Crisis and Risk Management in Food ProductionCase of Moldova

From Drought to Rural Development

JULY2008

Prepared by Armen Mehrabyan, International Consultant, UNDP Agriculture and Rural Development Expert

Country Brief

1.1. Characterization of the economy and relevant demographics

1.1.1.. Population size, urban/rural composition, urban/rural compositionAccording to the The National Bureau of Statistics (NBS) in the beginning of 2008 population was 3.58 million, that’s about one percent down from the last census in 2004 and about 10 percent down since 1990 independence. The yearly population growing arte has been negative on about 1.5 percent since 1970 since. The demographic structure opf poopulation shown that the rate of residency by sex decrise up to 1,8% since 1990 and currently women per 100 man number is about 108, it means that about 48,1% of populatrion are man and 51,9% are women. Current density of population is about 118 people per square kilometr and percentage of urbanisation is decrised since 1990 up to 12,3% and currently the rural population account for about 58,7 percent of the total. Population annual growth is about 0.87%1.

Moldova: Demographic structure opf poopulation (Table 1)

Source: National Bureau of Statistics.

The agieng factor of population shown that according to the G.Bojo-Garnier scale when the value of the indicator is 12 and over the coefficient of demografic agieng incrise from Moldova independence period up to 5.46%, it means that number of persons fo 60 years over per 100 inhabitants is about 13,5.

Moldova: Agieng factor of population (Table 2)

Source: National Bureau of Statistics.It is estimated that about 400 000 people or more than 10 percent of the population working abroad and a further 290 000 people intended to migrate in the following months2. According to the official data in 2006 its about 854.6 million US$ was transferred through official channels by

1 http://www.worldbank.org.md/2 http://imf.org/external/pubs/ft/scr/2006/cr06185.pdf

the citizens of Moldovan that are working abroad, that about 25 percent increase over 20053 and that is about 26 percent of GDP.

1.1.2. Poverty lineThe housholds income and expenditures ratio shows that the poverty is pervasive (Table 3) with national poverty rate of 27 percent, where in rural areas exceeding up to 42 percent 4. In the World Bank Report mantioned that “The Government of Moldova’s Economic Growth and Poverty Reduction Strategy Paper (EGPRSP) lays out an ambitious plan for sustaining growth and poverty reduction and reshaping the government to meet the needs of a market economy. The public expenditures envisaged under this ambitious plan, however, vastly exceed the domestic resources available to the Government.

Additional foreign budgetary support may help alleviate some of that resource constraint. Recognizing that the share of tax revenues and expenditures to GDP in Moldova already greatly exceed comparable international levels, generating additional domestic tax resources risks crowding out the private sector and undermining growth prospects. This suggests that in order to finance higher order public expenditures priorities, the Government needs to create fiscal space from within the existing resource envelope. This will require inter and intra-sectoral reallocation of expenditures and an increase in the efficiency of public spending rather than increasing the relative size of government”5.

Whereas urban residents saw their incomes rise and their poverty rates decline, poverty actually increased among farmers and rural pensioners. A major proportion of a poor man’s expense is dedicated to food. The lowest quintile spends about 77 percent of its consumption expenditure on food and non-alcoholic beverages6.

Moldova: Structure of Disposable Incomes of Housholds (table 3)

3 http://www.bnm.md/en/grafic_date

4http://www.worldbank.org.md/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/MOLDOVAEXTN/0,

5 http://go.worldbank.org/VIGIV8ST60

6 FAO/WFP Crop and Food Supply Assessment Mission, , August 2007

The Kiel Institute (IOM/SICA) study made in 2006 shows that the remittance play a major role in the national economy and the reemittance levels strongly depend on the country the migrant is working in. They are highest for migrants in Europe and lowest for migrants in Russia or Ukraine. The migrants from rural households remit least amounts of money that is in line with poverty rates (42 percent rural). Neither public transfers nor private remittances are reaching relatively poor groups in amounts sufficient to offset the loss of income from other sources, in particular agriculture.

Nearly 70 percent of the population was considered poor and more than 60 percent lived in extreme poverty in 1999. Rapid economic growth between 1999 and 2004 reduced poverty up to 26.5 percent and unfortunately economic growth has not been coupled with poverty reduction. Poverty in the rural areas rising up to 70 percent where agriculture being the main source of informal employment and income for many households. In 2004 their welfare was below the absolute poverty line as compared to 40% in 2002 and currently poverty estimated at about 29 percent7.

1.1.3. Size of the economy: GDP, GDP per capita, growthTogether with poverty rate, inequality level also reduced. The problem of inequality is aggravated by the fact that poor people receive part of their income in kind. Consequently, the access of poor people to goods and services becomes limited. This trend is reflected by the Distribution of family income - Gini index that measures inequality at country level and income and consumption distribution by quintiles. As a result, in the period of 2000 – 2007 the Gini (Gini 2007 - 37.1 (medium)) coefficient decreased from 0.2 points8. However, inequality remains at a high level in Moldova compared to other countries9.

Economic growth is a pre-condition for higher living standards and poverty reduction. Between 2003 and 2007, the estimated average poverty elasticity to average consumption growth was about 2.1 %. That means that with each percent of growth, the poverty rate reduces by 2.1%.

The statistical results relating to the socio-economic development revealed a number of increasing trends in most sectors of the national economy in 2007. The GDP increased by 6 % and starting with the year 2000 the GDP increased by over 43%. In 2007, the GDP per capita exceeded US$296210. However, the structure of growth has not improved and some challenging trends in the country’s macroeconomic development were not overcome. Economic and

7 http://imf.org/external/pubs/ft/scr/2006/cr06185.pdf8 IMF, Republic of Moldova: Poverty Reduction Strategy Annual Evaluation9 Armenia, Albania, Ukraine10 http://en.wikipedia.org/wiki/Moldova

investment growth took place in the context of slow restructuring of the national economy, reduction of the growth rate in industry and agriculture. The accelerated growth of import led to higher share of net production and import duties in GDP, while the share of the gross value added in the GDP decreased.

Moldova's dependence on Russian energy was underscored at the end of 2005, when a Russian-owned electrical station in Moldova's separatist Transnistria region cut off power to Moldova and Russia's Gazprom cut off natural gas in disputes over pricing. Russia's decision to ban Moldovan wine and agricultural products, coupled with its decision to double the price Moldova paid for Russian natural gas, slowed GDP growth in 2006. However, in 2007 growth returned to the 6% level Moldova had achieved in 2000-05, boosted by Russia's partial removal of the bans, solid fixed capital investment, and strong domestic demand driven by remittances from abroad. Economic reforms have been slow because of corruption and strong political forces backing government controls. Nevertheless, the government's primary goal of EU integration has resulted in some market-oriented progress. The granting of EU trade preferences and increased exports to Russia will encourage higher growth rates in 2008, but the agreements are unlikely to serve as a panacea, given the extent to which export success depends on higher quality standards and other factors. The economy remains vulnerable to higher fuel prices, poor agricultural weather, and the skepticism of foreign investors. However, domestic demand has been a major source of growth – household consumption and construction fuelled by large remittances from workers abroad, officially estimated at about 30 percent of GDP.

Source: IMF, International Finance Statistics.

Public sector investment has remained very low, about 2 percent of GDP, resulting in deteriorating public infrastructure, roads in particular, with negative consequences for economic growth. Private investment, on the other hand, has slowly increased since the recovery, averaging 17 percent of GDP per year.

The irregular evolution of GDP components led to changes in its structure. Due to an increase of 16.4% of taxes weight in GDP, the share of production sector reduced from 88% in 2000 to 83.6% in 2005, of which the share of goods production shrank from 42 to 31%, whereas the share of services increased from 48 up to 54%.

Moldova: Key Economic Indicators, 2002–2006 (Table 4)2002 2003 2004 2005 2006

GDP per capita in Lei (at constant 2000 prices) 5 052 5 401 5 816 6 660 6 914Real GDP growth rate % change year on year 7.8 6.6 7.4 7.1 4.0Unemployment rate (incl. underemployment) 18.7 17.1 16.9 17.1 -Employment in agriculture % of total employed 51.0 49.6 43.0 40.5 40.7Exchange rate Lei:US$ (annual average) 13.6 13.9 12.3 12.6 13.1Consumer price inflation % change year on year. 5.2 11.6 12.4 11.9 12.5Trade deficit in million US$ 378 623 754 1 192 1 591Total external debt in billion US$ 1.8 1.9 1.9 2.1 2.6Total debt service in million US$ 175 244 159 305 251

Source: IMF series, the Central Bureau of Statistics, the National Bank of Moldova and the EIU.

1. 2. Agriculture, food production, distribution and demand structures

Agriculture’s share of the economy has declined since independence, both in absolute and relative terms, with agricultural value added shrinking by 50 percent. However, it remains the largest real sector of the economy, accounting for more than 20 percent of the GDP (30 percent if agro-processing is included) and employing more than 40 percent of the labour force. The agricultural sector also suffers from policy uncertainty, lack of access to adequate farm inputs, extension services and limited access to financial and insurance services. Inefficient farm sizes, some exceeding 2 000 hectares, and the continued squeeze on small farmers through lack of access to sufficient farm inputs (credit, farm power, improved seeds and extension services) as well as markets have contributed to the underperformance of the agricultural sector.

Land entitlement and ownership security is considered one of the pillars of a market driven agricultural economy. As part of reforms the government adopted the Land Code and the Law on Peasant Farms in early 1992, which provided the legal tools and mechanisms for land privatisation and the establishment of individual private farms. The reforms were half-heartedly implemented until the USAID-supported National Land Programme (NLP) was initiated in 1997, which primarily focused on individual land entitlements, carved out of the former collective farms. Unfortunately, the NLP was not accompanied by efforts to address the agricultural service industries, including input supply and agricultural marketing. The second phase of the NLP, which was initiated only in late 2000 and financed by the World Bank and USAID, attempted to address agricultural servicing. It has been argued that focusing only on land distribution, without paying due attention to agricultural skills, extension services, marketing for inputs and outputs and rural finance institutions, had a severe impact on the agricultural sector as a whole. The agricultural and livestock sectors are still recovering from the shock in the 1990s and ignoring the agricultural servicing sectors are said to be one of the contributing factors to the shock.

Moldova: Structure of Agric. Land Ownership, 2004

Private67%

State9%

Reserve16%

Municipal8%

Source: State Cadastre. Total Agric. Land 2.5 million ha.

Limited options, lack of adequate access to input and output markets as well as agricultural finance and farm machinery, have compelled many small holders to lease their land to corporate farms on unfavourable terms. The terms of the land lease in most cases are such that the landowners have borne most of the risk. Therefore, a re-collectivisation of farms has taken place, with very large farm sizes, reminiscent of the former collective farms. It is estimated that half of the agricultural land is used by 300 000 individual family farms and the rest is managed by 300-400 new corporate farms. The average farm size in Moldova is already 4-5 times larger than in Western Europe, owing to the rapid spread of leasing arrangements. A World Bank study (Agricultural Policy Notes: Agric. Land, December 2005), using Total Factor Productivity measure, has conclusively established that small farms are significantly more efficient than the large farms, yet, small farms cannot thrive in the current context.

According to the Rapid Rural Household Food Security Assessment made by Centre for sociological, Political and Psychological Analysis and Investigations CIVIS in the frame of UN

Drought Response Project, on average, 1,8 ha belong to one rural household, which corresponds to the official data, according to which the peasant households (individual farmers) own on average 1,6 ha.

Area of the available agricultural land

However, the agricultural land is parcelled very much, more than a half of the households surveyed (55,1%) possess no more than 2 ha of the agricultural land, half of which own up to 1 ha. Or, this area is sufficient only to provide the household internal consummation.

The practice of the agricultural land tenancy is developed poorly in the Republic of Moldova, which was confirmed only by 4,9% of the households surveyed. The tenancy of the agricultural land is practiced more often by the households, which do not have their own agricultural land. They normally take small plots of land up to 3 ha in tenancy, preponderantly, to satisfy the needs for their internal consummation. While the households owning more areas of their own land, are orientated to lease the larger plots of land for the production and sale activities. The minimal area of tenancy registered in the survey was 0, 12 ha and the maximal one was 120 ha. Besides the agricultural land, which practically all rural households (99 per cent) had received as a result of the privatization, they own a plot of land around their households, the surface of which varies from 0,02 ha to 0,9 ha.

Public expenditure on agriculture in Moldova is relatively low, about 3 percent of the total budget, which accounts for about 0.9 percent of GDP. Public expenditure in developing countries is typically 6-8 percent of the total budget, and in the developed industrialised countries the figure is 3-5 percent. The Medium Term Expenditure Framework (MTEF) agreed with the IMF and other donors does not envisage room for any increase in the near future.

Agriculture remains the main source of foreign exchange earnings in Moldova, after remittances from Moldovans working abroad. In 2005 aggregate earnings from agriculture-based exports (US$528 Million) accounted for more than half the total export value. In 2006, despite the ban from Russia on Moldovan exports, in particular wine, total agricultural-based export revenue was US$412.8 million, nearly 40 percent of total export earnings. Prospects are good for easing restrictions on Moldovan exports to Russia, while the European Union is increasingly becoming an important trade partner. Improved market outlets are essential for any improvement of the agricultural sector in Moldova.

Agricultural capital and infrastructure have suffered a dramatic decline during the economic crisis of the 1990s. Recovery, though significant, have not been able to reach the pre-crisis productive levels. Nearly 50 percent of the orchards and vineyards are out of production, irrigation is only 7 percent of the pre-crisis capacity, farm machinery has declined by 50 percent and existing machinery is on the average a decade old. Most of the high value crops are converted into high-volume-low-value crops such as cereals and sunflower. Significant

14,7%

28,4%

26,7%

14,5% 14,7%

1,0%

0%

5%

10%

15%

20%

25%

30%

0 ha 0,1-1 ha 1,1-2 ha 2,1-3 ha 3,1-8 ha 10 ha - 30 ha

investment through a comprehensive agricultural strategy is necessary to revitalise the agricultural sector.

According to the Matthias Moen, FAO assessment expert, report made during 30th of January – 20th of February 2008 in the frame of UN Drought Response Project, no more than 58 percent of the households are relying either on agriculture, daily labour or livestock as their main source of income. For the remaining households, non-agriculture sector activities are their main source of income.

Main sources of income

46.5%

7.9%0.4%

2.2%

20.4%

5.1%

17.4%

agriculture Livestock

Casual labour Commerce

Employment Remittances

Pension / social support

The main assets in rural economy in Moldova are animals, houses, mechanical tools (tractors, vehicles, etc.) and land. In general, animals are considered a valuable asset as households invest cash savings into livestock holdings. In addition, animal products (milk, wool, skins and meat) are an important source of income. Of the total number of interviewed households, 67.7 percent declared that they own animals and 87.4 percent have poultry. Those with big animals have an average of 6.5 animal units11, split into 0.1 horses, 0.5 cattle, 1.1 sheep, 0.1 goats and 0.7 pigs per household. On the other hand, those with poultry have in average 13.5 units.

1.3. Food supply/demand balance and market condition /prices.

National food balance sheets show, overall, how a nation deals with inter-annual fluctuations in the domestic supply of basic foods by adjusting commercial food imports to meet average total utilization requirements.

The long-term per capita human milled grain consumption trend and the 2006 Household Income and Food Consumption Survey indicate an average per capita consumption of cereal and derived products of 392.5 grams/person/day, equivalent to 143.2 kg/capita/year. It is used to set the target total human utilization level (unmilled) at 787 100 tonnes. To remain at this level of average consumption, Moldova would have to import about 737 000 tonnes of grain in 2007, assuming that household stocks are totally depleted at the end of the marketing year.

11 Animal units: estimated average value of the animals on local markets for slaughter use, average of the different regions, with a sheep or goat as a basic unit, conversion factors as follows: 1 sheep or 1 goat = 1 unit, 1 cattle = 5 units, 1 pig = 3 units, 1 horse = 7 units.

Summary Balance Sheet for 2007 (‘000 tonnes)12 (Table 5)Total gross cereal production 835.2Losses (%) 153.5Total cereal seed requirements 181.6Public stocks 50.0Total livestock feed 500.0Net commercial imports 737.0Total human utilization (unmilled) 787.1

Republic of Moldova is a net exporter of cereals in most years. The estimate total grain utilization from both net domestic and outside sources, given post harvest losses, requirements for seeds and livestock feed, household and (since 2003) emergency public stocks, and human consumption. The evening out inter-annual supply through adding to or subtracting from grain stocks, long-term average per capita consumption of grain, in milled terms, has been consistent with the 2006 estimate of 143 kg per year13.

The rough proportional breakdown of utilization for the total net grain supply, for the period 1999-2006 is as follows:

Losses 15 percentSeeds 10 percentHousehold roll-over stocks

3 percent

Livestock feed 35 percentHuman consumption 37 percent

The most important export market for the Moldovan high value agricultural products, mainly wine, fruits and vegetables, remains the CIS, in particular the Russian Federation. The Russian Federation remains Moldova’s strong trading partner despite the ban on Moldovan agricultural exports in 2006, in particular wine. Russia accounted for nearly 40 percent of the total Moldovan exports in 2003, which declined to just over 17 percent of the total in 2006. Romania ranked second in the export destination for Moldovan exports (14.8 percent of total), which has also been restricted since the former joined the European Union (EU). Russia has gradually eased restrictions on Moldovan fruit imports, while negotiations still continue to ease restrictions on wine imports. The IMF and the EIU predict that the current trade deficit, estimated at over 40 percent of GDP, will continue to persist despite the promised easing of import restrictions by Russia. On the import side, remittances from workers abroad will continue to strengthen demand for imported consumer goods and foodstuffs, pushing up the trade deficit in 2007-08. The IMF and the EIU also predict that the remittances and the increase in foreign grants may narrow the current-account deficit from 12 percent of GDP in 2006 to around 6 percent in 2007-08.

However, this optimism in a narrowing of the current account deficit may have also been compromised by 2007 severe drought.

High logistic costs, the requirement that all exporters use the state transportation, high administrative and handling costs, dilapidated road networks and lack of adequate storage and cold room facilities have combined to reduce profitability and impede further trade development. Investment in HVAP production, processing and trading is also hampered by lack of adequate access to credit. The banking system considers the agricultural sector as a risky investment and interest rates typically range between 20 percent and 30 percent, well beyond the reach of most farmers.12 FAO/WFP Crop and Food Supply Assessment Mission, , August 2007

13 Source: National Bureau of Statistics

Domestic market for fruits and vegetables are relatively small and saturate rather quickly during the harvest season. Cold room capacity is very low and only a fraction of the pre-crisis capacity. Therefore, most of the harvest has to be sold in a relatively short period of time or wasted, which is reflected in the highly variable seasonal prices. Off-season vegetables and fruits are imported and distributed through a small number of supermarkets and small shops in towns. Domestically produced fruits and vegetables are, by and large, directly marketed by small farmers in small towns and weekly markets. Relatively large-scale fruit and vegetable production are usually for export markets or larger towns, which require further sorting, packaging and processing.

Kitchen garden and livestock are the most important elements of household food security both in terms of nutrition and income. Most households directly sell their produce in the local weekly markets involving little or no marketing costs, i.e. intermediaries, packing and sorting. Dairy products are marketed either directly by households in the local weekly markets or sold to processors. The collection points for milk is usually situated closer to a large dairy farm and households with small number of livestock usually rely on large producers to supply to processors.

Markets throughout the country seem to be well integrated despite deteriorating road networks. A WB study (Moldova, Agricultural Policy Notes: Agricultural Markets, December 2005) shows that domestic input and output prices are highly distorted and there is a net transfer from producers to consumers. Producers receive significantly lower prices for their output, while paying much higher prices for purchased inputs compared with international prices. The indirect taxation of farmers was found not to be the result of Government revenue taxation but rather other distortions such as (a) inefficiencies and monopoly elements in processing, trading, marketing and transport (e.g. sunflower seed is bought, transported, processed and traded by only one company), (b) low product standards and (c) inefficient and distorting government interventions and regulations.

Wheat bread is the main staple in Moldova and annual consumption, estimated at about 110 kg per person per year, is similar to the high levels consumed in some Central Asian countries. Large mills dominate the market for wheat flour and bread, while small mills (up to 5 tonnes/day capacity) are also important players in the market. Government is weary of bread price hikes and

regularly intervenes in the market to ensure stable prices for consumers, sometimes at the expense of producers.

Domestic food prices have begun to rise following the drought. The FAO/WFP CFSAM Mission observed in some markets vegetable prices had more than doubled compared with the same time last year, while bread prices had also increased by nearly 40 percent in some areas. The government has recently suspended import duties on cereal imports14, and the VAT on essential staples, which will ease somewhat pressure on the prices of bread and maize. Figures in table 6 indicates that prices in four major markets in the Centre, North, South and East, respectively as shown in the graphs, move together, suggesting good market integration. Prices of sunflower seeds have slightly increased despite the sharp drop in production, while meat prices have followed an upward trend, especially recently (Moldova is a structurally net importer of live animals and meat products).

Food Prices in Four Major Markets, Lei/Kg, March 2006–August 2007 (Table 6)

Source: National Bureau of Statistics and ACSA (March 2006-July 2007), Mission findings, August 2007.

14 Until July 2008.

Wheat Prices, Lei/Kg July 06 - July 07

0

1

2

3

4

5

6ChisinauBaltiCahulOrhei

Potato Prices Lei/Kg, Mar 06-Aug 07

0

2

4

6

8

10

12

ChisinauBaltiCahulOrhei

Maize Prices, Lei/Kg, Mar 06-Aug 07

0

1

2

3

4

5

6

7ChisinauBaltiCahulOrhei

Tomato Prices Lei/Kg, Mar 06-Aug 07

0

5

10

15

20

25

30

35

Chisinau

Balti

Cahul

Orhei

Beef Meat Prices Lei/Kg, Apr 06-Aug 07

0

10

20

30

40

50

60

Chisinau Balti

Cahul Orhei

Sunflower Seed Price Lei/Kg Mar 06-July 07

02468

10121416

ChisinauBaltiCahulOrhei

1. 4. Effects of food crisis and Drought 2007

Consumer price inflation has remained in two-digit figures since 2002, reaching 12.5 percent in 2006. The International Monetary Fund (IMF) and the Economic Intelligence Unit (EIU) forecast the CPI inflation to drop to a single digit by the end of 2007 and remain so in 2008 and 2009. However, the 2007 drought that has devastated the agricultural and livestock sectors may increase pressure on prices and a single digit inflation rate may not be a realistic forecast under the circumstances. The exchange rate (Lei:US$) remains stable and the strengthening of Lei against the US$ during the second half of 2006 and the first quarter of 2007 reflects the high volume of remittances flowing into the country. In addition, the interventions of the Central Bank (the National Bank of Moldova) in the foreign exchange markets have been praised by various international organisations, including the IMF, the WB and EIU, as prudent monetary policies.

The 2007 drought has had severe impacts on the agricultural sector, which directly or indirectly support more than 60 percent of the population. In addition, more than 70 percent of the poor live in the rural areas mostly depending on kitchen gardens and small land areas under their management (1-6 hectares/household) or earn their living from casual farm labour.

All categories of farms, large farms, small individual farms and kitchen gardens have all suffered reduced output by an average of 60 percent and in some cases the entire crops are compromised. In addition, relatively high prices for food products, in particular vegetables and bread prices have eroded the purchasing power of households in both rural and urban areas. Pensioners and wage labourers are particularly vulnerable to high food prices.

The UN Food and Agriculture Organization and the World Food Programme (FAO/WFP) CFSAM conducted in August 2007 underline that about 84% of the total area of agricultural land of the country has been affected by the drought and the cost of lost production, at market prices, is estimated at nearly €300 million for cereal crops only.

Its about 60 per cent of the households do not have their meals or reduce the meals size, each fifth household of the total of the households surveyed practice not having their meals or reducing them to 3-6 days per or week or oftener.

Output of Main Crops, 2004-2007 15

Crop Region

Output ‘000 tones Decline over 2004-2006 (%)2007 2006 2005 2004

WheatCentre 98 140 258 198 51North 185 300 449 276 46South 181 208 343 319 38

Sub-total Wheat 464 648 1 050 793 44

MaizeCentre 118 282 510 314 68North 89 441 486 744 84South 70 600 497 552 87

Sub-total Maize 276 1 322 1 492 1 610 81

BarleyCentre 19 50 43 50 61North 24 56 68 80 65South 43 160 102 142 68

Sub-total Barley 86 266 214 272 6615 FAO/WFP Crop and Food Supply Assessment Mission, , August 2007

SunflowerCentre 64 115 71 74 27North 142 182 163 170 17South 38 117 95 90 62

Sub-total Sunflower 244 414 330 334 32

Sugar beetCentre 90 167 186 182 49North 452 880 758 719 42South 10 48 3 10 49

Sub-total Sugar beet 552 1 094 947 910 44

VegetablesCentre 118 194 60 43 19North 104 176 88 64 5South 44 100 169 173 70

Sub-total Vegetables 265 470 317 280 26

GrapesCentre 139 126 138 240 17North 2 2 2 3 10South 217 320 367 442 42

Sub-total Grapes 358 448 507 685 35 Source: National Bureau of Statistics.

The correlated data analysis emphasizes that about 90 per cent of the households use both of the above practices.

In addition, 30 per cent of the households either purchase the food on credit, or borrow the food. The service of the social canteens is not offered virtually at all in the rural environment, which is affirmed by 98 per cent of the respondents. The services of this type are encountered within the municipality of Chisinau. Another service providing more or less the food security of children is meals in the educational institutions. However, only 1/4 of the rural households benefit by this service. Practically half of the households, which have children up to 17 years do not benefit from the meals in the local educational institution.

Actions undertaken by the rural households in October 2007 to satisfy the food needs

40,9%

14,7%

98,7%

75,2%

69,4%

19,1%

14,2%

1,5%

8,1%

19,4%

26,2%

2,0%

13,0%

15,2%

26,5%

11,3%

8,3%

5,4%

18,4%

10,0%

1,2%

0% 20% 40% 60% 80% 100%

skip a meal or reduce portion size

rely on less expensive or less preferred foods

meal from social canteen

meal through school feeding

purchase food on credit or borrowing

Never Seldom (1-3 days / month) Sometimes (1-2 days / week) Often (3-6 days / week) Daily

Referring to the daily consummation of the agricultural households, we assert that their daily diet is preponderantly formed of cereals and root vegetables as well as of vegetable fat/oil, 86,6% and, respectively 83,0% of the households surveyed consume the respective food products daily.

About 31 per cent of the rural households, which have the livestock, were forced to purchase the fodder on credit or to borrow it. The strategy of the livestock breeding was used by at least 3/4 of the households.

The percentage of the households, which have sold and/or cut the livestock in March – October 2007 as a result of the fodder insufficiency

0%

10%

20%

30%

40%

50%

60%

70%

80%

milk producing cows pigs poultry traction animals sheep, goat, rabbit

39,7%

77,8% 74,1%

29,5%

56,4%

17,2%

44,6%

4,1%

15,9%

26,5%

at least one all

Therefore, from the month of March 2007, because of the fodder insufficiency and in order to meet the family food needs, 40 per cent of the rural households, which have milking cows, were forced to sell them. Moreover, about half of these households have sold their last milking cow/cows, remaining without this source of existence, which provide the income both in the natural products and in money.

As for the pigs, the situation is more impressive, since about 78 per cent of the households, which own pigs, have sold and/or cut at least one pig as a result of the fodder insufficiency. About half of these households (46, 6%) have sold/cut all pigs they had in their households.

Likewise, 41% of the households, which have poultry, have sold and/or cut more than half of the poultry from March to October 2007, but 4% of the households have sold/cut all the poultry they had.

1.5. The UN Relief and Technical Assistance Response to the Drought in Moldova.

The UN Project “Relief and Technical Assistance Response to the Drought in Moldova” was launched in September 2007.

The project constitute to a coordinated response to the request for assistance made by the Prime Minister of the Republic of Moldova to the United Nations Secretary General and aims at addressing the emergency needs created by the drought which affected the country in 2007.

The project includes five key components: - Technical expertise, management, coordination;- Emergency procurement of seeds, fodder and other agricultural supplies;- Emergency assistance to socially vulnerable groups;- Aid monitoring; and- Planning for medium and long-term assistance.

Up to now, 20,500 families affected by the drought have received assistance in the form of packages consisting of seeds, fertilizers and fuel which allowed for the planting of 10,250 ha of winter wheat.

Also 18,500 pregnant women and nursing mothers from 19 districts have received food packages.

More than 20,000 socially vulnerable farming households have benefited from nearly 9,000 tons of livestock fodder.

Other 82,500 farming households have received maize seeds for spring agricultural works.

Beneficiaries from socially vulnerable families had been selected by few NGOs in collaboration with Local Public Authorities and related ministries, according to vulnerability criteria established by national / international experts and donors. Aid distribution had been monitored by NGOs selected by the UN.

And 22 most vulnerable communities from districts severely affected by the drought had benefited from pecuniary aid in order to implement community works projects. These localities, included in UN project, were selected based on drought consequences and cereal harvest losses evaluation report done by Ministry of Agriculture and Food Industry together with Food and Agriculture Organization and with village categorize report based on deprivation indexes done annually by Ministry of Economy and Commerce. Totally, 1,800 people participated in community works. Selected communities/primarias received from the UN Moldova approximately 20,000 USD each.

The UN project is financially supported by the European Commission through its Directorate-General for Humanitarian Aid (ECHO), the Swedish International Development Cooperation Agency (SIDA), the Austrian Development Agency (ADA), Governments of the Netherlands, Norway, Italy and Finland, the Austrian Federal Ministry of Agriculture, Forestry, Environment and Water Management, United Nations Development Programme (UNDP) and United Nations Population Fund (UNFPA).

The project is managed by the UNDP in partnership with the FAO, UNFPA, UNICEF, other UN agencies and the Government of the Republic of Moldova as well as non-governmental organizations and local public authorities which are implementing partners of the project.

More than 135,000 vulnerable rural households affected by the drought last year were provided with winter wheat seeds, fertilizers, fuel, maize seeds, livestock fodder, food packages and cash for work.

As a result of successfully implemented assistance, more than 400,000 vulnerable people were able to overcome the difficulties caused by the drought.

Out of 600,000 vulnerable about 400,000 (67% of vulnerable) or 143 845 households received UN DRP assistance, that covers 98% of rayons and 96,5% of communities.Total assistance cost was about 9, 9 MLN USD and following results are achieved:

a) Eemergency distribution of Winter wheat seeds• 86.4% of the beneficiaries fulfilled the criteria of selection• 80.0% of the population considered that the criteria was correctly followed • Crop Performance analytical tables accepting on time delivery and success of support

provided

• Expected yield will be about 3.3 MT / Ha up to 4.8 MT / Ha (in stand and dependent of location).

• An increase of up to 35% compared what the farmers are getting usually. • Up to 20% of losses are estimated during the harvest process.• The Combine-harvest owner gets in average 15 – 20 % of the harvested yield.

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b) Animal Feed Distribution:• 84.0% have fulfilled the main criteria• 6.7% have fulfilled inclusive at least one or more additional criteria

Analyses shows that about 65.7% of beneficiaries would have had to slaughter or sell their animals without the UN fodder assistance and about 11% would have had enough fodder for keeping their animals over the whole winter, due to the mild winter. It needs to be underline that the feed distribution support helps to moist vulnerable not only to keep the last cow, but also mitigate destocking and recognize improvement. Improvements records shows milk production an increase of 51.9% has been recorded when feeding the cows with the received concentrates

For the first time the Transnistria region was part of an operation of such complexity. About 8,200 vulnerable rural households received support in this region, which represents more than 21,000 people.

Situation Analyzes

2.1. The Current Situation with Natural Disasters and Climate Changes in Moldova

This thoughts , conclusion and recommendations made during all my four missions in Moldova, from July 2007 by May 2008, as an FAO International Consultant and Technical Adviser/Agronomist, on the base of experience, collaboration with International and National Organizations and Institutions as well as several reports and important sources such as Millennium Development Goals, A Hazardous Existence (MNLT in Rural Moldvoa) – 5 FEB 2007, The World Bank Report, Drought Risk Reduction Framework and Practive - International Strategy for Disaster Reduction – May 2007, Risk measurement in extreme situation – M.Daradur – Chisinau 2005, 3th National Report on the implementation of UN Convention Combat Desertisation in RM –Chisinau 2006, DROUGHT : Evaluation of Management and Mitigation Measures for Central Asia and Caucasus– The World Bank Report No.31998-ECA – March 2005, Convention on Biological Diversity (CBD), the Global Environment Facility (GEF), Syntesis Report of Intergovernmental Panel on Climate Change – 17 NOV 1997, United Nations Framework Convention on Climate Change – Bangkok 2008, Kyoto Protocol and

particularly FAO 2007 report on “The State of Food and Agriculture” and 2007 publication of “Climate change: a growing challenge for development and poverty reduction” in Commonwealth Heads of Government Meeting (CHOGM) by Mr.Lennart Båge, President of IFAD and World Bank Repost on Agriculture for Development report presented in 2008 May in Moldova.

2.1. Problem Statement

Climate change is expected to put almost 50 million additional people at risk of hunger by 2020. Today about 2.1 billion people live on less than US$2 a day; Almost 1 billion people live on less than US$1 a day; the world’s population is expected to rise from 6.5 billion people to 9.1 billion by 2050, with most of the growth in developing countries; to meet projected demand, cereal production will have to increase by nearly 50 per cent and meat production by 85 per cent from 2000 to 2030; climate change is expected to put 49 million extra people at risk of hunger by 2020, and 132 million by 2050; since the 1949s, the Republic of Moldova has experienced a 15 per cent decline in rainfall; in Moldova, between 2,5 million people will be exposed to increased water stress due to climate change by 2020.

Climate change makes it more difficult to predict weather patterns and to plant crops at the appropriate time. Rising sea levels will threaten low-lying coastal areas and cause the Stalinisation of surface water and groundwater aquifers in some coastal communities. More frequent flooding will arise from heavy and erratic precipitation and ice melts. At the same time, more erratic weather patterns will affect the reliability of water sources for irrigation and livestock. In some regions, climate change will also lead to a higher incidence of vector-borne diseases, such as malaria, schisto-somiasis and dengue fever, as well as pests affecting livestock and crops.

The seriousness of the situation must not be underestimated. Climate change is expected to put almost 50 million extra people of the World at risk of hunger by 2020. In some high-latitude regions food production may increase with higher temperatures. But in others, yields may drop significantly.

2.2. Global Climate Changes and Moldova

Following the World Bank Report A Hazardous Existence (MNLT in Rural Moldvoa) – 5 FEB 2007, Risk measurement in extreme situation – M.Daradur – Chisinau 2005 and 3th National Report on the implementation of UN Convention Combat Desertification in RM –Chisinau 2006 can be mentioned that after 10 years in Moldova, about 90 per cent of smallholders and 50 percent of total farmland area in some extent will be suffer from soil erosion; as much as 80 per cent of pasture and rangelands will exhibit some form of degradation. Over 95 per cent of Moldovan agriculture depends on rainfall. Models indicate that about 400,000 hectare of agricultural land in Moldova currently deemed constrained will improve as a result of drought and other climatic change. However, this will be more than offset by the estimated 500,000 hectare currently classified as moderately constrained that will become even more severely affected. This threatens to further affect food security and exacerbate malnutrition on the continent.

Cereal production in Moldova could drop by over 20 per cent. In drier areas, climate change is expected to lead to salinisation and desertification of agricultural land. Productivity of livestock and some important crops are expected to decline.

There will be greater competition over water resources available for human consumption, agriculture and industry, as a result of changing rain patterns and the disappearance of glaciers after 5-6 year from now. Agricultural commodity prices will rise, partly due to changing weather

patterns, and it is believed they will continue to rise in the foreseeable future. This will have enormous consequences for poor rural people. For some, it will mean new opportunities - particularly poor rural producers with access to markets. But, for households that are net buyers of food commodities, rising prices will cause serious problems.

2.3. Who will suffer from Climate Changes? The poorest will suffer most.

Three out of four of the world’s one billion poorest people live in rural areas and depend on agriculture and related activities for their livelihoods. More rapid agricultural and rural development is essential to the achievement of the Millennium Development Goals (MDGs). The world’s poorest people are subsistence farmers, nomadic herders and day laborers. Many live on ecologically fragile land. They depend on vulnerable sectors – agriculture, livestock and forestry – for their livelihoods. Women in rural areas, particularly those responsible for fetching water and keeping livestock, are expected to pay a particularly high price as the climate changes. The IPCC has said very clearly that climate change will hit the poorest and most vulnerable people hardest. There is clearly an economic, social and moral imperative to help poor rural people adapt to climate change in a sustainable way.

In the World Bank Report of a Hazardous Existence clearly mentioned that “Agricultural damages are clearly identified while the breakdown of other damages such as earthquakes and water logging between rural and urban settlements is not available. However, most of these damages are estimated to occur in rural areas: the rural areas are much prone to and les protected against water logging.” Per year cost of weather hazards, such as drought, etc are estimated about 35.76 million USD or 33,7 in per cent of total for the time period of 1996-2005 and drought only 19.9 in per cent of total or 21.12 million USD. In this case the Drought can be evaluated as a kind of manifestation of Global Climatic Changes that develops desertification and soil degradation in Moldova.

It needs to be mentioned that from 2007 severe drought in Moldova were suffered rural poor manly; about 35% of that who had last milking cow sold them, because of luck of fodder, another 65% received the feed staff from UN DRP in time. More then 75% of stallholders that cultivated cereal crops were affected by 2007 severe drought and about 65% of those rural poor are receiving humanitarian assistance and support from UN DRP and various donors in time, that make possible to mitigate the impacted of the drought.

2.4. Mitigation

There are several proposals how possible to mitigate the impacted of natural disasters caused by Global Climatic Changes, but I would like to mention the human factors and particularly an important role of rural poor in climate change mitigation by using better agricultural practices and by promoting forestry activities that will contribute to carbon dioxide absorption.

For Moldova particularly, it is very important to:1. Establish and improve Good Agricultural Practices 2. Promote forestry activities3. Developing irrigation system and setup rainwater management system as an alternate

source of irrigation water4. Support to setting up solar power systems to help poor households get energy from the

abundant sunlight in the area. 5. Make possible to produce that will turning human and animal waste into a mixture of

methane and carbon dioxide gases that can be used for lighting and cooking.

Above mentioned are just few proposal points for future consideration for medium and short term activities that need to be assessed by interagency group of professional. And without clear

understanding the existing situation and realistic assessment of the current situation will be not possible to make a bridge from rehabilitation to recovery and development of rural Moldova and particularly agriculture sector.

For implementation of all of those activities poor rural can be a part of solution. But, they need secure access to land and water, as well as to financial resources and agricultural technologies and services. They need access to markets and the opportunities for enterprise that can help them diversify and increase their income. They also need effective institutions and the organizational power and influence required to advocate for their own needs and take advantage of emerging opportunities.

It is clear that climate change will make reaching the MDGs much more difficult unless donors and governments in developing countries sharply increase investments in agricultural development and sustainable land management practices. And IPCC notes that sustainable development can reduce vulnerability to climate change by enhancing adaptive capacity and increasing resilience and rural population can pays key role on it.

2.5. Agriculture and Rural Development

It is very clear that the environmental agenda is inseparable from the broader agenda of agriculture for development. The 2008 World Development Report recognizes that agriculture can play an important role in mitigation through better stewardship of the natural resource base on which it depends.

Implementing sustainable agricultural practices is more important now than ever. Agriculture and forestry are major sources of greenhouse gas emissions. But, through sustainable practices and management, both also have great potential to mitigate the impact of climate change. This means that as managers of land, water and forests, poor rural people could have an important role to play in mitigation measures.

- By using better agricultural practices and by nurturing and protecting forests poor rural people can contribute to absorb carbon dioxide. - By improving livestock management and crop practices, coupled with adaptive management of forests, could have a very significant impact to mitigate the climatic changes.

-By adopting better land use practices, such as conservation agriculture, conservation tillage, agro-forestry, and rehabilitation of degraded crop and pasture land, would also help to maintain significant amounts of carbon in the soil.

Soil is the largest reservoir of carbon in the terrestrial carbon cycle. The emerging markets for trading carbon emissions also offer new possibilities for small farmers to benefit from land uses that sequester carbon.

Afforestation, reforestation, better land management and sustainable agricultural practices can all contribute enormously to reducing carbon emissions. For example, the restoration of two billion hectares of degraded land could compensate for three per cent of global annual carbon emissions. Avoiding deforestation is even more important.

Poor rural people can play a key role in activities that, but governments and public policies must also put the right incentives in place for this to happen, particularly compensation and payment for the environmental services poor rural people provide. With appropriate and innovative incentives, poor farmers, forest dwellers and indigenous peoples can make an important contribution to emissions reduction and carbon sequestration.

Climate changes are affecting and will affect us all, but it poses a particular risk to development and poverty reduction, and to the achievement of the MDGs. Our efforts will be more effective if we recognize poor rural people as effective custodians of the natural resource base, and ensure they have access to the technology and financing they need to cope with climate change and be part of the solution. By listening to the voices of poor rural people when planning adaptation and mitigation processes, we can reduce the risks of climate change, while accelerating progress towards a world without poverty.

In Moldova drought and overgrazing had degraded vast areas of the rangelands. And because of FAO/WFP CFAS and donors’ responds on founds mobilization, because of successful implementation of UN Drought Responds Project - rehabilitation programme has led to improved rangeland productivity, regeneration of cereal production and all of those are helps to recover the gap in agriculture sector..

2.6. Helping Rural Poor

It is strongly recommend that future projects and programmes in Moldova needs to be focused on supporting marginal, rain fed areas that are at risk from water shortage, land degradation and desertification. Such issues as desertification and changes in cropping patterns due to climate variability must be main priority. Working closely with poor rural people, most of whom are smallholder farmers, landless people, herders and small entrepreneurs who depend on agriculture to survive all UN family members need to play lead role for rural development in Moldova to draws in helping rural poor to adapt to climate change.

Adaptation will include all activities that help people and ecosystems reduce their vulnerability to the impact of climate change and that minimize the costs of natural disasters. There is no universal way to adapt; specific measures need to be tailored to specific contexts. That’s why Feasibility Assessment to Support Rural Livelihoods and the Agricultural Sector Following the 2007 Drought needs to be taken place.

Crisis and Risk Management

Crisis means that normal livelihood of population is harmed by disaster. It could be any disaster including natural. That’s why risk identification and management are important.

Source: Matthias Molle (Beneficiary Assessment Methodology)

66baselinebaselinecrisiscrisis

Normal Normal livelihoodlivelihood

Livelihood after Livelihood after shock (1)shock (1)

Livelihood with Livelihood with coping coping mechanism (2)mechanism (2)

Livelihood with Livelihood with emergency (3) or emergency (3) or rehabilitation rehabilitation interventions (4)interventions (4)

Livelihood with Livelihood with development development interventions (5)interventions (5)

Effect of Effect of crisis on crisis on livelihoodlivelihood

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Livelihood Livelihood recovered recovered by own by own means (6)means (6)

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Livelihood after Livelihood after shock (1)shock (1)

Livelihood with Livelihood with coping coping mechanism (2)mechanism (2)

Livelihood with Livelihood with emergency (3) or emergency (3) or rehabilitation rehabilitation interventions (4)interventions (4)

Livelihood with Livelihood with development development interventions (5)interventions (5)

Effect of Effect of crisis on crisis on livelihoodlivelihood

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crisiscrisisNormal Normal livelihoodlivelihood

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Livelihood with Livelihood with coping coping mechanism (2)mechanism (2)

Livelihood with Livelihood with emergency (3) or emergency (3) or rehabilitation rehabilitation interventions (4)interventions (4)

Livelihood with Livelihood with development development interventions (5)interventions (5)

Effect of Effect of crisis on crisis on livelihoodlivelihood

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development (5)development (5)

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Livelihood after Livelihood after shock (1)shock (1)

Livelihood with Livelihood with coping coping mechanism (2)mechanism (2)

Livelihood with Livelihood with emergency (3) or emergency (3) or rehabilitation rehabilitation interventions (4)interventions (4)

Livelihood with Livelihood with development development interventions (5)interventions (5)

Effect of Effect of crisis on crisis on livelihoodlivelihood

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1122

33

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Livelihood with Livelihood with development development interventions (5)interventions (5)

Effect of Effect of crisis on crisis on livelihoodlivelihood

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development (5)development (5)

1122

33

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Livelihood with Livelihood with development development interventions (5)interventions (5)

Effect of Effect of crisis on crisis on livelihoodlivelihood

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Once risks have been identified, they must then be assessed as to their potential severity of loss and to the probability of occurrence. These quantities can be either simple to measure, in the case of the value of a lost building, or impossible to know for sure in the case of the probability of an unlikely event occurring. Therefore, in the assessment process it is critical to make the best educated guesses possible in order to properly prioritize the implementation of the risk management plan.

The fundamental difficulty in risk assessment is determining the rate of occurrence since statistical information is not available on all kinds of past incidents. Furthermore, evaluating the severity of the consequences (impact) is often quite difficult for immaterial assets. Asset valuation is another question that needs to be addressed. Thus, best educated opinions and available statistics are the primary sources of information. Nevertheless, risk assessment should produce such information for the management of the organization that the primary risks are easy to understand and that the risk management decisions may be prioritized. Thus, there have been several theories and attempts to quantify risks. Numerous different risk formulae exist, but perhaps the most widely accepted formula for risk quantification is:

Rate of occurrence multiplied by the impact of the event equals to risk.

Later research has shown that the financial benefits of risk management are less dependent on the formula used but are more dependent on the frequency and how risk assessment is performed.

In business it is imperative to be able to present the findings of risk assessments in financial terms. Robert Courtney Jr. (IBM, 1970) proposed a formula for presenting risks in financial terms. The Courtney formula was accepted as the official risk analysis method for the US governmental agencies. The formula proposes calculation of ALE (annualized loss expectancy) and compares the expected loss value to the security control implementation costs (cost-benefit analysis).

3.1. Risk Assessment

Risk assessment is measuring two quantities of the risk R, the magnitude of the potential loss L, and the probability p that the loss will occur.

Risk assessment may be the most important step in the risk management process, and may also be the most difficult and prone to error. Once risks have been identified and assessed, the steps to properly deal with them are much more programmatical.

A risk assessment is an important step in mitigating the impacted of climate changes. It helps you focus on the risks that really matter with the potential to cause real harm. This proposed methodology of risk assessment tells you how to achieve that with a minimum of fuss. This is not the only way to do a risk assessment and there are other methods that work well, particularly for more complex risks and circumstances. However, we believe this method is on of the most straightforward.

A risk assessment is simply a careful examination of what could cause harm to people, so that you can weigh up whether you have taken enough precautions or should do more to prevent harm. Workers and others have a right to be protected from harm caused by a failure to take reasonable control measures.

Natural disasters can ruin lives and affect country business. That’s why it is required to assess the risks so that you put in place a plan to control the risks.

3.1.1. Five steps to risk assessment

Identify the hazards Decide who might be harmed and how Evaluate the risks and decide on precautions Record your findings and implement them Review your assessment and take appropriate measures

Part of the difficulty of risk management is that measurement of both of the quantities in which risk assessment is concerned can be very difficult itself. Uncertainty in the measurement is often large in both cases. Also, risk management would be simpler if a single metric could embody all of the information in the measurement. However, since two quantities are being measured, this is not possible. A risk with a large potential loss and a low probability of occurring must be treated differently than one with a low potential loss but a high likelihood of occurring. In theory both are of nearly equal priority in dealing with first, but in practice it can be very difficult to manage when faced with the scarcity of resources, especially time, in which to conduct the risk management process. Expressed mathematically,

Financial decisions, such as insurance, often express loss terms in dollars. When risk assessment is used for public health or environmental decisions, there are differences of opinions as to whether the loss can be quantified in a common metric such as dollar values or some numerical measure of quality of life. Often for public health and environmental decisions, the loss term is simply a verbal description of the outcome, such as increased cancer incidence or incidence of birth defects. In that case, the "risk" is expressed as:

If the risk estimate takes into account information on the number of individuals exposed, it is termed a "population risk" and is in units of expected increased cases per a time period. If the risk estimate does not take into account the number of individuals exposed, it is termed an "individual risk" and is in units of incidence rate per a time period. Population risks are of more use for cost/benefit analysis; individual risks are of more use for evaluating whether risks to individuals are "acceptable".

Risk of losses due to vulnerability and Benefit gain

Potential risk treatments

Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories: (Dorfman, 1997) (remember as 4 T's) Tolerate (aka retention) Treat (aka mitigation) Terminate (aka elimination) Transfer (aka buying insurance)

Ideal use of these strategies may not be possible. Some of them may involve trade-offs that are not acceptable to the organization or person making the risk management decisions.

4.1. Risk avoidanceIncludes not performing an activity that could carry risk. Avoidance may seem the answer to all risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have allowed.

4.2. Risk reductionInvolves methods that reduce the severity of the loss. Modern software development methodologies reduce risk by developing and delivering software incrementally. Early methodologies suffered from the fact that they only delivered software in the final phase of development; any problems encountered in earlier phases meant costly rework and often jeopardized the whole project. By developing in iterations, software projects can limit effort wasted to a single iteration. A current trend in software development, spearheaded by the Extreme Programming community, is to reduce the size of iterations to the smallest size possible, sometimes as little as one week is allocated to an iteration.

4.3. Risk retentionInvolves accepting the loss when it occurs. True self insurance falls in this category. Risk retention is a viable strategy for small risks where the cost of insuring against the risk would be greater over time than the total losses sustained. All risks that are not avoided or transferred are retained by default. This includes risks that are so large or catastrophic that they either cannot be insured against or the premiums would be infeasible. Any amounts of potential loss (risk) over the amount insured are retained risk. This may also be acceptable if the chance of a very large loss is small or if the cost to insure for greater coverage amounts is so great it would hinder the goals of the organization too much.

4.4. Risk transferMeans causing another party to accept the risk, typically by contract or by hedging. Insurance is one type of risk transfer that uses contracts. Other times it may involve contract language that transfers a risk to another party without the payment of an insurance premium. Liability among construction or other contractors is very often transferred this way. On the other hand, taking offsetting positions in derivatives is typically how farms use hedging to financially manage risk.Some ways of managing risk fall into multiple categories. Risk retention pools are technically retaining the risk for the group, but spreading it over the whole group involves transfer among individual members of the group. This is different from traditional insurance, in that no premium is exchanged between members of the group up front, but instead losses are assessed to all members of the group.

Risk Management

Risk management is the process of measuring, or assessing, risk and developing strategies to manage it. Strategies include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk. Traditional risk management focuses on risks stemming from physical or legal causes (e.g. natural disasters or fires, accidents, death, and lawsuits). Financial risk management, on the other hand, focuses on risks that can be managed using traded financial instruments.

In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled in descending order. In practice the process can be very difficult, and balancing between risks with a high probability of occurrence but lower loss versus a risk with high loss but lower probability of occurrence can often be mishandled.

Intangible risk management identifies a new type of risk - a risk that has a 100% probability of occurring but is ignored by the organization due to a lack of identification ability. For example, when deficient knowledge is applied to a situation, a knowledge risk materializes. Relationship risk appears when ineffective collaboration occurs. Process-engagement risk may be an issue when ineffective operational procedures are applied. These risks directly reduce the productivity of knowledge workers, decrease cost effectiveness, profitability, service, quality, reputation, brand value, and earnings quality. Intangible risk management allows risk management to create immediate value from the identification and reduction of risks that reduce productivity.

Risk management also faces difficulties allocating resources. This is the idea of opportunity cost. Resources spent on risk management could have been spent on more profitable activities. Again, ideal risk management minimizes spending while maximizing the reduction of the negative effects of risks.

5.1. Steps in the risk management process

Establishing the context involves1. Planning the remainder of the process.2. Mapping out the following: the scope of the exercise, the identity and objectives of stakeholders, and the basis upon which risks will be evaluated.3. Defining a framework for the process and an agenda for identification.4. Developing an analysis of risk involved in the process.

5.2. Identification

After establishing the context, the next step in the process of managing risk is to identify potential risks. Risks are about events that, when triggered, cause problems. Hence, risk identification can start with the source of problems, or with the problem itself.

Source analysis Risk sources may be internal or external to the system that is the target of risk management. Examples of risk sources are: stakeholders of a drought project, employees of a trading company, etc.

Problem analysis Risks are related to identify threats. For example: the threat of losing crop/profit, the threat of abuse of privacy information or the threat of accidents and casualties. The threats may exist with various entities, most important with shareholder, customers and legislative bodies such as the government.

When either source or problem is known, the events that a source may trigger or the events that can lead to a problem can be investigated. The chosen method of identifying risks may depend on culture, industry practice and compliance. The identification methods are formed by templates or the development of templates for identifying source, problem or event.

Common risk identification methods are: Hazards risk identification. Identification the risks on the base of most frequently hazards. Objectives-based risk identification. Organizations and project teams have objectives. Any

event that may endanger achieving an objective partly or completely is identified as risk. Objective-based risk identification is at the basis of Enterprise Risk Management - Integrated Framework

Scenario-based risk identification. In scenario analysis different scenarios are created. The scenarios may be the alternative ways to achieve an objective, or an analysis of the interaction of forces in, for example, a market or battle. Any event that triggers an undesired scenario alternative is identified as risk.

5.3. Risk Charting

This method combines the above approaches by listing Resources at risk, Threats to those resources Modifying Factors which may increase or reduce the risk and Consequences it is wished to avoid. Creating a matrix under these headings enables a variety of approaches. One can begin with resources and consider the threats they are exposed to and the consequences of each. Alternatively one can start with the threats and examine which resources they would affect, or one can begin with the consequences and determine which combination of threats and resources would be involved to bring them about

5.4. Create the plan

Decide on the combination of methods to be used for each risk. Each risk management decision should be recorded and approved by the appropriate level of management.

The risk management plan should propose applicable and effective security controls for managing the risks. For example, an observed high risk of drought in agriculture could be mitigated by acquiring and implementing Early Warning System. A good risk management plan should contain a schedule for control implementation and responsible persons for those actions.

According to ISO/IEC 27001, the stage immediately after completion of the Risk Assessment phase consists of preparing a Risk Treatment Plan, which should document the decisions about how each of the identified risks should be handled. Mitigation of risks often means selection of Security Controls, which should be documented in a Statement of Applicability, which identifies which particular control objectives and controls from the standard have been selected, and why.

5.5. Implementation

Follow all of the planned methods for mitigating the effect of the risks tray to avoid all risks that can be avoided without sacrificing the entity's goals, reduce others, and retain the rest.

5.5.1. Review and evaluation of the plan

Initial risk management plans will never be perfect. Practice, experience, and actual loss results will necessitate changes in the plan and contribute information to allow possible different decisions to be made in dealing with the risks being faced.

Risk analysis results and management plans should be updated periodically. There are two primary reasons for this:1. to evaluate whether the previously selected mitigation methods are still applicable and

effective, and 2. to evaluate the possible risk level changes in the business environment.

5.5.2. Limitations

If risks are improperly assessed and prioritized, time can be wasted in dealing with risk of losses that are not likely to occur. Spending too much time assessing and managing unlikely risks can divert resources that could be used more profitably. Unlikely events do occur but if the risk is unlikely enough to occur it may be better to simply retain the risk and deal with the result if the loss does in fact occur.

Prioritizing too highly the risk management processes could keep an organization from ever completing a project or even getting started. This is especially true if other work is suspended until the risk management process is considered complete.It is also important to keep in mind the distinction between risk and uncertainty. Risk can be measured by impacts x probability.

5.5.3. Areas of risk management

As applied to climate changes, risk management is the technique for measuring, monitoring and controlling the agriculture operational risk on a farm's balance sheet. The Basel II framework breaks risks into market risk (price risk), credit risk and operational risk and also specifies methods for calculating capital requirements for each of these components.

5.5.4. Farming Enterprise risk management

In farming enterprise risk management , a risk is defined as a possible event or circumstance that can have negative influences on the Agriculture Enterprise in question. Its impact can be on the very existence, the resources (human and capital), the products and services, or the customers of

the enterprise, as well as external impacts on society, markets, or the environment. In a financial institution, enterprise risk management is normally thought of as the combination of credit risk, market risk, interest rate risk, and operational risk.

In the more general case, every probable risk can have a pre-formulated plan to deal with its possible consequences (to ensure contingency if the risk becomes a liability).

From the information above and the average cost per employee over time, or cost accrual ratio, a project manager can estimate: the cost associated with the risk if it arises, estimated by multiplying employee costs per unit

time by the estimated time lost (cost impact, C where C = cost accrual ratio * S). the probable increase in time associated with a risk (schedule variance due to risk, Rs where

Rs = P * S): Sorting on this value puts the highest risks to the schedule first. This is intended to cause the

greatest risks to the project to be attempted first so that risk is minimized as quickly as possible.

This is slightly misleading as schedule variances with a large P and small S and vice versa are not equivalent. (The risk of the RMS Titanic sinking vs. the passengers' meals being served at slightly the wrong time).

the probable increase in cost associated with a risk (cost variance due to risk, Rc where Rc = P*C = P*CAR*S = P*S*CAR)

sorting on this value puts the highest risks to the budget first. see concerns about schedule variance as this is a function of it, as illustrated in the equation

above.

Risk in a project or process can be due either to Special Cause Variation or Common Cause Variation and requires appropriate treatment. That is to re-iterate the concern about extremal cases not being equivalent in the list immediately above.

5.5.5. Risk management activities as applied to project management

In project management, risk management includes the following activities: Planning how risk management will be held in the particular project. Plan should include risk

management tasks, responsibilities, activities and budget. Assigning a risk officer - a team member other than a project manager who is responsible for

foreseeing potential project problems. Typical characteristic of risk officer is a healthy skepticism.

Maintaining live project risk database. Each risk should have the following attributes: opening date, title, short description, probability and importance. Optionally a risk may have an assigned person responsible for its resolution and a date by which the risk must be resolved.

Creating anonymous risk reporting channel. Each team member should have possibility to report risk that he foresees in the project.

Preparing mitigation plans for risks that are chosen to be mitigated. The purpose of the mitigation plan is to describe how this particular risk will be handled – what, when, by who and how will it be done to avoid it or minimize consequences if it becomes a liability.

Summarizing planned and faced risks, effectiveness of mitigation activities and effort spend for the risk management

5. 6. Risk management and business continuity

Risk management is simply a practice of systematically selecting cost effective approaches for minimizing the effect of threat realization. All risks can never be fully avoided or mitigated

simply because of financial and practical limitations. Therefore farmers have to accept some level of residual risks.

Whereas risk management tends to be pre-emptive, farm management planning (FMP) was invented to deal with the consequences of realized residual risks. The necessity to have FMP (for large scale farming organization) in place arises because even very unlikely events will occur if given enough time. Risk management and FMP are often mistakenly seen as rivals or overlapping practices. In fact these processes are so tightly tied together that such separation seems artificial. For example, the risk management process creates important inputs for the FMP (assets, impact assessments, cost estimates etc). Risk management also proposes applicable controls for the observed risks.

Therefore, risk management covers several areas that are vital for the FMP process. However, the FMP process goes beyond risk management's pre-emptive approach and moves on from the assumption that the disaster will realize at some point.

Crisis Response and Assistance Monotoring

7.1. Creating SMART Objectives

7.2. Monitoring and Evaluation

7.2.1. Indicators for Measurement

Objective hierarchy Indicators Means of verification

Risk and assumptions

Impact Improve the living standards of farmers.

Increased % of population: - with access to schools & health services;- reaching food self–sufficiency; - ability to cover cash expenditures

Impact assessment,statistics from health post and schools, EFSA from WFP, CFSAM reports,

Security remains the same, no further displacement, school and health post working normally

Outcome P1: increase food self-sufficiency with a 30% higher staple food production (maize and beans) after the first harvest.P2: increase production by 20% through improved agricultural practices - applying newly learned technologies.P3: increase cash income by 10% after one season by selling produce from vegetable cultivation.

- Food availability per household;- reduced dependency on food aid; - food purchased by households; - shortened hunger gap.- % of farmers using improved technologies; - increased production; - reduced workload in the field.

Impact assessment,EFSA from WFP, Impact assessment,Field observations,Attendance list to training courseImpact assessment,EFSA from WFP,

No adverse climatic conditions, access to land not restricted, security remains the same, farmers have the necessary inputs and tools for implementing the learned practices, access to market and demand for vegetables exists

Project outcome: “60 percent of farmers in the district of Gulu, northern Uganda, will have covered 70% of their basic food needs (maize, beans and sesame) through own production within 1 year, through the distribution of agricultural inputs (improved varieties, tools and fertilizer)and improved cultivation practices under the prevailing security situation”.

To make sure that an objective is sufficiently detailed, use the SMART-rule: S specific specifies exactly the result 60% of farmers in the district of

Gulu, northern Uganda M measurable the result can be tracked will have covered 70% of their

basic food needs (maize, beans and sesame) through own production

A attainable should be realistic the approach chosen will enable attaining the objective

R relevant to the intended result influencing factors have been taken into consideration

T time-framed indicates a specific period within 1 year

- Cash availability;- reduced debts.

Output - Production;- improved skills;- income

- Kg of maize and vegetables;- obtained knowledge;- amount of currency.

 

Activities See implementation schedule

 

7.2.2. ImplementationActivities Hire staff

Procurement of inputs Coordinate with actors Contract with NGOs Selection of beneficiaries Distribution of inputs Post distribution evaluation Mid-term report Training sessions (three) Crop performance evaluation Monitoring Impact assessment Reporting

Latest mid June “ mid June during whole June Latest end June Latest mid July Latest end July Mid August End August In August, October and December Mid September until Mid October All along June until January January End of February

7.2.3. Potentialities and Constrains

7.3. Evaluation Methodology

Parameter Potentialities Constrains Political

security situation information military sovereignty of state state

Logistical communication roads storage facilities

Organisational mobility of beneficiaries number of beneficiaries professional workers local workers

Financial cost banking systems

Impacts economical environmental humanitarian by the beneficiaries by the population by the public by the authorities

improvement access to good sources supporting support actions supporting / facilitator available / radio licence good whole year available are settled down constant number motivated / skilled motivated / skilled are covered available increase production avoids bigger problems efficient interventions reached self-sufficiency synergies working supports intervention supports intervention

worsening misinformation mistrust delays approvals not in their interest remote area / no access to HF none or bad conditions / seasonal has to be set up further displacement possible again fluctuating and / or high numbers lack experience & professionalism low level education / commitment funded only part of all needs cash transfers with high risks disrupts local markets deplete natural resources creates dependency lost jealousy towards beneficiaries has other priorities (health for all) uses for political reasons

7.3.1. Stakeholder analysis– Brainstorming– Discussion with focus groups– Strengths, Weaknesses, Opportunities and Threats (SWOT)– Drama and role plays– Dreams and visions– Impact flow diagram (or cause-effect diagram)– Institutional Linkage Diagram (or Venn / Chapatti diagram)– Problem and Objective Trees– Documentation review

7.3.2. Biophysical measurements– BMI (adults)– MUAC (school children)– UNICEF Table (children below 5)

7.3.3. Direct observations– Transect – Sketch – Mapping and GIS Mapping– Photographs and Video

7.3.4. Cost Benefit Analysis

7.3.5. Semi structured interviews

7.3.6. Case studies– Diaries– Historical Trends and Timelines– Seasonal Calendars– Table of most significant changes

7.3.7. Impacted Assessment Surveys

• When are the time-periods for implementing the surveys

• Which kind of data will be collected– Design of questionnaire

• Which is the sample size (beneficiaries & control group)• Who will do which work

– Data collection, data entry, data analysis, reporting • How to outsource the data collection

– Selection of institution or NGO (signing of contract)• Which are the available skills

– Training needed• Which are the costs of the whole exercise

– Budget• How are those costs covered

– Which project budget line will be charged • Sample unit: households / beneficiaries• Sample size: around 7% of total beneficiaries• Sampling methodologies

- Systematic sampling- Random sampling- Non-random sampling - Purposive sampling (targeting selected group) - Quota sampling (same sample size of each group)

• Control group (non beneficiaries)

7.3.8. Survey

Post distribution survey Crop performance survey Harvest crop performance Impact assessment

7.3.9. Data gathering

Geographical data Household characteristics Household economy data

7.3.10. Data Analyzes

• Data codification and conversion– List of codes– List of conversions

• Data entering (Excel or Access Database) • Data controlling (filtering)

• Data analysis with Excel Pivot Tables• Proportional pilling• Pair wise ranking• Wealth ranking• Well-been ranking with cards• Mapping (soils, cops, ethnic groups, resources)

Conclusion and Recommendations

8.1. Main Challenges

Difficulty to estimate actual impacted of climate change on local, regional scale, which is the basic problem of crop forecasting methods

Variability of more important and then extremes Structural measures often high-cost (like irrigation, breading, etc) Difficulties with formal preparedness plan for Non-structural measures (like legislation,

insurance, etc)

8.2. Recommendations

Establishing Disaster Risk Management System Develop Climate change Adaptation technologies Established Crop warning and for Immediate respond technologies Improve risk/benefit situation tolls and methodology Develop better parallel crop/weather impact data analyzes Establish farm level Integrated Pest and Dieses Management tools Diversify of regional agriculture specialization Develop Community Agriculture Strategy Plans Mitigate frequency cursive Sustainable System that benefits exceed risks Reduce of chronic impacts of climate changes trough better use of weather information Stabilize production and commercial farming maximizes profit

The Next Step:From drought to prosperity, through community development

A UN programmatic package will be designed to improve agriculture and rural livelihoods, in the context of food security and soaring food prices. Attention will be paid to determine measures that increase the capacity of the rural population (small-holders in particular) to cope with extreme climatic conditions and variations. Consideration should be given to adapting to climate change, rationalising agricultural production, increasing production and levels of disposable incomes, promoting alternative sources of income and the sustainable use of natural resources. Likewise, due consideration must be given to the mandates and in situ capabilities of participating agencies to determine best possible roles and arrangements.

The following areas are proposed for integration into the programmatic response:

a) AgricultureThe agricultural sector accounts for a significant proportion of the livelihoods of the rural community. However, overall contribution to the national economy remains low and is especially vulnerable to climatic and structural conditions.The goal is to contribute to improved food security, at household and individual level, by decreasing poverty and improving the livelihoods of the rural population. This can be achieved by boosting productivity, efficiency and by generating added value.Envisaged results, could include, inter alia: Improved knowledge dissemination of good agricultural practices, new technologies and access to market and other information;

Stimulated and strengthened farmer and grower organisations; Improved agricultural infrastructure, especially small and medium scale irrigation schemes and water catchments; Replacement of obsolete farming equipment to reduce significant harvest and post-harvest losses; Improved agriculture financing mechanism; Improved management of (communal) grasslands and increased forage and protein availability for livestock; Increased production through the diversification of crops and varieties with better resistance to changing climatic conditions, by fostering seed certification and multiplication; Adoption of sustainable production practices taking into account land-use and land tenure patterns, soil, water and environment conservation; Establishment of alternative income-generating initiatives in rural areas.

b) Develop Alternative Sources of Income

Private agricultural production and processing enterprises are oriented on a few commodities. Diversification and development is constrained by lack of investment and investor confidence; the level of skills and capacities, limited access to markets and export markets largely due to food safety (SPS) barriers.The goal is to promote enterprise development in rural areas, to reduce regional imbalances and to support the development of national and international trade, by improving the system of food safety, fostering the development of SMEs, and providing training and information so as to increase trade and access to markets.Envisaged results, could include, inter alia: Proposals for the diversification of production capacities by revitalising local entrepreneurship using existing assets or providing infrastructure investments and workforce re-training; Potential explored for non-farming activities in rural livelihoods to diversify sources of income and so reduce dependency on self-sufficiency agriculture; Study of the capacities of the fresh produce and food processing industry (packhouses, slaughterhouses, canning, freezing, drying, storage, handling and distribution) taking into consideration appropriate standards and regional demand; Determination of priorities within the various food product value chains, internal and export markets, information and food safety barriers; Best use of the state subsidy system and ongoing area-based/local development programmes is analysed and linked to existing micro-credit schemes and other financing instruments.

c) Adaptation to Climate Change and Early Warning System

The effects of the 2007 drought demonstrated the high level of vulnerability of existing production systems and a lack of alleviating support mechanisms, including improved weather forecasting.The goal is increased resilience to the effects of natural crises through adapted production systems and diversification of sources of income. Envisaged results could include, inter alia: Training of farmers in drought-resistant crops and provision of advice on agricultural risk management techniques and instruments; Information dissemination and training in water use and conservation practices; Building capacities for pest and disease management; Aforestation and its role in minimising droughts effects and soil conservation; Use of renewable energy resources (biomass).

Additional general considerations to be factored in the exercise include: Defining the role of women and activities to increase their incomes; Determining the socio-economic infrastructure needs (feeder roads, health centres,

schools, drinking water, etc.) and the income-generating activities required for community development;

Determining credit requirements and operational mechanisms; Clearly defining the role of operator and producer organizations for agricultural and non-

agricultural activities;

Studying the technical, economic and environmental feasibility of the different project activities, as well as their social and environmental impacts and any mitigating measures.

Prior to the submission of the UN programme proposal, a validation workshop will be undertaken with key stakeholders. The final proposal will be presented to national counterparts and concerned donors, in order to incorporate additional feedback during September 2008.