 Impact Assessment Survey

Project beneficiaries


Control group Households

% indicating have savings with banks 2.2% 29% 19% % and # of GAPAs with savings and credit system

2.4% (5 GAPAs)*

97% (188 GAPAs) Not assessed

% with access to formal credit (within GAPA our outside) 17% - 20% Not assessed Not assessed

* 2011 data from PCU data and 2014 the impact assessment based on interviewee recall 53. Within GAPAs, revolving fund accounts were managed by elected committees who decided on credit allocations, defined collateral, and controlled the repayment of loans. On average GAPAs received 56,000 SDG per GAPA (approximately US$10,000). The project credit officer and LIUs extension staff provided support to committees and members on the management of the scheme. Repayment rates within GAPAs were included as an intermediate results indicator at appraisal but the indicator was removed in the restructuring of the results framework. The project did, however, continue to monitor and selectively report on repayment rates in quarterly progress reports based on monitoring missions. No comprehensive report was available from the project on repayment performance for all GAPAs. Nonetheless, based on limited reporting, repayment appears high although there are some instances of low repayment, particularly in the first installment of funds. Table 4: Sample of GAPA revolving fund repayment rates

Locality # of GAPAs

# of members

Total microfinance funds received (SDG)

Repayment rate - first installment

Repayment rate - second installment

Bara 14 1,846 789,600 93% 94% Tandalti 9 399 489,000 51% 92% Abujubaiha 27 1,762 1,428,800 82% 88%

Source: July – September, 2014 Quarterly Progress Report PDO Indicator: Number of Direct project beneficiaries and Number of Direct Project Beneficiaries of which female. 54. This target was fully achieved in terms direct project beneficiaries and mostly achieved with respect to the percentage of female beneficiaries. Within the original 11 localities targeted by the project, an initial 132 GAPAs were targeted at appraisal (110 for micro-finance and 25 for

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matching grants). The longer time frame available for implementation allowed the project to reach more GAPAs. The Government Implementation Completion Report (ICR) of March, 2015 indicates 236 GAPAs had been reached by the project – 180 with micro-finance support (grants and/or training) and 56 with matching grants. The impact assessment, which assessed progress up to December 2014, indicates 194 GAPAs had been supported – 129 with microfinance support (grants only), and 56 with matching grants. The difference in number appears to be related to inclusion of GAPAs that benefitted from capacity building training but did not benefit from matching grants or micro-finance grants. Both sources of data demonstrate the project exceeded its targets for direct beneficiaries. 55. The project also reported an increase in the size of GAPAs. Membership increasing from an average of 120 members per GAPA in 2011 to 189 in 2014 compared an average of 83 members for non-beneficiary GAPAs in 2014. The total number of individual beneficiaries within participating GAPAs is estimated by the Government ICR at 17,080 for microfinance, 5,315 matching grants and 1,500 for training and capacity building. In terms of female beneficiaries, the project targeted participation of 25% and achieved 24 %, based on a calculation number of female members in targeted GAPAs. 56. The project also reached a number of indirect beneficiaries. Indirect beneficiaries included individuals within the project area who benefitted from investments in infrastructure and access within communities where beneficiary GAPAs were located – 20 of the 56 matching grants financed water points or water storage structures used by the community at large – as well the larger population of gum arabic producers who benefitted from policy reforms and access to services through capacity building investments in FNC. A total of 550 GAPAs were registered in the 11 localities where the project operated and there were approximately 2,000 GAPAs country-wide. Table 5: Capacity building and matching grant investments

Activity Unit Target Achieved

Capacity building support to producers associations (training on: improved production techniques, credit, financial management, Marketing; business/organizational skills and gender mainstreaming)

# of GAPAs

120

189

Training for ToT , Forestry Extension officers and locality coordinators on community organizational skills, credit- marketing and gender mainstreaming

persons

28

28

Training of GAPA executive officers on marketing, credit, financial management; business administration (3 members per association.) member 582 1112

Training for GA Unions at locality and state level wshop 40 40

Seasonal credit and Micro finance grants # of GAPAs 110 129

Support infrastructure/productive investment (matching grants) # of GAPAs 30 56

Source: Impact assessment 57. Other indirect beneficiaries include laborers employed in the gum arabic sector, private sector processors, exporters as well as institutions supporting the sector such as the Gum Arabic Board, state and local government, and FNC itself, through infrastructure investment in tree nurseries and training facilities and training provided to FNC staff. The project estimates

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approximately 175,000 total indirect beneficiaries were reached by the project from the full range of stakeholder groups. Change in gum arabic marketing 58. Links between income change and project interventions. There is a reasonable case for attributing changes in income seen in the impact assessment to specific project interventions based on the following factors: 59. Improved marketing. GAPAs supported by the project benefitted from efforts in collective marketing to obtain better prices and avoid low prices in the peak marketing season. These efforts were directly facilitated by training for GAPAs which allowed for more effective collective action as well as the project’s matching grant investments in storage and transport9, which allowed GAPAs to sell in bulk at a time when prices were highest. Project investments in savings and credit systems also allowed individual gum arabic producers to access credit and reduce their reliance on the sheil system, which in turn increased the amount of gum marketed directly rather than transferred as repayment to moneylenders10. Evidence from impact assessment survey indicate a higher number of producers in the project are now directly marketing their gum in comparison to non project beneficiaries (see Table 6). Table 6: Changes in Gum Arabic production, marketing and profitability



Control group Households


Project beneficiaries

% of respondents indicating price of gum arabic was profitable

3.5% 54% 71%

% engaged in collective marketing of gum arabic

8.1% 12% 62%

% of gum sold that was cleaned and sorted 20% 13% 23% % of utilization of owned (gum arabic) land 43% 44% 79% % of gum arabic marketed directly no data no data 68%

Source: Project Impact Assessment Original PDO Indicator/Restructured Intermediate Results Indicator: Percentage of FOB price received by small scale gum producers after project intervention. 60. This target is considered fully achieved. Both the 2007 Policy Note and FPP noted that producers received as little as 10 percent to 15 percent of the FOB price under the pre-liberalized system where the Gum Arabic Company had monopsony purchasing power. Whether producers received a higher share of FOB price was seen as a key indicator of policy changes within the

9 The 56 matching grants financed tractors (23 grants), water reservoirs (15 grants), gum stores (13 grants), hafirs (underground rainwater storage structures – 2 grants), and artisan wells (3 grants). 10 The sheil system is a type of informal agricultural credit that provides cash loans to producers to be repaid in kind at an agreed upon price set at the time of the loan. This sheil price is typically much lower than the eventual market price.

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sector and the mechanism by which higher incomes would be achieved by project beneficiaries. All producers experienced significant increases in prices following liberalization in the sector and evidence from project surveys indicate project beneficiaries did achieve higher price levels. 61. In the project’s 2010 baseline assessment, producers reported an average price of 57 SDG per kantar (100 lb bag). At the time of the impact assessment project beneficiaries reported prices of 854 SDG/kantar while non-project beneficiaries reported average prices of 704 SDG/kantar (equivalent to 286 SDG/kantar and 236 SDG/kantar in real terms if discounted to 2010 SDG) – a difference of 87 percent between project and non-project households. Although international CIF and Sudan Free on board (FOB) prices for gum Arabic did fluctuate during the project period, prices in 2014 remained very similar to 2007/2008 levels. As a result, higher producer prices have also resulted in a higher share of the FOB prices than non-beneficiaries. 62. Project M&E reports indicated producers received 65 percent of the FOB price by project end. Although the ICR analysis was not able to replicate this number due to the lack of disaggregated price data for various grades of gum, project estimates are credible and it is likely project beneficiaries received competitive market prices very near average FOB prices. Official trade statistics indicate FOB prices for Hashab in 2013 were around US$3,300/ton or US$148/kantar. Average farmgate producers prices for project beneficiaries in 2014 impact assessment were equivalent to US$412/MT or US$105/kantar – around 71 percent of the FOB price reported by project while non-project beneficiaries reported prices around 59 percent of FOB prices11. Higher price premiums received by project beneficiaries compared to non-project beneficiaries are credibly attributed to better marketing efforts and higher quality gum production - as discussed in the sections above. Table 7: Estimated FOB Price Received by Producers

Average Producer Price (project surveys)

Average FOB price US$/kantar

(Central Bank of Sudan) % of average FOB

price received SDG/Kantar US$/Kantar

2010 Baseline Survey 57.5 25 58.84 42

2014 Control group Households

704 (236 in 2010

SDG)

87 148 (2013 data) 59

2014 Project beneficiaries

854 (286 in 2010

SDG)

105 148 (2013 data) 71

Notes: 1 kantar = 100 lb, 2010 FOB price is average across Hashab and Talh gum, 2014 FOB price is Hashab price only, US$ exchange rate based on unofficial market exchange during the season

11 Sudan and global price data for various qualities and grades of gum is not easily available so average prices mask the quality premium received by higher grade gum. Hashab gum from Acacia senegal trees is of higher quality than Talh gum from Acacia seyal trees. Disaggregated price data for the two types of gum is not consistently reported in Sudan and global trade data.

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Source: Project surveys and Central Bank of Sudan Summary of Performance against PDO Outcome indicators 63. The June 2011 restructuring, which simplified and re-organized the results framework, reduced the original set of PDO indicators by downgrading two indicators to intermediate results indicators. Because they were still measured for the life of the project and are outcome rather output indicators, they are still reported here. Project M&E data show most targets were achieved or nearly achieved. Table 8: PDO Indicator Reporting

PDO Indicator Baseline Original target Actuals reported by Project

Percentage change in the income level of beneficiary households from Gum Arabic production after project intervention

0 (baseline avg. income SDG 8,410

20% 65%

Direct project beneficiaries 0 12,275 23,895

% of beneficiaries female 0 25% 24%

Number and % of GAPAs with effective saving and credit systems* 2.4 % 100% 95%

Percentage of the FOB price received by small scale gum producers after project intervention*

10% – 15% 60% 65%

* changed to an intermediate results indicator in June 2011 restructuring

Average beneficiary farmgate price (US$/MT)

Baseline average farmgate price (US$/MT)

Average control farmgate price (US$/MT)

Average CIF price France (US$/MT)

Average FOB price Sudan (US$/MT)

Hashab FOB price Sudan (US$/MT)

Talh FOB price Sudan (US$/MT)

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2007 2008 2009* 2010* 2011 2012 2013 2014

Source: UN Comtrade Database, Central Bank of Sudan, Sudan Central Bureau of Statistics, project surveys *all 2009/2010 Sudan data sourced from the UN Comtrade due to lack of in country data

Gum Arabic Farmgate, FOB and CIF Prices

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3.3 Efficiency 64. Appraisal assumptions. The FPP did not include any detailed economic and financial analysis and because the project was prepared under OP8.0, no ex ante net present value (NPV) or economic or financial rates of return were calculated. A basic analysis of expected economic impact of the project was presented in the FPP, however, and estimated the expected increase in export revenues for Sudan as a result of the project and increased producers’ incomes in target areas. 65. ICR analysis: producer profitability. Detailed gross margin analysis was not undertaken due to data constraints, however project surveys provided data on the income changes and allowed for comparison between project beneficiary and control households. Based on survey data there were significant positive changes in income for both control and project beneficiary households. The net increase incomes among direct project beneficiaries after discounting the general rise in income for all gum arabic producers shows an increase in income among project beneficiaries of approximately 1,773 SDG in real terms, equivalent to a net incremental increase in income of 21 percent. 66. ICR analysis: internal rate of return: A basic financial internal rate of return was calculated based on the estimated increase in revenue generated by gum arabic sales among project beneficiaries using assumptions on the average production levels, number of direct beneficiaries and the average price premium realized by project beneficiaries as found in project surveys and ICR analysis.

67. If only direct beneficiary net revenues are compared to total project costs, the internal rate of return for the project is estimated at 7 percent, which is generally considered below the opportunity cost of capital. This rate of return represents a conservative estimate, however, since additional income from indirect beneficiaries may be attributable to project investments in policy dialogue and capacity building. Given the lack of data on available to quantify indirect benefits the internal rate of return was also calculated using a more narrow set of costs more directly associated with provision of services to direct beneficiaries. Under these different assumptions, the internal rate of return rises to 21 percent. This latter estimate likely represents an upper bound estimate and the project’s internal rate of return could be considered somewhere between these upper and lower estimates.

3.4 Justification of Overall Outcome Rating Rating: Satisfactory 68. The project is rated satisfactory based on an assessment of the relevance of the project to Sudan’s post conflict economic and poverty reduction goals, satisfactory achievement of its stated development objective in raising gum arabic producer incomes and evidence of the generally net positive return generated by the project, all within an emergency, post-conflict context.

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69. An independent evaluation of the MDTF-N was carried out in 2013 and included a case study on the project. It was provisionally rated as moderately satisfactory12 with an indication that was a likelihood the project would attain its PDO, in depth evidence on project outcomes was not yet available and the project was still under implementation. 70. The results framework analysis demonstrates nearly all performance indicators were fully achieved. Despite good performance, it should be noted the relevance of some of the intermediate results indicators to the PDO can be considered weak. The changes to the results framework proposed in 2013 identified better metrics to capture intermediate results, particularly with respect to measuring GAPA capacity and functioning of the gum arabic market. These indicators were not adopted, however, and no reporting provided against them. Nonetheless, the existing results framework reporting and available evidence is considered sufficient to measure achievement of development objective. 71. One area of poor performance within the project relates to implementation of the market information system. The implementation performance of a gum arabic market information system (GAMIS) under component 1 can be considered moderately unsatisfactory. Although design was completed and hits on the website show a number of visitors, the system has not been fully established and there remains significant uncertainty as to whether it will be fully functional or operational. 72. While market information was considered an important aspect of the project, the support provided to consolidation of sector policy reforms, investments in institutional capacity building, producer organization development, credit facilities, productive investments and restocking of gum arabic trees made substantial contributions to improving the production and marketing systems as whole. Because the project’s development objective focuses on raising producer incomes and were largely achieved, weaknesses in GAMIS implementation can be classified as minor and as a result, the project is rated satisfactory.

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 73. The project’s design was poverty focused from the start given its focus on raising incomes among gum arabic producers. Income provided by gum arabic also represents a key source of cash income in the dry season. Sudan’s national poverty rate is estimated at 46.5 percent based but rural poverty was much higher in the states where the project operated – 67 percent in North and South Kordofan, 64 percent in Blue Nile and 61 percent in White Nile. The beneficiary characteristics reported in the project’s impact assessment show that 78% of the direct beneficiaries’ GAPA members were classified as either very poor, poor or less poor.

12 World Bank. 2013. Independent Evaluation of the World Bank Administered Multi-Donor Trust Fund in Sudan: final evaluation report. Washington DC; World Bank. http://documents.worldbank.org/curated/en/ 2013/02/17879140/independent-evaluation-world-bank-administered-multi-donor-trust-fund-sudan-final-evaluation-report

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74. Because gum arabic producers are almost exclusively located in isolated rural communities that have limited access to basic services, project investments in storage facilities, water points and transport also had an indirect poverty impact for communities in addition to the direct productivity and marketing improvements. 75. In terms of gender, project implementation focused on meeting its 25 percent target for gender participation, which was almost fully achieved. There were ten all female GAPAs supported by the project. While data was not systematically captured, information on GAPA membership indicates that the project contributed to an increase in the share of female membership over time – in some cases project supported GAPAs experienced an increase in female membership from levels below 20 percent to 25 percent by project end. (b) Institutional Change/Strengthening 76. Gum Arabic producer organizations. A key benefit of the project has been building stronger producer organizations. Project investments provided training and capacity building for GAPAs and facilitated exchanges between GAPAs to foster knowledge sharing and coordination. Development of higher level producer organizations and more formal coordination in marketing among groups of GAPAs is under consideration among more mature GAPAs. 77. Forest National Corporation. Project investments have made substantial contributions to the longer term capacity of FNC to deliver services to gum arabic producers through the rehabilitation of FNC nurseries and training facilities. Seedling production capacity for FNC has increased as a result of nursery development and training capacity has expanded. The project developed training modules and built the technical capacity of extension workers and FNC staff, which provide a sound basis for scaling up training to additional GAPAs if resources are available. 78. Gum arabic sector reform. The project’s knowledge and communication products have contributed to the larger stock of knowledge around gum arabic market opportunities, expanded market promotion and communication activities and identified issues for continued policy dialogue. Project investments in market information systems, if fully operationalized, would provide a long term benefit for producers within the sector and the creation of more efficient and transparent marketing systems. 79. Market liberalization also resulted in sustained institutional changes within the sector as the Gum Arabic Company’s role in marketing was eliminated and new institutions emerged to provide coordination in the sector. The government established the Gum Arabic Board in 2009 to facilitate reforms and it continues to operate as the primary coordinating body within the sector. (c) Other Unintended Outcomes and Impacts (positive or negative) 80. Increased productive potential and additional environmental benefits. The project produced 2.7 million seedlings as a result of investments in tree nursery rehabilitation and support for the operational costs of seedling production through FNC stations. This is expected to boost the long term productive potential within the localities where the project operated and across the gum belt in general. Gum arabic trees play an important secondary role in agro-

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ecological systems through contributions to restoring soil fertility, providing dune or wind breaks to reduce erosion and providing both fuel and fodder. Trees can also be expected to contribute global environmental and climate benefits through carbon sequestration. 81. Private sector development. Liberalization of the sector has resulted in new private sector entrants into export and processing activities. Although sustained activity appears variable –not all new participants sustained activities across multiple seasons – project data indicates that more private sector entities are active within sector in terms of export as well as basic marketing and processing activities than was the case prior to sector reforms.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 82. A stakeholder workshop was held as part of project closure. General discussion took place around the following topics:

Project location as initially piloted in the 11 localities The vision for the project expansion in the potential states of the gum arabic belt The values of constraints and the lessons learned from the project implementation to help

the FNC in setting policies to sustain the sector reform and assist in rural development planning

The role played by the project in the sector policy reform The importance of information, data collected on the project activities The project legal framework and staff remuneration

83. Participants highlighted the need for continued work on marketing and storage issues, land tenure, association development and strengthening, and access to finance. Key points are summarized in Annex 6.

4. Assessment of Risk to Development Outcome Rating: Moderate 84. Institutional and policy risk. This risk assessed as moderate. Rollback of policy reforms represents the primary policy risk to sustaining gains achieved under the project. While market liberalization following the Presidential Directive appears to be well established, revenue pressure may affect government commitment to sustaining the reform. The split with South Sudan and low oil prices have resulted in lower revenues and growing budget deficits, which could create an incentive for re-imposition of taxes and fees, particularly at state or locality level. The risk of re-imposition of the floor price policy or monopsony arrangements through the now defunct Gum Arabic Company, however, is low. Additional reforms or market development activities will require further policy dialogue – particularly if auction markets are to function more effectively. 85. Institutional capacity risks are also moderate. Inter-ministerial/agency coordination between FNC, MFT and the Gum Arabic Board needs continued attention in order to fully operationalize a market information system for the sector.

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86. Financial risks. Financial risks are substantial. While loan repayment within GAPAs supported by microfinance matching grants appears high, performance is reported to be variable across GAPAs. There remains a moderate to substantial risk that microfinance grant investments may not be sustained in the long term if lower repayment levels erode the principal maintained by GAPAs. Continued monitoring of GAPAs is planned by FNC and should be followed up with technical support as needed. 87. Environment and Social development risks. Environmental risks are low. Project investments in better tree management and harvesting techniques as well as gum arabic seedling production have created a net positive environmental impact. Matching grant investments in storage structures and water points are likely to have limited environmental impact and maintenance plans have been put in place as part of the matching grant training. 88. Social development risks are moderate, due to the larger country risk around potential conflict and violence. An outbreak of conflict did affect the project during implementation and could represent a risk to development outcomes in the future.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 89. Although the project was prepared under OP 8.0, more time and resources were devoted to project design than other MDTF-N supported projects. This was aided by the Bank’s involvement in preparation of and dialogue around the 2007 Policy Note on Gum Arabic as well as a project preparation process that was initiated in the year prior to approval by the RCC. The PCN was reviewed in January 2008, a QER held for the project in May 2008 and the project was provisionally approved by the RCC in March 2009. The preparation team brought in technical design support for gum arabic reform and the project’s microfinance support. Engagement with IFAD on project design also took place and both the IFAD program document and the Bank’s FPP were consistent and well aligned. Nonetheless, the time between RCC decision meeting and negotiations/ finalization was relatively short and as noted above, suggestions by the RCC to strengthen the project’s results framework were not fully taken on board prior to approval. (b) Quality of Supervision Rating: Moderately Satisfactory 90. The Bank undertook regular supervision with task team leader TTL and staff based within the region in neighboring countries. The Bank had a relatively small office in Khartoum at the start of implementation but increased capacity over time as the portfolio of projects expanded. The 2013 MDTF-N evaluation found that in-country staffing was a challenge for the Bank and had an impact on the implementation of MDTF-N projects at the start but improved substantially by the mid-point of MDTF-N implementation.

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91. TTL turnover was high and the project was led by four TTLs. Frequent change in TTL ship may have led to a loss of institutional memory and affected the extent of the Bank’s engagement on policy dialogue over the course of implementation. The supervision team was generally responsive to dealing with issues, however, including M&E and planning for transition arrangements. Restructuring of the results framework was planned and discussed early on. Further refinement of the results framework was judged useful and follow up took place in 2013, however no formal restructuring took place. No major changes to project design were required over implementation, a mid-term review was discussed but not held because it was deemed too close to project closure. While there was not a strong need for course corrections or adjustments to design, a timely mid term review process could have provided an opportunity to more formally re-assess the sector reform agenda with Government and implementation performance of matching grant activities. 92. Because the project was thought to be rated category C no dedicated safeguards supervision took place outside what was in place for the larger environmental and social safeguard framework for natural resource projects in Sudan. A wider review of safeguards undertaken for MDTF-N projects in 2012 found that while no adverse environmental or social effects resulted, the MDTF-N missed an opportunity to strengthen environmental protection and social sustainability for the future. This largely mirrors the experience of the project. While no evidence exists of negative impacts – and there are clear conservation and environmental benefits from the project – there may have been an opportunity for further strengthening existing systems within FNC and GAPAs. The Bank team should have also identified the inconsistency in safeguards categorization between the original FPP and Bank implementation status reports. 93. Supervision was candid in ratings of project shortcomings and constraints. The project was rated marginally unsatisfactory at the start due to delays in establishing implementing capacity and revised upwards when performance improved. Development of implementation modalities for matching grants and microfinance took time to finalize and were reviewed in detail during early supervision missions. The market information system received input from the Bank’s information and communication technology (ICT) team. Supervision of the IFAD funds proceeded smoothly and supervision was often undertaken as joint-Bank-IFAD missions. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 94. The rating is based on a moderately satisfactory rating for both quality at entry and quality of supervision.

5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory

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95. Achievement of project development objectives would have been difficult had the Government not followed through on implementation of the Presidential Directive on reforms and market liberalization. The policy environment changed markedly following reform and has remained largely the same with no retrenchment in policies. Following the Directive, two ministerial committees were established to ensure the decree was implemented and address barriers to implementation of the liberalization policy. A decision was also taken to establish the Gum Arabic Board to coordinate reform measures and support the revival of gum arabic production and exports. The objectives of the Gum Arabic Board were somewhat similar to the former Gum Arabic Company, but without monopoly power. Since then, the Gum Arabic Board has fulfilled its mandate for promotion of gum arabic export, opening new markets, providing finance services and quality control. 96. Government policies were less consistent in terms of macroeconomic stability. During the project period Sudan had a significantly overvalued exchange rate and a parallel exchange market. The real exchange rate was estimated to be overvalued by as much as 65 percent in 2008, which reduced only slightly to 50 percent and 40 percent in 2010 and 2011. The nominal exchange rate was devalued by almost 100 percent in 2012/13 but real exchanges rates remained overvalued for the duration of project implementation. High inflation and growing budget deficits also had an impact with monetization of the budget deficit contributing to high inflation levels in 2013 and 2014. Monthly inflation peaks exceeded 45 percent occurring at times. Trade was also substantially affected by the existence of sanctions which complicated cross border payments.13 (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 97. Implementing agency performance is rated moderately satisfactory. While the project took some time to fully launch in 2009 and 2010 resulting in a moderately unsatisfactory rating, project coordination did improve and remained satisfactory for the remaining project period. The