second barani area development project (loan 1012-pak[sf])

7/31/2019 Second Barani Area Development Project (Loan 1012-PAK[SF])

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ASIAN DEVELOPMENT BANK PPA:PAK 21220

PROJECT PERFORMANCE AUDIT REPORT

ON THE

SECOND BARANI AREA DEVELOPMENT PROJECT(Loan 1012-PAK[SF])

IN

PAKISTAN

August 2002


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CURRENCY EQUIVALENTS

Currency Unit Pakistan Rupee/s (PRe/PRs)

At Appraisal At Project Completion At Operations Evaluation(December 1989) (October 1999) (March 2002)

PRe1.00 = $0.0465 $0.0195 $0.0166$1.00 = PRs21.4736 PRs51.30 PRs60.15

ABBREVIATIONS

ABAD Agency for Barani Area DevelopmentADB Asian Development BankADBP Agricultural Development Bank of PakistanADTA advisory technical assistanceAI artificial inseminationAR appraisal reportBADP Barani Area Development Project

BARI Barani Agricultural Research InstituteBLPRI Barani Livestock Production Research InstituteCIF cost, insurance, freightDCW Department of Communication and WorksDLDD Department of Livestock and Dairy DevelopmentEIRR economic internal rate of returnFOB free on boardha hectareIFAD International Fund for Agricultural Developmentkm kilometerNGO nongovernment organizationO&M operation and maintenance

OEM

Operations Evaluation MissionP&D Planning and Development BoardPC-1 Planning Commission Form 1PCR project completion reportPCU project coordination unitPPAR project performance audit reportRIV resource intensive villageSAWCRI Soil and Water Conservation Research InstituteSDR special drawing rightst metric tonTA technical assistance

t/ha ton per hectareUNDP United Nations Development Programme

NOTES

(i) The fiscal year (FY) of the Government ends on 30 June.(ii) In this report, $ refers to US dollars.

Operations Evaluation Department, PE-599


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CONTENTS

PageBASIC DATA iiiEXECUTIVE SUMMARY ivMAP vii

I. BACKGROUND 1A. Rationale 1B. Formulation 1C. Purpose and Outputs 1D. Cost, Financing and Executing Arrangements 2E. Completion and Self-Evaluation 2F. Operations Evaluation 3

II. PLANNING AND IMPLEMENTATION PERFORMANCE 3A. Formulation and Design 3

B. Achievement of Outputs 4C. Cost and Scheduling 4D. Procurement and Construction 5E. Organization and Management 5

III. ACHIEVEMENT OF PROJECT PURPOSE 6A. Operational Performance 6B. Economic Reevaluation 11C. Sustainability 12

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS 12

A. Socioeconomic Impact 12B. Environmental Impact 14C. Impact on Institutions and Policy 14

V. OVERALL ASSESSMENT 14A. Relevance 14B. Efficacy 15C. Efficiency 15D. Sustainability 15E. Institutional Development and Other Impacts 15F. Overall Project Rating 16G. Assessment of ADB and Borrower Performance 16

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 16A. Key Issues for the Future 16B. Lessons Identified 18C. Follow-up Actions 19


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APPENDIXES

1. Comparison of Appraisal and Actual Project Costs 202. Summary of Physical Accomplishments 213. Economic Reevaluation 23

SUPPLEMENTARY APPENDIXES (available upon request)

A. Subsidies for Irrigation InvestmentB. Village Survey Data


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BASIC DATASecond Barani Area Development Project (Loan 1012-PAK[SF])

PROJECT PREPARATION/INSTITUTION BUILDINGTA No. TA Name Type Person-Months Amount ($) Approval

Date

708

1357

Master Plan for Barani AreaDevelopmenta

Barani Farming SystemTraining and Research

ADTA

ADTA

23

51

1,300,000b

691,000b

15 Oct 1985

27 Jun 1991

KEY PROJECT DATA ($ million)As per ADB

Loan Documents ActualTotal Project Cost 59.9 51.3

Foreign Exchange Cost 21.5 20.9Local Currency Cost 38.4 30.4

ADB Loan Amount/Utilization 25.0 22.8Amount of Cofinancing

IFAD 19.4 15.5ADBP 0.8 1.3Government 10.8 8.3UNDP 0.7 0.7Farmers Contribution 3.2 2.7

KEY DATES Expected ActualAppraisal 22 Jun11 Jul 1989Loan Negotiations 1316 Nov 1989Board Approval 20 Feb 1990Loan Agreement 19 Mar 1990Loan Effectiveness 17 Jun 1990 6 Dec 1990First Disbursement 4 Feb 1993Project Completion 31 Dec 1997 31 Dec 1998Loan Closing 30 Jun 1998 24 Dec 1998Months (effectiveness to completion) 90 97

INTERNAL RATE OF RETURN (%) Appraisal PCR PPAR

Economic Internal Rate of Return 24.0 10.1 4.1

BORROWER Pakistan

EXECUTING AGENCIES Provincial Government of PunjabAgricultural Development Bank of Pakistan

MISSION DATA

Type of Mission No. of Missions No. of Person-DaysFact-Finding 1 138

c

Appraisal 1 200c

Project AdministrationInception 1 10

Review 14 387Project Completion 1 15

Operations Evaluationd

1 42ADB = Asian Development Bank, ADTA = advisory technical assistance, IFAD = International Fund for AgriculturalDevelopment, TA = technical assistance, UNDP = United Nations Development Programme.a

This was not a project preparation TA. Its findings, however, were used in the design of the Project.b

Funded by UNDP.c

Including a large amount of staff consultant inputs financed by IFAD.d

Comprising Ellen Qiaolun Ye, Senior Evaluation Specialist (Mission Leader) and Gary Holm (internationalconsultant). In addition, Qaim Shah (domestic consultant) conducted a village survey.


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EXECUTIVE SUMMARY

The Project aimed to (i) increase farm household production, employment, and income,particularly among smallholders, the landless, and women; (ii) reduce the growing migration ofpopulation to urban areas; and (iii) alleviate constraints on agricultural development. The Projectcomprised a number of components related to soil and water conservation, rangeland and

forestry development, water harvesting, crop husbandry, animal husbandry, rural infrastructure,rural credit, and institutional strengthening.

The Projects objectives were consistent with the development strategy of theGovernment and the operational strategy of the Asian Development Bank at the time of projectappraisal. By promoting agricultural development in a region bypassed by earlier development,the Project contributed, in a limited way, to balanced regional development and increasedagricultural production. The project design, however, did not include measures to ensure thatthe intended target groups (smallholders, the landless, and women) received a proportionateshare of benefits. In conjunction with a top-down approach that focused on technologyimprovement, this resulted in the capture of a significant amount of benefits by a small numberof large landholders. The Project is therefore rated partly relevant.

The Project met most of its physical targets as revised during implementation. TheProject also fulfilled, to a reduced extent, its primary objective of increasing farm householdproduction, employment, and income. However, its intention to increase household incomeparticularly among smallholders, the landless, and women was not fulfilled. The objective ofreducing constraints to rain-fed agriculture was fulfilled only in the farmlands that receivedirrigation facilities. The achievements were less than anticipated due to the small number offarms that received irrigation facilities. Finally, the Project did not fulfill its objective of reducingmigration to cities. On balance, the Project is rated less efficacious.

The Projects economic internal rate of return has been reestimated at 4.1%,substantially below the appraisal estimate of 24.0%, primarily due to a significant reduction in

the number of project beneficiaries and underuse of irrigation facilities. The high subsidies forirrigation investment distorted private decisions and provided less incentive for project staff andfarmers to select the most cost-effective interventions. The design of the livestock centersfocused on provision of buildings without addressing the key constraint of staff shortage,resulting in significant underuse of the centers. The Project is therefore rated less efficient.

The Projects primary benefits have been increased farm production and householdincome in farms that received irrigation facilities. The sustainability of these benefits is likely asthe irrigation facilities have been well maintained by their owners, and continued operation ofthese facilities is likely. Other project facilities such as roads and water supply systems havealso been well maintained. The project facilities without clear sustainability are those that did notgenerate significant benefits, even during implementation, such as the womens agricultural

extension program. Overall, the Projects sustainability is rated likely.

The Project had a positive impact on the Governments policies and public agencies as itencouraged the Government to continue to invest in rain-fed agriculture, and trained a largenumber of project staff. The project design included community mobilization, nongovernmentorganization (NGO) engagement, and a womens extension program. However, as measures toensure successful implementation were not developed, the impact on local communities andwomen was minimal. The insufficient attention to the distribution of benefits restricted the impact


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on poverty reduction. On balance, the Projects institutional development and other impacts arerated moderate. Based on these assessments, the overall project rating is partly successful.

The evaluation has identified the following issues:

Distribution of Project Benefits. A major portion of the project subsidies was captured

by a small number of large landholders instead of the intended target groups because (i) thesubsidies were open to all farmers on a first come, first served basis; (ii) the high subsidies(75% of investment cost or a maximum of $16,000 for a minidam) attracted nontarget groups,including influential people; (iii) there was no ceiling on how much one household could receivein subsidies from various project activities; (iv) the requirement that farmers contribute at least25% of investment cost put the target groups in a disadvantageous position as mostsmallholders had neither their own capital nor easy access to long-term loans; and (v) a top-down approach was adopted, which excluded the participation of local communities in theselection of subproject sites and beneficiaries. In retrospect, the Project could have benefitedmany more farmers, especially smallholders, if its design had included measures to ensure afair distribution of project subsidies.

Use of Public Subsidies. The benefits of the small-scale irrigation facilities in theproject areas are highly localized, confined mostly to adjacent fields belonging to onehousehold. If the Project had used subsidies for environmental purposes, a catchment approachcould have been adopted to identify critical sites where the construction of water conservationstructures was critical to the entire region. If the Project had used subsidies for povertyreduction, large landholders could have been excluded from the irrigation subsidies.

Cost Effectiveness. Inefficiencies were reported including oversized construction ofsome irrigation structures, a lack of clear need for many water spillways and outlets, andunderuse of some minidams as their owners did not invest in supplementary activities such asland leveling. In retrospect, measures could have developed to make farmers treat the subsidieslike their own money, such as giving subsidies in the form of a fixed amount instead of on a

percentage basis without limit.

Integrated Approach. Although the Project adopted an integrated area developmentapproach to address multiple needs in the rain-fed areas, this appeared to have been confinedto the conceptual level without guiding the selection of subproject sites. Each implementingagency selected subproject sites based on its own criteria without particular attention to thecomplementary needs of the beneficiaries under other components. The desired synergy impactof using multiple interventions to simultaneously address the key constraints in a particular areawas not apparent. Alternative approaches that integrate project interventions at the village levelshould be considered for future projects of this nature.

The Project has provided valuable lessons learned including the following:

(i) Implementing a project in a poor region may not automatically have a significantimpact on poverty reduction if specific measures are not taken to ensure a fairdistribution of project benefits in favor of the poor.

(ii) Inclusion in a project design of poverty-reduction activities such as NGOengagement and community development may not have the desired socialimpact if careful arrangements are not made for effective implementation of suchactivities.


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(iii) Provision of a credit line may not have the desired social impact if carefularrangements are not made to develop borrower groups and microfinanceinstitutions that can deliver microfinance services to the poor.

(iv) Inclusion of numerous training programs may not have the desired impact if thetraining is not based on beneficiary demand and is not aimed at building up long-term capacity in the local communities with continued support after the training.

(v) Smallholders and landless poor can easily be bypassed by public assistance thatfocuses solely on technology improvement.

(vi) Support for agricultural research should focus on improvement in farmers fields.Incentive measures need to be included in project design to encourage researchinstitutes to develop suitable technologies that match the prevailing conditions onmost farms instead of aiming at the highest possible yields in research institutesunder the most ideal conditions that are not accessible by most farmers.

(vii) Free provision of inputs to farmers may lead to closure of such services afterproject completion. Project design should aim at the long-term operation of theintroduced services and use funds during implementation to build up localinstitutions and capacities to sustain such services.

(viii) Provision of project facilities (such as buildings) without addressing constraints to

their full operation (such as staff shortage) may lead to underuse of such facilitiesand unnecessary maintenance cost.


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I. BACKGROUND

A. Rationale

1. The Green Revolution that began in the 1960s brought significant increases in cropyields to Pakistan. However, adoption of the new technology was largely confined to areas with

access to irrigation. As the income gap between irrigated and barani(rain-fed) areas rose, moreattention was given to balanced regional development and special assistance for rain-fed areas.In March 1986, the National Commission on Agriculture proposed the allocation of public fundsto promote development in rain-fed areas, which was seen to have high potential for increasingcrop yields, contributing to overall agricultural growth, and mitigating increasing regionaldisparity. At the time of project appraisal, the Asian Development Bank's (ADBs) operationalstrategy in Pakistan supported balanced regional development, with its assistance to agriculturefocusing on increasing productivity, farm production, and rural employment.

B. Formulation

2. The Project was a follow-up of the first Barani Agricultural Development Project (BADP),

which was financed by the International Fund for Agricultural Development (IFAD) andimplemented from 1981 to 1990 under ADB administration. The Project was formulated inaccordance with a Master Plan for Barani Agricultural Development (the Master Plan), whichwas developed during 19861988 under a technical assistance (TA) financed by the UnitedNations Development Programme (UNDP) under ADB administration. Feasibility studiescontained in the Master Plan were used in formulating the Project, together with a large amountof consultant inputs financed by IFAD during joint ADB/IFAD missions.

C. Purpose and Outputs

3. The Project aimed to (i) increase farm household production, employment, and income,particularly among smallholders, the landless, and women; (ii) reduce the growing migration of

population to urban areas; and (iii) alleviate constraints on agriculture in the project areas.1

4. The Project comprised five components: Part 1 Watershed Improvement, including(a) soil and water conservation, (b) rangeland and forestry development, and (c) waterharvesting; Part 2 Crop and Livestock Development, including (a) crop husbandry, whichcovered (i) basic agricultural research, (ii) adaptive agricultural research, (iii) agriculturalextension, and (iv) womens agricultural extension program; and (b) animal husbandry, whichcovered (i) livestock production extension, (ii) animal health, and (iii) livestock nutrition research;Part 3 Rural Infrastructure, including (a) upgrading of farm-to-market roads, and (b) villagewater supply systems; Part 4 Rural Credit; and Part 5 Institutional Strengthening, whichincluded (a) improvement of capacities of government staff, (b) training for beneficiaries andproject staff, and (c) support for the project coordination unit (PCU).

5. The Project covered four subdistricts in Punjab Province (see Map); two subdistricts hadbeen partially covered by the BADP and the other two were new subdistricts. The selection ofthe project areas considered (i) the desire to represent the low, medium, and high rainfallregions in the rain-fed areas for pilot testing, and (ii) the large number of landless poor in these

1The constraints identified were erratic rainfall, soil erosion, labor scarcity, inadequate inputs, small farms, poorcommunications, inadequate marketing, and lack of farm systems technology.


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subdistricts.2 Project activities were aimed at farmers with landholdings of 5 hectares (ha) orless, estimated at 92,000 households or 580,000 people in 865 villages, accounting for about80% of the population in the project areas.3

D. Cost, Financing, and Executing Arrangements

6. At appraisal, the project cost was estimated at $59.9 million (Appendix 1), financed byan ADB loan of SDR19.024 million ($25.0 million equivalent) from ADB's Special Fundresources. The rest was to be financed by an IFAD loan of $19.4 million, a UNDP grant of $0.7million, and counterpart funds from the Government ($10.8 million equivalent), AgriculturalDevelopment Bank of Pakistan (ADBP) ($0.8 million equivalent), and farmer beneficiaries ($3.2million equivalent). The UNDP grant was to finance training and consulting services as well asan ADB TA associated with the Project.4

7. The Project involved two executing agencies. ADBP was responsible for executing thecredit component while the Government of Punjab was responsible for all other components.The Project involved a number of government departments.5 A project steering committee and aproject coordination committee established under BADP continued to supervise and coordinate

implementation at the secretariat level and the project level, respectively. The Agency for BaraniArea Development (ABAD) was responsible for interagency coordination and policy guidance.The PCU established under BADP was responsible for field-level coordination between linedepartments. At the subdistrict level, the project director of the PCU, or his representative at asubdistrict field office, was responsible for coordination between various line agencies. A projectplanning and implementation committee formed under the project director comprised subdistrict-level officers from various implementing agencies.

E. Completion and Self-Evaluation

8. The Project was completed in December 1998. A project completion report (PCR)prepared by ADBs Pakistan Resident Mission was circulated to the Board in August 2000. The

PCR rated the Project partly successful.6

Issues identified in the PCR included: (i) projectbenefits were captured by a limited number of beneficiaries, including large landholders,(ii) provision of free saplings resulted in no continuity of social forestry at project completion dueto farmers lack of willingness to pay for the saplings, (iii) use of ADBP in credit delivery resultedin a very small portion of loans being received by women due to ADBPs culture of focusing onlarge-scale lending, (iv) the quality of eight livestock centers was poor due to weak constructionsupervision, (v) there was a significant delay in community organizing due to a 4-year delay inconsultant recruitment, and (vi) ADB supervision was weak because of frequent staff changes.

2Landless livestock holders ranged from 11% in Chakwal Subdistrict to 37% in Shakargarh Subdistrict at projectappraisal.

3Due to a lack of regular rainfall, much of the land in the project areas was not productive without irrigation.Consequently, farming with 5 ha or less was classified at the subsistence level in the Appraisal Report.

4ADB. 1991. Technical Assistance to Pakistan for Barani Farming System Training and Research. Manila.

5Department of Agriculture, Department of Forestry, Department of Livestock and Dairy Development, Departmentof Communication and Works, and Department of Public Health and Engineering.

6The rating was based on the previous three-category system (generally successful, partly successful, andunsuccessful).


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F. Operations Evaluation

9. This project performance audit report (PPAR) assesses the Projects design,implementation, outputs, and impacts, and draws on lessons learned for future improvement.The PPAR presents the findings of an Operations Evaluation Mission (OEM), which visitedPakistan in March 2002. The OEM has drawn its conclusions and recommendations from three

sources: (i) a desk review of relevant project documents and records, (ii) discussions withrelevant governmental officials and field staff, and (iii) focus group discussions and interviewswith beneficiaries and nonbeneficiaries in the project areas.7 Copies of the draft PPAR weresubmitted for review to the executing and implementing agencies, as well as to ADB staffconcerned. Comments received were considered in finalizing the PPAR.

II. PLANNING AND IMPLEMENTATION PERFORMANCE

A. Formulation and Design

10. The project design was based on the Master Plan that represented the Governmentslong-term development strategy in the rain-fed areas. The design was also based on the

Governments strong commitment to rain-fed area development, demonstrated by its allocationof development funds for a number of projects. Last, the project design was built upon theachievements of BADP and incorporated a few lessons learned from that project.8

11. The OEM, however, noted certain weaknesses in the project design. First, while theProject intended to target smallholders, the landless, and women, its design did not includemeasures to ensure distribution of benefits in favor of the intended target groups. In contrast,project subsidies9 were open to all farmers in the project areas on a first-come, first-servedbasis. Furthermore, beneficiaries were required to contribute at least 25% of the investmentcosts for construction of irrigation facilities. Although this requirement had the merit ofencouraging ownership, it excluded most of the smallholders and landless poor who had neithertheir own capital nor access to long-term loans. In contrast, large landholders, with their better

connections, information, and financial capacity, were the first to take advantage of the irrigationsubsidies. As a result, the 5 ha limit of beneficiary targeting (para. 5) was not observed. Asreported by the PCR, a substantial increase in farm productivity was observed on farmlandbelonging to large landholders whereas widespread increases in household income of theintended target groups were not evident.

12. Second, the project design adopted an engineering approach in the selection ofsubproject sites based primarily on technical feasibility. The top-down approach excluded theparticipation of the intended target groups in project decisions, including selection of subprojectsites or beneficiaries. In conjunction with a monitoring system that emphasized physical targets,project staff focused almost entirely on the fulfillment of their physical targets, such as the

7The OEM visited 13 villages in the project areas to inspect project facilities and hold discussions with farmers andfield staff. After the OEM, a survey of 19 villages was conducted to collect further information on the Projectsbenefits.

8For example, the level of irrigation subsidies was reduced from 100% to 75% to encourage farmers maintenanceof the irrigation facilities. However, other important lessons were ignored (paras. 11 and 12).

9Subsidies provided under the Project were in the form of government provision of a large portion of investment costfor construction of irrigation facilities such as minidams, ponds, tubewells, and dugwells, and use of governmenttractors for land leveling and deep plowing. The subsidies were received by individual farmers without significantexternal benefit to the public. In addition, tree seedlings were provided to farmers free of charge, and poultry unitswere supplied at subsidized prices.


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number of irrigation facilities constructed, with less attention to the level of use of the facilitiesafter construction, benefits generated, or distribution of the benefits.10

B. Achievement of Outputs

13. Many of the projects targets were revised significantly during project implementation

(Appendix 2).11 This flexibility allowed the reallocation of funds to better uses when moreinformation became available.12 Against the final revision, most of the important targets weremet. For some small items, such as culverts, small water gates, and drop siphons, the targetswere exceeded by a large margin. For a few items, such as handpumps, drip irrigation systems,and portable irrigation systems, the targets were not met.13 Chapter III provides detailedassessments by project component.

C. Cost and Scheduling

14. At $51.3 million, there was a project cost underrun of 14%, leading to cancellation of theADB loan by SDR2.8 million ($3.7 million equivalent).14 Cost deviations of individualcomponents varied, with significant under- and overruns (Appendix 1).15 The large cost

deviations were associated with the substantial changes in project targets as well asdepreciation of the local currency against the dollar between project approval in 1990 andproject completion in 1998.

15. The Project suffered serious delays in its first 4 years of implementation. Initially, loaneffectiveness was delayed by aboaut 6 months due to the longer than anticipated compliancewith conditions for effectiveness, such as project approval by IFAD and UNDP, and theGovernments approval of their project documents (Planning Commission Form 1 [PC-1]). Anunusually slow release of IFAD funds was experienced in the initial 2 years due largely to lack ofexperience of the National Bank of Pakistan in dealing with the transfer of the IFAD loan. Agovernment ban on hiring of new staff led to slow recruitment of project staff; many of themwere hired only in the fourth and fifth year of project implementation. Cumbersome procedures

in documentation resulted in very slow liquidation.16 The Governments slow approval of therevised PC-1 also contributed to the delays.

10The Project was designed in the late 1980s when ADB assistance focused on productivity increases andgovernment subsidies were widely used to facilitate the implementation of government programs. Furthermore,neither the Government nor donors were familiar with the community participatory approach at that time. Significantimprovement has been made since the early 1990s in the use of the participatory approach in developmentprojects.

11The revisions included substantial increases in some activities such as minidams (increased by 448%), ponds (by475%), lift pumps (by 229%), tubewells (by 158%), and roads (by 86%), as well as significant reductions in others,such as turbine pumps (by 64%), water disposal outlets (by 58%), and fencing for public forestry (by 73%).

12For example, it was found during project implementation that turbine pumps required a large amount of water flowand high investment cost (PRs50,000 per ha), and yet resulted in low use of water resources (only 8%). Afterfailure of the first 3 turbines, the target for turbines was reduced from 14 to 5, and the savings were used to finance

increases of other activities.13The drip irrigation system was found unsuitable for the project areas.

14Two cancellations, one in June 1998 and the other in December 1998, amounted to SDR2.3 and SDR0.5 million,respectively. The dollar equivalent amount varied due to exchange rate fluctuations.

15The most significant cost underrun was in the soil and water conservation subcomponent (by 23%), creditcomponent (by 45%), and consulting services (by 20%). In contrast, significant cost overruns were experienced inthe water harvesting subcomponent (by 163%), rural infrastructure (by 79%), training (by 150%), and projectmanagement (by 72%).

16ADBs loan review missions reported that it took up to 4 months for a line agency to furnish the required documentsfor the PCU to submit liquidation to ADB, and up to 1 year if procurement of machinery or equipment was involved.A minimum of 23 months was needed for ADB/IFAD disbursement to reach the project accounts.


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16. ADBs weak project supervision in the initial years was another cause of the delays. TheOEM noted that ADB did not field any mission between project inception in August 1990 and thefirst loan review mission in February 1992.17 Frequent changes of ADB supervisory staffdecreased the effectiveness of project implementation.18 After a midterm review in mid-1994 andchange of the director general of ABAD, project implementation picked up momentum in early1995, accelerated with Governments approval of the first revision of PC-1 in October 1995, was

in full swing in 1996 and 1997, and was completed in December 1998, 1 year behind theoriginal completion date.

D. Procurement and Construction

17. Goods and services were procured in accordance with ADBs Guidelines forProcurement. Local competitive bidding was used to select prequalified contractors forupgrading farm-to-market roads. Procurement was made through each implementing agencysprocurement committee with members from ABAD as well as senior staff from that agency. Aconsultant selection committee in the Planning and Development Board (P&D) processedconsultant recruitment.

18. The OEM inspected project facilities at the sites visited, including farm-to-market roads,water supply systems, and irrigation facilities as well as buildings and equipment. In general,construction quality appeared to be good with the exception of buildings in the eight livestockcenters. Factors contributing to the poor construction quality in these centers included weaksupervision of construction work by the Department of Communication and Works (DCW), andless ownership and attention of the Department of Livestock and Dairy Development (DLDD),which only identified the quality problems months after having accepted the buildings. It was toolate for DCW to request the contractors to repair the buildings.

E. Organization and Management

19. The project organization worked smoothly, especially in the later years. The project

steering committee met only when issues arose that were beyond the control of the projectdirector. The project coordination committee and project planning and implementationcommittee met more regularly and facilitated coordination between line agencies at the projectand subproject levels. One area of weakness in project management concerned the monitoringsystem, which focused on the achievement of physical targets and financial targets (use ofbudget allocated) instead of results and project objectives.

20. The Government complied with most of the loan covenants. In particular, the entireamount of the Governments counterpart funds was released at project commencement. Thefew exceptions included requirements for timely recruitment of project staff, their retention, andprovision of sufficient funds for operation and maintenance (O&M) of project facilities. Whilemost of the project staff remained in government service, some contractual staff were laid off

after project completion, including most women agricultural officers and extension workers.

21. Consultant recruitment was delayed by 4 years due to a number of problems. While theProject intended to use nongovernment organizations (NGOs) rather than consultants forcommunity development under the associated TA, no assessment on the availability of NGOs

17ADBs supervision intensified later, with four loan review missions in 1992, two in 1994, three in 1995, and two in1996.

18As noted by the PCR, seven ADB staff supervised the Project during its 8-year period.


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was given in the appraisal report. At the end, no NGO was engaged under the Project due todifficulties in identifying credible NGOs with the capacity to work in the project areas. After4 years of delay, two consulting firms were engaged, one for marketing and enterprisedevelopment and the other for training and community development. Due largely to weakness inthe project design and delayed TA commencement, the TA activities did not perform well. Theconsultants focused on fulfillment of their terms of reference, with less attention to the

relevance, quality, and sustainability of their outputs (paras. 41 and 42).

III. ACHIEVEMENT OF PROJECT PURPOSE

A. Operational Performance

1. Watershed Improvement

a. Soil and Water Conservation

22. This subcomponent aimed to provide a structural basis to enhance infiltration of rainfalland moisture storage within the soil profile through the construction of earthen bunds, water

outlets, gully plugging, terracing, and land leveling as well as construction of minidams andponds. Most of the revised physical targets were completed, and generally construction was of agood standard.

23. Based on available data and discussions with farmers, the OEM estimated that thenonirrigation investment had increased the yield of rain-fed wheat by 17% from 1.2 metric tonsper ha (t/ha) to 1.4 t/ha. The financial return on such investment was less attractive, and farmerssaid they would not have carried out the investment without project subsidies. In sharp contrast,the impact of minidams and ponds was most impressive, including substantial increases in cropyields as well as a shift to high value crops such as vegetable and fruits, or to fish production insome cases. The high investment cost (an average of almost 10,000 per minidam) could berecovered by the high financial returns within 4 years even without project subsidies. The OEM

found, however, that most owners of the minidams were large landholders instead of theintended target groups. While there were secondary benefits such as raised water table inadjacent areas and improved supply of water for livestock, optimal environmental benefit to thepublic is less clear. The project design intended to construct minidams and ponds in strategiclocations to reduce flood-generated runoff from the catchments. This was not implemented assubsidies for minidams were open to all farmers, and most dams were built for irrigation ratherthan for soil conservation. In retrospect, the minidams could more appropriately be classified asprivate irrigation facilities instead of soil and water conservation works.

24. Significant underuse of minidams was reported, as only half of the command area hasbeen cultivated. OEMs village survey also confirmed this finding.19 This problem could havebeen avoided if the project design had required that construction of minidams be based on

beneficiaries willingness to invest in supplementary facilities such as land leveling and waterconveyance systems.

19For example, the survey found that a farmer received a minidam but did not invest in supplementary land leveling.As a result, water ran off the fields and only 3 ha of land were brought under cultivation in spite of sufficient watersupply throughout the year. The OEM also found that some beneficiaries of minidams were absentee landlords;their limited attention to agriculture contributed to underuse of the irrigation facilities.


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b. Rangeland and Forestry Development

25. The rangeland and forestry development subcomponent financed reforestation onprivate lands and noncultivable public lands, mainly through the provision of free saplings.Seventeen private nurseries were engaged by the Department of Forestry to produce saplingsand distribute them to farmers. Most of the targets were met or largely met, and the Project

contributed to increased vegetation in the rain-fed areas. However, since this subcomponentprovided saplings without controlling the sites of tree planting, many farmers did not plant treesin the upstream areas due to considerations of distance and management costs. The provisionof free saplings also led to cessation of operations of the nurseries after project completionwhen subsidies ended and few farmers were willing to pay for the saplings.

c. Water Harvesting

26. The water harvesting subcomponent aimed to provide small-scale irrigation schemes,including turbine pumps, tubewells, lift pumps, and drop siphons. The engineering wing of theDepartment of Agriculture was responsible for the construction of tubewells, and the on-farmwater management wing was responsible for the delivery of water to cultivated areas through

provision of water-lifting devices and irrigation conveyance systems. This subcomponentachieved most of its revised physical targets. In response to heavy demand, appraisal targetsfor tubewells and lift pumps were revised upwards; new targets were introduced for dugwells,water storage tanks, and handpumps. These irrigation facilities had a significant impact onincreasing crop yields. The OEM noted that many dugwells were provided to smallholderswhereas the expensive tubewells were concentrated in the hands of large landholders. As aminimum of 6 ha of landholding was required for the construction of a tubewell, smallholderswith 5 ha or less were excluded.20

2. Crop and Livestock Development

a. Crop Husbandry

27. Basic and Adaptive Research. This subcomponent aimed to support basic research toexamine the effect on crop production of variations in tillage techniques and seedbedpreparation as well as adaptive research to test the findings of the basic research. The OEMvisited a number of basic and adaptive research institutes supported by the Project. The trials ofimproved crop varieties were impressive, indicating the potential contribution of agriculturalresearch to increased crop yields in rain-fed agriculture. The OEM found that farmers in rain-fedareas were aware of the recommended varieties, especially wheat, and improved landpreparation technologies. However, a considerable proportion of farmers did not apply them dueto cost considerations and other constraints.21 The OEM found that agricultural research underthe Project was largely conducted under ideal rain-fed conditions such as flat cropland withgood availability of inputs including, in particular, timely access to machinery services and

intensive management. There is a need for the research institutes to adopt a more results-oriented approach aiming at higher crop yields in farmers fields under prevailing conditionsinstead of highest yields under the best conditions in the research institutes.

20This minimum requirement was set to ensure economic efficiency.

21The recommendations included increased use of improved seeds and fertilizer as well as deep cultivation of landbefore or very early in the rainy season. Most smallholders could not compete with large landholders for timelyaccess to sufficient machinery services within the key season. Smallholders were also hesitant to use improvedseeds and fertilizer in view of the high risk of drought, which was severe in the past 2 years.


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28. Agriculture Extension. The extension activities focused primarily on 44 resourceintensive villages (RIVs), which were selected to demonstrate recommended farm technologies.This subcomponent fulfilled all of its revised physical targets. The OEM observed that farmerswho adopted a greater proportion of the recommended practices were those with good contactwith agricultural extension staff, who tend to visit large landholders with good technical andfinancial capacities. Smallholders and the landless poor, without being organized into groups,

had less access to extension services. OEMs village survey also found that many smallholdersconsidered extension services less relevant to them as they already knew the recommendedtechnologies, which could not resolve their problems. The demonstration plots were selected ongood farmland with irrigation facilities, and were seen by the poor as mainly benefiting largelandholders who received improved seeds and fertilizer for their demonstration plots with heavysubsidies. The OEM also noted that concentration of extension activities around RIVs reducedextension contact in outlying areas.

29. Womens Agricultural Extension. This subcomponent aimed to provide training forwomen agricultural officers, women extension workers, and female farmers, including trainingon crop production, poultry and livestock husbandry, vegetable and fruit tree culture, andmarketing as well as enterprise development. Although a large amount of training was

conducted, OEMs discussions with trainees found limited long-term impact of these activities.Only a few womens groups were organized under the Project and none of them sustained theiroperation after project completion, largely due to lack of demand and support. A greater impacton women could have been made if the design of this subcomponent had been based on abetter understanding of womens needs and constraints. Interviews with women found that theypreferred sewing machines and associated training as well as microfinance services. Theseactivities could have been provided if a bottom-up approach had been adopted to engagewomen beneficiaries in the project design.

b. Livestock Husbandry

30. Livestock Production Extension. This subcomponent established eight livestock

production and veterinary centers to provide curative and preventive animal health facilities aswell as extension services. The OEM visited two of these centers. The quality of the buildingswas poor due to weak construction supervision (para. 18). Livestock owners in the project sitesreported benefits of these centers when they were in full operation during implementation. Inparticular, the provision of artificial insemination reportedly doubled milk production fromimproved breed crosses. Due largely to staff shortage and inadequate funding, however, thesecenters have been operating below capacity since project completion, with only one part-timestaff borrowed from other centers.22 After project completion, these centers were not transferredto the Governments regular budget due to the poor condition of the buildings and operations.With inadequate maintenance, the buildings are now in a very poor state.

31. Animal Health and Nutrition Research. The Project provided support for the Barani

Livestock Production Research Institute (BLPRI), which developed several feeding options forlivestock owners that enabled animals to better withstand rain-fed conditions. These optionsincluded balanced livestock feeds using local crops and a urea-molasses block for milkinganimals. The capacity of the BLPRI feed mill was expanded to produce more feed for theinstitute and farmers. The feed mill has continued to operate since project completion, and

22The OEM was told that normally one third of DLDDs technical positions were vacant in rain-fed areas due partly tostaffs reluctance to be stationed in remote sites. Senior staff in DLDD tried to modify the design of thissubcomponent at an early stage to downsize the centers to small units with fewer staff. This could not beaccommodated as the tendering process had already been initiated.


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approval has recently been received to establish a revolving fund to facilitate the sale of thefeed and allow the mill to operate on a sustainable basis. BLPRI also provided training forlivestock staff of DLDD and village workers. Although the training of village workers in improvedlivestock management, feeding, artificial insemination, and first aid treatment was a verypractical approach to improving livestock production, there was no follow up by DLDD on theeffectiveness of the training, or further assistance to let trainees practice the new technologies

after the training.

3. Rural Infrastructure

a. Farm-to-Market Roads

32. This subcomponent intended to upgrade 160 kilometers (km) of roads, each rangingfrom 2 to 8 km in length, from earthen to hard-surface. The physical target was increased to298 km during implementation to use the large amount of loan savings from substantialreductions in other components. At project completion, 72 roads were upgraded with a totallength of 307 km. The roads inspected by the OEM appeared to be in good condition. Thelinkage between the roads and other project interventions, however, was less clear as the sites

for road improvement were selected independently from other project components. DCW, whichhas recently been devolved to the district level, is responsible for maintaining the roads withreportedly sufficient funds from a general budget of the concerned district councils.

b. Village Water Supply

33. The village water supply subcomponent aimed to provide 16 water supply schemes toserve 3,200 households. The target was increased to 18, but one of the completed schemeswas damaged by a flood in 1994. Sites of the water schemes were selected by the Departmentof Public Health Engineering based on four criteria: (i) technical feasibility, (ii) village size largerthan 100 households, (iii) willingness of most households to be connected to the water system,and (iv) communities willingness to take over O&M after completion of the scheme. The last

requirement was introduced after 1994, incorporating lessons learned from schemesconstructed earlier where local communities refused to take over O&M since they had not beenconsulted and found the schemes unaffordable.

34. The OEM visited two water schemes. Due to a design flaw, one scheme was not usingthe water storage tank constructed. The other was at an isolated village that received no otherinterventions under the Project. In both villages, water was pumped daily for half an hour, whichwas sufficient to fill enough water containers to cover household needs for a day. Thecommunities strongly supported O&M of the schemes with monthly fees collected on time and infull. The OEM noted that benefits from the water schemes were equally distributed among allhouseholds, with a typical time saving for women of about 1 hour per day. While the provision ofpotable water reduced incidences of water-borne diseases, the overall benefit is less clear as

sanitation problems were reported due to inappropriate disposal of wastewater since thissubcomponent did not include sanitary systems.

4. Rural Credit

35. The rural credit component aimed to assist ADBP to develop a special lending programin the rain-fed areas to meet the needs of the rural poor. Demand for credit was estimated atPRs155 million at appraisal, with a target of 3,800 subloans for small-scale agricultural


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production, irrigation, and cottage industries. At project completion, a total amount of PRs317million had been disbursed in 7,565 subloans, nearly double the appraisal target. Theaccumulated recovery rate of these loans was 68%,23 better than the overall performance ofADBPs operations. Since project completion, ADBP has disbursed 2,996 additional loans worthPRs163 million, making a total amount of loan disbursement of PRs480 million from projectinception to the end of January 2002.

36. While this component intended to target the poor, the OEM found that most landlesspoor and women were excluded as 98% of the loans disbursed under the Project required landcollateral. The remaining 2% were surety loans, which did not require assets or land registrationof the borrower. However, those who provided the surety for the borrower had to ensure theavailability of assets. As a result, only 7% of the loans issued under the Project were receivedby women. Furthermore, farmers interviewed by the OEM complained about the cumbersomeloan application procedures, which appeared to be simple on paper and reportedly could becompleted in one day. Smallholders with little connection to ADBP personnel and othergovernment officials, however, needed days or weeks to obtain the required documents,especially the certificate of land ownership required for loan collateral.

5. Institutional Strengthening

a. Improvement of Capacities

37. This subcomponent was to provide research support, survey assistance, trainingmaterials, vehicles, and equipment to the executing and implementing agencies for projectimplementation. In view of a lack of reliable baseline data under BADP, the project designspecified the use of a local economic research institute to undertake a baseline survey andupdate it at project completion. The baseline report was completed in December 1993, 3 yearsafter project commencement, and contained no poverty data. Project staff might have gainedbetter experience if an in-house monitoring system had been established instead of usingexternal experts for the required survey and evaluation.

b. Training

38. The training subcomponent supported international training in farming system methodsand agrometeorology as well as international study tours to review soil conservation practices.In addition, a large amount of domestic training was provided to project staff and beneficiarieson social forestry, farming system methods, livestock nutrition and health, womens extension,and village literacy. Most of the training plans were implemented with reportedly a large numberof trainees. Trainees expressed great appreciation for their training opportunities, especially fortheir international experience. The OEM noted that the training could have had a larger impact ifit had been designed based on beneficiary demand with an aim to build up local capacity,monitored by training impact assessment, and followed up by post-training assistance.

c. Project Coordination

39. The project coordination subcomponent provided office buildings, vehicles, equipment,and incremental staff for the PCU. Overall, the PCU performed well in project implementation,especially in the late years. It was noted that slow progress during the initial years was due

23The poor recovery rate appeared to be due to slow collection of repayments, as the accumulated recovery rate hadincreased to 88% as of 31 January 2002.


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partly to insufficient experience of the PCU in coordinating the numerous agencies in a complexproject as well as the heavily centralized procedures for staff recruitment, procurement, andconsultant engagement. A pressing area for improvement was in monitoring and evaluation,which should have focused on project results instead of physical targets (para. 12).

6. Advisory Technical Assistance on Barani Farming Systems Training and

Research

40. The ADTA was financed by the UNDP grant (para. 6, footnote 4). The original design ofengaging NGOs did not materialize due to difficulties in identifying suitable NGOs in the projectareas in the early 1990s. As a result, a consulting firm was recruited for marketing andenterprise development. After a market survey, the consultants concluded that the project areashad no competitive advantage in industry except for animal products. Instead of developing newenterprises, it was more prudent to strengthen the existing ones. To fulfill the TA requirement ofestablishing 60 enterprises, the consultants facilitated 49 borrowers to obtain ADBP loans, andgave cash grants of about PRs5,000 each to another 38 small enterprise owners.

41. Another consulting firm was engaged under the TA to organize community groups in

100 villages. After consultation with the PCU, the consultants decided to work in non-RIVvillages, as the RIVs were large and had been well served by various government programs.Because consultant recruitment was delayed 4 years, the community development wasconducted in isolation from other project activities. At TA completion, the village organizationswere still young and immature, and there was no follow-up monitoring or assistance. Theconsultants also trained 108 village training masters. While these masters probably benefitedfrom the 1-week literacy training, there was no assistance to help them train other farmers intheir villages.

42. The above problems originated from weaknesses in the project design, which includedcommunity development without specific measures to ensure its success. The 2-year TA periodwas too short to sustain the newly established village organizations. The necessary sequencing

of community development ahead of other project interventions was not possible due toinadequate attention to sequencing in the project design, and the 4-year delay in consultantrecruitment. The use of consultants for community development was ineffective as consultantsfocused on the delivery of short-term tasks rather than long-term relationships with the targetedcommunities.

B. Economic Reevaluation

43. Based on directly quantifiable benefits and costs, the economic internal rate of return(EIRR) for the Project (excluding rural infrastructure and rural credit) is reestimated at 4.1%(Appendix 3), substantially below the appraisal estimate of 24.0% and the PCR reestimate of10.1%.24 The primary cause of the reduced EIRR is a substantial reduction in the Projects

outreach. Instead of benefiting 32,000 to 51,000 farms as anticipated at appraisal, the Projectscrop components benefited about 20,200 farms, of which only 2,257 farms (11%) gainedsignificant financial returns with access to irrigation facilities. The low usage of some irrigationfacilities is another factor contributing to the low EIRR, largely due to farmers reluctance tofinance complementary investments such as land leveling and water conveyance systems.

24Rural infrastructure (farm-to-market roads and water supply) and rural credit were excluded in the EIRRcalculations at appraisal and at PCR, which covered only the main components of crops, livestock, and forestry.


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44. EIRR estimates for individual project components range from 3.3% for the forestrycomponent to 3.8% for the crop component to 26.5% for the livestock component (Appendix 3).The high EIRR for the livestock component is due to the significant benefits of artificialinsemination and its low cost. Sensitivity analysis was conducted for the project EIRR, which ishighly sensitive to increases in production costs, but less sensitive to reduction in crop yields orincreases in O&M costs. A 10% increase in production costs would make the project EIRR

negative.

C. Sustainability

45. The irrigation facilities provided under the Project were reportedly well maintained bytheir owners; this was confirmed by the OEMs field inspection. Buildings and equipment in theresearch and extension agencies were transferred to the Governments regular budget afterproject completion and are well maintained. The farm-to-market roads inspected by the OEMwere in good condition under the maintenance of district offices of DCW. While repairs areneeded on some roads, DCW reported sufficient allocation of maintenance budget from districtcouncils. O&M of 12 of the 17 water supply systems has been transferred to local communities,where water user committees collect monthly fees for O&M of these systems. The remaining

five schemes, which were constructed in the early years without prior agreements with localcommunities on their O&M responsibilities, have not been transferred and are being maintainedand operated by DCW district offices. The OEM noted that some of the project activities havebeen terminated since project completion, such as the 17 private nurseries and the womensagricultural extension program. Since the womens agricultural extension services contributedlittle to the Projects primary benefits, their termination did not seriously affect the Projectssustainability.

IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS

A. Socioeconomic Impact

46. The Projects most significant impact was apparent on farmlands that received access toirrigation after project interventions. Crop yields were doubled, cropping patterns shifted fromwheat to high-value crops, and farm income substantially increased. Access to irrigationsignificantly reduced the risk of crop failure due to erratic rainfall. The impact was particularlyremarkable when comparing farms which benefited from minidams and tubewells with rain-fedfarms that had no access to irrigation and suffered from severe drought in the past 2 years.Asthe irrigation facilities will continue to generate benefits, these facilities seem to be the mosteffective long-term solution to overcoming constraints to rain-fed agriculture.

47. The OEM noted, however, that benefits of the small-scale irrigation facilities in theproject areas are highly localized, mostly confined to adjacent fields,25 which, in most cases,belong to one household. The external benefits of these facilities are rather small, including the

convenience of washing clothes, or increased water supply for animals, which could be mostcritical in times of severe drought. While increased demand for farm labor occurred, the OEMnoted that most of the newly hired tenants were not local farmers but migrants with experiencein vegetable planting since the irrigated land was shifted to vegetable production and localfarmers lacked such experience. Smallholders could not participate in the irrigation investmentdue largely to their inability to compete with large landholders in accessing project subsidies,including their inability to provide the required counterpart funds for the investment.

25For example, a minidam on average irrigates about 6 ha; a pond, 1 ha.


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53. The Project intended to target small farmers with landholdings of 5 ha or less, estimatedat about 92,000 households. The OEM found that the most significant benefits came from theconstruction of minidams, ponds, tubewells, and dugwells, which benefited 2,257 households(Appendix 3, Table A3.12). The investment in rain-fed agriculture benefited another 17,925farms, where wheat yields increased by 17%. The Project also provided subsidies for 965 liftpumps and 798 spillways/outlets and therefore benefited another 1,763 households. In addition,

about 10% of the villages benefited from road improvement; 2% benefited from improved watersupply; and a large number of households received free tree seedlings, poultry units, training,and extension services. However, these benefits were small compared with the benefits ofirrigation facilities.

B. Environmental Impact

54. The Project generated a positive impact on the environment with negligible negativeinfluence. First, most of the irrigation structures such as minidams and ponds were relativelysmall as were land reclamation interventions such as gully plugs and land leveling. Increaseduse of wells and lift pumps may have lowered the water table in some locations, but thesignificance is difficult to assess after several years of continued low rainfall. Second, improved

cultivation has an impact on augmenting water retention and intensifying vegetative cover.Third, roads constructed were mainly on flat or low undulating terrain, normally not requiringcuts into steeply sloped areas. Finally, potable water supply has reduced incidences of water-borne diseases.

55. The Project could have generated a better environmental impact if watershedmanagement had been used to make optimal use of water resources and stabilize soil erosionin a catchment area. Most of the water and soil conservation works, however, took place inlocalized areas without taking into account the large catchment or subcatchment area.Furthermore, the social forestry component was unable to direct tree planting to the most criticalareas due to its focus on plant nurseries.

C. Impact on Institutions and Policy

56. The Projects achievements in ameliorating constraints to rain-fed agriculture bydeveloping small-scale irrigation facilities have encouraged the Government to continue publicinvestment in rain-fed areas. After the Project, the Government implemented the Barani VillageDevelopment Project financed by IFAD, and is currently preparing another intervention to befinanced by ADB. The Project has not only provided rich experience and lessons learned for thedesign and implementation of follow-up projects, but also trained a large number of governmentofficials and field staff who continue to work on such projects. Its institutional impact on localcommunities, however, was minimal as they were largely excluded from the design andimplementation. Although the TA consultants organized a number of community groups, none ofthem sustained their operations after TA completion.

V. OVERALL ASSESSMENT

A. Relevance

57. The Projects objectives were consistent with the development strategy of theGovernment and the operational strategy of ADB at the time of appraisal. By promotingagricultural development in a region bypassed by earlier development, the Project contributed,in a limited way, to balanced regional development and increased agricultural production. The


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project design, however, did not include measures to ensure that its intended target groups(smallholders, the landless, and women) received a proportionate share of benefits. Inconjunction with a top-down approach that focused on technology improvement, this resulted inthe capture of a significant amount of benefits by a small number of large landholders. TheProject is therefore rated partly relevant.

B. Efficacy

58. The Project met most of its physical targets as revised during implementation. TheProject also fulfilled, to a reduced extent, its primary objective of increasing farm householdproduction, employment, and income. However, its intention to increase household incomeparticularly among smallholders, the landless, and women was not fulfilled. The objective ofreducing constraints to rain-fed agriculture was fulfilled only in the farmlands that receivedirrigation facilities. The achievements were less than anticipated due to the small number offarms that received irrigation facilities. Finally, the Project did not fulfill its objective of reducingmigration to cities. On balance, the Project is rated less efficacious.

C. Efficiency

59. The Projects EIRR reestimated by the OEM is substantially below the appraisalestimate primarily due to a significant reduction in the number of project beneficiaries.Furthermore, farmers reluctance to finance investment supplementary to minidams and pondsled to low use of these facilities. The high subsidies for irrigation investment distorted privatedecisions and provided less incentive for project staff and farmers to select the most cost-effective interventions. The design of the livestock centers focused on provision of buildingswithout addressing the key constraint of staff shortage, resulting in significant underuse of thecenters. The Project is therefore rated less efficient.

D. Sustainability

60. The Projects primary benefits have been increased farm production and householdincome in farms that received irrigation facilities. The sustainability of these benefits is likely asthe irrigation facilities have been well maintained by their owners, and continued operation ofthese facilities is likely. Other project facilities such as roads and water supply systems havealso been well maintained. The project facilities without clear sustainability are those that did notgenerate significant benefits, even during implementation, such as the womens agriculturalextension program. Overall, the Projects sustainability is rated likely.

E. Institutional Development and Other Impacts

61. The Project had a positive impact on the Governments policies and public agencies as itencouraged the Government to continue investment in rain-fed agriculture, and trained a large

number of project staff. The project design included community mobilization, NGO engagement,and the womens extension program. However, as measures to ensure successfulimplementation were not developed, the impact on women and local communities was minimal.The insufficient attention to the distribution of benefits restricted the Projects social impact onpoverty reduction. On balance, the Projects institutional development and other impacts arerated moderate.


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F. Overall Project Rating

62. The overall project rating, based on the five rating criteria (paras. 5761), is partlysuccessful.28 The Project has met most of its revised physical targets; its impact on increasingfarm production was marked on farmlands benefiting from irrigation facilities. The primarybenefits of the irrigation investment, however, flowed to a small number of large landholders.

The Project had intended to target smallholders and landless poor. In the absence ofimplementation measures, however, it bypassed the majority of its intended target groups.

G. Assessment of ADB and Borrower Performance

63. ADB designed the Project based on the Governments initiatives and long-term strategyfor rain-fed area development. ADB also mobilized cofinancing from other donors. However,ADB should have given more attention to developing measures to ensure appropriatedistribution of benefits. ADBs supervision of implementation could have been more effective inthe initial years. Less frequent turnover of supervisory staff could have ensured theeffectiveness of project supervision. Overall, ADBs performance is rated partly satisfactory.

64. The Government demonstrated strong ownership and commitment to rain-fed areadevelopment, and fulfilled the loan covenants with few exceptions. In particular, the entireamount of counterpart funds was made available at project commencement, thus avoidingimplementation delays due to slow releases of counterpart funds. ABAD and other line agenciesimplemented the Project largely as designed. Although there were serious delays in the initial4 years, implementation accelerated in later years and was completed with only 1 year of delay.Overall, the performance of the Government is rated satisfactory.

VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS

A. Key Issues for the Future

65. Distribution of Project Benefits. A major portion of the project subsidies was capturedby a small number of large landholders instead of the intended target groups because (i) thesubsidies were open to all farmers on a first come, first served basis; (ii) the high subsidies(75% of investment cost or a maximum of $16,000 for a minidam) attracted nontarget groups,including influential people; (iii) there was no ceiling on how much in subsidies one householdcould receive from various project activities; (iv) the requirement that farmers contribute at least25% of investment cost put the target groups in a disadvantageous position as mostsmallholders had neither their own capital nor easy access to long-term loans; and (v) a top-down approach was adopted, which excluded the participation of local communities in theselection of subproject sites and beneficiaries. In retrospect, the Project could have benefitedmany more farmers, especially smallholders, if its design had included measures to ensure afair distribution of project subsidies.29

28Using the current four-category rating system (highly successful, successful, partly successful, and unsuccessful).

29For example, household coupons could have been issued and distributed exclusively to smallholders indicating theamount of project subsidy available for them to invest on irrigation. A number of smallholders could have combinedtheir coupons to enable the construction of an inexpensive dugwell, which could have removed the key constraintto their farms and increased their household income. A bottom-up approach could have been adopted to organizelocal communities to facilitate the implementation of the household coupon system.


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66. Use of Public Subsidies. The OEM considers subsidies to irrigation investment in therain-fed area justified under two criteria: (i) the investment has significant environmental impactdue to its critical location in a watershed area, or (ii) the investment generates a significantimpact on poverty reduction due to its direct benefits to a large number of the poor. These twocriteria, however, were not followed under the Project. The benefits of the small irrigationfacilities in the project areas are highly localized, confined mostly to adjacent fields belonging to

one household. If the Project had used subsidies for environmental purposes, a catchmentapproach could have been adopted to identify critical locations where the construction of waterconservation structures was critical to the entire region. If the Project had used subsidies forpoverty reduction, large landholders could have been excluded from the irrigation subsidies.30

67. Cost Effectiveness. Inefficiencies were reported during implementation, includingoversized irrigation structures and a lack of clear need for many water spillways and outlets,which were 100% subsidized. Cases of underuse of minidams were thereafter reported as theirowners did not invest in supplementary measures such as land leveling. Some farmersinterviewed by the OEM said that they would not have constructed the water outlets withoutgovernment subsidies. Others said that they could have reduced the investment by using localmaterials if the investment money had been their own. It appears that the project subsidies

distorted private decisions on investment as farmers compared the financial returns with theirown portion (25%) instead of with the entire investment cost. Furthermore, the subsidiesprovided little incentive or pressure for project staff to promote cost-effective measures, as theyhad the authority to allocate the attractive subsidies. In retrospect, incentives should have beendeveloped to make farmers treat the project subsidies like their own money.31 To removeconstraints to irrigation investment, efforts could have been made to provide easy access tolong-term loans for all farmers who were interested in irrigation.32 Research institutes couldhave been encouraged to develop and disseminate affordable technologies. It is likely thatfarmers can make the most cost-effective investment decisions if they are (i) free from financialconstraints, (ii) made fully aware of the investment costs and benefits, and (iii) given multiplechoices, including cheap alternatives.

68. Integrated Approach. Although the Project adopted an integrated area developmentapproach to address multiple needs in the rain-fed areas, this appeared to have been confinedto the conceptual level without guiding the selection of subproject sites. Each implementingagency selected subproject sites based on its own criteria without particular attention to thecomplementary needs of the beneficiaries under other components. The desired synergy impactof using multiple interventions to simultaneously address the key constraints in a particular areawas not apparent.33 Alternative approaches that integrate project interventions at the village

30For large landholders, the Project could have organized study tours to visit successful investment cases, and

provided free engineering design and financial analysis to encourage them to invest in irrigation using their owncapital.

31For example, the provision of subsidies could have been in the form of a fixed amount instead of on a percentagebasis without limit.

32Land collateral may still be required to ensure financial soundness of intermediaries. However, procedures for loanapplication should be simplified for small landholders.

33The lack of synergy impact was due to the following reasons: (i) the current set-up of government organizationsdoes not easily facilitate the integration of different project activities across different line agencies; (ii) the Projectused physical targets to monitor the performance of various agencies; the targets became the basis of budgetaryallocation and a driving force motivating each agency, which endeavored to achieve its own targets instead of thefinal goal and objectives of the Project.


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level should be considered for future projects of this nature.34 Such an approach may alsosimplify project design by limiting the number of participating government agencies to a singleagency responsible for area development, with strong field offices set up under localgovernments in the project areas. Various line agencies could participate in the project andprovide services on a contractual basis.

B. Lessons Identified

69. The Project has provided valuable lessons learned including the following:

(i) Implementing a project in a poor region may not automatically have a significantimpact on poverty reduction if specific measures are not taken to ensure a fairdistribution of project benefits in favor of the poor.

(ii) Inclusion in a project design of poverty-reduction activities such as NGOengagement and community development may not have the desired socialimpact if careful arrangements are not made for effective implementation of suchactivities.

(iii) Provision of a credit line may not have the desired social impact if careful

arrangements are not made to develop borrower groups and microfinanceinstitutions that can deliver microfinance services to the poor.

(iv) Inclusion of numerous training programs may not have the desired impact if thetraining is not based on beneficiary demand and is not aimed at building up long-term capacity in the local communities with continued support after the training.

(v) Smallholders and landless poor can easily be bypassed by public assistance thatfocuses solely on technology improvement.

(vi) Support for agricultural research should focus on improvement in farmers fields.Incentive measures need to be included in project design to encourage researchinstitutes to develop suitable technologies that match the prevailing conditions onmost farms instead of aiming at the highest possible yields in research institutesunder the most ideal conditions that are not accessible by most farmers.

(vii) Free provision of inputs (such as tree seedlings) to farmers may lead to closureof such services after project completion. Project design should aim at the long-term operation of the introduced services and use funds during implementation tobuild up local institutions and capacities to sustain such services.

(viii) Provision of project facilities (such as buildings) without addressing constraints totheir full operation (such as staff shortage) may lead to underuse of such facilitiesand unnecessary maintenance cost.

34One alternative approach of village-level integration may include the following steps. First, conduct intensiveconsultations with local communities and let them identify their key constraints and investment priorities. Based onthe results of the consultations, a village plan may be developed, which should focus on one or two primaryinvestments. Other investments could be considered only if they facilitate the removal of constraints to the full

operation of the primary investments so as to maximize their impact. Second, select project components andactivities based on the village plans. Third, issue and distribute village coupons to the targeted villages; thecoupons should specify the amount of project assistance available to finance public investments (such as roads orwater supply systems) in the village plans. Fourth, let villages use their coupons to buy investment services fromconcerned government agencies. The demand for public services will then become a basis for budgetary allocationto line agencies. The performance of the government agencies will then be monitored by the local communities,who are now clients of the government agencies. Finally, a project design should provide maximum flexibility foreffective implementation. At the initial stage, the target indicators of a project may be set in terms of its final goals,such as the number of villages and number of households that will be better-off after project interventions, insteadof physical targets of dams and wells. The definition of the better-off situation and its monitoring indicators couldlater be developed through consultations with local communities.


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C. Follow-Up Actions

70. The OEM has identified the following actions required to ensure the sustainability ofproject benefits. The OEM recommends that the Pakistan Resident Mission take the overallresponsibility for monitoring the implementation of these actions.

(i) The Government of Punjab, through P&D, should, by March 2003, ensure thatDLDD transfer the eight livestock centers to the Governments regular budget toenable immediate repair of these facilities and to sustain their long-termoperations. DLDD should, by March 2003, post at least one full-time veterinaryassistant to each of the eight centers.

(ii) The Government of Punjab, through P&D, should, by March 2003, ensure thatthe concerned district councils of the four project subdistricts allocate sufficientbudgets for proper maintenance of the farm-to-market roads in these subdistricts.

(iii) The Government of Punjab, through P&D, should, by March 2003, ensure thatthe concerned district councils of the four project subdistricts allocate sufficient

budgets for proper maintenance of the five water supply systems that will not betransferred to local communities.

(iv) ABAD should review lessons learned from the Project and incorporate them intothe design of the proposed third barani intervention, which will be preparedthrough TA in 2003.


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Appendix 2 21

At As Revised as % Actual as %

Unit Appraisal Reviseda Actual of Appraisal of Revised

A. Watershed Improvement1. Soil and Water ConservationImproved Cultivation acre 174,322 93,204 83,205 53 89Deep Plowing/Chiseling acre 108,497 70,965 66,306 65 93Terracing and Leveling acre 138,650 79,172 73,936 57 93Land Reclamation acre 12,025 15,277 15,293 127 100Gully Plugging acre 22,400 21,966 21,966 98 100Water Disposal Outlets acre 53,122 22,191 22,191 42 100Demonstration of Vetiver Grass acre 1,000 1,001 1,001 100 100Establishment of Nurseries no. 6 6 6 100 100Stream Bank Training km 52 52 53 100 102Minidams no. 54 296 323 548 109Ponds/Weirs no. 120 690 708 575 103

2. Rangeland and Forestry Developmenta. Public Forest

Dry Afforestation/Seeding acre 13,000 14,747 12,568 113 85Anti-Erosion Work acre 13,000 13,993 12,133 108 87Fencing acre 13,000 3,507 2,912 27 83

b. Private LandsSilvopastoral acre 9,500 4,580 3,896 48 85Agrisilvicultural acre 9,500 21,265 21,170 224 100

3. Water HarvestingTurbine Pumps no. 14 5 5 36 100Dugwells no. 0 1,140 1,144 100

Tubewells no. 36 93 92 258 99Lift Pumps no. 300 987 965 329 98Small Water Gates no. 2,100 2,636 3,923 126 149Drop Siphons no. 1,400 622 847 44 136Water Storage Tanks no. 0 91 107 118Water Conveyance Network no. 0 134 147 110Culverts no. 0 24 49 204Handpumps no. 0 1,077 727 68Drip Irrigation System no. 0 330 110 33Portable Irrigation System no. 0 166 156 94

B. Crop and Livestock Development

1. Basic Agricultural Research

BARI no. of trials 0 299 284 95SAWCRI no. of trials 0 255 276 108

2. Adaptive Research no. of trials 0 307 354 115Demonstration Plots no. 0 2,078 1,237 60Farmer Days no. 0 141 135 96Model Farms no. 0 116 104 90Distribution of Technical Literature no. 0 4,676 4,526 97

SUMMARY OF PHYSICAL ACCOMPLISHMENTS

Item


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22 Appendix 2

At As Revised as % Actual as %

Unit Appraisal Reviseda

Actual of Appraisal of Revised

3. Agricultural ExtensionResource Intensive Villages no. 44 44 44 100 100Demonstration Plots no. 0 2,184 2,173 99Farmer Days no. 0 1,678 1,874 112Distribution of Technical Literature no. 0 19,708 25,454 129Pre- and Postharvest Training no. 0 4,896 5,053 103Agricultural Officers/Field Assistants no. 44 8 8 18 100Women Agricultural Officers no. 8 4 4 50 100Village Women Motivators no. 72 72 72 100 100

4. Livestock HusbandryDistribution of Improved Poultry unit 15,000 48,389 48,389 323 100

no. of trainees 700 847 814 121 96

Distribution of Veterinary Kits no. 700 770 719 110 93Outreach Training no. of trainees 0 9,600 8,932 93Artificial Insemination no. of animals 0 21,285 20,495 96Farmer Days no. 0 96 126 131

C. Rural Infrastructure1. Farm-to-Market Roads km 160 298 307 186 103

2. Village Water Supply no. of schemes 16 18 17 113 94

D. Rural Credit

1. Disbursements PRs million 155 293 317 189 108

2. Borrowers no. 3,800 7,565

E. Institutional Strengtheningb

Training on Soil Conservation no. of staff 18 25 139Training on Livestock Extension no. of staff 20 12 60Training on Enterprise Development no. of staff 0 40Training on Women Village Motivators no. of staff 72 72 100Training on Livestock Farmers no. 700 814 116

no. 100 107 107Training of Masters for Literacy Training no. of farmers 0 109Training on Livestock Management no. of farmers 0 133Training on Women Farmers no. of farmers 0 80Training on Marketing no. of farmers 190 395 208Establishing of New Enterprises no. 60Strengthening of Existing Enterprises no. 0 87Farmer Days on Crop Production no. 0 2,009Farmer Days on Livestock no 0 126

a Target figures were revised in September 1995 and July 1997; the revision targets of July 1997 are used in this table.b As there were no revisions on targets under this component, the actual accomplishments are compared with the appraisal targets.

Source: Appraisal Report, Project Completion Report, Project Coordination Unit, and Implementing Agencies.

Item

Formation of Beneficiary Groups

BARI = Barani Agricultural Research Institute, ha = hectare, km = kilometer, no. = number, SAWCRI = Soil and Water ConservationResearch Institute.

One-Week Course on Livestock


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Appendix 3 23

ECONOMIC REEVALUATION

A. Methodology and Assumption

1. The method used in the economic reevaluation follows Asian Development Bank

Guidelines for the Economic Analysis of Projects. The economic internal rate of return (EIRR) isestimated for the Projects major components (irrigated and rain-fed agriculture, forestry, andlivestock) individually and jointly. Major assumptions used in the analysis include the following:

(i) All costs and benefits are expressed in constant 2002 prices.

(ii) Financial prices of nontraded commodities are adjusted by employing a standardconversion factor of 0.9 used for similar projects in Pakistan. Input and farmproduct prices are based on seasonally adjusted 2002 prices. Economic pricesfor internationally traded commodities (wheat, milk, and urea) are based onMarch 2002 World Bank commodity price projections (Tables A3.1A3.2). Theeconomic price of labor is calculated using a shadow exchange rate of 0.75, a

standard practice for rural development projects in Pakistan. A comparison offinancial and economic prices used at appraisal, project completion report (PCR),and project performance audit report is given in Table A3.3.

(iii) Quantifiable benefits for the agricultural components are derived through farmbudget analyses for crops on farms supported by the Project. Crop models areconstructed for rain-fed crops including chickpea, millet, rapeseed, and wheat,and for irrigated crops, including cauliflower, onion, maize, and wheat (TablesA3.4A3.11). Based on the estimated crop yields and input uses, net returns arecalculated.

(iv) The assumed economic life of the Project is 20 years while the investment period

covered 8 years from 1992 to 1998.

B. Estimation of Project Benefits

2. The main project benefits were increased agricultural, livestock, and forestry production.Estimation of these benefits is derived from a comparison between the withand withoutprojectscenarios. Based on the annual completion figures provided by the Project Coordination Unit(PCU), it is estimated that a total of 20,181 farms benefited from the project interventions,including 17,925 farms that received project subsidies for land leveling, deep plowing, gullyplugging, and land reclamation, and 2,257 farms that received minidams, ponds, tubewells, anddugwells. The total crop area affected by the Project is estimated at 40,011 hectares (ha),including 3,713 ha of irrigated land (Table A3.12).

1. Rain-Fed and Irrigated Agriculture

3. There were two types of crop enterprises in the project areas: the majority of farms weresmall (less than 5 ha) and dependent on rain-fed agriculture. Irrigated farms were larger usingheavily subsidized and more capital-intensive structures provided under the Project.Accordingly, farm models are constructed for rain-fed and irrigated agriculture, including mod