staff appraisal report - world...

Document ofThe World Bank

Report No. 17312-KG

STAFF APPRAISAL REPORT

KYRGYZ REPUBLIC

AGRICULTURAL SUPPORT SERVICES PROJECT

April 3, 1998

Rural Development and EnvironmentEurope and Central Asia Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CIIRRENCY EOUIVALENTS(January 1998)

Currency Unit SomUS$1 17.5 Som

WEIGHTS AND MEASURESMetric System

BORROWER'S FISCAL YEAR

January I - December 31

ABBREVIATIONS AND ACRONYMS

ACSPP - Agency for Chemical Supply and Plant ProtectionALRF - Agricultural Land Redistribution FundASSP - Agricultural Support Services ProjectATAS - Agricultural Training and Advisory ServicesCLAR - Center for Land and Agrarian Reform (oblast/rayon level)CNFA - Citizen's Network for Foreign Affairs

CRI - Crop Research Institute (Agrarian Academy)FPRI - Forage and Pasture Research Institute (Agrarian Academy)

GoKR - Government of the Kyrgyz RepublicGTZ - Gesellschaft fur Technische Zusammenarbeit (German)

IFAD - International Fund for Agricultural DevelopmentIPM - Integrated Pest Management

KAFC - Kyrgyz Agricultural Finance CorporationKH-F - British Know How Fund

KS - Kyrgyz StandardMAWR - Ministry of Agriculture and Water ResourcesMOFE - Ministry of Finance and Economy

MIS - Agricultural Market Information SystemNLF - National Land Fund

NMC - National Management Committee for MISNSA - National Seed Association

NPOZ - Industrial Association for Crop ResearchNSC - National Statistical CommitteePIU - Project Implementation UnitPSC - Project Steering Committee

RADC - Rural Advisory and Development CenterRADS - Rural Advisory and Development ServicesRASC - Rural Advisory Steering Council

RCLAR - Republican Center for Land and Agrarian ReformSDAP - State Department of Anti-Monopoly Policy

SDP - Sheep Development ProjectSFCOP - Small Fanner Credit Outreach Program

SIPQ - State Inspectorate of Plant QuarantineSALMLR - State Agency for Land Management and Land Resources

TACIS - Technical Assistance to the Commonwealth of Independent States

Vice President: Johannes F. Limn, ECAVPCountry Director: Kiyoshi Kodera, ECCO8Sector Director: Kevin Cleaver, ECSRE; Sector Leader: Joseph Goldberg, ECSREResponsible Staff. Ramesh Deshpande, ECSPF (Team Leader)Peer Reviewers: Jitendra Srivastava, Severin Kodderitzsch, and Tjaart Schillhom-Van Veen (ECSRE)Appraisal Mvissions: The IDA post-appraisal mission (November 1997) included: R. Deshpande (Mission Leader), J. Srivastava (PrincipalAgriculturist), J. Cole and R.Selvaratnam (Consultants), and D. Djoldsheva (Operations Officer). The IDA appraisal mission (June 1991)included: J. Cole (Mission Leader) ), R. Deshpande (Principal Financial Operations Officer), F. Dauphin (Agronomist); B. Villerette (AgriculturalEconomist); P. Dickie (Seed Specialist); M. Childress (Land Tenure Specialist); R. Selvaratnam (Consultant); and Ms. S. Abdysheva (OperationsOfficer). The IFAD's post-formulation and appraisal missions coincided with IDA appraisal and post-appraisal missions.

International Development AssociationFOR OFFICIAL USE ONLY

IDA/ R98-44[SAR]/1

FROM: The Secretary April 21,1998

KYRGYZ REPUBLIC - Agricultural Support Services Project

Staff Appraisal Report

(Corrigendum)

Attached are Tables 4,5 (pp. 1 & 2) and 6 of Annex C which were inadvertently omittedfrom the Staff Appraisal Report regarding a proposed credit to the Kyrgyz Republic for anAgricultural Support Services Project (IDA/R98&44[SARI distributed on April 16,1998).

Distribution:

Executive Directors and AlternatesPresidentBank Group Senior ManagementVice Presidents, Bank, IFC and MIGADirectors and Department Heads, Bank, IFC and MIGA

This document has a restnrcted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

Annex CTable 4

KYRGYZ REPUBLICAgricultural Support Services Project

Estimated Disbursement Profile(US$ million)

Disbursements Profile %

Bank Fiscal Year By Quarter Cumulative Agriculture Projectsand Quarter (USS million) (US$ million) ASSP in ECA region

19991 0.5 0.5 3.3 4.52 0.5 1.0 6.7 6.03 0.5 1.5 10.0 10.04 0.5 2.0 13.3 14.0

20001 0.5 2.5 16.7 20.02 0.5 3.0 20.0 26.03 0.6 3.6 24.0 30.04 0.6 4.2 28.0 34.0

20011 0.7 4.9 32.7 382 0.7 5.6 37.3 423 0.8 6.4 42.7 484 0.8 7.2 48.0 54

20021 1.0 8.2 54.7 602 1.0 9.2 61.3 663 1.0 10.2 68.0 724 1.0 11.2 74.7 78

20031 1.0 12.2 81.3 822 1.0 13.2 88.0 863 0.5 13.7 91.3 904 0.5 14.2 94.7 94

20041 0.5 14.7 98.0 1002 0.3 15.0 100.0 106

figures may differ slightly due to rounding. SDR amount is equivalent of US$14.98 million.

Annex CTable 5

Page 1 of 2

Proposed Supervision Plan and Schedule for the ASSP Project

Approximate Activity Expected skill Requirement StaffDate of Input Weeksl(mo/yr.)

June 98 Supervision Mission Task Manager 20(Project Launch) Extension Specialist

Agriculturist / Seed SpecialistFinancial Management / Disbursement Spec.Procurement Specialist

Dec 98 Supervision Mission Task Manager 20Extension SpecialistAgriculturist / Seed SpecialistFinancial Management ! Disbursement Spec.

May 99 Supervision Mission Task Manager 20Extension SpecialistAgriculturist / Seed SpecialistFinancial Management / Disbursement Spec.Procurement Specialist

Dec 99 Supervision Mission Task Manager 20Extension SpecialistAgriculturist / Seed SpecialistFinancial Management / Disbursement Spec.

(continued)

Annex CTable 5Page 2 of 2

Approximate Activity Expected skill Requirements StaffDate of Input Weeks

June 2000 Supervision Mission Task Manager 20Extension SpecialistAgriculturist / Seed SpecialistFinancial Management / Disbursement Spec.Procurement Specialist

Dec. 2000 Supervision Mission Task Manager 15(Mid-term review) Extension Specialist

Agriculturist / Seed SpecialistFinancial Management / Disbursement Spec.

May 2001 Supervision Mission Task Manager 15Extension SpecialistAgriculturist / Seed SpecialistFinancial Management / Disbursement Spec.Procurement Specialist

Dec. 2001 Supervision Mission Task Manager 15Extension SpecialistAgriculturist / Seed SpecialistFinancial Management ! Disbursement Spec.

May 2002 Supervision Task Manager 15Extension SpecialistAgriculturist / Seed SpecialistFinancial Management / Disbursement Spec.Procurement Specialist

Dec. 2002 Supervision Task Manager 20(ICR Preparation) Extension Specialist

Agriculturist / Seed SpecialistFinancial Management / Disbursement Spec.

Includes desk work at headquarters in Washington

Annex CTable 6

Kyrgyz Republic

Agricultural Support Services Project

Technical AssistanceA List of TORs in the Implementation File

Component TORs for

A. Land and Agrarian Reform 1. Land and Agrarian Reform Specialist2. Land Law Specialist3. Monitoring and Evaluation Specialist4. Land Auction and Leasing Specialist5. Training Specialist6. Public Information Specialist

B. Rural Advisory and Development Services 1. Local RADC Managers, Farm Mang. Specialist2. RADS General Manager (local)3. Extension Specialist4. Training Specialist5. Farm Development Fund Specialist6. Farm Group Development Fund Specialist

C. Seed Industry Development 1. Seed Specialist2. Plant Breeding Specialist3. Seed Certification Specialist4. Variety Testing Specialist

D. Crop Protection and Plant Quarantine 1. Pesticide Specialist2. IPM Expert3. Legal Specialist

E. Agriculture Market Information System 1. Market Information System Specialist2. Market Analysts for National Statistical Committee

(local support)3 Market Analysts for Department of Anti-Monopoly4. Specialists in Grades and Standards

F. Project Implementation Unit 1. National Project Director2. Project Implementation Advisor3. Procurement Specialist (National)4. Disbursement Specialist (National)


KYRGYZ REPUBLIC


Contents

1. BACKGROUND .............................................................. ,1I

A. PROJEC'T' BACKGROUND .IB. AGRICULTURE SICTOR .IC. BANK GROUP SUPPORT FOR AGRICULTURE IN T-IE KYRGYz REPUBLIC .3

2. ISSUES IN AGRICULTURAL SUPPORT SERVICES .5

A. LAND AND AGRARIAN REFORM .5B. RURAL ADVISORY SERVICES .9C. SEED PRODUCTION .1D. CROP PROTECTION .13................................................. ...... 3E. AGRICULTURAL MARKET INFORMATION .14

3. THE PROJECT .15

A. PRO.ICT OBJECTIVES .15B. StUMMARY DESCRIPTION .15C. DETAIIED FEATURES .15D. PROJECT COST ESTIMATES .24E. PROJECT FINANCING .25F. STATUS OF PROJECT PREIPARATION .26

4. PROJECT IMPLEMENTATION .28

A. PROJECT ORGANIZATION AND MANAGEMENT .28B. PROCUREMEN'T ARRANGEMENTS .37C. DISI3URSEMENTS .42D. ACCOUNTS ANI) AUm'I .43E. SUPI.RVISION AND MONI'I'ORING .44F. COORDINATION WITI I OI lIE.R PROJEICTS .44

5. PROJECT BENEFITS AND RISKS .45

A. BENi.F.ITS .45B. FINANCIAL, ANI) ECONOMIC ANALYSIS .46C. PROJEC T SUSTAINABILITY3.l 50D. POVERTY IMI'AC."I 53E. ENVIRONMENIAI. IMIAC'T .53F. PROJE.CT RISKS ANI) MITIGATION MEASURES .54

6. AGREEMENTS REACHED AND RECOMMENDATION .56

- ii -

ANNEXES

A - Project Design SummaryB.- Detailed Project Costs EstimatesC - Project Implementationi PlanD- Financial and Economic Analysis

TABLESTable 1.1 Rural Population and Agricultural Lanid by Oblasts ....................................................... 2Table 2.1 Progress in Land Reform ................................................................................ 5Table 2.2 Farmer Groups in Donor-Assisted Pilot Projects .......................................................... 10Table 3.1 Summary of Project Costs ............................................................................... 25Table 3.2 Financing of Technical Assistance and Training .......................................................... 26Table 3.3 Summary of Financing Plan ............................................................................... 27Table 4.1 Project limplementing Agencies ................................................................................ 28Table 4.2 Summary of Procurement Arrangements ...................................................................... 40Table 4.3 Summary of Procurement Information .......................................................................... 41Table 5.1 Summary of Yields and Gross Margins of Major Crops With Existing and Improved

Technology ................................................................................. 47Table 5.2 Farm Models - Area, Returns and Credit ...................................................................... 47Table 5.3 Household Models ............................................................................... 48Table 5.4 Sensitivity Analysis: Switching Values ......................................................................... 50Table 5.5 Sensitivity Analysis: Changes in Project Cost and Benefits (Economic) .......... . .......... 50Table 5.6 Incremental Income and Service Costs per Household (HH)............................ ....... 51

FIGURES

Figure 1.1 -RADS: Conceptual Design ........................................................................ 18Figure 1.2 -Project Organization and Management ................................... .................................... 29Figure 1.3 -Organization of Rural Advisory and Development Service (RADS) ......................... 32Figure 1.4 -Organization of Rural Advisory and Development Centers (RADCs) ....................... 33

MAP IBRD 28979

TECHNICAL ANNEXES IN IMPLEMENTATION FILE

I. Land and Agrarian Reforn (Farn Restructuring Support)2. Agricultural Advisory and Development Services3. Seed Development4. Regulatory Services in Plant Protection and Pesticide Use5. Agricultural Techniology6. Agricultural Market Information System7. Financial and Economic Analysis8. Project Cost Estimates (Detail Tables)9. Technical Assistance and Training: Terms of Reference10. Five-Year Procurement Plan

-iii-

KYRGYZ REPUBLIC

AGRICULTURAL SUPPORT SERVICES PROJECT (ASSP)

CREDIT AND PROJECT SUMMARY

Borrower: The Kyrgyz Republic

Implementing Agency: Ministry of Agriculture and Water Resources (MAWR)

Beneficiaries: MAWR and its associate entities; State Agency for Land Managementand Land Resources; Participating enterprises and farms.

Project Objective: Improve incentive framework for, and productivity, profitability andsustainability of Kyrgyz agriculture by: implementing land and agrarianreforms; providing emerging private farmers with advisory anddevelopment services (including micro-credit); seed industrydevelopment; establishing legal framework, organizations andprocedures for crop protection and plant quarantine; establishingagricultural marketing system; and capacity building in the Ministry ofAgriculture and Water Resources (MAWR).

Poverty: In the rural sector, the proportion of households in poverty is over 50percent of the total. The project's focus on increasing agriculturalproductivity is critical to increase rural incomes and alleviate ruralpoverty.

Amount: SDR 11.1 million (US$14.98 million equivalent).

Terms: Standard IDA terms, with 35 years maturity, including 10 years grace.

Commitment Fee: 0.50 percent on undisbursed credit balance, beginning 60 days aftersigning, less any waiver.

Project Financing: Total project costs are estimated at US$30.2 million. IDA wouldfinance about US$15 million, or 49.7 percent of the total project costs,and 74.9 percent of foreign exchange part of the total project costs.

IFAD would co-finanice the project up to US$7.9 million or about 26.2percent of the total project costs, to support the Rural Advisory andDevelopment Services (RADS) component. Bilateral donors wouldcontribute about US$2.1 million or 6.9 percent of the total project costs.IDA and IFAD-assisted SDP would provide US$1.8 million or 6 percentof the total project costs to finance rural advisory and developmentservices to be taken over by the project.

-iv-

Governmenit would contribute US$2.2 million, or about 7.1 percent ofthe total project costs. Beneficiaries' contributioni would be aboutUS$1.2 million or 4.1 percent of the total project costs.

Fiancin2g Plan:

Fintancinig Source Local Foreign Total % of totalproject costs

IDA 3.0 12.0 15.0 49.7IFAD 2.5 5.4 7.9 26.2Sheep Development Project 1/ 1.1 0.7 1.8 6.0Bilateral Donors 0.9 1.2 2.1 6.9Governmeit 2.0 0.2 2.2 7.1Beneficiaries 0.7 0.5 1.2 4.1

Total 10.2 20.0 30.2 100.0Percent of Total 33.7 66.3 100.0Note: Vigures may slightly vary due to rounding.

1 / Livestock advisory services financed by IFAD under the Sheep Development Project (SDP) will be mergedwith ASSP's rural advisory and development services (RADS) which will be co-financed by IFAD.

Economic Rate of Return: 20 percent

Staff Appraisal Report: 17312-KG

Map: IBRD 28979

Project ID Number: KG-PE-40721

KYRGYZ REPUBLIC



CHAPTER 1: PROJECT AND SECTOR BACKGROUND

A. PROJECT BACKGROUND

1.1 Revitalization of agriculture is a central element of IDA's assistance program for the KyrgyzRepublic. Agriculture is the mainstay of the Kyrgyz economy accounting for about 47 percent of GDP, 49percent of employment and 38 percent of total exports. The sector's sustained growth is fundamental toaccelerate the country's overall growth and reduce poverty. After a downward spiral of declining output,productivity and incomes during 1991-96, the sector is beginning to recover with a projected positivegrowth. However, the sector remains far from becoming efficient and profitable.

1.2 Against this background, the proposed project is designed to improve productivity, profitabilityand sustainability of agriculture by accelerating the implementation of land and agrarian reforms; and byproviding to farmers critical advisory services and market information, supplemented by farmdemonstrationis, field trials, and adaptive research; increased availability of quality seed; and cropprotection and plant quarantine technologies. The project would complement other IDA-assistedagricultural operations and enable private farmers to avail themselves of rural credit, and benefit fromirrigation infrastructure improvements, which would be supported respectively by the Rural FinanceProject (approved in June 1997) and the Irrigation Rehabilitation Project which is being processed inparallel to the proposed project. The project would improve the effectiveness of the Ministry ofAgriculture and Water Resources (MAWR) as a service-provider to the sector and the administrator ofnew laws and regulations. The Government provides high priority to this project.

B. AGRICULTURE SECTOR

Physical and Economic Setting

1.3 Kyrgyz agriculture is diverse. Out of a total of 10 million hectares of agricultural land, there are 1.5million hectares of arable land in lowlands under intensive production, and 8.5 million hectares of uplandgrasslands and pastures under extensive livestock grazing. The country broadly splits into two main"regions", the heavily populated and climatically warmer South consisting of two oblasts, Osh andDzhalal- abad, separated by the Tien Shan mountains from the more sparsely populated North. In winterit is not possible to drive between the two regions. In the North, there are also differences with Chuihaving a disproportionate amount of the cultivable and irrigated land (Table 1.1). The countryexperiences a typical continental clinate for Central Asia in the lowlands with temperatures rising to40°C in the summer and falling to -20°C in the winter. The mountains are snowbound over the winterbut provide much of the summer grazing. Precipitation which is dispersed throughout the year, variesfrom 130 - 680 mm and potential water deficits range from 360 -1450 mm. However, surface watersupplies, largely derived from snow-melt are about adequate to meet the deficit in almost one millionhectares under irrigation command. The major crops grown are wheat, barley, maize, cotton, tobacco,

CHAPTER 1: PROJECTAND SECTOR BACKGROUND 2

sugarbeet, sunflower, potato, vegetables, fruit and fodder crops, while the main livestock products are meatand wool.

1.4 Livestock production contributes over 40 percent of agricultural GDP. Historically, feed fromnatural grasslands and fodder crops grown on irrigated land was heavily supplemented with imported grainsand numbers rose to unsustainiable levels. Since 1991, there has been a severe cut back in imported feedand livestock numbers hiave dropped shiarply - sheep from 10.5 million to about 3 millionl and cattle from1.2 million to 0.9 million. Livestock production remains less profitable than crop production, largelybecause prices for most livestock products remain depressed. New feeding systems based on improvedfodder are required.

1.5 The population is about 4.6 million of whom 800,000 live in the capital Bishkek. Some3.8 million people live in the regions and depend on the agricultural sector for thieir livelihood. Thepopulation of the six oblasts (excluding Bishkek city), whichi is predominantly rurai, is broadly asfollows:

Table 1. 1 Rural Population and Agricultural Land By Oblasts

Oblast Population Cultivated Land Irrigated Land(000 persons) (000 ha) (000 ha)

Dzhalal-Abad 820 191 97Issyk Kul 418 186 137Naryn 262 178 11]Oshi 1 409 360 129Talas 202 134 89Chiui 746 447 273Total 3 857 1 498 836

Poverty

1.6 While poverty existed when the country was part of the FSU, real declines in GDP from 1991 until1996 have been accompanied by rising unemployment and increasing poverty. In 1993, slightly more thani40 precut of the population were classified as poor. By 1996, at least half of the population hadconsumption levels below the poverty line. The severity and depth of poverty are greater in rural areaswhere paid employment has declined more sharply than in urban areas. The most vulierable group is ruralwomen while anthropometric data highilight the increasing incidence of malnutrition among children. Theoverall demand for benefits under the social safety net system in the Kyrgyz Republic has increased to apoint where it is putting intolerable pressure on the social and employinent fuLids. Increasinig rural incomesthroughi productivity increases in agriculture, the project's core objective, is therefore critical to alleviaterural poverty and reduce the government's growing fiscal obligations toward social expenditures.

Government Objectives and Strategy

1.7 Kyrgyz Republic has been in the forefront in Central Asia in pursuhig econoinic reforms. Topromote agricultural recovery and adjustment, the Government, with Bank Group assistance, hiasformulated a strategy which includes: (a) privatizing state-owned land, and state and collective farms;(b) removing price controls and trade restrictions; (c) creating competitive and private marketingchaninels, (d) rebuilding a rural credit system; and (e) redefining the role of the state. Since 1991, theGovernment has acted on a number of fronlts includinig demonopolizing and privatizing agro-


conglomerates, introducing land reform legislation, improving the incentive structure, and reorienting thefunctions of the Ministry of Agriculture and Food, whichi has recently been merged with the Ministry ofWater Resources, to be able to efficiently serve the emerging market-oriented agriculture.

1.8 The governmenit launched land and agrarian reforn in 1991, and vigorously pursued it since1994 with emphasis on1 privatizing state and collective farms and ensuring equitable distribution of landand property among their members and rural citizens. Although the Kyrgyz Constitution still prohibitsprivate ownership of land, considerable progress has been made in distributing the land held in formercollectives and state farms on1 a 99-year lease basis. Land use rights are tradable. In December 1997, thegovernment submitted to Parliament a comprehenisive draft Land Code, and is expected to propose aconstitutionial amendment instituting private ownership of land and a Civil Code with provisions on theright to owIn lanid.

Rural Credit

1.9 The Government has also embarked on a reform of the financial sector and is putting in place astrategy for rural finance. The Kyrgyz financial system, like those in other FSU countries, is still intransitioni. A comprehensive financial sector reform, supported by an IDA-assisted Financial SectorAdjustnent Credit (FINSAC) is assisting in the creation of a policy and regulatory environment conduciveto the sound growth of a competitive and efficient banking system. As part of this operation, theAgroprombank which was the main channel for provision of directed credit to agriculture in the FSU wasliquidated in 1996. The demise of this institution has left the rural sector without an institutional lender, andindeed virtually no access to credit. In response to this void, the govemment has established acommercially oriented and operationally autonomous noni-banikinig credit agency, the Kyrgyz AgriculturalFinhance Corporation (KAFC) and to begin the long-tern development of a community-based rural financesystem. This program is being supported by the recently approved, IDA-assisted, Rural Finance Project.

1.10 The Rural Finance Project would: (a) in the short-term, through KAFC, establish an interiminstitutional arrangement for lending to the agricultural and agribusiness sectors; and (b) in the medium-to long-term, support a Small Farmer Credit Outreach Program (SFCOP) to provide the basis fordeveloping community-based financial services for the rural population. The SFCOP will beimplemented on a pilot basis to permit necessary flexibility to learn and eventually establish ruralfinancial intermediaries (RFIs) based on cooperative principles. SFCOP would test specific mechaniismsfor credit delivery to poor houselholds and develop self-help organizations to facilitate poor households'access to commercial credit and other financial services.

C. BANK GROUP SUPPORT FOR AGRICULTURE IN THE KYRGYZ REPUBLIC

1.11 The Bank's Country Assistance Strategy (May 1998) supports interventions in four main areas:restoration of growth, particularly in the rural sector; poverty alleviation; institution building; andstrengthening of public finances. Recovery in the agriculture sector is a critical element of IDA'sassistance program for economic growth and poverty reduction. Within the CAS framework, IDAassistance strategy for the rural sector consists of both policy-based operations in support of structuralreforms and investment lendinlg operations in support of sectoral development. Operations in support ofstructural reforms, with relevance to the agricultural sector, included: (i) the Privatization and EnterpriseSector Adjustment Credit (PESAC) whichi initiated liberalization of trade and price policies, and theimprovement of the regulatory framework for private sector development; (ii) the AgriculturalPrivatization and Enterprise Adjustment Credit (APEAC) which has promoted the deepening of marketand price liberalization in agriculture and development of competitive markets through


demonopolization, privatization, and private sector development; and (iii) tile Financial SectorAdjustment Credit (FINSAC) referred above (para. 1.9) to restructure banking and make it competitive.Tile Bank Group has also provided TA to assist in designing a Land Reform and Farm RestructuringProgram.

1.12 In addition to the above policy-based operations and the Rural Finanice Project (paras. 1.9 and1L.10), IDA's lendinig program in agriculture includes the following investment operations: (i) the SheepDevelopment Project (SDP) whiclh recently became effective, aims to privatize, and increase profitabilityand export-orielltatioll of the sheep industry; (ii) the proposed Irrigation Rehabilitationi Project to restoreoriginal capacity of the irrigation and drainage system, and to establish an effective institutionial capacityto manage irrigation water efficiently and on a sustainable basis; and (iii) the proposed AgriculturalSupport Services Project (ASSP) to provide post-privatization support services to the growing privatefarming sector. Other donors, including TACIS aiid the Asian Development Bank (ADB), are providingtechniical assistance to MAWR for its reorganization and capacity building.

1.13 Co-financing: IFAD Assistance Strategy. The International Fund for Agricultural Development(IFAD) would co-finance the Rural Advisory and Development Services component of the proposedproject. IFAD's particular role is to ensure that in agricultural restructuring and development funded bythe iiiterllatiollal community, small farmers and rural people who are below the poverty line are takeninto account. Given the limited resources at its disposal, IFAD's strategy is one of involving theformation of strategic alliances, joining with the goveriiment and major financing agencies interested innationial sector interventions, and seeking to ensure that suchl interventions are adequately responsive tothe requirements of the rural poor. Pursuant to this strategy, IFAD is currently co-financing the IDA-assisted Sheep Development Project (SDP) which focuses on raising incomes of sheep producers whoconstitute the poorest segment of the rural population. The SDP is designed to introduce institutionalreforms including the formation of grassroots level slheep farmers' organisations and provide them withladvisory services. Under the proposed project (ASSP), IFAD will co-finance agricultural advisoryservices for crops and livestock, the latter by integrating sheep advisory services being financed underSDP; and a pilot Iine of credit for small-holders with related teclinical assistance, complementillg the on-,going IDA-assisted Rural Finance Project.

1.14 Bank Group's Experience. With the Slieep Development Project, wlich is the Bank Group's firstinlvestmenet project in the sector, followed by the recently approved Rural Finance Project wlicih is justgetting underway, the Bank Group has little project implementation experience in Kyrgyz agriculture.However, it is clear that inadequate implementation capacity is a serious issue and that effective projectimplementation requires reliance on foreign technical assistance. At the same time, considerable care mustbe taken to build local ownershlip. Elsewllere, investments in land and agrarian reforms have sIlowI to hiaveimproved producer incentives, and those in agricultural advisory services and seed industry development tohiave ligll payoffs, if implemented under a coinducive policy environiment and participatory approach.Initiatives in the area of crop protection and plant quarantine detect, monitor and address threats to plant,animal and humani healtll, tlhereby significantly contributing to the protection of the environment. Similarly,the Bank Group's experience from elsewilere in the world inldicates that the existence of a marketinformation system can be critical to the development of competitive markets for agricultural inputs andoutputs. Also, tIle Bank Group's limited experience in FSU and Eastern European countries indicates thatproject implementation problems require investments in institution building with emplhasis on hlumandevelopment.

CHAPTER 2: ISSUES IN AGRICULTURAL SUPPORT SERVICES

A. LAND AND AGRARIAN REFORM

2.1 Legal Framework. Since 1991, land reforn and farn restructurilng have been the cornierstonie ofthe governmeit's economic reform program, with a focus on creating an effective market environment inthe rural sector, improving farm profitability, and providing equal opportunities for developmenit of all typesof farm enterprises. Durinig 1991-93, the government established a legal framework to introduce theconcepts of an "individual farm", a "peasant farm", and other types of farn organizationis SLIch asagricultural production cooperatives, associations of peasant farms, joint-stock companies, and smallenterprises. UIntil early 1993, these types of fanns gained in number and land area. As the stagnationi andeven reversal of the reform process became evident by about the end of 1993, the government introduced, in1994, a Presidential Decree to reinforce the implementationi of the land and agrarian reforn program. Thisdecree has become a center-piece of the prevailing legal framework for agricultural land and noni-lanidproperty distribution and farn restructuring.

2.2 Progress witht Land and Agrarian Reform. The 1994 Presidential Decree required all state andcollective farms to issue shares of their land to farm residents, and non-lanld assets to farm employees forpurposes of reorganization into smaller units. The decree provided the beneficiaries of land reform, theright to choose the kind of fann unit they want to establish or participate in, within the limits of minimumand maximum farm sizes set by the law. While the maximum limits on farm sizes were subsequentlyeliminated, the minimum limits on farm sizes were reduced to one ha for individual farms and five ha forassociations of peasant farms.

2.3 There has been a substantial progress in thefirst stage of land reform, namely, the distribution ofrights to use land from the former state and collective farms to individual farm households, with MAWR-recognized shares distributed for approximately 75 percent of 986,000 ha subject to distribution. This wasdone by issuing either of State Acts guaranteeing 99-year user rights (with few restrictions) or Certificatesof Right to Use a Land Share. As in the case of land shares, the distribution of non-land assets ("property"),especially livestock, has proceeded almost as rapidly, with property share distribution completed on 387 ofthe 518 former state and collective farms. The backlog in the issue of land and non-land shares is mainly inChui oblast.

Table 2.1. Progress of Land Reform (as of January 1, 1997)

Category Area (000 ha) % CommnentsLand distributed by shares 766 471 51 Owned by about 800 000 familiesLand not distributed 219 995 15 184 000 ha in Chui oblastLand Redistribution fund 353 438 24 Available for leasingSeed and breeding farms 158,613 11 Continuing as state farmsTotal 1 498 517 100

2.4 The land and agrarian reform program provided members of the former state and collective farmsthe following four options in farm reorganization: (a) divide into individual and peasant farms; (b) divideinto individual and peasant farms with voluntary reconsolidation into associations and cooperatives; (c)reorganize whole or part of the farms into joint stock companies; or (d) declare bankruptcy, with property

CHAPTER2: ISSUESINAGRICULTURALSUPPORT SERVICES 6

sold by auction to other producers. However, contrary to the govermienit's expectation that most of theforner state and collective farms would dismanitle and restructure by the end of 1996, approximately 45percent of the irrigated land area, or about 430,000 ha. still remains unider m-anagement structuresessentially unchianged from those of the commanld economliy era, withi thieir chiaracteristic inefficienlcies.

2.5 Agricultural Land Retlistribution Fund (ALRF). An additional feature of tile Kvrgyz Republic'sland and agrarian reforn program was the creatioii of a large reserve of land whichi formerly belonged tostate and collective farms, whichi has been placed by law uiider the control of local goverinmenits. Initially,about 50 percent of total irrigated arable land, in most cases the best land, was transferred to a NationalLand Fund whichi was designated for the creation of peasant farms with "traditional Kyrgyz ways offarming". The land reserve has since been reduced to 25 percent and the National Land Fund hias beenreplaced by the Agricultural Land Redistribution Fund (ALRF). By currenit policy, the governmeit expectsto auctionl about 50 percent of this land, with the remaininig 50 percent rented in shiort-term leases. Interimauction and leasing procedures, issued in September 1997, however, remain largely ulitested.

2.6 New Plhase in Land and Agrarian Reform. Land and agrarian reform in the Kyrgyz Republicmust, therefore, launcil a new phase of consolilation and completion in whichi emphasis needs to be givento the areas in whichi land and non-land assets have either not beeii distributed, or distributed but notc*onsistenit with official guidelines. Attentioni must also be focused on the creation anid managemenlt of newe*nterprises from land anid non-land properties that still remain under the soviet-style collectivemaniagemenit. As the government is in the process of introduciing an immovable property registrationsystem and a revised Land Code, the new phase of consolidation of land and agrarian reform is critical toestablish the foundation for a secure, well-functioniing market in land leases and other assets in rural areas.To achieve this objective, a number of issues and constrainits, as noted below, must be systematicallyaddressed:

(a) Legal and Policy Aspects. While the legal framework for land anid agrarian reform, overtime, has become more coherent, the following aspects are impeding the progress of landand agrarian reform:

first, legal mandates for the agencies charged witlh land arid agrarian reform,including MAWR's Republican and Oblast level Centers for Land arid AgrarianReform (RCLAR/CLARs); the recently established State Agency for LandManagement and Land Resources (SALMLR); the oblast and rayonadministrations, arid village governments tend to overlap arid need to beadequately defined, particularly at the grassroots level. The lack of clarity in thefunctionis of the above agencies have contributed to fragmented, arid sometimescontradictory approaches to land arid agrarian reform;

secontd, while temporary regulations for the auction of land held in reserve haverecently been issued, the basic policy objectives of the auction program remain to

The government has since asked the MAWR Council headed by the Minister to address inter-agencycoordination issues in the context of government orders Nos. 490 of October 1996 (for RCLAR); 3 1 0 ofJuly 1996 (for SALMLR); and 187 of April 1996 (for local governments). Further work is needed toclarify responsibilities of individual agencies under these orders and other laws on land and agrarianreform.

CHAPTER 2: ISSUES INAGRICULTURAL SUPPORTSERVICES 7

be defined. If the objective of the auction program is to make more land availableto younlger or land-poor farmers (equity objectives), these goals should beexplicitly incorporated into auction procedures;

thiirdl, there is a need to provide fuller definition of rights and obligatiolis of newtypes of farms and service providers;

fourth, legal rights conferred by land certificates for use of a land share,particularly with respect to inileritanice procedures, require formal clarifications;and the multiplicity of formats used for land certificates may complicateauthenticationi and registration of land rights;

fifth, criteria whicih can be used by local governmeit authorities for forfeiture ofland use righits need legal clarification;

sixtih, as land leases expire, their desirability for use as collateral diminishes. Thequestion of how to make long-term use-rights function effectively as collateralmust be addressed; and

filnally, there is a need to reexamine the desirability of minimum size limits fromthe standpoint of enforcement and land market efficiency.

(b) Institutional Coordination. The current informal coordination among RCLAR andCLARs, and SALMLR is weak and contributinig to fragmented implementation of the landand agrarian reform program. Besides, RCLAR, CLARs and SALMLR lack adequately-trained staff in sufficient numbers and equipment to carry out their responsibilitieseffectively. The government should draw up revised institutional mandates and a unifiedstrategy for RCLAR and SALMLR; provide necessary training to their staff to effectivelycarry out land and agrarian reform policies; and support rural inhabitants in a variety offarm restructuring tasks.

(c) Distribution of Land Shares. About 25 percent of land shares (for some 220,000 ha.)remain to be officially distributed. The backlog is mainly in Chui oblast where land shareshave not been issued for some 185,000 ha, or about 77 percent of the total land earmarkedfor distribution but not yet distributed (220,000 ha). Further, about 90 percent of landcertificates issued to holders of land shares are "temporary" rather than "permanent" anddo not necessarily contain a sketch map identifying the location of household parcels. InChui oblast, the shares issued are not recognized by the MAWR, as the share certificates donot conform to what the government has now adopted as an official standard; moreover,the certificates have been issued in the names of individuals rather than in the names ofhouseholds. Land share distribution in Chui oblast is, therefore, a major unfinished issue,which will need to be dealt with through a coordinated effort of RCLAR/CLARs andSALMLR, taking a proactive role in issuance of share certificates for an estimated 90,000families. Some 90,000 additional land shares in existence outside Chui do not correspondto a spatially defined parcel of land. These parcels need to be surveyed and sketched on

CHAPTER 2: ISSUES INAGRICULTURAL SUPPORTSFRVICES 8

maps, giveni tilat it is now the government's policy that cach land slhare shiould be spatially

located. 2

(d) Distribution of Property Shares Property shiares lhave not vet beeen issued by some 131state and collective farms (out of 518 ). Of these 131 farms. 90 are located in CIhLui oblast.Valuation of propelty and shiare distribution in ClLii oblast, tlherefore. is a key unfinishedissue. Elsewhiere in the couLntry, particularly in Oslh oblast. whdere many small larms hiaveemerged, the manlagemenit of redistributed property lias become the central issue. Manyindividual farmers hiave ownerslip slhares in machiniery and infrastructure wlicih are runi by-service centers" wlhose maniagemenit is in the hanids of village government and/or theprevious farm management committees, sometimes due to indivisibility of propertiesinvolved but more ofteii to provide the latter witlh an incomiie. The lack of transparent.equitable, and efficient manageinent practices for thlese assets is inhibitiiw( access tomachiniery services for a substantial numilber of farms aiid contributing to decapitalizationof the sector. Outstandinig fann debt, principally to the forner Agroprombanik and thegovernmenit, hias further complicated property shiare division, and is creating a disincenitiveto formation of new farms. Pragmatic and conciliatory collection procedures and case-by-case debt restructuring linked to new leniding, may substanitially reduce this disincentive.

(e) Farm Management and Reorganization. In some areas, especially in Chui oblast, thlepre-reforn management structures control up to 80 percent of irrigated land. Difficultmacro-economic conditionis have played a large role in discouraging furtlher evolution infarn organizationi. But an equally discouraging role has been played in some areas, bymanagers and administrators reluctant to lose advantages offered to tlhem by thle status quo.Wlhile economic and sectoral reforms are beginninig to address constrainits to farmreorganization, public information about the legal framework, support for thie establislhmentof true cooperatives and associations, and pro-active policy of advocacy and advisoryservices for restructuring enterprises must address the second set of constrainits. Thle newlyforined farn enterprises face severe constrainits to becoming economically viable entitiesdue to the lack of post-privatization services. Many are transitionial farn units whichi mightundergo further changes, suclh as consolidation, division, and liquidation. Critical to thesurvival of these new private farns is access to: (i) credit to purcilase needed inputs; (ii)mechanizationi services and irrigation water; (iii) competitive product markets (includingthe recovery of agro-processing); (iv) techinical and farm management advisory services;and (v) productivity-enlhanicing technologies.

2.7 The government provides hiiglh priority to the establishment of a land registration system. 3 Adraft law on the State Registration of Laand alid Immovable Property Riglhts wliclh provides for a uniform

2 The certificate for the right to use the land has only one official form introduced by the GovernmentResolution No. 632 of August 22, 1994, which has been used by all oblasts except Chui. The Chui oblasthas introduced a different form for this certificate by a local government resolution No. 7/P-2/16 which,according to MAWR and SALMLR must be canceled and new certificates issued in the standard form.Chui certificates, unlike the certificates issued in other oblasts, are not accompanied by plot sketches.

Pending the passing of a law on the State Registration of Land and Immovable Property Rights, thegovernment has issued a Resolution No. 172 dated April 2, 1997 to facilitate registration of rights to useland. The SALMLR has been designated as the implementing agency. According to SALMLR, some450,000 certificates must be issued and unless it is institutionally strengthened, it would take several years


registration system covering all land (both rural and urbani) Uinder a single authlority has been submittedto Parliament. The governmiienet has also designated the Ministry oflJustice as the agenicy responsible forthe registration system. A pilot registrationi project finaniced by USAID has been completed in tworayons and a follow-up project may be included in the IDA lending program for f1Y99. Accelerated andlegally consistenit completioni of the distributioll ol land and property sliares is critical to ensure thattransactionis and new boundaries created out of land reformi and farmi rCstrLucturinig are properlydocumented and monitored, througlh rural committees and rayoni level adminiistrationis and eventually bythe Ministry of Justice. The proposed strengtlhenlinig of RCLAR/CLARs and SALMLR is fulidamenital tothis process.

B. RURAL ADVISORY SERVICES

2.8 Clhanges in Iniformiationi Needs. Under the forner system, the previous Ministry of Agricultureand Food (MAF) planied production in the agricultural sector on the basis of Governmenit targets, issuinginstructions directly to the state and collective farms. The Agricultural Directorate of MAF providedtechinical support to large scale farms throughi oblast and rayon level staff, in the form of directivesconcerning production quotas and use of new cultivators, fertilizers and other inputs. Many of these staffhave joined new farms and those remainin1g with local departments of agriculture now deal primarily withregulatory matters.

2.9 Field surveys slhow that new farm owners created by the processes of land reform, either have nokinowledge of farming or, should they have worked in collectivized agriculture before, have muchspecialized knowledge in one or two activities under large scale agricultural production. Neither grouphas any experience of total farn management in a market economy nor of technical farm activities, apartfrom their previous specialization. The need for an advisory service is clear and urgent if land reforn isnot to falter, and agricultural production is not to remain low with serious consequences for the economyas a whole as well as for the incidence of poverty.

2.10 Donor-assisted Advisory Services Projects. Since 1992, pilot projects funded by TACIS, SwissAid (provided through Helvetas and Caritas) and GTZ (Germany) have been launched to test out theprovision of farm advisory services to emerging private farms. TACIS has operated two pilot projects: oneof these has financed Agri-Business Centers (ABC) in three locations - Kara-Balta (Chui Oblast), Narynand Djalal-Abad and the other set up Agricultural Training and Advisory Services (ATAS) in the Issyk-Kuland Talas oblasts, and a central unit in MAWR, Bishkek. These two pilot projects closed in December1997. TACIS has also supported a pilot Farm Management Survey. Although there are no experiencedfarn management advisors within the country, the various pilot projects have shiowin that correctlyselected and trained nationals, provided with up-to-date and accurate information, can very rapidly startto play a role in the support of the new land owners and managers. These pilot projects have testeddifferent models of advisory services, as follows:

the Swiss model supported the bottom-up approach based on the formation of groups whichprovide small farmers and poor people with democratic and financial power. The main emphasishas been on credit and farmer institution building, the latter bringing other benefits in its wake;

* the German model is based on the special environment of Osh Oblast which already has strongFarmers Associations (FAs) established. The approach of this model has been to provide

to complete this process and effectively service its obligations concerning the registration of rights to useland under the above government resolution.


technical and legal advice at oblast level, as there is considered to be less need for rayon level staffbecause of the existence of strong FAs;

* the ECU-TACIS ABC model is based on providing credit, building farmers' organizations andagro-technical advice withi specialist staff based in a large town rather than at rayon level;

* the ECU-ATAS model is committed to the concept of general advisors at rayon level supported bysubject-matter specialists at oblast level and a central office to provide a stream of information oninarketing and prices, land reform, credit as well as technical advice.

2.11 The Swiss-funded project run by Helvetas has been operating in two rayons in Naryn, while Caritashas a pilot activity in Djalal-Abad. Swiss aid is expected to continiue to support these operations for the next5-10 years and any intervenitionis by the proposed project would be of a complementary nature. GTZ starteda 5-year pilot program in July 1996, with the objective of developing structures and institutiolIs for farmers,ethniic groups and women in four rayons of Osh oblast. These pilot projects have demonstrated thatfarmers need general advisors at rayon level, capable either of advising directly on a range of topics(finanice, tax, techinology etc.) or know how, and where to get the informationi. Broadly, where farmershave a good techinical grounding, they seek Agri-business skills including fann management, financialplanninig, cooperative managemenit and marketing. On the technilcal side, farmer skills are particularlyweak in soil conservationi, irrigation management, animal husbandry and farm mechanizationi. The majorityof farmers seek advice that is impartial and free of political interference.

Table 2.2: Farmer Groups in Donor-Assisted Pilot Projects

Oblast Pilot Project Farmer Groups Members (Farms)Talas ATAS 35 1643

CNFA 1 62Naryn ABC/Helvetas 16 2470

Helvetas 44 1287Djalalabad Caritas 118 2917Osh GTZ 12 2917

CNFA 3 159Issak-Kul ATAS 65 2724

PIAFDP 5 154CNFA 1 234

Chui ABC 4 235Total 304 14798*

* Average farmer members per group: 49. CNFA: US-based Citizens Netwiork for Foreign Affairs.

2.12 Sustainability of Present Advisory Services. While there are altogether about 70 advisory staffworking under the three donor-assisted projects (Swiss, German and EU-TACIS) in some 16 rayons, thesustainability of these services is in doubt. To date, pilot advisory services have been financed entirely bydonor funds. While the services so developed are unsustainable as such, farmers have come to dependon them for sound advice and a fair counsel in the face of resistance of local administrations and ruralcommittees (which previously managed the state or collective farms) with whom they are frequently indispute on matters of land and property distribution. MAWR considers that quasi-independence of theadvisory services should be maintained, while the local departments of agriculture should continue to beresponsible primarily for regulatory matters. The proposed ASSP project would support this approacihwithi the objective of putting advisory services on a sustainable basis and improving donor coordination,without, however, (a) losing the key elements of individual initiatives; and (b) by developing necessarylinkages withi farm demonstrations, field trials, adaptive research and the agricultural research system.


2.13 Agricultural Research System. The agricultural researcih system wlich was hardly sustainablebefore 1991 has ilow virtually collapsed. Designed for a different era whien much of the research wasmanaged and funded from Moscow for the benefit of collective and state farms, salaries have dwindled andare paid irregularly, many staff have left and laboratories are closed. Conscious of the need to reform thesystem, the govemment is implementing an initial reorganizationi of the services. The core institutes foragricultural research comprising the Agricultural Traininig Institute (University) and five MAWR instituteshave been brought together as an Agrarian Academy created by Presidential Decree of April 1, 1996. Interms of research, early indicationis are that the Agrarian Academy would focus on basic and appliedscience while MAWR would provide techniology support to farmiers. MAWR remains responsible forfinanlcinig and coordinationi of activities of the experimental stations, training and extensioni, seed growing,livestock breeding and other farms of the Academy. Total scientific staff is about 375. While the coreresponsibility for agricultural research is with the Agrarian Academy and five associate institutes, theAcademy of Sciences also contributes, as do the units of regional universities such as in OsI and Djalal-Abad which have recently established their departments of agriculture.

2.14 In addition to the core budgetary funds, fundinig for agricultural researcih is made available on1 acompetitive basis by the Scientific Council oni Research in Agriculture operating under the Commission onScience and New Technology (CSNT). The Council puts out tenders for selected themes, but an amount ofonly 5 million Soms (US$350,000) was allocated in 1996 for this activity, whichi hardly cover salaries of thestaff involved.

2.15 Farmers' Teclhnology needs: Importance of on-farm demonstrations, feled trials and adaptiveResearchl. Technologies needed for small-scale farming in a market economy are different from those thatwere developed for large-scale farms of several thousand hectares with little reference to costs and benefitsof production. Location-specific recommendations are required for optimum cropping patterns in differentagro-ecological regions including: less intensive use of chemical inputs, better use of irrigation water andintroduction of smaller scale machiniery. On-farm demonstrations, field trials and adaptive researchprograms should focus oln farmers' needs and be conducted partly on-farm and with farmer participation,while research results need to be subjected to economic analysis. Links with regional and internationalresearch institutes need to be established to introduce planting material and technologies that might beadaptable to Kyrgyz conditions. The proposed project would take the first step in developing on-farm trialsand demonstrations to promote a sustainable improvement in productivity.

2.16 Rural Credit. Farmers' lack of access to credit for purchase of major inputs such as seed,fertilizers and chemicals, spare parts, animal feed and general support services continues to be the majorconstraint to realization of benefits of rural advisory services, exacerbated by falling incomes in the ruralsector. To address this constraint, while the development of a broader rural financial market is underway(paras. 1.9-1.10), under the proposed project, the IFAD will provide a loan of US$1.5 million to theGovernment to make an equity contribution to KAFC for provision of micro-credit targeted at smallfarmers. This will essentially be a poverty targeting feature of the project. Additionally, the IFAD loanto tile Government, up to US$300,000 equivalent, would finance technical assistance for development ofinnovative micro-credit mechanisms suited to local conditions.

C. SEED PRODUCTION

2.17 Background. Until recently, the country supported an active seed industry, exporting seed tomuch of the FSU. Today, much of this has collapsed because breeding and primary seed production areunder-funded and increasingly ill-equipped and seed quality controls are weak. Farmers do not haveinformation about new seeds and demand is constrained because of the lack of markets and credit in the


agricultural sector. Seed used by farmies in most ex-collective or private farms is Luntreated. locally-saved seed, wlicil is genetically highly variable, contaminiiated withi seed-borne discases. weeds, andgenerally poor in terms of germinationi and vigor. TIhle quality of seed in the lpip3eline, from Breeder seedto Elite seed is also very variable. As a result, most farmers hiave no access to qualitv seed, whille seedproducers hiave difficulty in selling good seeds at an adequate price. f'urthermore. the capacity of theseed industry to produce a steady flow of marketable varieties needs to be increased, as thils is crLucial tothe development of an efficient and competitive agricultuire.

2.18 Institutions. Plant breeding is essentially conducted at two researcil ilnstitutes. botih under tiheAgrarian Academy. The Crop Research Institute (CRI) is responsible for the developmenit of all majorcrops, except fodder crops. CR1 is part of the "Industrial Association for Crop Researcil" (NPOZ) whichlinks tihe researcih institute withi a network of experimental stations and productionI farmis. There areseven experimental stations under NPOZ, all of whiichi to some degree are involved in varietalimprovemenit or in primary seed multiplicationi. In tile formier system, some five farms sLipplied EliteSeed (produced from Super Elite seed received from two specialized NPOZ farmis) to close to seventyspecialized farms in the state sector whiichi are responsible for the productioll of comimlercial seed. TheForage and Pasture Research Institute (FPRI) conducts research on natLiral pastures anid cultivatedforages. FPRI is also part of an 'industrial association' under wlichi operate four experimental stations.Recently, tile farn responsible for production of Elite and Super Elite forage crop seed hias been broughltback tinder the FPRI.

2.19 Regulatory functionis regarding seeds involve official variety testing, carried out by the StateCommission on Variety Selection, and seed inspectioni by the Republican Seed Inspectorate and anetwork of seed laboratories at oblast and rayon level. These various services are nom-niially LinderMAWR as the oblast and rayon-level seed laboratories are dependenit on local governmenits wlicih funidthemr.

2.20 Seed program. The governmeit lias placed highi priority on tile relhabilitation of the seedindustry. With inputs from various donors, MAWR is working on a national strategy to clarify the roleof the state and private sector withi an emphasis on the development of seed productioni anid distributionin the private sector. The government has also started to put in place an appropriate legal and regulatoryframework (a public sector role) for establishing an enablinig environmenit for seed development.including freer access to international germplasm. A recently passed seed law provides a satisfactoryframework withlin whiich the sector would operate, except that the seed law containis a requiremenit ofcompulsory certification of all varieties. This requirement, thiough primarily intenided to ensure that lowquality seed does not enter the market and allow time for the development of genuine seed producers. inthe long run, it (tlhe compulsory certification) could become a constrailit to the development of a market-based, private sector seed industry. The government agrees that this restriction should be lifted in duecourse, and is prepared to provide for appropriate safeguards in certification procedures that would befollowed in the interim. During negotiations, an agreement was reached that the government wouldissue, by December 31, 1998, policy guidelines, satisfactory to IDA, to implement the conmpulsory seedcertification requirements under the Seed Law; and by December 31, 2000, submit to the Parlicm?ent, a

drafi amendment to the Seed Law, satisfactory to IDA, which would allow MA WR to offer seed

certification on a voluntary basis.

2.21 The Government also intends to introduce a law on Plant Breeders' Protection Rights (PBPR) tocreate an enabling environment for private investmenits in plant breeding. FAO legal and technicalspecialists have reviewed the draft PBPR Law with the government anid made recommendations, and thegovermment has also sought and incorporated the comments of UPOV (Interniationial Unioni for Protection


of New Varieties of Plants) in thie draft law. Goverinimlenit lhas stated its inteintioni to becomne a member ofthe UPOV and the necessary finanicinig hias becei included unide- the project. Dutrin,g neg,oliations, anagreenent 11/as reLaCheLd i/hit tlie government wo uld subiniii to the ParlijamnentU (/raft law, satisf.afctor.y toIDA. ol tile Pr otection of p/ant brecders rsrigh/s. A ugigst 3/, 1998.

2.22 Tlhrougih an EU-assisted project, a credible mechianism for productionl and supply of qualitycommercial seed has been demonstrated USingl couniterpart funids generated from food aid. Amonig theseed farmiis associated withi this project. a number of farmis have already demonlstrated a poteintial toemerge as hiealthy private sector seed businesses. Hlowever, they still tace significant finanlcial, tecihnicaland marketing problems, and need furthier sUpport beforc tiley can become fully sustainable. Also, thereis need to move tihpstrealnf to secure thie production of good Elite seed for contract multiplication and toput in place necessary regulatory and quality controls, especially in the sphieres of breeding, and initialmultiplicationi (the primary seed sector), wlicil the goveriinmenit sees as of strategic importanlce in tileprevailinig economic environmiienit.

2.23 The government has accepted that one step downward from breeding, i.e., Super Elite and Eliteseed production, should be privatized. In support of this approach, the proposed project will assist the(Zovernmeit in progressively dismantling the state monopoly starting witlh Elite seeds, then Super Eliteseeds, and encouraginig tile private sector to step in. The project-assisted public investments would onlybe at the apex of the seed industry, (germplasm acquisition; seed breeding; and regulatory services).Support for seed multiplication would be limited to finanicing of two publicly-owned Super Elite andElite seed farms and to thiree private commercial seed producers (selected competitively) to provide abasis for trainiilng and demonstrationi of good practice. The project's emphiasis is on creating an incenitiveframework to assist in developing techinical and managerial expertise in the private sector. At thlis time,the Kyrgyz seed sub-sector is not ready to permit a total shiift from public funding to private/clientfundinig, ancd the proposed limited public sector intervenitioni is urgently needed to pave the way for futuresustainable private sector investments. This is particularly so because the project support would relatemainlly to self-pollinating cereal and fodder crops, the seed production of whichi, due to its inherently lowprofitability, is of limited commercial interest to the private sector.

D. CROP PROTECTION

2.24 Until 1995, crop protection was essentially in the domain of one company, tile KyrgyzSelkhiozkimia (KSK), whiicih hiandled procurement, application and distribution of pesticides and otheragro-chiemicals along withi its related regulatory functions of product registration, quality control andresidue monitoring. With the privatization of KSK in 1996, these regulatory functionis were given toMAWR's Agency for (often called as Department of) Clhemical Supply and Plant Protection (ACSPP).ACSPP, an independent legal entity, is currently under-funded. There is no establishied registrationsystem for pesticides while the import, sale and use of pesticides is currently uncontrolled. Althoughplant quarantine services were relatively well established using FSU procedures, these remain severelyunder-funded with major quarantine facilities being in need of reliabilitation. The capacity of plantquarantinie witihin tihe country, thierefore, needs to be strengtihenied: first, in the context of the reducedavailability of fiscal resources; and second, to effectively respond to a significant increase in the demandfor quarantine services as a result of the increase in the germplasm exchiange emanating from the on-going agrarian reform.

2.25 What is needed is to establishi a sound legislative framework and effective organizations andprocedures for the Kyrgyz crop protection and plant quarantine services whicih will effectively assist incontrollinig plant pests and diseases by: (a) detecting and monitorinig tlireats to plant healtih; (b)

CHAPTER2: ISSUESINAGRICULTURALSUPPORTSERVICES 14

forecasting attacks and disseminating information; (c) deploying counter-measures, strategies andmethods of protection (these include the use of pesticides in the context of integrated pest management,biological control agents and similar techniques, methods and substances). In this regard, thegovernment has formulated a draft law for the control of pesticide use.

E. AGRICULTURAL MARKET INFORMATION

2.26 Currenitly, the development of agricultural marketing is constrainied by several factors includingthe following: the structural remains of the old system whiich limit producers' access to free, competitivemarkets; interventionis by local autilorities in price setting for inputs and outputs; the lack of workingcapital resulting in delayed payments to sellers; limited price differentiation by product quality; the lackof legal protection to buyers and sellers in enforcement of contracts; inadequate infrastructure for storageand transportationi contributing to higih post-harvest losses; and the lack of access of producers, tradersand consumers to market information. The proposed project will focus on strengthelling institutionalarrangements for collection, processing and disseminationi of relevant market information for the benefitof producers, processors, traders, and policy-makers, playing the role of a catalyst in promoting a broaddevelopment of agricultural marketing. A pilot project to disseminate market informationi is currentlyunderway in two oblasts, with support from the British Know How Fund. The proposed project wouldextend the pilot to the remaining four oblasts, thus extendinig market informationi nationi-wide, under animproved conceptual, legal and operational framework.

CHAPTER 3: THE PROJECT

A. PROJECT OBJECTIVES

3.1 The project objective is to improve the incenitive framework for, and productivity, profitability,and sustainability of Kyrgyz agriculture by meanis of: assisting the government in implementing landand agrarian reforms; providing emerging private farms with advisory and development services;developing the seed industry; establishinig a legal framework, organizationis and procedures for cropprotection and plant quarantinie; establishinig an agricultural market informationi system; and enhancinginstitutional capacity of MAWR.

B. SUMMARY DESCRIPTION

3.2. The project would comprise of the following main components: (i) Land and Agrarian Reform(Support to Farn Restructuring); (ii) Rural Advisory and Development Services; (iii) Seed IndustryDevelopment (for cereal and fodder crops); (iv) Crop Protection and Plant Quarantine; (v) AgriculturalMarket Information System; and (vi) Institutional Capacity Building of MAWR, including of the ProjectImplementation Unit (PIU), already established, to ensure timely implementation of the abovecomponents, consistent with sound financial, economic and technical standards. The project would use ajudicious combination of public, private and voluntary initiatives to help raise rural household incomes,reduce poverty, and protect the environmenit. It would promote a participatory approach to technologyadaptation and transfer. Increased farmer ownership and accountability of the agricultural knowledgesystem is a key element of the project design. The project will be implemented over a period of fiveyears (1998-2003). Annex A summarizes the Project Design.

C. DETAILED FEATURES

(i) Land and Agrarian Reform (Support to Farm Restructuring)

3.3 The main objectives of this component are to: (i) complete distribution of land and non-landassets so that, by the end of the project period, there will be complete private use-rights or ownership ofland and non-land assets designated for privatization, (ii) establish policies and procedures for landauctions; (iii) support capacity building in government agencies (RCLAR, CLARs and SALMLR), andof farming communities to support agricultural enterprise restructuring; and (iv) establish a legal andregulatory framework for land market development.

3.4 At the republican and oblast levels, the component will assist RCLAR, CLARs and SALMLR todevelop policy, monitoring, outreach and support service capacities. At rayon, village and farmer levels,the strategy would be to overcome both physical and human resource constraints to substantive farmrestructuring, through improvements in the legal framework, provision of agricultural enterprisemanagement information, and physical demarcation and allocation of land and non-land assets. TheBritish Know How Fund (KHF) would provide a grant up to US$800,000 during the first two years of theproject and the major inputs of this technical assistance will be concentrated in strategy development forland reform nationwide, capacity building in MAWR's RCLAR and oblast level CLARs; and resolvingproblems across country in order to establish sustainable systems for managing and financing land andagrarian reform programs.

CHAPTER 3: THE PROJECT 16

3.5 The land and agrarian reform componlenit will be nationial in scope. Tel RCLAR and SALMLRwill initially commenlce the componenit implemilenitationi in Chui oblast, f'ollowed by the five otheroblasts, during project years I and 2. comillelnsLirate with the progress in capacity huildin, in localinstitutiolIs whicIh will be the focus of technilcal assistanice proposed to be provided by the KI 1F. In Chui,the reforml process is the least complete of all the six oblasts. withi little of' its land distributiollrecognized by the MAWR as valid, and 90 (out of a nationiwide total of 131 ) large state and collectivefarms still required to carry out distributioni of their noni-lanid assets. AltIlougIl the distributioll oft landand noni-lanid shares is relatively advanced in the remaining iive oblasts (Osh, Talas, Dzal-abad, Narynand Issyk-Kul), there are major issues to be addressed in all i/hi six oblasts. including the orgaLization ofnew farmillng UllitS, forilializationi of land use-righllt certificates, resolution of outstanding debts.clarificationi of property righits; formiationl aiid adminlistiationi of equipmenit service entities: andauctioning/leasing of land held in ALRF. Durinlg negotiationis, at the Goverinimienlt request, IDA agreed toexpand the scope of this componienit to include the cost of issuanice of land certificates in all oblasts (inisteadof ihilitilig this activity to only Chui oblast as originally proposed).

3.6 The componenit will finanice techinical assistance, training, office equipment, vehicles, printinig ofland certificates, and iicr-emenital operating expenditures for the following: (a) a review of unresolvedlegal aspects of land and agrarian reform and land market development; (b) institutionial strengtihenlilng ofRCLAR in four areas (program coordinationi and implementationi; public information preparation anddisseminationi; monitorinig and evaluation; and the maniagemenit of ALRF); (c) SALMLR's capacitybuilding for physical demarcation of land boulidaries and issue of land certificates; and (d) institutionlalstrengthieninig of oblast and rayon CLARs, village governimenits and farner groups to effectively carryout grassroots-level responsibilities.

(ii) Rural Advisory and Development Services (RADS)

3).7 The objective of this component will be to assist newly created private farms (throughi theprocesses of land reform) to undertake profitable farming on a sustainable basis, by making available theknowledge they need, with regard to small-scale farming, accessing credit and input supply, and outputmarketiig. (Figure 1). As the project-assisted farm restructuring program proceeds, there are likely toemerge as many as 140,000 private farmers, many with very small holdings. To be able to effectivelyserve this large clientele, the RADS will establish a network of rural advisory and development centers(RADCs), one in each of the six oblasts (includinig the centers already established in all the six oblasts bydonor-assisted pilot projects). The oblast RADCs will, in phiases, open some 44 rayon/village leveloffices, 4-10 per oblast, depending upon the oblasts' area and population. RADCs' rayon offices willhave an average of 2-3 advisors each, totaling about 100 advisors. The RADCs will be supported by aSecretariat in Bishkek to provide coordinationi, monitoring and financial managemeit.

3.8 The RADCs' main functions will be to give advice to farmers, on a one to one or group basis, inappropriate techniques of farming, backed by location-specific technology development. Techniologydevelopment will concentrate on field trials and demonstrationls and these will be done on1 farmers' fieldsat the request of farmers, in conjunction with necessary adaptive research. This is expected to raisefarner awareness and understandinlg of the basic principles of plant nutritioni and protection, as well as ofsoil and water management, including the importance of rotations, proper tillage and irrigation practices.This knowledge is generally lacking, as most of the new farn operators hiave no prior farmingexperience. Demonstrationis and on-farm experimentation would help translate these principles inpractices that increase farm efficiency. This would be a long-term investment In sustainiable agriculture.RADCs will also assist farmers in preparing business plans in support of credit applications, anid invarious forms of group development such as credit, water user, machiniery and marketing groups,


including associated training. These initiatives will enable farmers to organize themselves for obtai1iligimproved services, solving coImlilimlo problems. and improving productivity of farms thley cultivate.

3.9 In this regard, the RADS will use the experience gailned with on-goling pilot projects that arebeing implemented in the counltry by EU-TACIS (ABC and ATAS projects); the Swiss; GTZ and NGOsin agricultural extensioni and credit (para. 2.10) and integrate farmn advisory services currenitly beingprovided by the donors and the on-goling IDA/IFAD-assisted Sheep Developmelit Project (SDP). Thiswill avoid the developmenit of parallel actions serving different productioin activities on the same farms.Major donors have agreed on the need for coordinationi, and the convergenice of various donor-assistedpilot projects into RADS is uliderway. This will, it is hoped, contrast with maniy extensioni serviceswhiich go out to "deliver" techniical messages that are not necessarily demanded by farmers. As acondition of negotiations, the governmlent (MA WR) issued a formnal order (No. 2 of February 4, 1998) tomerge livestock advisory services under the 'Sheep Development Project ('SDP) with A&STSP integratedrural advisory and development services (RADS2) and, at negotiations, informed IDA and IFAD (whichwZould co-finance RADS) that this merger would be cairried out effectively, no later than September 30,1998.

3.10 Target Group. RADCs operating at the oblast and rayon levels will serve a wide range offarming enterprises includinig individual farms, partnershiips, associations, and joint stock companies.The strategy would be to re-activate the farming sector as a whole, the collapse of whichi is one of themajor causes of the present highi level of poverty in the rural sector. Experience with on-going pilots(para. 2.10) indicates that an advisory service will be most effective wheln it is dealing with innovative,early-adopter type farmers, and indeed it will, by demand, be pulled in that direction. In this context,IFAD, whichi will co-finance this componenit, would necessarily reconcile its institutional policy ofproviding advice and support for the poorest rural groups with the fact that if the advisory service mustachieve the maximum effect at the lowest cost and effort, theni it is the lead farmers, who wouldinfluence others in their social groups, who would be the most rewarding to target.

3.11 However, the project will include deliberate measures to target the needs of the rural populationbelow the poverty line (about 50 percent of rural houselholds), comprising mostly small holders withlimited or no access to social services, social infrastructure, credit, and off-farn employment as follows:(a) stipulating eligibility criteria that will ensure that small holders get access to credit provided by theproposed IFAD-funded Farm Development Fund (FDF) (paras. 2.16 and 4.11-4.13); (b) introducing,from year 3 of the project, a voucher system (funded by IFAD loan) to enable small holders below thepoverty line, to pay for advisory services -- by which the government will bear the cost of vouchersissued to and used by those who would most need its assistance; (c) introducing initiatives to overcomefarm machinery problems faced by small holders; (d) targeting poorer farmers in field trials anddemonstrations; and (e) training RADS advisors to address broader socio-economic issues, includingissues faced by rural women. While RADS' institutionial goal will be to operate gradually on a self-financing basis, the cost of targeting the poor will be borne by the governmeit for many years.

Kyrgyz Republic Figure 1.1Agricultural Support Services Project

Rural Advisory Development Service (RADS)

Farmer Needs Farmers Farmer ____Farmer __ OblastRepresentatives Steering National

(i) Technical Representatives \ Councils Secretariat InBishkek

Cropstarmer

Livestock V Represenitatives RADC atRADS Oblast Day-to-day Contact Training

(ii) Business at Level SpecialistManagement Rayon -

Day-to-day Level Farm Management Formal Requests for (iii) Financial . _ _ Specialists Research/information

Information Contact RayonAdvisors

(iv) Credit Fanmer with Advisors .Farmer day-to-day contact Group Developmenwith Specialists Specialists

(v) Mechanisation . A Commissioned Research

(vi) Group Univemetie Agraian Ag. Universities Formation | j A 4 Local Academy

Agrarian NationalAcademy Level

Day-to-day contact with Group Development SpeciallsVis

FARMERS REQUESTS | NATIONAL REQUEST EVALUATION | PROCESS| LOCAL REQUEST EVALUATION I

RESEARCH COMMISSIONED BY OBLAST STAGESRESEARCH COMMISSIONED

BY SECRETARIAT

co


3.12 The main items to be finaniced by RADS componienit will include relhabilitation of existingbuildings for RADCs; laboratory and field equipment: vehicles; technical assistance and traininig; andincremental operating expenses (includinlg salaries of RADS staff). The project envisages that farmerbeneficiaries will begin to pay, even if in small amouLnts, toward RADCs' service cost right from thestart. This approach will have two advantages. First, farmers will demand value for money and advisorswill liave to perform or they will not be able to clharge. Second, farmers will begin to recognize thatadvice hias monetary value. RADCs will make chiarges for: thle preparation of business plans;preparation of credit applications; techilical visits to farms and services such as soil analysis andfertilizer recommendationis. The initial charges will be low. The government will review theeffectiveness of the proposed cost-recovery mechanlisms for the RADS during the project's mid-termreview and introduce appropriate refinements (paras. 5.15-5.16).

(iii) Seed Industry Development

3.13 The project would assist in establishinig a viable, self-sustaining, seed industry with emplhasis on1commercialization, providing farmers with good quality seed of improved varieties. For this, the projectwould: (a) support the acquisition and development of plant varieties including the use of internationalfinished germplasm for cereals and forage; (b) rehabilitate selected facilities for cereal and forage seedproduction, processing and storage; (c) demonstrate seed production on pilot farms to promote thedevelopment of a private commercial seed sector; (d) strengtheni first, MAWR's capacity to develop andimplement seed policy and second, its regulatory services for variety testing, variety registration andseed certification; (e) establish a legal framework and procedures for the protection of plant breeders'rights; and (f) support publication and dissemination of official variety testing results and seed industryinformation.

3.14 Plant Variety Acquisition and Development. The project would provide support to the plantbreeding departments of the Crop Research Institute (CRI) and the Fodder and Pasture Research Institute(FPRI) which are constituents of the Agrarian Academy and responsible for the acquisition, developmentand evaluation of new germplasm and its submission to the official variety testing system. Support inthie form of laboratory and field equipment, incremental salaries, and operating costs would be providedto CRI for variety development activities in wheat, barley and maize (and later for oil seeds and potatoes)at Djal (Chui oblast) and two other stations (Osh and Issyk-Kul), and to FPRI for alfalfa and sainfoinvariety development at the FPRI center in Sokoluk rayon (Chui oblast) and one outstation.

3.15 The two breeding units' main functions under the project would be to: (a) acquire a wide rangeof (essentially finished) germplasm for cereals (wheat, barley, and maize) and forage crops (alfalfa andsainfoin), from appropriate sources including CGIAR Institutes and renowned universities, and selectmaterial suitable for Kyrgyz conditions; (b) test and screen such material for different ecologicalconditions and market requirements; (c) further improve/adapt such material to the extent needed tomaintaini germplasm collections and release adequate quantities of breeder seed of preferred, existing andnew varieties; and (d) ensure prompt release of preferred varieties. The breeding units would concentratetheir efforts on the implementationi and evaluation of finislhed cereal varieties and forage germplasm, soas to accelerate the flow of new varieties for testing and reduce the costs involved. For cereal varieties, itis anticipated that most of this material should come from ICARDA (International Center forAgricultural Research in Dry Areas) and CIMMYT (International Maize and Wheat ImprovementCenter). ICARDA may also be able to assist in providing trial material of the forage species. It will alsobe the responsibilities of the CRI and FPRI to maintain new and existing varieties which have beenofficially released and to undertake rapid bulking up to the breeder seed generation. To make this

CHAPTER 3: THE PROJECT 2 0

possible, the project would provide assistance to breeding units to adopt modern breeding technology byproviding training and study tours for its teciical staff and participating seed growers. Duringnegotiations, an assurance was obtained fron the government that: (ac) he CRI and FPRI wvould, hyMarch 31 of each year (or such other clale aigreed wilh IDA), submil lo IDA f/r its review, their (annzualseed breeding program77s; (b) inmniediately thereaffer, finalize said prrograms taiking in! o conws deruionIDA 's comnmenis thereon: and (c) ccarmy oul such p)rogramns ini accordance wvith their term.s. IDA creditwithdrawals for CRI's and FPRI's seed breeding activities Would be made ulider programlis acceptable toIDA.

3.16 Multiplication of Super Elite and Elite Seed. For cereals (wheat, barley and maize), the mainspecialized producer of early generationi seed, i.e., Super Elite and Elite generatiolns, woLIld be the NPOZfarn at Djal. The FPRI seed farm (Sokoluk rayon) would hiandle multiplication of alfalfa and sainfoillvarieties. In order to commercialize operations of the seed enterprises and ensure full cost recovery (byreplacing existing budgetary funding of these farms), the governmenit would disburse IDA credit fLunids toNPOZ and FPRI farms, subject to cost recovery, on terms and conditionis acceptable to IDA (para. 4.17).These funds will finanice incremenital investmenits and working capital requiremenits. The farims w ill sellSuper Elite and Elite seed to commercial seed production farms at a premium price for fuLthiermultiplication and eventual sale to farmers. They may also undertake this multiplication themilselves tosupplement income. The NPOZ and FPRI farms would repay project finanice from proceeds of seedsales. The farms would maintaini separate accounts for project-financed seed activities. The CRI andFPRI breeding units would owin new varieties of seed and allow NPOZ/Djal, or othier authorized farms,to produce and market Super Elite and Elite seed of new varieties. These NPOZ and Djal farms wouldpay a fixed percentage of the sale proceeds of Super Elite and Elite seed, as royalty to CRI and FPRIbreeding units toward the cost of variety development.

3.17 Pilot Commercial Seed Production. To facilitate the start-up of commercial seed productioni inthe private sector, the MAWR, in collaboration with the Agrarian Academy, would select on the basis ofcriteria acceptable to IDA (para. 4.16), thiree newly privatized seed farms - one in each of the maingrowing areas: Chui, Osh, and Issyk-Kul - whichi would be contracted by the Seed Unit in MAWR toserve as models for the development of the commercial seed sector. These pilot farms would serve asdemonstration and training ground for other seed farm managers and techinicianis. and RADCs. At thesame time, they would also increase the production of quality seeds and demonstrate the advantage ofusing such seeds, thus developing the market for good seeds. The MOFE would provide IDA creditfunds to the three pilot farms subject to cost recovery, on terms and conditions acceptable to IDA (para.4.17). The IDA credit would finance mainly the repair of essential buildings, purchase of seed cleaningand farm equipment, including for each farm, a combine and a seed drill.

3.18 Review of Seed Farms' Investment Proposals. MAWR's Seed Unit, in association witlh PIU,will be responsible to: (i) assess feasibility of subprojects proposed by super elite and elite seed farms(NPOZ farm at Djal and FPRI seed farm at Sokoluk) and the selected private commercial seed farms(paras. 3.16 and 3.17) and (ii) recommend to MOFE or its authorized representative (e.g. PIU), theamount of project finance that should be provided for eligible subprojects, taking into account IDArecommendations on the feasibility studies. It would also be the condition of MOFE's project finanice toCRI, FPRI and the farms engaged in the multiplication of Super Elite and Elite seed that the varietiesproduced by them would be made available to other registered Super Elite and Elite seed producers. withseed breeding units compensated adequately (using market-based prices), following the rules of theproposed Plant Breeders' Rights Law. A project finance contract indicating the obligations of each partywould be signed by MAWR/MOFE and the farm management/s (para. 4. 17). Seed producers wishinig toproduce Super Elite and Elite seed would need to register with MAWR's seed unit using criteria to be


agreed with IDA. During negotiations, the government agreed to ensure that. (a) the seed productioneniterprises, selected according to criteria acceptable to IDA, would submit to IDA for its review, bySeptember 30 of each year, feasibility studies with reconmmendations (including those on cost recovery)for the production of seed to be financed under the Credit; (b) immediately thereafter, finalize saidreconmmendations taking into consideration IDA's comments thereon; and (c) carry out suchrecommendations in accordance with their terms.

3.19 In coordinating seed production, the Seed Unit of MAWR would maintain close contacts withrelevant Rural Advisory and Development Centers (RADCs). RADCs' mandate would include, atfarmers' request: (a) variety testing at the centers and on farmers' fields; (b) provision of advice andtechnical support to farmers in the production of good quality farmer-saved seed; and (c) demonstrationof early generations of public domain varieties. For the pilot private commercial farms (para. 3.17), theRADCs would represent a source of readily available technical expertise in agronomy, businessmanagement, and machinery operation. Tlhrough variety testing activities, RADCs would provide ameeting ground for researchers, farmers and seed growers to assess demand for new varieties. Tofacilitate these close contacts, financial assistance to pilot commercial seed farms would be granted, asmuch as feasible, in conjunctioni witlh local RADCs.

3.20 Official Variety Testing. The project would strengtlhen the capacity of MAWR's StateCommission on Variety Testing to test new varieties by: (a) streamlining the service, maintaining onlythe minimum required number of locations (four for cereals, of which two responsible for maize), thusensuring thlat scarce budgetary resources are used for those centers which remain active in theirmandated tasks; (b) introducing modern experimental and data analysis procedures; (c) introducing testsfor distinctiveniess, uniformity, stability (DUS), particularly to obtain detailed variety descriptions whichwill be required for plant variety protection; and (d) publishing and disseminating test results,particularly througlh the advisory service, so as to allow farmers to make inforned variety choices. Plotmachinery would be provided at four main testing stations (Bishkek, OshI, Issyk-Kul and Talas), togetherwith miscellanieous laboratory equipment for measuring quality attributes of new cereal and foragevarieties. The project would also provide computer equipment, technical assistance, and training.

3.21 Seed Certification. The project would support the development of an effective seed testing andcertificationi calpacity. Seed certification for commercial seed would be compulsory initially (followingthe provisions of the new seed law), but would be expected to move to a voluntary basis after theproject's mid-term review, that is after about three years (para. 2.20). The project would provide for: (a)strengtheninlg the Republican Seed Inspectorate and developing its capacity to technlically supportregional and local seed quality control laboratories; (b) relocating and equipping the central seedlaboratory to a standard that will enable ISTA accreditation, and providing minimum supplementarylaboratory equipment for six regional laboratories; and (c) providing training and technical assistance tofacilitate the introductioni of efficient certification procedures. The Republican Seed Inspectorate and theVariety Testing Commission would be merged into one Variety and Seed Testing Organization operatingunder the oversight of a Deputy Minister for Crops.

3.22 Seed Unit. As part of the MAWR's proposed reorganization plans, MAWR's Seed Unit wouldbe strengtlheined to develop and implement seed policies, maintain registry of plant variety rights, liaisewith internationial seed organizations, and promote the development of a Kyrgyz National SeedAssociation (NSA). The project would provide office equipment, a vehicle and incremental operatingcosts of the Seed Unit. A seed specialist would be funded by the project to build capacity and providetechnical assistance for implementation of the overall seed component.


3.23 The objective of the National Seed Association (NSA) would be to bring togetlher public andprivate sector agencies and private seed producers committed to tl-he development of quality seed. TheNSA would provide a mechanismii for coordinatilig the flow of good quality seed from breeder to farmerand build the concept of quality seed whiichi has been seriously eroded in recent years. The NSA wouldbe established in the first year of the project as a noni-goverinmental organization with a democraticstructure, open to all parties interested in producilg and selling quality seed. During negotiations, anassurance was obtained that, by Decenmber 31, 1998, the Government will establish NSA with a charterand by-laws acceptable to IDA.

(iv) Crop Protection and Plant Quarantine

3.24 Current Status. The shiift, during the transition, in the provision of farn inputs from thegovernmenit or parastatals to the private sector requires the governmtnent to reassess its role. This appliesin particular witlh respect to the supply of agro-chemicals where there is still a major public sectorinterest, especially with respect to consumer protection, user safety and prevention of disease and insectresistance. As such the governmenit is drafting a new set of regulations but this process, and in particularthe implementation of these regulations is limited by budgetary constraints followed by low salary ofstaff, poor managemenit, inadequate equipment, and the lack of modern technical expertise.Consequently, MAWR's regulatory services are working much below acceptable levels. There has beenas yet no external fundinig for these services, except for an on-going review under a TACIS project.

3.25 The overall objective of the componient is, therefore, to assist the government to develop pestmanagemenit systems for the country that warranits user safety, public hiealth and environmental andagronomic sustainability. The project will not directly fhianlce the import or purchase of pesticides, buthelp develop a system of sustainable pest management, by (i) assisting the government to develop theframework and tools to ascertain the use and marketing of appropriate and safe pest control methods; and(ii) educating farmers in safe and sustainable pest preventioni and control. The government intends tointroduce a new law on pesticides and pest control. A draft of this law was reviewed during appraisal byan FAO expert and the new version provides for increased relevance to current and future conditionis, andincreased precision and clarity. The Kyrgyz authorities have indicated a general acceptance of the nlewdraft and recognized the need to revise current rules for pesticide registration. At negotiations, it wasagreed that by August 31, 1998, the government would submit to the Parliament a draft law, satisfactoryto IDA, on pesticides and pest control, in the context qf an IPM approach. This would supplement theassistance given directly to farmers through the project-assisted RADCs, and complement the techilicalassistance behig provided by the EU and ADB for MAWR's re-organization and redefinitioll offunlictiolls.

3.26 In line with the internationial understanding on pest managemenit, it is governmenit policy toencourage the use of integrated pest management (IPM). The government regards the proposed projectas the first critical step in support of this policy. As a follow-up, the governmenit (MAWR) wouldintroduce a systematic. phased effort to introduce diverse IPM approachies suchI as biological control,cultural practices, and the development and use of crop varieties that are resistaiit or tolerant to pests.ITle project-assisted RADS would be the vehicle that would be available to the government, to reachIPM messages to farmers and farmer groups. At negotiations, it was agreed that the government wouldissue by June 30, 1999. a Manual on Pesticide Management and Application, Crop Protection and PlantQuarantine acceptable to IDA, for use by RADCs, traders and farners, outlinin1g environmenitally soundpractices that must be followed in the management of agricultural chemicals and pesticides includingtheir distributioll, hanidlinlg and utilization. It was also agreed that the Government would ensure thatRADCs advise farnmers andfarm?er groups on pesticide use only when such use is justified under an IPM


approach, and submit to IDA, by December 31 of each year, reports on compliance by RADCs with thisobligation, and take into consideration IDA 's comments on these reports, including ways to improvecomnpliance with this obligation..

3.27 In the spheres of plant quarantine and crop protection, the project would assist in the followingspecific initiatives:

a) Crop Protection. Support the development and implementation of a pesticide registration systemand of regulations and procedures covering the safe distribution and use of pesticides, andmonitoring of pesticides utilization and residue contents in the context of an IPM approach. Theproject will establish two laboratories to international standards, one in the north (Bishkek) andone in the south (Osh) to analyze pesticides, and re-equip each of the six (oblast-level) centerswhose role will be to monitor the compliance with the new law. The project would financecritical facilities for the operations of the two laboratories and the six oblast-level centers,including vehicles; computers; communication equipment; technical assistance; staff training; andincremental operating costs.

b) Plant Quarantine. The project would rehabilitate on a pilot basis quarantine facilities at two sites(Bishkek and Osh) to improve quarantine controls on imported plants and plant produceconsignments, and finance: (i) vehicles, computers and office equipment; (ii) membership of theEuropean Plant Protection Organization (EPPO); (iii) technical assistance (a legal specialist) toreview quarantine regulations and procedures; and (iv) incremental operating expenses

3.28 MAWR's State Inspectorate for Plant Quarantine will update plans and cost estimates forrehabilitation of the (Bishkek and Osh) Plant Quarantine Centers, consistent with international (EPPO)standards for laboratory equipment and operation, and the requirements of the 1987 Montreal Protocolon Ozone Depleting Substances including amendments thereto, which would require the approval of IDAbefore these investments are made. Under the recently amended Montreal Protocol, the calculated levelsof consumption and production of the controlled substances do not include the amounts used by acountry for quarantine and pre-shipment applications. During negotiations, an understanding wasreached that, by December 31, 1998, the government would submit to IDA, for its review, feasibilitystudies for the rehabilitation ofplant quarantine centers in Bishkek and Osh and, immediately thereafter,finalize saidfeasibility studies taking into consideration IDA 's comments thereon.

3.29 There is no justification for keeping an extensive network of stations and laboratories whichwould by force remain ill-equipped and understaffed. For plant quarantine, only about half the numberof rayons should retain stations, and that new points of entry would be staffed primarily by re-deployment of local personnel. Besides the proposed rehabilitation of ACSPP's Bishkek and Oshcenters, there are a number of rayon stations which cannot be maintained. At negotiations, an assurancewas obtained ihat, by December 31, 1999, the government would submit to IDA for its review, a plan forthe consolidation of existing quarantine laboratories and centers at the rayon level; and imnmediatelythereafter, finalize said plan taking into consideration IDA 's comments thereon, and carry out such planin accordance with its terms.

(v) Agricultural Market Information

3.30 Market Information System (MIS). The project would provide equipment, technical assistanceand training for the establishment of a nation-wide agricultural MIS building upon the pilot projectwhich is currently underway in two oblasts, Talas and Issyk-Kul, with financing provided by the BritishKnow How Fund (KHF). The KHF pilot, which was recently extended to December 1997 includes the


recruitment and traininig of the MIS staff for the four oblasts not covered by the existing pilot project;institutional strengthieninig of the State Department of Anti-Moniopoly Policy (SDAP) and the NationalStatistical Committee (NSC); and support to Kyrgyz Standard (KS) and Kyrgyz Agrotech project(KATP) for evaluation of grades and standards.

3.31 The MIS would collect, process, and disseminate agricultural market information for the benefitof producers, processors, traders and policy-makers. It would help increase the transparency of markettransactions; transmit incenitives and opportunities to agricultural producers; improve producers'bargaining position; stimulate competition among traders; and expand processors' and consumers'choices in product selection.

3.32 Initially, the MIS's commodity and informationi coverage will be somewhat limited (farm gate,wholesale and retail prices for major agricultural commodities) whichi would be expanded, in phases, toinclude all major agricultural inputs, outputs, and processed products, and report on prices at variouslevels (farm gate, wholesale, retail, and buying and selling prices of agro-processors) and on production,market arrivals and volumes traded.

3.33 By about the end of Year I of the project, MIS would begin to provide information oninternational prices, initially starting with FSU. Also, MIS cannot be effective unless prices are relatedto commodity standards and grades, which makes the marketing system function in an orderly manner.The MIS work program and staff development includes a well-designed strategy to achieve theseobjectives. Specific proposals for project support would include: updating standards and grades forpriority commodities, especially those intended for export to CIS and other countries; dissemination ofinformationi on standards and grades; preparing legal framework for enforcing the use of standards andgrades in market transactions; and strengthening MIS to report market information with reference tostandards and grades.

(vi) Project Implementation Unit (PIU)

3.34 MAWR would establish a project implementation unit (PIU) to coordinate the overall projectimplementation (and taking account of the services already available from the PIU established uider IDA-assisted Sheep Development Project). The implementation of individual components/activities will beentrusted to respective MAWR departments, SALMLR, Agrarian Academy (CRI, FPRI); the seed farms;RADS' national secretariat and RADCs. The project would provide for finanlcinlg of PIU's managementcosts including the cost of a national project director; an expatriate project implementation advisor (foreighteeni monthis) and national procurement and financial management specialists.

D. PROJECT COST ESTIMATES

3.35 Total project costs are estimated at US$30.2 million, of which 66 percent would be foreignexchange part of the costs. Project costs are net of taxes and duties whicih will be reimbursed by thegovernment. Cost estimates are summarized in Table 3.1 and shiowin in more detail in Annex B. Physicalcontingencies have been included at 10 percent on civil works, equipment, vehicles and printing of landcertificates. Price contingencies have been calculated on the basis of the annual projected inflation ratesapplied to local and foreign costs, including physical contingenicies. Price contiligenicies equal to about IIpercent of the base costs.


Table 3.1: Summary of Project Costs

(SOM Million) (US$ Million)Foreign Foreign as % Total

I % BaseComponent Local Foreign Total Local Foreign Total of Total Costs

A. Land and Agrarian Reform 14.22 55.87 70.09 0.81 3.19 4.01 75 15

B. Advisory Services (RADS)Advisory and Development Services 34.80 25.46 60.26 1.99 1.45 3.44 42 14TIIrai;iiing, Credit & Secretariat 23.04 60.24 83.28 1.32 3.44 4.76 72 19Field Demonstration and Adaptive Research 9.07 13.29 22.36 0.52 0.76 1.28 59 5Group Development 5.81 15.22 21.02 0.33 0.87 1.20 72 5

Subtotal 72.71 114.20 186.91 4.15 6.53 10.68 61 42

C. Seed Industry DevelopmentCrop Breeding (CRI Program) 3.78 24.59 28.37 0.22 1.41 1.62 87 6Forage Breeding (FPRI Program) 1.87 5.85 7.71 0.11 0.33 0.44 76 2Super E:lite and Elite Seed ProductioIn 2.17 16.40 18.57 0.12 0.94 1.06 88 4CoInmmercial Seed Multiplication 3.54 24.70 28.25 0.20 1.41 1.61 87 6Seed Unit in MAWR 1.80 7.54 9.33 0.10 0.43 0.53 81 2Official Variety resting 6.20 27.75 33.95 0.35 1.59 1.94 82 8Seed Certification 3.15 4.78 7.93 0.18 0.27 0.45 60 2

Subtotal 22.51 111.60 134.11 1.29 6.38 7.66 83 30

D. Crop ProtectionIPIlant Quarantine 5.65 5.32 10.97 0.32 0.30 0.63 49 3Crop Protection 2.12 10.20 12.32 0.12 0.58 0.70 83 3

Subtotal 7.77 15.53 23.29 0.44 0.89 1.33 67 5

E. Agricultural Market Information System 10.79 15.69 26.49 0.62 0.90 1.51 59 6Subtotal 10.79 15.69 26.49 0.62 0.90 1.51 59 6

F. Project Implementation Unit 6.84 6.69 13.53 0.39 0.38 0.77 49 3

Total BASE COSTS * 134.83 319.58 454.42 7.70 18.26 25.97 70 100Physical Contingencies 4.53 17.05 21.58 0.26 0.97 1.23 79 5Price Contingencies 38.42 13.40 51.82 2.20 0.77 2.96 26 11

Total PROJECT COST 177.78 350.04 527.82 10.16 20.00 30.16 66 116

* Excluding taxes and duties. Figures/total may slightly vary due to rounding.

E. PROJECT FINANCING

3.36 An IDA credit of SDR 11.1 million (equivalent of US$14.98 millioni) will finance about 49.7percent of total project costs and 74.9 percent of the foreign exchange part of the project costs. IFAD isexpected to co-finanice RADS component up to a total of US$7.9 million, covering about 26.2 percent oftotal project cost. The remainder of the RADS cost would be financed by IFAD throughi the on-goingSheep Development Project (US$1.8 million), following the proposed integration of SDP's livestockadvisory services with RADS. Bilateral donors (Swiss, GTZ and KHF) have reached understandings withthe government to provide grants amounting to about US$2.1 million equivalent, of whichi US$1 millionwill finance technical assistance and the balance of US$1.1 million, vellicles and operating expenditures for


the on-going pilot projects. Project beneficiaries would contribute about US$1.2 million and theGovernment would finance the balance at US$2.2 million (plus taxes and duties, if any). The project wouldreceive a total financing of US$3.88 million for techinical assistance and US$1.87 million for training asshlowni in the table 3.2 below.

Table 3.2 Financing of Technical Assistance and Training(US$ million)

Source of Financing Technical Training TotalAssistance

1. Bilateral grants 1.00 - 1.002. IDA Credit 1.44 0.41 1.853. IFAD loan for the proposed ASSP 1.04 0.97 2.014. IFAD loan for SDP (livestock advisory services) 0.40 0.49 0.89

Total 3.88 1.87 5.75

3.37 Financing of the project costs would be in the amounts and proportions shown in Table 3.3.As a condition of IDA credit effectiveness, the government will open a Project Account in a commercialbank and nmake an initial deposit of an amount in Somn equivalent to US$25,000 into such account. Atnegotiations, the government agreed to maintain the Project Account during the execution of the project,and deposit semi-annually an amount of Son, acceptable to IDA, into such account, toward its budgetarycontribution for the project.

F. STATUS OF PROJECT PREPARATION

3.38 Initial preparation studies were undertaken by Euroconsult, Netherlanids, and the FAO InvestmenitCeniter working with the MAWR. Euroconsult carried out farm studies and worked on proposals for seedand post-privatization on-farm support. The FAO Investment Center reviewed and developed the adaptiveresearch program. A joint IDA/IFAD mission visited the Kyrgyz Republic in October 1996 and reached abroad agreement with MAWR on the components to be included in the project. Subsequently, in February1997, the MAWR asked IDA to include the Land and Agrarian Reform Component in the project whichwas prepared by an IDA appraisal mission in collaboration with MAWR and SALMLR during June-August1997. The IDA post-appraisal and IFAD appraisal missions (November 1997) finalized the project designand implementation arrangements in consultation with the Government's relevant ministries anddepartments. The State Foreign Investment and Economic Aid Commission (Goskominvest) approved theproject for IDA/IFAD financing in January 1998.

3.39 Substantial preparatory and pilot work done by the government, with assistance from donors, hassignificanitly reduced the risk of implementation delays usually attributed to project complexity. Theinvolvement of RCLAR and SALMLR in defining the Land and Agrarian Reforn component and thetechnical assistance (up to US$0.8 million) which the British KHF has agreed, in principle, to supportRCLAR and SALMLR, will facilitate an early start on implementationi of this componenit. As regardsthe Rural Advisory and Development Service (RADS), in each of the six oblasts, at least one advisorycenter has already been established: in Clhui, Naryn, Dzalal-Abad, Issk-Kul and Talas oblasts under theEU-TACIS program; in Naryn, Dzalal-Abad, and Osh oblasts under the Swiss program; and in OsIhoblast under the Dutch program. FAO has provided techinical assistance for preparation of the seed, cropprotection and plant quarantine components including the review of the proposed legal framework, whilethe British KHF has funded the establishment of MIS in two oblasts, which has become operational. The


project implementation will benefit from the organizations established and experience gained from theabove initiatives and the on-going implementation of the IDA-assisted Sheep Development Project.

Table 3.3: Project Financing Plan

Local Foreign Total % of totalFinancing Source _ project costs

(US$ nillion equivalent)

IDA 3.0 12.0 15.0 49.7

IFAD 2.5 5.4 7.9 26.2

SDP /a 1.1 0.7 1.8 6.0

SWISS 0.4 0.5 0.9 3.0

GTZ 0.3 0.1 0.4 1.4

KHF 0.2 0.6 0.8 2.5

Government 2.0 0.2 2.2 7.1

Beneficiaries 0.7 0.5 1.2 4.1

Total 10.2 20.0 30.2 100.0

Percent of Total 33.7 66.3 100.0 I

* Figures/totals may differ slightly due to rounding.a/ The livestock advisory services component of the Sheep Development Project (SDP) will be merged with the ASSP'sintegrated rural advisory services (RADS) which will also be financed by IFAD.

CHAPTER 4: PROJECT IMPLEMENTATION

A. PROJECT ORGANIZATION AND MANAGEMENT

Overall Project Management

4.1 The MAWR departments and other agencies that will be involved in the project implementation areshown in Table 4.1 below. Figure 1.2 shows the organizational and management arrangements for theproject. The primary responsibility for project implementation will rest with the Minister of Agricultureand Water Resources, who will chair an inter-agency Project Steering Commnittee (PSC) which will beestablished to provide oversight and coordination, as well as approve annual work plans and budgets. ThePSC members would include MAWR's Deputy Ministers responsible for individual components: MOFErepresentative; the President of the Agrarian Academy; and representatives of farmer and other non-governmental organizations working in the rural sector. Besides the Chairman, the PSC will have no morethan five members. During negotiations, an agreement was reached that, by August 31, 1998, theGovernment will establish and, thereafter maintain until the completion of the project, the PSC' withcomposition and under terms of reference acceptable to IDA; and carry out the prolect through MA WRwith participation of SALMLR; CRI, FPRI and selected seed farms; SIPQ and ACSPP; and NMC inrespective components (Table 4.1).

Table 4.1: Project Implementing Agencies by Component

Component F Implementing Agency1. Land and Agrarian Reform (Farm Restructuring Support) MAWR - Republican and Oblast Centers for Land and.

Agrarian Reform.SALMLR - State Agency for Land Management and LandResources.

2. (i) Rural Advisory and Development Services (RADS) RASC/RADS Foundation/RADCs. Rural Advisory Steering(ii) Small Farmer Credit (Farm Development Fund) Council (RASC); the RAIDS Foundation (registered as a

farmer-dominated, autonomous, non-profit, foundation) with anational secretariat; Oblast Steering Councils and RuralAdvisory Development Centers, with support from MAWRand the institutes of Agrarian Academy, agriculturaluniversities and contract researchers.KAFC in collaboration with UNDP and RADCs

3. Seed Industry Development MAWR: Seed. Unit and Variety Development and SeedTesting Organization;-Agrarian Academy: Crop Research Institute (CRI) andForage and Pasture Research Institute (FPRII) SuperElite/Elite Seed Farns (3); and Private Commercial SeedFarms (3);I

4. Crop Protection and Plant Quarantine MAWR: State Inspectorate of Plant Quarantine (SIPQ) andthe Agency for Chemical Supply and Plant Protection

I(ACSPP)5. Agricultural Market Information System MAWR: NMC for MIS and the MIS Unit in MAWR6. MAWR Capacity Building MAWR (PItJ._

4.2 The Project Implementation Unit (PIU) in MAWR, already established, will be responsible forcoordinating the project implementation. The PIU's main responsibilities will include: (a) oversight onproject implementation including providing guidance to, and coordination among agencies involved in

Figure 1.2

Kyrgyz RepublicAgricultural Support Services ProjectProject Organization and Management

.i3~~~~~~~jec : ~~~~~~~~~MinisterSteering .............................. MAWR l

Committee

Project Deputy Minister/s..... Director M R

(PIU) MAWIIR l

Project Components

Rural Advisory and Land & Agrarian Reform Seed I dustry Crop Protection Agricultural arketDevelopment Service (Farm Restructuring) Development & Plant Quarantine Information System(MIS)

National

RuralAdio. yRC.A.We..SALMLR [Agra Sn SteeringSteering Council : Academy : Unit * Committee for

:......... .......... .... .. CRI and FPRI MAWR | * MIS

_ , , _ _ _ _ ' ',~~~~~~~~~~~~ ~~ Agency for,: MIS

RADS Foundation Pilot Variety & Seed State Chemical Unit_ Seed Testing Inspectorate of Supply &

Secretariat Farms Organizations Plant Protection Plant

(SIPQ) ::Protection:(ACSPP)

Rgpeseat coorftdb&I

or Sutlolous agebicR_2 Lim A

CHAPTER 4: PROJECT IMPLEMENTATION 30

the implementation of individual project components; (b) undertake procurement of goods and services; (c)accounting and financial management of project funds; (d) arrange audit of project accounts;(e) monitoringand evaluation of project performance including the preparation of progress reports; and (f) liaise with thenational and local governments to ensure effective implementation of the project. The PIU will work underthe direction of a national Project Director who has been recruited, using competitive selection procedures.The national project director will, however, be under study (on the job training) for the initial one year andwill work in collaboration with an internationally recruited Project Implementation Advisor (PIA). ThePIA will be contracted for about 18 months, will take full responsibility for all aspects of projectimplementation during the first year of the project, and during the following six months, assist PIU in anadvisory capacity. As a condition of negotiations, the Government also finalized, in consultation withIDA, the Letter of Invitation (LOI) to international firms to submit bids for the PIU advisory assignment,including the terms of reference of this assignment. The Government will appoint a ProjectImplementation Advisor prior to the effectiveness of the IDA Credit. During negotiations, the governmentagreed that, throughout the execution of the project, it would maintain the PIU with sufficient number ofqualified staff, adequate facilities and resources, satisfactory to IDA. It was also agreed that theGovernment will exercise its rights under the PlUAdvisory Agreement in a manner acceptable to IDA inorder to accomplish the purposes of the Credit, and would not assign, abrogate, amend or waive the PIUAdvisory Agreement without the concurrence of IDA. The execution of the PIU Advisory Agreementbetween the government and the PIU Advisor, satisfactory to IDA, will be a condition of IDA crediteffectiveness.

(i) Land and Agrarian Reform (Farm Restructuring Support)

4.3 Role ofRCLARICLAR and SALMLR. The implementation strategy for this component is to useexisting governmental institutions at the republican (national), oblast and rayon levels, namely, theRCLAR, CLARs and SALMLR, which would be strengthened and supported by the project. No neworganizations or bodies will be created. While the PIU will coordinate and oversee the componentimplementation, a Land Reform Specialist, a Legal Specialist, M & E Specialist, and a Land Auction andLeasing Specialist will be attached directly to RCLAR. A Legal Specialist, though attached to MAWRwould coordinate with SALMLR, the Ministry of Justice, and the President's and Prime Minister's officeson issues concerning land and related legal reform issues. The Farm Management Specialist, workingclosely with existing TACIS-assisted farm survey activities in Chui oblast, will assist the localAgribusiness Center, in carrying out farm restructuring activities. Building on the earlier donorcollaboration, MAWR will place a Training Specialist (preferably Russian speaking) in the AgrarianAcademy, for designing and implementing training-of-trainers programs, including the preparation oftraining modules/materials. These core trainers will then train CLARs, village governments and farmerrepresentatives in topics such as Land and Agrarian law and p:rocedures, the establishment of newenterprises, and monitoring of farm performance. On-the- job training will be provided by TA specialiststo the national staff for local capacity building.

4.4 As a condition of negotiations, the Government provided to IDA, a position paper on land andagrarian reform issues, reinforcing its commitment to implement various activities proposed by theproject. Additionally, following the recent international agricultural conference held in Bishkek inDecember 1997, the government issued a resolution (No. 773 of December 1997) incorporating therecommendations of the conference on land and agrarian reform which are in accord with ASSP-supportedactivities, and inter alia focus on debt resolution for new enterprises; strengthening of the legal framework;and operational strategies to complete the issuance of land use right certificates and commence landauctions. The Draft Land Code (second version) and the Draft Law "On State Registration of Rights onImmovable Property are currently under discussion by the Parliament (paras. 2.6 and 2.7).


(ii) Rural Advisory and Development Service (RADS)

4.5 RADS. In order to ensure autonomy, professional competence and operational efficiency indelivering technical services and business advice to numerous farmers and farmer groups, the RADS hasbeen established as a non-governmental, farmer-dominated and non-profit Foundation (paras. 2.10 and2.11). This model is based on the concepts successfully used in the country for the EU-TACIS AgriculturalTraining and Advisory Service (ATAS). The RADS Foundation sponsors will include farmerrepresentatives drawn from the six oblasts, the Government (MAWR and MOFE) and bilateral donors. Byensuring that farmer representatives remain in the majority, both as sponsors of the RADS Foundation, andas members of the national-level Rural Advisory Steering Council (RASC), the RADS is expected toremain fully oriented to farmer needs. At the same time, since the bulk of the RADS initial financing willbe provided by the government (with IFAD co-financing), the ultimate control over channeling of the fundswill unavoidably rest with the government. For this reason, the RADS will function as a semi-autonomousinstitution, until it becomes, over a period, a self-financing organization. Another important feature of theRADS will be that its management will remain decentralized as RADCs at the oblast and rayon levels willfunction as the main grassroots level resource management and operating units.

4.6 Rural Advisory Steering Council (RASC). The RASC will be the highest permanentmanagement body for the RADS. RASC's Chairman would be appointed by the President and/or the PrimeMinister and will have qualifications and experience acceptable to IDA and IFAD. The RASC Chairmanwould be the main link between the RADS and the rest of the project (including the government and theAgrarian Academy), as both the Minister of Agriculture and Water Resources and the President of theAgrarian Academy will be the members of RASC. Other members of the RASC will include therepresentatives of key government agencies, including the President's/Prime Minister's Offices; theMinistry of Finance and Economy (MOFE); farmer associations (one from each oblast); and donors.Finally, the charter of the RADS Foundation will provide for a flexible institutional structure, so thatRADS could effectively respond to the changing economic and sectoral environment. The RASC willoversee the implementation of the component through approval of annual work plans and budget preparedby the Secretariat in collaboration with RADCs. Each RADC would prepare an annual work plan andbudget using the format and schedule agreed with IDA, for approval by RASC, and review by IDA duringproject supervisions.

4.7 The RADS will have a national Secretariat in Bishkek which will be headed by a General Managerand will include technical specialists as well as support staff for personnel management, training,accounting and financial management. Two international advisers (extension and training) will be attacheddirectly to the Secretariat. In addition, a media unit will be located in the Secretariat although its principalclients will be the RADCs. The Secretariat will be responsible for the component implementation, in liaisonwith the MAWR (line departments) on technical matters and MOFE on financial matters. The Secretariat,being autonomous, would have the authority to: (a) open and operate bank accounts; (b) select and hirestaff for itself and RADCs, and (c) sub-contract activities to various agencies and NGOs. TheSecretariat's responsibilities would include: policy development; RADC administration; financialmanagement and control; advice to media unit; and monitoring of RADC performance.

Kyrgyz Republic Figure 1.3Rural Advisory and Development Services (RADS) and Micro Credit

Organization and Management

RADS Micro Credit

Rural RADS __

Advisory Foundation KAFCSteering :---------- --_ -__Council , Secretariat HQ(RASC)

.. ,___ , ,, ~~~~~~~~~~~~~~~.... ........ Obasry-on

ObasRDCs lOblastUrayon l'------- IKAFCoffices

OblastSteering .. ICouncil/s Rayon Farmers &

----- Centers .- Farmer Groups

Farmers &Farmer Groups

Represents coordinating and I orautonomous agenciesRepresents line agencies

Kyrgyz Republic Figure 1.4Agricultural Support Services Project

Organizational Structure of Rural Advisory and Development Centers (RADCs)

Agrarian Academy RADC SecretariatOther Research . Manger

...... .... . . . .

Farm Management______ __ Advisor

(Subject Matt r Specialists)

Mechar~lsation Agroomy Livestock Eco omics Women'sDevelopment

Rayon Centers24 Advisors

Farmers andFarrers Groups

-Rpresent coordinating and I orautonomous agenciesRepresent line agencies

_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~(~

CHAPTER 4: PROJECTIMPLEMENTATION 34

4.8 Figure 1.3 shows RADCs' proposed structure. RADCs will be the main vehicles to deliveradvisory and development services to farmers and farmer groups and will have the following mainresponsibilities: (a) prepare and implement technical programs in advisory services; (b) carry out on-farm demonstrations and field trials on farmers' fields at farmers' request; (c) commission local adaptiveresearch contracts; (d) manage oblast and rayon level staff and maintain accounts; (e) liaise with localgovernments; and (g) disseminate information. RADC Managers will be responsible for the developmentof annual work plans for their respective oblasts, under the overall guidance of local Oblast SteeringCouncils (OSCs). The OSCs which will comprise of representatives of farmners, NGOs, and governmentagencies from within the oblast, will play the same pivotal role as the RASC will do at the national level,in terms of ensuring that RADS remains client-responsive.

4.9 In addition to the Manager, there will be five specialist staff and two administrative staff as wellas a TA-financed advisor, either from the associate donors (Swiss, GTZ) or from local UN volunteers orequivalent. The group development adviser (financed by Swiss grant) will also work at RADC level,though based in Bishkek. RADCs' rayon offices will be staffed by two or three extension advisorscapable of giving a broad range of advice to farmers. They will also advise farmers where to go foradditional help, whether to the specialists in RADC oblast offices, to the rayon land reform offices, toKAFC or to research institutes, as necessary. There will be no need for a formal committee structure atthe rayon level.

4.10 As a condition of negotiations, the government. (a) approved the Charter for the establishmentof the RADS Foundation and registered this Foundation, as a legal entity, with the Ministry of Justice;(b) issued a friamework agreement in a format acceptable to IFAD, for the establishment of a small

farmer credit program (Farm Development Fund in KAFC), duly signed by the KAFC, UNDP and thegovernment; and (c) confirmed that the existing legal and administrative arrangements permit theestablishment of: (c) farmer-dominated Steering Committees for the RADS; and farmergroups/associations which would be RADCs' target clientele.

4.11 Farm Development Fund (FDF). The government will establish a Farm Development Fund inKAFC with an equity contribution of US$1.5 million from the Loan provided by IFAD, under asubsidiary agreement to be signed by the Government and KAFC. KAFC will operate FDF incoordination with but outside the RADS, using its (KAFC's) institutional structure already in place.KAFC will give authority to its regional managers to approve subloans to small-holders initially up toabout US$1,000. This is seen as a necessary institutional development for KAFC if it is to efficientlyserve its institutional mandate to finance the agricultural sector. The small-farmer credit program will beimplemented through a three-party agreement under which: (a) KAFC will provide financial services;(b) UNDP (with technical assistance of US$0.5 million to be provided outside the project) will developcredit-worthy groups; and (c) RADS/RADCs will provide technical services.

4.12 KAFC has prepared a lending operations Manual to provide practical guidance to the operatingstaff covering procedures for lending under the IDA-assisted Rural Finance Project's Small FarmersCredit Outreach Program (para. 1.10). In addition to the lending under SFCOP, KAFC would use theASSP-assisted Farm Development Fund (FDF) to provide subloans mainly to poorer farmers on a groupbasis, who would not qualify for credit even under the liberal criteria proposed to be used by SFCOP.The FDF window will be mainly for banking with the poor, by providing non-collateralized credits usinggroup dynamics and by developing a credit culture and discipline among farmers. This part of socialintermediation is currently being supported by UNDP as part of its poverty alleviation project. Using theproposed UNDP grant of US$0.5 million, the KAFC will build partnerships with community-based


organizations for delivering credit to poorer farmers. As part of the project implementation, UNDP willhire an expatriate training - cum - group development expert to strengthen the processes of training andgroup formation and organize training programs exclusively for KAFC staff and guide in the appraisal ofgroup loans, the documentationi processes and portfolio management. KAFC and UNDP will shareinformation on1 their respective activities and prepare quarterly work programs for the FDF. They willassociate RADC staff with these processes.

4.13 IDA has appraised KAFC in its role as the implementing agency for the Rural Finance Project(RFP) which is being regularly supervised. The terms and conditions for KAFC's subloans from the FDFto farmer groups and individual farmers will also be broadly similar to those for the SFCOP componentunder the RFP so that the interest rates charged by KAFC remain positive and the subloan maturities areconsistent with the production cycle. KAFC may waive or modify collateral requirements. Theexecutionr of the Subsidiary Agreement between the government and the KAFC would be a condition ofeffectiveness for the IFAD loan, and implicitly for IDA credit, as the effectiveness of the latter isconditional upon the IFAD loan becoming effective.

(iii) Seed Development

4.14 MAWR's coordinating/regulatory role. MAWR's Seed Unit operating under the DeputyMinister for Crops, would be the administrative office for all matters relating to seeds within theMinistry. It would be responsible for promoting a policy and regulatory environment favorable for thedevelopment of a commercially viable and diversified seed sector in which private companies can play asignificant role. Specifically, the Seed Unit would: (i) develop and implement seed policies, seedregulations and standards; (ii) approve the registration of varieties as recommended by the Variety andSeed Testing Organization; (iii) maintain the official registry of varieties protected by the grant of PlantBreeding Rights; (iv) license seed producing companies which satisfy minimum standards in terms offacilities and staff; and (v) liaise with international seed organizations concerned with seeds andvarieties. The Seed Specialist will be based within the Seed Unit and will be expected to strengthen theinstitutional role of the Unit and advise on the above activities.

4.15 Seed regulatory services (including official variety testing and seed certification) would remainpart of MAWR but would be reorganized to bring all technical work concerned with seed variety testing,seed quality control and certification, under one organization to ensure coordination and the efficient useof the existing facilities. The two existing services (Variety Testing and Seed Inspection) would bebrought under one regulatory agency called Variety and Seed Testing Organization.

4.16 Selection Criteria for Pilot Seedfarms. The selection criteria for the three pilot commercial seedfarms which were agreed with IDA during negotiations, include the following: (a) farms should beeasily accessible and located in different agro-climatic (representative) regions; (b) farms should beprivate and/or have plans to complete the privatization process in a manner acceptable to theGovernment and IDA; (c) farms should have necessary managerial and technical staff, with appropriatequalifications and experience and a demonstrable track record of producing high quality commercialseed; (d) farms should provide adequate documentary evidence regarding the ownership of land and non-land assets held by them; the commercial viability of the improved seed production; ability to repayproject finance for seed production; and the legal authority of the farms' representatives to sign projectfinance and cost recovery agreements with MOFE or its representative; (e) farms should qualify forselection through a competitive tendering process, acceptable to the government and IDA; and (f) thenumber of farms to be selected will be three unless otherwise agreed to by IDA at the request of theGovernment.


4.17 Financing of Seed Farms. Finanicinig of super elite and elite seed farms and the three privatecommercial seed farms will be processed by PIU in collaboration with MAWR's seed unit and theCRI/FPRI as relevant (paras. 3.16 and 3.17). The MOFE or its designated representative (e.g. PIU) willprovide IDA Credit to eligible seed farms on the basis of project finance agreements to be signed by it(MOFE) and the beneficiary seed farms oni the following main terms and conditions: (a) the projectfinance will carry interest at rates that are positive in real terms (to be determined by MOFE annually atthe end of each calendar year) and include (i) a fee of 3-5 percent payable to a financial institution,acceptable to IDA, which will act as MOFE's agent for account administration; and (ii) such additionalspread as MOFE might prescribe, in consultation with IDA to cover the opportunity cost of capital to thegovernment. The interest rate charged by MOFE will not generally exceed the prevailing interest rate/scilarged by commercial banks for similar working capital and/or investment credit; (b) tile MOFE willrequire the seed farms to repay project finance for working capital within a period of two years, and forcapital investments within a period of seven years, taking into account the subprojects' incrementalincome; projected cash flow; and the assessment of the seed farms' repaying capacity. MOFE may roll-over the working capital finance to seed farms, on similar terms and conditions; and (c) the MOFE willrequire the seed farms to provide collateral and guarantees consistent with local commercial practices.These terms and conditions were agreed with the government during negotiations. The MOFE willintroduce such other terms and conditions as may be determined by IDA during project supervisions orthe proposed mid-term review of the project (para. 4.42). KAFC has agreed to administer project financeaccounts of the seed farms, as the agent for MOFE.

4.18 Commercialization of seed production. MAWR is phasing out its direct support for seedproduction and the majority of farms classified as seed producers are nlow in private hanids. Only somesix state-owned farms remain under the Agrarian Academy and one under MAWR. The guidelines forseed certification, proposed to be issued by the government under a project covenant (para. 2.20) willensure that seed production will be open for any seed farm that is able to meet necessary legal, financialand technical standards developed by the MAWR's Seed Unit in agreement with IDA.

4.19 Links wit/l RADCs. While the commercial seed sub-component would be coordinated by theMAWR's Seed Unit (with PIU support), close contacts would be maintained at the regional level withrelevant RADCs (para. 3.19).

(iv) Crop Protection and Plant Quarantine

4.20 The two sub-components, plant quarantine and crop protection, would be implemented by theconcerned regulatory bodies under MAWR, namely the State Inspectorate for Plant Quarantine (SIPQ)and Agency for Chemical Supply and Plant Protection (ACSPP). The MAWR will bring the twoagencies, SIPQ and ACSPP, under the administrative control of a Deputy Minister for Crops to ensurenecessary technical coordination. The effectiveness of the present administrative set-up for the twoservices will be re-assessed during the mid-term review of the project.

(v) Agricultural Market Information

4.21 MAWR will be the primary organization responsible for the establishment and conduct of MISin collaboration with the State Department of Anti-Monopoly Policy (SDAP); the National StatisticalCommittee (NSC); Kyrgyz Standard (KS); and Kyrgyz Agrotech project (KATP), all operating at thenational and regional levels, and the six participating oblasts.


4.22 The MIS's national unit at Bishkek is currently located in MAWR. The national unit wouldoperate under the direction of a National Management Committee (NMC) which will comprise of seniorstaff from MAWR, NSC, SDAP, KS, and RADS. During negotiations, an agreement was reached thatthe Government will maintain NMC until the completion of the project with composition and terms ofreference acceptable to IDA. MAWR is currently reviewing its organizational structure to introducenecessary changes to make itself more client-responsive. MAWR would inform IDA of any changes inMIS national unit's internal organization. For information collection, processing and dissemination, theMIS will have regional offices established in each of the six oblasts (two of which have already beenestablished for the pilot project). To coordinate activities in the regions, Regional MIS ManagementCommittees will be established comprising of oblast representatives (Agriculture Department of theAkimiat) and oblast level SDAP, KS, and ATAS (and its successor organizations, RADCs).

4.23 As a condition of negotiations, the government issued a resolution (No. 76 dated February 13,1998) approving the establishment of the agricultural Market Information System (MIS). Thegovernment also established a NMC for MIS and required the agencies involved in the MISimplementation to sign a cooperation agreement outlining their mutual responsibilities.

B. PROCUREMENT ARRANGEMENTS

4.24 Procurement Responsibilities. The PIU would be responsible for carrying out all procurementactions under the project. The PIU would include a procurement specialist, with responsibilities that willinclude: (i) training of PIU and regional staff on Bank Group procurement and disbursement procedures;(ii) developing monitoring procedures for procurement and disbursement; (iii) ensuring propernotification of bidding opportunities; (iv) preparing specific bid documents based on the current BankGroup Standard Bidding Documents for goods and works; (v) preparing requests for proposals (RFPs)and terms of reference for consultants; and (vi) assisting PIU in contract administration. In addition, IDAwould monitor procurement activities, contract administration, and project record keeping duringsupervision missions and assist the Government (through PIU) to organize training for the nationalcontractors in competitive bidding.

4.25 Procurement Procedures. The General Procurement Notice for the Project and a SpecialProcurement Notice for international recruitment of a Project Implementation Adviser for the PIU werepublished in the Development Business issue of February 15, 1998. Procurement of goods and workswould follow the "Guidelines: Procurement under IBRD Loans and IDA Credits, January 1995 as revisedin January and August 1996 and September 1997 (the Guidelines)". Recruitment of consultants wouldfollow the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers, publishedby the World Bank in January 1997 and revised in September 1997 (the Consultant Guidelines)". TheBorrower will use the Bank's standard bidding documents for goods and works, including the Bank'sRegional standardized NCB documents for works issued in 1995. For consulting assignments, theBorrower will use the Bank's standard form of contract. A Procurement Workshop will be held inBishkek immediately after the project effectiveness, tentatively scheduled for June 1998.

4.26 Procurement Arrangements. Tables 4.2 and 4.3 summarize the procurement methods and priorand post-review procedures proposed under the project. Annex C, Table I provides a summary of thefive-year procurement plan which was reviewed and agreed upon during negotiations. Details of theproposed arrangements are as follows:

* Civil Works: The project consists of components which require construction andrehabilitation works mainly for office and laboratory buildings. Minor Works (MWs)


estimated to cost less thani US$100,000 per contract, and up to an aggregate amount of aboutUS$300,000 may be procured under lump sum, fixed price contracts awarded on1 the basis ofquotations from three qualified domestic contractors in response to a written invitation. Thenumber of contracts under this category would be about 12. However, any work estimated tocost above US$100,000 and below US$200,000 up to an aggregate amount of US$400,000will be procured through NCB usilng Europe and Central Asia (ECA) Region's StandardBidding Documents. The NCB contracts are expected to number about three. All contractsestimated to cost above US$200,000 shall be procured through ICB in which case, the localcontractors will be eligible for preference in accordance with Bank procurement guidelines.

* Goods: Goods including laboratory and field equipment, office equipment, and vehicles,collated in different packages and estimated to cost more than US$200,000 up to anaggregate amount of US$6.6 million, would be procured using Internationial CompetitiveBidding (ICB) procedures. The number of ICB subpackages would be in the range of 37 andwould be consolidated into about 21 packages. The procurement of land certificates,estimated to cost about US$0.8 million, usinlg ICB procedures, will be througlh a multi-yearsingle contract with a provision for price adjustment. For ICB contracts, localmanufacturers, eligible for domestic preference in accordance with Bank ProcurementGuidelines, would be granted a domestic preference in bid evaluation equivalent to 15percent of the CIF price, or the amount of the custom duties and other import taxes,whichever is lower. Contracts for the supply of goods and equipment, estimated to cost lessthan US$200,000 up to an aggregate amount of US$2.2 million would be procured throughInternational Shopping (IS) on the basis of quotations to be obtained from a minimum ofthree suppliers from at least two eligible countries. The number of IS subpackages would beabout 55 which could be consolidated into an appropriate number of larger packages forpurposes of achieving necessary efficiency in procurement including a potential ICB,especially for vehicles. Contracts for procurement of items costing less than US$50,000would be awarded through national shopping (NS) on thie basis of three quotations obtainedfrom three different eligible suppliers, depending upon the availability of such items in theKyrgyz Republic. The number of NS contracts will be few (about seven) for an aggregateamount not to exceed US$124,000.

* Consultant Services: Prior to the issuance to consultants of any requests for proposals, thegovernment will submit to IDA a Plan for the selection of consultants for its review andapproval. The procurement of consultant services will be undertaken in accordance with theselection plan approved by IDA. Consultant services amounting to US$1.4 million would beprocured on the basis of Quality and Cost-Based Selection (QCBS), with individual contractsgenerally exceeding US$50,000. The number of QCBS contracts will be about 12.Contracts related to services for PIU, seed development and crop protection, estimated tocost not less than US$25,000 may be procured using Least Cost selection procedures,involving about six contracts for a total amount of US$133,000. During the projectimplementation, there will be some contracts, not exceeding US$25,000 per contract(totaling about US$151,000), which will be entered into with individual consultants selectedfrom short-listed candidates acceptable to the IDA to carry out specific tasks such as thepreparation of training materials, case studies, legal support, and translation services. A partof the consulting services for agricultural market information system and research servicesestimated to cost approximately about US$59,000 (about five contracts) will be contractedfollowing the single source selection procedures. Suchi contracts will be generally foramounts less than US$25,000 each.


* Training. The cost of IDA training is estimated at about US$ 410,000. The trainingprogram and criteria for selection of trainers and trainees under IDA/IFAD-assistedprograms would be agreed with the two institutions. Training financed by bilateral grantswill be procured following donor procedures.

* FDFSubloans. The beneficiaries of individual or group subloans issued by KAFC from theIFAD-funded Farm Development Fund (FDF) which are expected to range between US$100to US$2,000 will use subloan funds for purchase of farm inputs, small equipment, spareparts, livestock breeding stock and agricultural produce. They will carry out theprocurement using local commercial practices. KAFC being an implementing agency for theIDA-assisted Rural Finance Project is familiar with the Bank Group's procurementprocedures.

* Incremental operating expenses will include: (a) salaries of project staff over a period offive years (about US$3 million) to be recruited following competitive procedures includingadvertisements, interviews, etc; and (b) expenditures on maintenance of vehicles, rent, officeconsumables, expenses for field visits, etc (US$6 million), which would be procuredfollowing public procurement practices.

4.27 IDA Review: All ICB and NCB contracts would be subject to prior IDA review, as well as thefirst three contracts for minor works, one each from three different oblasts; and the first two contractseach for procurement of goods using international shopping (IS) and national shopping (NS) procedures.

4.28 With respect to Consultant Services, prior IDA review would be required for all terms ofreference, irrespective of the contract value. Contracts estimated to cost more than US$25,000 would besubject to IDA's prior review (the IDA would review the Request for Proposals, the terms of referenceand short-lists). For each contract estimated to cost US$50,000 or more, after the technical proposal hasbeen evaluated, the technical evaluation report would be submitted to the IDA for its review prior to theopening of the priced proposals. For contracts estimated to cost between US$25,000 and US$50,000, theIDA would be notified of the results of the technical evaluation prior to the opening of the financialproposals. For contracts with individual consultants costing US$25,000 or more, the qualifications,experience, terms of reference and terms of employment shall be furnished to IDA for its review andapproval. All other contracts would be subject to ex-post review by IDA on a random basis.

4.29 An Agreement was reached during negotiations that all procurement actions under the projectwouldfollow the procedures outlined above.

4.30 A Country Procurement Assessment Report (CPAR) is to be scheduled. The PIU would keep arecord of all procurement actions and furnish to IDA quarterly reports thereon, which would includeinformation as to: (a) revisions, if any, in cost estimates for individual contracts and the total project; (b)changes in the timing of procurement actions and completion dates; and (c) compliance with aggregatelimits on specified methods of procurement. As a condition of negotiations, the government hasprepared a procurement plan for the first year of the project.


Table 4.2: Summary of Proposed Procurement Arrangements(US$ million equivalent)

Procurement MethodTotal

Project ICB NCB Other /a NBF Cost

1. Civil Works

1.1 Rehabilitation of Laboratories/ 0.4 0.3 0.1 0.8Office buildings (0.4) (0.3) lb (0.7)

2. Goods

2.1 Equipment 6.6 1.0 0.9 8.5(6.6) (1.0) (7.6)

2.2 Vehicles 1.0 0.8 1.8(1.0) (1.0)

2.3 Issuance of Land Certificates 0.8 0.8(0.8) (0.8)

3. Farm Development (Credit) Fund 1.5 1.5

4. Consultancy Services and Training

4.1 Project Implementation Support 1.7 3.5 5.2 /c(Consultancy services) (1.7) (1.7)

4.2 Capacity Building 0.4 2.1 2.5/d(Training & study tours) (0.4) (0.4)

5. Incremental Operating Cost

5.1 Project Implementation Support /e 1.4 1.6 3.0(0.4) (0.4)

5.2 Operating Expenses /f 3.7 2.3 6.0

(2.3) (2.3)

Total 7.4 0.4 9.5 12.8 30.2Total IDA (7.4) (0.4) (7.2) (15.0)

Figures may slightly differ due to rounding

Note: Figures in parenthesis represents amounts financed by the IDA credit. NBF= Non IDA Financed but includes IFAD and other donors.

a. International Shopping (IS) will be for field equipment, laboratory equipment & vehicles.

National Shopping will be for small procurement packages such as office equipment and vehicles.

b. Some of the civil works contracts are likely to be for less than US$100,000 each, which would be procured as Minor Works.

c. Co-financed by IDA(USS 1.4 million), IFAD (USSI.0 million), the Sheep Development Project (US$0.5 million) and Other Donors (US$1.0 million)d. Co-financed by IDA(US$0.4 million), IFAD (US$1.3 million), Sheep Development Project (US$0.5 million) and Other Donors (USS0.1 million)

e. Represents salaries of non-governmental local staff contracted as per Bank guidelines (para 4.25), would be co-financed by IDA (US$0.4 million)

IFAD (US$0.5 million), the Sheep Development Project (US$0.6 million), Other Donors (US$0.4 million), Beneficiaries (US$0.3 million)and the Government (US$0.6 million).

f. Operating expenses include operations and maintenance of equipment and vehicles, rent, office consumables, expenses for field visits etc.Thes items would be procured following public procurement practices. Items would be co-financed by IDA (US$2.3 million), IFAD (US$1.0 million),the Sheep Development Project (US$0.1 million), other Donors (US$0.4 million), Beneficiaries (US$0.9 million) and the Government (US$1.4 million).

Kyrgyz RepublicAgricultural Support Services ProjectTable 4.3 Procurement Information'

ProcurementofWorks Intemational National Intemational MinorWorks OtherMmethodsCompetitive Competitive ShoppingBidding Bidding (IS) (MW)

(ICB) (NCB) __ _._>z

1. Procurement method thresholds >US$200,000 <US$200,000 <US$100,000 _2. Prior Review All All First Three. _

Procurement of Goods ICB NCB IS NS Other methods1. Procurement method thresholds >US$200,000 >US$50,000 but <US$50,000 Local Commercial practices for i<c

<US$200,000 FDF subloans.2. Prior Review All First two First twoM

Procurement of Consultant Services Quality Based Quality and Cost Fixed Least Cost Sole IndividualSelection Based Selection Budget Source _

1. Procurement method thresholds >US$50,000 - >US$25,000 US$59,0002 <US$25,000<US$50,000 _

2. Prior Review All - All All All TORs3. Ex-post Review All

1. PIU to recruit qualified procurement staff with prior experience m World Bank procurement procedures. PIU will have primary responsibility for overseeing implementationof procurement procedures.2. Country Procurement Assessment Report or Country Procurement Strategy Paper status: 3. Are the bidding documents for the procurement actions of the first yearTo Be Scheduled. ready by negotiations? Yes in part (mainly for ICB contracts).

.~~~~ ~ ~~~~~ .R .. .w - :

1. Estimated date of Project Launch 2. Estimated date of General 3. Indicate if contracts are 4. Domestic 5. Domestic Preference forWorkshop: Procurement Notice publication: Prior subject to mandatory SPN in Preference for Consultant Services:

to negotiations (February 1998). Development Business: Goods/Works:August 1998 No3 Yes

6. Retroactive fmancing: No i7. Advanced Procurement: No

8. Procurement Monitoring System: PMU to report procurement actions in quarterly progress reports.

*~~~~~j*~~~~~~*4~~~~~~ P ~~~~~u ~~~~~$~~~ ........ . .....1. Indicate name of Procurement Staff as part of Project Team: Division: Ext.

Naushad Khan ECSRE 326992. Explain briefly the Expected role of the Field Office m Procurement:

XSubject to the provisions of the Development Credit Agreement.

2 Represents estimated aggegate amount of Single Source Contracts (5).

It is planned to publish SPNs for ICB contracts in the Development Business, although this is not mandatory.


C. DISBURSEMENTS

4.31 The proceeds of the proposed IDA Credit and IFAD Loan would be disbursed over a five yearperiod, expected to start about July 1, 1998. The IDA Credit's estimated disbursement schedule and theaverage disbursement profile for similar projects, are presented in Annex C , Table 3 and 4.

4.32 Funds would be disbursed through two Special Accounts, one for IDA funds and the other forIFAD funds, which would be opened in a bank acceptable to IDA and IFAD respectively. The depositorybank holding the special accounts would satisfy the following criteria: (i) execute both foreign exchangeand local currency transactions; (ii) open letters of credit; (iii) handle a large number of transactionspromptly; (iv) issue prompt and detailed monthly bank account statements; and (v) have therecommendation of the MOFE and the National Bank of Kyrgyz Republic (NBK) to perform as adepository bank.

4.33 To facilitate disbursements against eligible expenditures, the government would establish in acommercial bank a Special Account (SA) to be operated by the PIU under terms and conditions satisfactoryto IDA. The IDA would, upon request, make an Autlhorized Allocation of US$1 million. Initially, theallocation would be limited to US$500,000 until disbursements had reached SDR 5 million at which timethe full Authorized Allocation could be claimed. Applications for the replenishment of the Special Accountwould be submitted monthly or when 20 percent of the initial deposit has been utilized, whichever occursearlier. The replenishment application would be supported by necessary documentation, including theSpecial Account bank statement and a reconciliation of the bank statement. The SA would be auditedannlually by an independent auditor acceptable to IDA. The authorized amount for the IFAD SpecialAccount would be US$500,000.

4.34 Disbursements would be fully documented except that Statements of Expenses (SOEs) would beused for: (i) contracts for civil works and goods valued at less than US$200,000; (ii) contracts forconsultant firms valued at less than US$50,000; (iii) contracts with individual consultants valued at lessthan US$25,000; (iv) operating costs; and (v) individual training activities up to US$5,000 and less. Thedocumentation for justification of withdrawals made under SOEs will be retained by PIU, will be reviewedby IDA/IFAD supervision missions, and will be audited annualily by independent auditors acceptable toIDA/IFAD.

4.35 Disbursements would be made by IDA against the cost of the following components: Land andAgrarian Reform (Farm Restructuring Support); Seed Development; Crop Protection and Plant Quarantine;Agricultural Market Information; and Project Implementation Unit, rmaking a total of US$14.98 millionincluding operational costs, at US$2.0 million (Annex B, Table 2).

4.36 IFAD would finance the project's RADS component (US$7.9 million), besides the use of itsalready approved loan for a similar component (livestock advisory services) under the Sheep DevelopmentProject (US$1.8 million). IFAD's contribution would finance: civil works (rehabilitation of buildings);goods (laboratory equipment, field equipment, vehicles, office equipment), government's equitycontribution to KAFC, technical assistance (consultant services) for pilot activities in micro-credit, andoperating costs. Percentages of IFAD disbursement for all categories of costs would be the same as for IDAexcept that IFAD will fund 100 percent of the government's contribution to KAFC's equity. Bilateraldonors would finance about US$2.2 million and beneficiaries, about US$1.2 million.

4.37 Disbursements under the IDA credit would be fully disbursed within about five years and wouldcover approximately 49.7 percent of the project costs as follows:


* 100 percent of foreign expenditure and 90 percent of the local expenditures against the cost ofcivil works mainly for rehabilitation of buildings, laboratories, storages, and quarantine andseed certification facilities;

* 100 percent of foreign expenditures, 100 percent of local expenditures (ex-factory costs), and80 percent of local expenditures for the other items procured locally, for goods includingvehicles and office equipment; laboratory equipment; and field equipment;

* 100 percent of the cost of consulting services;

* 100 percent of the cost of training; and

* Expenditures for operating costs (including office supplies; utilities; salaries, and vehicle andequipment maintenance). IDA credit would finance about 60 percent of the total incrementaloperating costs, at about US$2.4 million, with annual rate of disbursement declining from 100percent until June 30, 1999; 85 percent until June 30, 2000; 65 percent until June 30, 2001; 45percent until June 30, 2002; and 20 percent thereafter.

D. ACCOUNTS AND AUDIT

4.38 The PIU will receive technical assistance under the project to hire a financial specialist and anaccountant (national consultants) and necessary support staff with qualifications and experience acceptableto IDA (para. 4.2). The financial specialist and the accountant would be responsible for introducing andimplementing a financial management system including accounting, audit, and reporting to ensure thataccurate and timely information with respect to project resources and expenditures becomes regularlyavailable. The financial management arrangements would include: accounting based on chart of accountsto classify expenditures and sources of funds by project components/activities, following appropriateaccounting standards and reporting formats; recording of monitorable physical and other indicators forcomparison of related costs; procurement contract management; and internal controls.

4.39 The MAWR has gained experience in establishing a financial management system under the on-going IDA-assisted Sheep Development Project, which is now operational. As a condition of negotiations,the government revisited SDP's financial management system and submittedfor IDA staff review, a draftmanual on Financial Management and Accounting for the proposed project. During negotiations, thegovemment agreed to revise this Manual to simplify accounting processes and address issues such as thedefinition of staff responsibilities and documentation flow; the scope of financial statements and financialmanagement reports; treatment of currencies used; and treatment of interest income on bank accounts. TheGovernment confirmed that the revision of the Manual will be completed by about May 31, 1998. Atnegotiations, the government agreed to maintain for the project, a financial management system includingrecords and accounts, and prepare financial statements in a format acceptable to IDA, adequate to reflectthe operations, resources and expenditures related to the carrying out of the project, and consistent withInternational Accounting Standards.

4.40 Annual accounts for the project, including SOEs and Special Account (SA) for each fiscal year,would be audited in accordance with International Standards oni Auditing by an independent auditor,acceptable to IDA, who will be appointed as a condition of effectiveness of IDA Credit. Implementingagencies under contract with PIU would provide annual financial statements for the component under theirmanagement, which would also be included in such audit.


4.41 The auditor would be appointed by the PIU and the implementing agencies close to the beginningof the fiscal year, so that the auditor may commence review sufficiently early in the financial year tocomplete the audit on a timely basis. Termns of Reference for the auditor would follow Bank Groupguidelines on Financial Reporting and Auditing. Generally, the auditor will be appointed for an indefiniteterm of office, subject to annual confirmation by the PIU. The audit cost will be financed by the project.

E. SUPERVISION AND MONITORING

4.42 The PIU would have the responsibility for monitoring and concurrent evaluation of projectactivities, in consultation with IDA/IFAD. The main indicators are shown in Annex A. These indicatorswere agreed with the Government during negotiations, with the understanding that more detailed indicatorswould be established by the PIU on the basis of annual work plans for individual components. Theindicators for the PYI will be established prior to the project launch workshop, by about May 31, 1998.IDA would generally carry out two supervision missions a year, following a start-up mission and workshopin June 1998. Time inputs and specialist needs have been defined in Annex C, Table 5. The project's mid-term review whiclh would be carried out by the Government, IDA and IFAD by about December 2000, onterms of reference acceptable to IDA/IFAD, will assess the progress achieved in carrying out of the projectduring the period preceding, and set out measures to ensure efficient carrying out of the project during theperiod following the review. This was agreed to at negotiations.

F. COORDINATION WITH OTHER PROJECTS

4.43 Project activities would be coordinated with those of the on-going Rural Finance Project (RFP)and, the proposed Irrigation Rehabilitation Project (IRP) whichi is being processed for IDA assistance,concurrently with ASSP. RADCs would provide assistance to farms in the preparation of business plansand credit applications to KAFC and other financial institutionis. Where noni-restructured farms seekcredit on the conditioni that they would restructure their operation, RCLAR/CLARs would provide themwith necessary technical assistance. RADCs will assist farmers benefiting from the irrigation project informinig water users' associations.

CHAPTER 5: BENEFITS AND RISKS

A. BENEFITS

5.1 Consistency witlh Country Assistance Strategy. The project objectives and activities areconsistent with the priorities for agricultural growth as outlined in the May 1998 Country AssistanceStrategy (CAS) and with the recommendations of the Bank Group's Agriculture Sector Review. TheCAS focuses on eliminating remaining policy and regulatory impediments to growth throughconsolidation of structural reforms and poverty alleviation through the provision of public goods inagriculture to increase productivity and incomes of the rural poor. Accordingly, the project sets out toestablish services that private farmers would demand for developing commercially viable andenvironmentally sustainable production systems, in a competitive market environment. This will bedone through a judicious combination of public, private and voluntary sector initiatives. The project'semphasis is on the creation of an enabling environment for private and voluntary actions, rather than onthe direct provision of services by the public sector. The project would help generate location-specific,environmentally friendly, approaches to agricultural development based on farmer involvement.

5.2 Benefits. Quantifying incremental benefits from a single or a range of the proposed projectactivities which are largely of an institutional development nature is complex both on theoretical andpractical considerations, more so because numerous non-service factors would influence decision-making at the farm level. The Bank Group's experience with several land reform and extension projectshas demonstrated that the outcome of the services provided depends on how effectively the basicrequirements are met: that is on: (a) whether relevant technology is made available for targeted farmingsystems; and (b) how efficiently farm inputs and credits are supplied. On this basis, potential benefits ofthe proposed project are expected to be derived mainly from the combined impact of the following threeprojects that would be assisted by the Bank Group and other donors, the implementation of which wouldbroadly coincide.

* Proposed Agricultural Support Services Project (ASSP) would provide support for farmrestructuring; advisory services backed by field trials and demonstrations in conjunction withadaptive research; and micro-credit targeted at the poor; seed industry development; cropprotection and plant quarantine; and market information;

* The on-going Rural Finance Project would provide private farms financial means (credit) toadopt improved technologies and purchase necessary inputs supplemented by ASSP to serveclients not covered by this project; and

* The proposed Irrigation Rehabilitation Project, due to commence in June 1998, would arrestthe deterioration of irrigation systems, and maintain water availability for more productivecropping systems.

5.3 Specifically, the benefits from ASSP components would be as follows:

(a) The support for Land and Agrarian Reform would help ensure a more equitabledistribution of land and property shares; accelerate the pace of farm restructuring; andexpand private (as against collective) management of farms which has generally proven tobe more productive in Kyrgyz Republic, as elsewhere in the former Soviet Union. Implicitin land reform and farm restructuring is greater freedom for new entrepreneurs to make

CHAPTER 5: BENEFITS AND RISKS 46

economically efficient choices in an increasingly competitive markets thereby bringingabout substantial financial and economic benefits.

(b) The Rural Advisory and Development Services component would provide technologyand business advice to farms to improve productivity and long-term sustainability of theirfarming systems.

(c) The Seed Industry Development component would improve availability of clean, qualityseed which is one prerequisite for raising crop yields (e.g. 0.5 tons for grains). Therestoration of the variety development capacity would bring in additional long term benefits.Existing varieties are old, limited in number, and not always adapted to specific conditions ofdifferent agro-ecological zones. The introduction of regulatory services will lead to improvedseed quality and varietal purity. Furthermore, due to technological improvements, theproduction cost of seeds would decrease, and average seeding rates would decrease by about20 percent, with better seed quality.

(d) The Crop Protection and Plant Quarantine component would establish soundlegislative bases and effective organizations and procedures for Plant Protection and PlantQuarantine services, and assist in controlling plant pests and diseases, improve farmproductivity, and reduce risks to human health and environment.

(e) The Agricultural Market Information System would improve access of farmers tochanging markets; better signal opportunities for commercially profitable agriculture;improve producer incentives and bargaining position; and stimulate competition amongtraders thereby potentially increasing farm gate prices; helping producers to diversifyproduction; and exploit competitive advantages.

B. FINANCIAL AND ECONOMIC ANALYSIS

5.4 Crop Models. Prior to reform, agriculture used to be collectively managed with average arableland units of 3-4000 ha and several thousands of people living on them. These enterprises are nowbreaking down into smaller farms, transformed into other types of organizations mostly managed byindividual or groups of farm families. In order to assess the project's potential impact at the farm level,crop models have been prepared with reference to two main types of farms targeted by the project:individual farms and peasant farms (or associations) based on a 1994-96 survey of 24 farms which wasupdated in 1997. The survey was carried out by EU TACIS, in two major representative regions of Chuiand Osh. These models broadly represent the national average performance of farms to compare cropperformances "without project" and "with project". The "without project" crop yields are based on1994-1996 national averages (updated in 1997) which had declined relative to the averages for 1989-91,in the wake of the transition to market economy, and farmers' lack of access to credit and inputs (AnnexD, Tables I and 2). The "with project" situation, on the other hand, combines the effect of improvedtechnologies including the use of quality seeds, fertilizers, and improved irrigation. It also makes anassumption that the three projects (ASSP, Rural Finance and Irrigation Rehabilitationi) would togethercontribute to increasing yield levels, at least up to the averages of 1989-1991 (Table 5.1).


Table 5.1: Summary of Yields and Gross Margins of Major CropsWith Existing and Improved Technology

Crop Yield Increase (tons/ha) Gross Margin (Som / ha)

Existing Improved % of increase Existing Improved % ofTechnology (*) Technology (**) Technology Technology increase

Wheat 1.9 2.7 42% 1,552 2,422 56%Barley 1.5 2.2 47% 1,143 1,808 58%Maize 3.8 6.3 66% 2,750 4,210 53%Sugar-beet 12.4 16.5 33% 3,791 5,845 54%Lucerne 6.0 9.0 50% 2,090 3,100 48%Cotton 2.2 2.6 20% 3,673 4,896 33%

(*) 1994-1996 national average. (**) 1989 - 1991 national average.

5.5 Farm Models. The following illustrative farm models (financial) derived from a rapid surveyundertaken in two oblasts for the purpose of this project, indicate the potential impact on individualfarms and peasant farms (or associations).

Table 5.2: Farm Models - Area, Returns and Credit

Farm model 1 Farm model 2 Farm model 3 Farm model AverageFarm Size: 10 ha Farm Size: 47 ha Farm Size 6 ha 4

Farm Size 20l ~~~~~~~~~~~~~~~~~~~~~~ha

Individual Farm in Peasant Farm in Individual Farm PeasantKara-Balta Kara-Balta in Osh Farm in Osh

No of HHs 1 5 1 5No of people 6 30 6 30Cropping Pattern (ha) Wheat: 4 Wheat: 20 Wheat: 2 Wheat: 8

Barley: 2 Barley: 16 Cotton: 2 Cotton: 6Maize: I Maize: 2 Maize: I Maize: 4Sugarbeet: I Sugarbeet: 3 Lucerne: I Lucerne: 2Lucerne: 2 Lucerne: 6

| Total: 10 Total: 47 Total: 6 Total: 20Net income Som per HH:

w/oproject 17,215 13,868 14,091 11,409 14,146with project 27,559 22,505 20,745 16,947 21,939incremental 10,344 8,637 6,655 5,538 7,793% increase 57% 62% 47% 49% 55%

Net income Som per ha:w/o project 1,721 1,475 2,348 2,282 1.956with project 2,756 2,394 3,458 3,389 2,999incremental 1,034 919 1,109 1,108 1,043% increase 60% 62% 47% 49% 53%

Working Capital (Creditrequirements) in Som:Per HHI 5,422 5,025 7,058 4,680 5,546Perha 542 535 1,176 1,170 856

(1) Assuming half of the private households in individual units, half in peasant farms.

5.6 Households adopting improved technologies and seeds promoted by the project and havingaccess to appropriate credit and water supply could increase their gross margins by an average of 55


percent to about Som 22,000 (US$1,250) and net income by an average of Som 3,000 (US$180) or 63percent to about Som 8,879 (US$508). The average incremenital income per ha would be about Som1,043 (or about US$60). This shows that under proper conditions, agriculture in Kyrgyz Republic wouldbe profitable. The implementation of these improved techniques would require incremental workingcapital averaging about Som 5,550 (US$317) per HH and Som 856 (US$49) per hectare. While asubstantial part of the working capital requirement may have to be financed by households from ownsavings and credit provided by input dealers and marketing agents, IDA-assisted Rural Finance Projectand the IFAD-assisted small farmer credit window (FDF) will indeed have a critical role in terms ofdelivering credit to farms working with RADCs. Proposed technologies would mainly consist of moreefficient use of inputs, including improved seeds, fertilizers, and mechanization. These activities wouldrequire some additional family labor but given the prevailing unemployment and underemployment inthe rural sector, labor availability is not foreseen to be a constraint. The FRR and ERR would be asfollows:

Table 5.3 Household Models

Rate of Return Model I Model 2 Model 3 Model 4 Average

FRR 25% 21% 14% 10% 17%

ERR 23% 15% 24% 14% 23%

5.7 Potential for Yield Increases. The scientific community in Kyrgyz Republic and outside believethat in an environment of optimal availability of farm inputs and access to markets, the potential yieldsof crops included in the farm models could be higher than those assumed for purposes of financial andeconomic analysis, as follows: Wheat: 3.3 tons/ha; Barley: 2.7 tons/ha; Maize: 10 tons/ha; sugarbeet: 30tons/ha; lucerne: 12 tons/ha and cotton: 3.5 tons/ha. With these yields, the financial and economic ratesof returns would be significantly higher (>40 percent).

5.8 Potential Changes in Cropping Patterns. Farm models presented above assume a croppingpattern comprising of predominantly low value crops. There will be mostly one crop per year thoughsome farmers might take vegetables as a second crop on a small area. However, the share of the secondcrop in the total cropping pattern is expected to be very small. Taking a conservative approach tofinancial and economic analysis, the farm models, therefore, assume neither any increase in the croppingintensity nor any fallow lands. Potentially, however, in response to higher prices and improvedmarketing, the cropping pattern may undergo structural changes relative to the base case. Such changeswould inevitably lead to increases in household/per ha incomes, and in the financial and economicreturns to the project. To illustrate the impact of a potential change in the cropping pattern on theproject's economic performance, a sensitivity analysis was undertaken assuming that the proportion ofrelatively high value crops such as maize, sugarbeet and cotton could go up by about 20 percent at theexpense of wheat and barley. The ERR in this environment, assuming other variables remain constant,could be as high as high as 33 percent relative to 21 percent under the base case (para. 5.12).

5.9 Super Elite and Elite Seed Farms. Government project finance to NPOZ/Djal farm forproduction of super-elite and elite seed in cereals (wheat and maize) and FPRI forage farms (Alfalfa andSainfoin) will be based on detailed techno-economic feasibility studies (paras. 3.16 and 3.18).Preliminary analysis of the these investments indicate financial rates of return ranging between 24


percent and 36 percent with economic rates of return ranging between 22 percent and 32 percent. At aninterest rate of about 12 percent (in real terms on project finance expressed in US$), the maturity periodwill be about seven years for machinery and equipment finance, and two-three years for working capitalfinance.

5.10 Economic Rate of Return (ERR). A cost/benefit analysis has been undertaken by usingeconomic values, and aggregating farm models and project costs at the national level. Economic priceshave been calculated for major tradable products using prices and price projections available inNovember 1997 issue of the Bank's Business Quarterly (Annex D, Table 9). A conversion factor of 1has been used for project costs as no distortions appear to affect the prices of items procured under theproject.

5.11 Economic values are higher by 18 percent to about 50 percent compared with the financialprices. When introduced in crop budgets, the economic prices show positive results indicating that majorcrops supported by the project are economically justified. While aggregating costs and benefits at projectlevel, two critical assumptions have been used:

Attribution of Benefits Among Projects. In order to avoid double-counting of the benefits due toASSP and the two other projects (Rural Finance and Irrigation Rehabilitation), approximately 40 percent ofthe previously mentioned benefits are attributed to the proposed project (ASSP); 40 percent to the RuralFinance Project; and 20 percent to the Irrigation Rehabilitation Project, based on a broad empiricalassessment of the contributions expected to be made by various inputs to total productivity improvement onparticipating farms. The irrigation project will be contributing about 10 percent increase in yields (accountingfor about 20 percent of the incremental benefit) as a result of improved water supply. The rest of theincremental benefit is estimated to result equally from the improved incentive framework and servicesprovided by ASSP and increased credit facilities to farmers provided by the Rural Finance Project.

0 Teclnology Adoption Rate. It is estimated that there will be approximately 143,000 privatefarmers when farm restructuring is completed. A recent survey to assess the impact of the experience ofTACIS households (ABC and ATAS) shows that "farmer coverage" rates are between 47 percent and 70percent. This means that about 67,200 households could be served by the project. Among these, only aproportion would adopt recommended technologies and/or improved seeds released by the project. Theadoption rate has been estimated at 50 percent so that the number of participating small-holders(households) would be about 33,600 or about 24 percent of the total: about 8 percent at the end of year 2(I 1,200 farmers); 16 percent at the end of year 3(16 percent); and 24 percent at the end of year 4 (33,600).

5.12 Economic Rate of Return (ERR). The ERR for the project as a whole is estimated at 20percent, corresponding to a Net Present Value of US$9.93 million(with a 12 percent discount rate),which is satisfactory given that the project's main emphasis is on the provision of services to farmers,including as many as 50 percent small holders. A sensitivity analysis has been undertaken using thefollowing approaches: (i) farmer coverage rate of advisory services, and adoption rates for proposedtechnologies could be lower; (ii) farm benefits from project activities could be lower; and (iii) the cost ofproject activities could be higher than expected. The results are as follows:


Table 5.4: Sensitivity Analysis

Sensitivity Factor Base Assumption Switching Value Switching Value in %compared with baseassumption

Participating Rate (Coverage rate 24% 17% -28%%x adoption rate)Farm Benefits attributed to the US$ 187 per household US$ 131 per household - 27%%project I_ ITotal Economic Project Costs US$ 26.3 million US$ 37.3 million + 42%

Table 5.5 Sensitivity Analysis: Changes in Project Cost and Benefits (Economic)

Benefits/Costs ERR Cost+ 10% Cost+20%

Base Assumption 20% 18% 15%

Benefits-10% 17% 16% 13%

Benefits -20% 14% 12% 10%

C. PROJECT SUSTAINABILITY

5.13 Sustainability. The project design has benefited from the experience with the on-going donor-assisted pilot projects in rural advisory services and market information, and a comprehensive evaluationof activities currently under way in the spheres of land reform; breeder, super elite and elite seedproduction; crop protection and plant quarantine. The analysis shows that the sustainability of theproject-assisted activities and institutions could be substantially enhanced if their reliance on governmentfunding could be progressively reduced, and private sector participation significantly increased.Accordingly, in the sphere of land and agrarian reform, no new organizations or bodies will be created:the strategy would be to strengthen the ability of existing government institutions and farmer groups tocarry out grassroots level activities more efficiently.

5.14 The rural advisory and development services (RADS) component would use a participatoryapproach ensuring that farmers gradually become responsible for managing and financing the servicesthey need. To facilitate this process, RADCs would function under autonomous, decentralized,management structures with participation of local farmers. The long-term sustainability of the advisoryservices would depend upon RADCs ensuring high professional standards, and assisting farmers toaccess credit from formal and informal sources. The sustainability of the seed component will be assuredby involving critical stakeholders in both public and private sectors in the initial development of thesector with emphasis on progressively increasing the role of the private sector in seed breeding andprimary seed multiplication leaving commercial seed production increasingly to the private sector.Under a similar approach, crop protection and plant quarantine activities would be sustainable by RADCtraining farmers and traders in safe handling and utilization of pesticides.

CHAPTER 5: BENEFITSAND RISKS 51

5.15 Cost Recovery. Durinig the five-year project implemip enitation period, the finanicinig of theincremenital operating expenses of the project would be progressively borne by the govermenit and/orthe project beneficiaries. At full development (PY6), anilual incremental operating costs would reachabout US$1.53 millioni, of whiich 70 percent would be finaniced by the Governmeit (US$1.08 million)and the remaininig by beneficiaries. Table 5.6 below compares the cost per beneficiary with the expectedanlilual incremenital increases at farm level as a result of the project intervelitiolns.

5.16 Cost Recovery Mechanisnms: These would vary by type of activity:

* In the case of land and agrarian reforn componenit, the cost recovery would come mainlyfrom fees thiat would be charged by the govermenlt on future land titling and registrationactivities whicil would be facilitated by the project. Additionally, the impact on the(lovernment budget of this componenit would progressively reduce as farner groups aretrained to carry out on their own, farm restructuring activities precedent to issue of landcertificates.

* As for the rural advisory and development services (RADS), it is envisaged that beneficiarieswill begin to pay for the services provided by the RADCs, even if in small amounts, rightfrom the start, mainly for concrete products such as the preparation of business plans,preparation of creditapplications, advisory visits Table 5.6: Incremental Income and Advisory Serviceto farms, soil analysis and Costs per Average Household (HH): 7 Hafertilizer recommendatiolis. Som inUS$During the project period, Annual total IncoTe per average [IH (7 ha) using 21.939 1253RADCs are expected to new technology (with proaject)

collect from the beneficiary Annual incremental income per average 1-11{ wvith 7.793 445

houselholds, a total amount projectof about US$700,000, Annual operating cost of proposed advisory 370 22

equivalent to about 5 percent services per average HH adopting newof the total project cost. The technology

Annual nct income per ha (with project) 2.999 171rest of the operational cost Annual incremental income per ha (witlh project) 1(043 60

will be financed by the Annual operating cost of proposed advisory 55 3.14

project. In year 5, the servicesperhabenleficiaries' contribution Annual farming cost per ha with improvedwould amount to about technology for an average HH 5,554 316

US$108,000 or 25 percent of the total salaries paid to RADS staff, and 15 percent of the totaloperational cost of the RADS estimated at about US$750,000 equivalent.

* In Year 6, the number of households expected to hiave beneficial contact with RADS isestimated at about 33,600 (235,000 ha). The cost per average beneficiary houselhold (7 ha)works out to about US$22 or US$3.14 per ha, whicih would be about 0.7 per cent of theaverage househiold's incremenital income of US$445, and less thani I percent of per hafarminig cost withi new techinology, at US$3 16. Dependilng upOIn the size of the farm, the costof RADS would range between US$8 for a small farm of say 2.5 ha to about US$150 for afarn with 50 ha, generally withiin the repaying ability of the beneficiary farms. In practice,hiowever, it may be difficult for RADS to levy differential fees, especially for services liketraining. Mechaniisms must, therefore, be developed to effect cost recovery with reference tospecific products such as the preparation of business plans and credit applications and thesize of farms served. It is expected that RADS, by the end of the project year 5, would be


able to charge fees for all types of services, at least to larger farms, estimated at about 50percent of the total number of expected beneficiary households (33,600), at rates equal to orabove the average cost. This will enable RADS to at least partially cross-subsidize smallholders, especially those below the poverty line.

* If on empirical considerations, RADS must reach the poor (small holders) free of charge orby charging fees at low rates, clearly the government would have to finance part of theRADS costs. However, to reduce this fiscal burden on the government and to better targetthe use of public funds to the poor, apart from piloting beneficiary payments during theimplementation of the project, the RADS would introduce two other sources of financingsmall holders: (a) a voucher system (initially funded by an IFAD loan of US$180,000) insupport of targeting the poor (para. 3.1 1), and (b) KAFC contracting RADS advisors (on feebasis) for supervision of its loans to farmers and farmer groups. Potentially, the RADSshould aim to promote competition in the provision of advisory services to farmers bypaying local level advisors a basic salary, and then allowing them to keep, as an incentive, apercentage of the fees, in which case, local advisors would compete with each other forcustomers (e.g. across rayons/oblasts). The RADS would also explore if it must divest all itsemployees providing advisory services, and let them become independent contractors. Inthis approach, the resulting competition could help lower the cost of advisory services, soalso the burden on the budget. RADS would then evolve itself into an association of agro-business centers rather than a monolithic NGO.

* During the project's mid-term review, the government and the RADS Foundation inconsultation with IDA, will review the effectiveness of various cost recovery mechanismsand develop plans for future financing of the RADS. The project's goal is to ensure thatRADS remains a client-oriented, viable, and efficient (competitive) activity, and takes anaggressive stance on cost recovery, to become a fully self-financinig activity, withgovernment funding limited only to the cost of RADS reaching the most needy groups andareas as may be justified by empirical considerations.

* Seed Component. Cost recovery under the seed component would be based on the sale ofpatent rights and payment of royalties for new varieties. Breeding activities should begin toachieve partial cost recovery after a period of about five years through the release of newvarieties. The seed production farms would recover costs through charging an adequatemargin on the commercialization of Super Elite and Elite Seed, respectively 50 percent and30 percent of their production costs. Cash flow projections of the NPOZ and FPRI farmsdemonstrate their financial sustainability (subject to a systematic effort toward eliminationof prevailing inefficiencies in seed production). Project finance to pilot commerzial seedfarms will be subject to full cost recovery.

* The seed regulatory services are the responsibility of the State. Annual expenses have beenestimated at US$74,000 for seed certification laboratories, US$115,000 for official varietytesting laboratories and US$23,400 for the Seed Unit. A full cost recovery is envisaged inoperating the seed certification laboratories which would charge the full cost of tests to seedgrowers at the current rate of about Som 80 per sample. The variety testing laboratorieswould recover initially 50 percent of their operating expenses by charging a realistic(market-based) fee of US$100 per variety to be tested, but the fee rate could be potentiallyincreased commensurate with the increases in farm profitability.


* The cost of regulatory services for crop protection and plant quarantine will be borne by thegovernment; however, the stations and laboratories to be developed under the project wouldcharge fees to gradually recover their operational costs over a period of five years.

* Agricultural market information system, at full development, would be partiallycommercialized by producing customized reports which would be sold to producers andtraders.

(iii) ][mpact on Government Budget

5.17 During 1997, the total budget allocated to the agricultural sector was about Som 286 million(about US$16.3 million) including: Som 60 million for the MAWR and the entities under itsresponsibility; Som 38 million for the Agrarian Academy; Som 38 million from oblast budgets to thelocal administration; and Som 150 million for agricultural credit. The annual incremental operating costsof the proposed services at full development (PY6) have been evaluated in constant terms at US$2million or Som 35 million of which the Government would have to finance about 80 percent, equivalentto US$1.6 million or Som 28 million (which could be reduced through concerted efforts toward costrecovery). This amount represents about 7 percent of the total budget support to agricultural sector.Additionally, during the project period (July 1998-June 2003), the government will bear the incrementalrecurrent cost of the services provided, up to a total of about US$2.1 million (Som 37 million), or 22percent of the total, with the balance funded by the project.

5.18 The government will raise incremental resources for the project mainly by reducing the level ofsubsidies provided to the agricultural sector, and by reallocating the savings to the proposed project,within the threshold set by the recent budget. Under the recently approved IDA-assisted Rural FinanceProject, the Government has agreed to reduce/phase out its budgetary allocations for agricultural creditaccording to the following maximum benchmarks and schedule: (i) 1997: Som 150 million; (ii) 1998:Som 50 million; (iii) 1999: Som 25 million; and (iv) 2000: Nil. These budgetary savings would be madeavailable for other uses, including the proposed project. In order to assist MAWR and MOFE inbudgeting counterpart funds over the next five years, detailed financial requirements per activity and peryear have been reviewed and agreed with the government.

D. POVERTY IMPACT

5.19 The project would target private and restructured farm-holdings in which the majority of the ruralpoor are founcl. The project would strengthen MAWR's institutional capacity to provide technical, andthrough RADS, farm management services to private farms which currently receive hardly any publicsupport. Women provide most of the farm labor in the country. Their role is likely to increase with theemergence of the private family farm-holdings which will be based largely on family labor. The project'sfarm advisory services would cover women as farmers and create potential for direct additionalemployment for them. The project will address poverty by improving household incomes and food security.

E. ENVIRONMENTAL IMPACT

5.20 The project is expected to have a positive impact on the environment and has been given a 'C'rating. The positive impact would be obtained essentially through activities supporting: (a) land andagrarian reform which are expected to lead to long-term investments in soil quality; (b) advisoryservices, ensuring that farmers make more efficient use of seeds, irrigation, fertilizers and cropprotection chemicals; (c) adaptive research which would focus on improving soil and water management


practices; and (d) crop protection and plant quarantine services in conjunction with an IPM approach.Other components, such as seed development, would also have a positive impact directly by reducingweed infestation and contamination with seed-borne diseases, and indirectly through the introduction ofvarieties with higher insect or disease resistance.

5.21 The proposed advisory services including field trials, demonstrationis and related adaptiveresearch programs are specifically directed towards better management of natural resources. The soilmanagement and conservation program would seek to reduce tillage and promote better waterinlfiltration, whiich would limit soil erosion, reduce the need for irrigation, and curtail land preparationcosts. The advisory services for crops whilch in the past tended to receive alarming levels of pesticides(such as vegetables) will raise awareness among farmers of the factors that influence pest developmentand introduce IPM methods for their control. Plant quarantine sub-component would reduce the risk ofintroducing new pests in the country and would put in place a system to regulate and control the supplyof pesticides, as well as their distribution, handling and utilization. This would allow to ban particularlytoxic chemicals, to control adulteration of pesticides (which invariably result in higher levels ofapplication or hazardous self-experimentation of new products), and impose proper labeling. Theseactivities would complement the work of advisory and adaptive research services and result in saferhandling and lower utilization of crop chemicals.

F. PROJECT RISKS AND MITIGATION MEASURES

5.22 The expected benefits can be achieved by participating farms only if the services provided by theproject are combined with appropriate and timely supply of credit to finance additional inputs associatedwith the adoption of new technologies. This risk will be mitigated by the proposed IFAD line of creditfor the Farm Development Fund in KAFC for small holder credit in conjunction with the IDA-assistedRural Finance Project; the ADB-financed Credit Union Project; and the on-going GTZ-supported line ofcredit.

S.23 The availability of budgetary resources to finance part of the incremental operating cost isanother major risk. In order to limit this risk, the levels of these expenses would be kept low and themechanism of cost recovery from beneficiaries would be introduced from the project start, thoughinitially on a modest scale. However, the Government would still have to redirect part of the agriculturebudget currently used for direct transfers to the provision of project-assisted services. During the projectimplementation, cost recovery would be carefully monitored as well as the availability of the governmentcontribution. Any disruption in government financing would be identified early on in order to seekalternative sources of financing.

5.24 In the sphere of land and agrarian reform, there are four main types of risks: political risks; risksof failure of complementary reforms; risk of social dislocation; and climatic risks. A substantialredistribution of land and property faces a political risk as it might undermine the basis of political powerof village and rayon administrations, leading to administrative "hold up" of some aspects of the landreform. This risk will be addressed by making information on far-m restructuring available directly tofarmers and by supporting land share certification scheme which identifies specific parcels, thusweakening local administrations' ability to influence land allotments prejudicially. The complementaryreforms, especially in rural finance, are currently under way. The project's focus on improving theincentive framework for agriculture is expected to reduce the risk of social dislocation. Climatic risksaffecting agricultural performance could potentially preclude farm families from pursuing changes in theprevailing collective management, and establishing individual farms and farmer associations. The on-going social expenditure programs are expected to address this risk.

CHAPTER 5: BENEFITSAND RISKS 55

5.25 Continued intervention by Government seeking to retain a direct role in agricultural productionrather than shifting its mission to that of a service provider, remains a risk. This is particularly so in thecase of the seed component, but could also toucih other components. The low implementation capacityespecially related to services which are new for the country, such as advisory services and MIS, coulddelay project implementation and realization of benefits. The relatively high content of technicalassistance, (about 15 percent of project cost), aimed at local capacity building is designed to mitigatethese risks.

CHAPTER 6: AGREEMENTS REACHED AND RECOMMENDATION

6.1 As conditions of negotiations, the Government completed the following actions:

(i) Issued a formal order to merge livestock advisory services under the Sheep DevelopmentProject (SDP) with ASSP's integrated rural advisory and development services (RADS),and at negotiations, informed IDA and IFAD that this merger would be carried outeffectively, no later than September 30, 1998 (para. 3.9);

(ii) Finalized the Letter of Invitation (LOI) to international firms to submit bids for PIUadvisory assignment, including terms of reference of this assignment (para. 4.2);

(iii) Provided to IDA for review, a position paper on land and agrarian reform, reinforcinggovernment commitment to implement various activities proposed by the project (para.4.4);

(iv) (a) Approved the Charter for the establishment of the Rural Advisory and DevelopmentServices Foundation and registered this Foundation, as a legal entity, with the Ministry ofJustice; (b) issued a framework agreement for the establishment of a small farmer creditprogram (Farm Development Fund in KAFC), duly signed by KAFC, UNDP, and theGovernment; and (c) confirmed that existing legal and administrative arrangementspermit the establishment of: farmer dominated Steering Committees for RADS, andfarmer groups and associations which would be RADCs' target clientele (para. 4. 10);

(v) Established criteria for selection of private pilot commercial seed farms, and terms andconditions of project finance to seed farms (paras. 4.16 and 4.17);

(vi) Issued a government resolution (No. 76 dated February 13, 1998) approving theestablishment of an agricultural Market Information System (MIS); established a NationalManagement Committee (NMC) for MIS; and required agencies involved in the MISimplementation to sign a cooperation agreement outlining their mutual responsibilities(para. 4.23);

(vii) Prepared a Procurement Plan for the first year of the project (para. 4.30); and

(viii) Prepared a draft Manual on Financial Management and Accounting for the project, whichwill be revised by May 31, 1998, taking into consideration IDA's recommendations (para.4.39).

6.2 During negotiations, agreements were reached on the following:

(a) Seed Industry Development:

(i) Government to issue, by December 31, 1998, policy guidelines, satisfactory to IDA, toimplement the compulsory seed certification requirements under the Seed Law (para. 2.20);

(ii) Government to submit, by December 31, 2000, to the Parliament, a draft amendment to theSeed Law, satisfactory to IDA, which would allow MAWR to offer seed certification on avoluntary basis (para. 2.20);

CHAPTER 6: AGREEMENTS REACHED AND RECOMMENDATION 57

(iii) Government to submit, by August 31, 1998, to the Parliament a draft law, satisfactory toIDA, on the protection of plant breeders' rights (para. 2.21);

(iv) Government to ensure that CRI and FPRI submit to IDA, by March 31 of each year (or suchother date agreed with IDA) for its review, their annual seed breeding programs;immediately thereafter, finalize said programs taking into consideration IDA's commentsthereon; and carry out such programs in accordance with their terms (para. 3.15);

(v) Government to ensure that: seed production enterprises, selected according to criteriaacceptable to IDA, submit to IDA for its review, by September 30 of each year, feasibilitystudies with recommendations (including those on cost recovery) for the production of seedto be financed under the Credit; immediately thereafter, finalize said recommendationstaking into consideration IDA's comments thereon; and carry out such recommendations inaccordance with their terms (paras. 3.18, 4.16 and 4.17);

(vi) Government to establish a National Seed Association (NSA) by December 31, 1998 with acharter and by-laws acceptable to IDA (para 3.23);

(b) Crop Protection and Plant Quarantine:,

(i) Government to: (a) submit to the Parliament, by August 31, 1998, a draft law satisfactory toIDA on pesticides and pest control in the context of an IPM approach (para. 3.25); (b) issue,by June 30, 1999, a Manual on Pesticide Management and Application, Crop Protection andPlant Quarantine, acceptable to IDA (para. 3.26); and (c) ensure that RADCs advise farmersand farmer groups on pesticide use only when such use is justified under an IPM approach;submit to IDA, by December 31 of each year, reports on RADCs' compliance with thisobligation; and take into consideration IDA's comments on these reports, including ways toimprove RADCs' compliance with this obligation (para. 3.26);

(ii) Government to submit to IDA, by December 31, 1998, feasibility studies for rehabilitation ofplant quarantine centers in Bishkek and Osh and, immediately thereafter finalize saidfeasibility studies taking into consideration IDA's comments thereon (para. 3.28);

(iii) Government to submit to IDA, for its review, by December 31, 1999, a plan for theconsolidation of the existing rayon-level quarantine laboratories and centers; and,immediately thereafter, finalize said plan taking into account IDA's comments thereon; andcarry out such plan in accordance with its terms (para. 3.29);

(c) Project Implementation:

(i) Government to maintain the Project Account during the execution of the project; anddeposit, semi-annually, an amount of Som, acceptable to IDA, into such account toward itsbudgetary contribution for the project (para. 3.37);

(ii) Government to establish by August 31, 1998 and, thereafter, maintain until the completionof the project, with composition and terms of reference acceptable to IDA, the ProjectSteering Committee (PSC), and assign to it the responsibility to provide oversight andcoordination for project implementation and approve annual work plans and budgets; (para.4. 1);

CHAPTER 6: AGREEMENTS REACHED AND RECOMMENDATION 58

(iii) Government to carry out the project through MAWR with participation of SALMLR; CRI,FPRI and selected seed farms; SIPQ and ACSPP; and NMC in respective components (para.4. 1);

(iv) Government to maintain, throughout the execution of the project, the PIU with sufficientnumber of qualified staff, adequate facilities and resources, satisfactory to IDA; exercise itsrights under the PIU Advisory Agreement, in a manner acceptable to IDA, to accomplish thepurposes of the project; and not to abrogate, amend, or waive the PIU Advisory Agreement,without the concurrence of IDA (para. 4.2);

(v) Government to maintain the National Management Committee (NMC) for MIS until thecompletion of the Project, with composition and terms of reference acceptable to IDA (para.4.22);

(vi) Government to establish and maintain policies and procedures for monitoring andevaluation of project activities on an on-going basis and in accordance with indicatorssatisfactory to IDA; and carry out, by December 2000, a mid-term review of the project onterms of reference acceptable to IDA (para. 4.42);

(d) Financial Management.

(i) Government to maintain a financial management system including records and accounts,and prepare financial statements in a format acceptable to IDA, adequate to reflect theoperations, resources and expenditures related to the carrying out of the project, andconsistent with International Accounting Standards (para. 4.39); and ensue that annualaccounts for the project, including SOEs and Special Account (SA) for each fiscal year, areaudited in accordance with International Standards on Auditing by an independent auditor,acceptable to IDA (para. 4.40);

Conditions of Effectiveness

6.3 It was agreed during negotiations that the following will be the conditions of effectiveness of IDACredit in addition to those in the general conditions:

(i) Government to open a Project Account in a commercial bank and make an initial deposit ofan amount in Som equivalent of US$25, 000 into such account (para. 3. 37);

(ii) Execution of the PIU Advisory Agreement with the PIU Advisor, satisfactory to IDA (para.4.2);

(iii) Government to appoint an independent auditor acceptable to IDA (para. 4.40); and

(iv) Government to fullfill all conditions precedent to the effectiveness of the IFAD Loan otherthan those related to the effectiveness of the IDA Credit.

Recommendation

6.4 I am satisfied that the proposed Credit would comply with the Articles of Agreement of theAssociation and reconmmend that the Executive Directors approve it.

Annex A


Project Design Summary

.. . .. *...*..*..*.........*.... .. . .. ~ o V lftt ~ t * oi. ( M.............t~ o

CAS-related goal:

Facilitate agricultural recovery to Measurable improvement in economic National statistics on: overall economic Continued macro-economic stability;increase the sector's contribution to growth; agricultural productivity, growth; agricultural growth; agriculturaloverall economic growth; increase rural profitability and sustainability; increases GDP per capita; agricultural production Political support for: processes of landincomes; and alleviate rural poverty. in rural incomes; reduction in poverty and productivity (annual); agricultural reform; farm restructuring; farmer access

and related social expenditures. incomes, by farm size and per capita; to support services; phasing out ofrural population in poverty and absolute remaining government interventions andpoverty; and trends in social promoting competitive marketing.expenditures.

Consolidate structural reforms; and Farm Management Surveys covering asample of crops and non-crop activities,farms and enterprises;

Strengthen institutional capacity. Rural household income and expendituresurveys;

Bank Group and other donors' economicreports and sector studies.

Improve incentive framework for and Physical outcomes in terms of land and Concurrent monitoring of key activities Macro-economic conditions sufficient toproductivity, profitability and property shares distributed; number of including PIU progress reports; stimulate increased agriculturalsustainability of Kyrgyz agriculture. This farms restructured and new farms production.will be done by means of assisting the created; farm management changes in IDA/IFAD supervision reports;government in: terms greater use of private (as against

collective) management structures; IDA/IFAD mid-term review;

The project's M and E system would provide location and institution-specific baseline and targeted values for each activity including the land and agrariani reform program; the seed industry development; and advisory, cropprotection and market infonmation services. The physical outcomes of the indicators, as relevant, will be defined on the basis of the annual work program for the project implementation as approved by the Project SteeringCommittee. The first year's expected physical outcomes will be defined at the commencement of the project, i.e, by May 31, 1998.

cyitD

RADC surveys of farm and crop budgets;

(a) implementing land and agrarian Improvements in farm productivity,reforms; profitability, (viability), and sustainability

of private farming;

(b) providing emerging private farms Improvements in farmers' access to Prepare Implementation Completionwith advisory and development services inputs including credit, quality seeds, Report (ICR) jointly with IDA/IFAD.and training (in conjunction with farm advisory and adaptive research services;trials, farm demonstrations and adaptive crop protection; and market information.research);

(c) developing seed industry;

(d) establishing legal bases, organizationsand procedures for plant protection andquarantine services;

(e) establishing agricultural marketinformation system; and

(f) capacity building in MAWR.

(i) Complete implementation of (i) Amount (ha) of farm and range land Existing baseline data on land and non- Four main types of risks:

government program in distribution of distributed; land assets and farm restructuring (i) political risk; (ii) r isk of failure of

land and non-land assets; managed by RCLAR, CLARs and complementary reforms; (iii) risk of(ii) Number of permanent land shares and SALMLR, supplemented by farm survey social dislocation; and (iv) climatic r isks.

(ii) Establish policies and procedures for certificates distributed and registered; data available in MAWR Economics Project design focuses on minimiziig

land auctions; Directorate; adverse impact of these risks as follows:

(iii) Capacity building in government (iii) Number of former state and Concurrent monitoring of land reform -- Political r isk addressed by making

agencies (RCLAR, CLARs and collective farms with land and non-land program by RCLAR, CLARs and information on farm r estructuring

SALMLR) and farming communities to property shares distributed; SALMLR to systematize available available directly to farmers; and

support agriculture enterprise baseline data and collect new data; supporting land share certification

restructuring; and (iv) Number and type of farm units scheme which identifies specific parcels,created in each rayon and oblast; Field surveys to assess range and quality thus weakening local administrations'

0

Narrat-ive.St eS lary - . : ................. .Key Perforinace Inidicators Monitoring.. ' p :..M9nitorin gid Sp t .:'.'~~~.' -.: . -,,',-' ".......:''.. . . :: ': : . '.: .......... .' '''-' :'''' :'........... :'_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ( e a n s f V e ific d~ ii . & I. .: ( M a n s f se ific ti o n

of services provided by CLARs and ability to influenice land allotments(iv) Establishmilenit of a legal framilewor-k SALMLR: prejudicially:for land market development.

(v) Number of goverinimlenit land auctionis -- Complementary reforms under waycomnpleted (aniual data) with total land Narrative repor-ts on progress and through IDA-assisted Rural Finance(ha) involved; ranige of lease tenures; and problems in agrarian reform by regions Project assisted by IDA and other donors;no. of farmers leasing lands; and for the country as a whole. ADB project in Credit Unions and

bilateral donors' credit programs;PIU to provide quarterly/semi-annualprogress reports;

(vi) Gross margins on crops by farm type -- Results of farm reorganization whichand farm size tbr represenitative rayoois IDA supervisionis; have occurred to date have not tended toand oblasts: exacerbate social dislocation and poverty.

A mid-term review to assess progress in The project objective of improving(vii) Number of machinlery service component implementation and its incentive framework for agricultureproviders established at rayon and oblast impact; and introduce mid-term directly addresses this risk:level: cor r ections.

(viii) Number of agricultural enterprisesseeking and receiving production andinvestment credit;

-- Climatic risks in agriculture could(ix) Number of transactions in private potentially preclude changes in farm(distributed) lands: leases, subleases, and management. This risk addressed bymortgages; and total land area (ha.) improving agricultural productivity andinvolved (more indicators to be added); incomes supplemented by on-going socialand expenditure programs.

(x) Number of transactions in non-landproperties: sales/purchases; leases andsub-leases and mortgages.

Compon.nt 2;Rural .Advisory OW : ::: .... .....

,JMotent Servce (Th c po,,nen t,,, .:. .:.-'

,wi, be ,Ofif d , y , .. ,, , . :.. .f. i.fto ::..: .

Assist newly created farms through the Key performance indicators would relate Two main types of risks: (i) RADCs'processes of land reform to establish to: sustainability; (ii) governmentprofitable farming and increase rural commitment to economic reform:incomes. Toward this objective. .__ __

(Means of ~~~~~~ . ...... *.. .. (e.s f..r.i.tonNui~~~~~~~~~~~~. ... . iary Key Per c e I hidXcali: V i' ur io

(i) Establish Rural Advisory and (i) Adoption Rate and Participationi: (i) Conculr-elnt monitorilng of physical (i) Sustainability: For long-termDevelopment Centers (RADCs) at oblast Number of villages and houselholds progr-ess and qualitative assessment sustainability of a farmer-driven advisoryand rayoni levels; directly receivinig project advice; throughi RADS progress reports, and service: (a) RADCs must assure high

adoption rate of each techinique; number PIU/IDA/IFAD supervision reports; professional standards; and (b) RADCsof groups formed and supported by the must remain fully oriented to provideproject: numilber of farm trials and (ii) PIU to conduct annual impact advice that is impartial and free fromdemonstiations completed; and number of evaluation of those actually participated political biases; encourage farmers tofarmers visitinig demonistiationl plots and in farmer associations; which services provide contributions to the cost oftrials: number of farmers/groups assisted under the component would be actually advisory services, and ensurewith business plans: numberof adaptive beneficial to farmers; and to what extent participatory character of the servicerescarchi contiacts signed, contracts did non-participanits benefit indirectly througlh on-farm trials, demonstrationis,completed. topics covered. results (information diffusion effect); and training; and (c) assist farmers todisseminated; access formal and informal credit;

(ii) Establish a Secretariat in Bishkek to (ii) Impact at farm level and (iii) Mid-tern review of the project by (ii) Government commitmentprovide coordiniationi and rmoniitorin1g for attractivenless of techniiques: number of IDA/IFAD backed by a survey of strengthened throughi: (a) on-goinigRAI)Cs and to oversee financial techniiques considered by farmers as beneficiaries privatization of land and non-land assetsmanagement and control: worthiwhile; assessment of yields and and productivity improvements in

incomile increases on sample houselholds (iv) MAWR (PIU) to prepare agriculture; (b) improved farmer accessadopting advice: implementation completion report (ICR). to credit; reducing dependelice of RADCs

on governmient budget; (c) on-goirig(iii) Access to Credit: Number of systemic and institutional reforms inbusiness plans prepared with MAWR functions and (d) use of aRADS/UNDP support; and subloans judicious blend of public, private anddisbursed by KAFC thiouglh Farm voluntary sector initiatives to imnproveDevelopmenit Fund; Progress in farm productivity:implementinig pilot activities in miciro-ftiance in selected areas;

(iii) RADCs to assist and traini farmers (iv) Cost Recovery. Amount of recoveryin (a) techiology adaptation including fr-om farmers of RADS runniinig costs andtraining in the use of improved otlher souices of income including mediaproduction practices, in conjunction with sales, and fees tor preparationi of credita program of field trials and field applications;demonstrations onl farmers' fields atfarmers' requests; (b) preparation of (v) Poverty Taigetinig. Classification otbusiness plans in support of credit advisory visits, credit and trainiingapplications; and (c) work on1 farimler according to poverty status.group development for obtainiig

N.. ... ....... '., . ', t' , ,.. ..M ... t

improved services and solving commonproblems, e.g.. in small-scale machineryoperation and water use:

(iv) Establish a Farm Development Fund($1.5 million) at KAFC and Carry outpilot activities in micro-credit ($0.3million).

* ' *p¢ ~ L S e~ 4 0 e v e1W... ........-.... _..

Establish a viable, self-sustaining, seedindustry with emphasis on private sectorparticipation by:

(i) Acquisition. development and (i) Quantity and sources of wheat, Crop Research Institute (CRI) and Fodder No significant risks from using newevaluation of new germplasm and its barley, maize, alfalfa and sainfoin and Pasture Research Institute (FPRI) varieties. However, the project designsubmission to official variety testing germplasm meeting specific breeding records and PIU progress reports. IDA would minimize following risks:system; objectives acquired for testing; supervision missions.

(ii) Number of selection nurseries Government continuing its dominant roleestablished for each crop at agreed in seed production.number of sites;

(iii) Number of collection nurseries (a) Project introduces phasedestablished; privatization of seed breeding and

primary seed multiplication.

(iv) Number of varieties meeting specific (b) Super elite and elite seed farms andcharacteristics in multiplication nurseries; pilot commercial seed farms will beand provided technical assistance to eliminate

current inefficiencies and introduce(v) Release of superior varieties to modern technical and managementofficial variety testing system. practices in seed production;

(ii) Rehabilitation of cereal and fodder (i) Area sown to wheat, barley, maize, NPOZ/Djal farm and Forage Institute Credit:seed (Super Elite and Elite) production, alfalfa and sainfoin for Super Elite and Seed Farm records. PIU progress reports The risk of the slow development ofprocessing, storage and distribution Elite seed production -- targets by year; and IDA supervision missions farmers' access to credit concurrentlyfacilities; and addressed by other development projects

including IDA-assisted Rural Finance

CO~

. .9 i tSS : -.: .K r 5: ;~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. .. . . . . .

Project, and ADB-assisted Credit Unionsproject.

(ii) Quantities for Super Elite and Elite Farm record; PIU progress reports andseed produced and released to registered IDA supervision mission.Elite and Commercial seed producers.

(iii) Demonstration of best practice (i) Three farms to be selected for 1999commercial seed production on thiee spring crop season according to criteriapilot private seed farms to encourage agreed with IDA, by June 1998;setting up of private seed houses;

(ii) Loans issued and equipmentprocured by January 1999;

(iii) Quantity of elite seed purchased formultiplication;

(iv) Quantity of certified commercialseed sold; and

(v) Financially viable seed businessestablished.

(iv) Strengthen MAWR's regulatory (i) Complete rehabilitation of facilities, VSTO annual reports, PltJ progressservices for variety and seed testing: including relocation of the central seed .reports and IDA supervisioni missions.

ceritification laboratory is merged withVariety and Seed Testing organization(VSTO);

(ii) Number of variety trials conducted atfour sites by crop;

(iii) Regular reports published on resultsof trials; and

(iv) Seed certification systemestablished.

(v) Establish a lcgal framework and (i) PBR law submitted to Parliament byprocedures for the protection of plant August 31, 1998;breeders rights and ensure satisfactory

implementation of Seed Law regulationsgoverning compulsory certification;

(ii) Regulations on implementation of VSTO repor-ts and PIU progress reports.seed law regulations issued by August 31,1998: and

(iii) Compulsory seed certificationregulations to be reviewed by mid-2000.

(vi) Publication and dissemination of (i) Publications issued at intervals to be PIU progress reportsofficial variety testing results and seed agreed.industry informationi.

4-t op hot et j~ W d . n. ... ,,.., .......d .................. . ..... ..... ........ ..... ....... ..... .. . ......_6omp' rnt 4^ Crop Protection and Plant .*...**.* .*...

Qaarwttine: . . .. .. .~~~~~~~~~~~~_A: .. ....

(i) Establish a legal framework for the (i) Draft law on pesticide use to be PIU progress reports and IDA Two types of risks need to be addressed:regulation of pesticide use and put in submitted to Parliament by August 31, supervision missions.place regulatory structures: 1998;

(ii) Committee responsible for (a) Likely delays in implementation dueimplementing pesticide registration to insufficient understanding of the needestablished and operating by August 31, to reform and take collaborative actions1998. with other agencies and services;

(ii) Implement pesticide registration (i) Bishkek and Osh laboratories of PIU progress reports and IDA (b) Stringent regulations might result insystem and apply regulations for safe Agency for Chemical Supply and Plant supervision missions. stifling private initiatives in procurementdistribution and use of pesticides, and Protection (ACSPP) refurbished and and distribution of agrochemicals, as wellmonitor performance at regional level; operating, and six oblast-level offices as the provision of related services.

equipped to monitor implementation ofpesticide regulations;

(ii) Oblast quarterly monitoring reports Risk (a) would be addressed by provisionprovided; of technical support including training,

inter-ministerial group work associatingnational and foreign specialists; and studytours abroad.

(iii) Manual on introduction of IPM Risk (b) will be addressed by priorproduced by June 30, 1999, and review of laws and regulations bydistributed to RADS centers soon international experts and IDA.

CJi

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . ....... .... . . . . ;; . . ;.;;;

thereafter; and

(iv) Sustainability of services assuredwith plan for consolidation of rayonoffices agreed by December 31, 1999,scale of charges of services set by mid-term review in December 31, 2000, withfees collected retained by agency.

iii) Relocate and rehabilitate key plant (i) Bishkek center relocated and PIU progress report.quarantine centers and improve refurbished and Osh center rehabilitatedprocedures; and by December 31, 1999; and

(ii) Report in improved procedures.

(iv) Support membership of European (i) Republic becomes a member ofPlant Protection Organization. EPPO, and benefiting from exchange of

information and training of staff.

s.<..rset....-:. -; ..- ;-~~~~~~~~~~~~~~~~~~~~~~~.........-;.- .; .... .... ..........

MIS coverage to be extended nationwide Effectiveness of inter-agency PlU's progress reports and IDA/IFAD The main risk is the prevailinig low

(6 ohlasts) from 2 oblasts currently coordination (in terms of policy direction; supervision reports. implementation capacity which the

covered by a pilot project. problem solving and monitoring project would address through provisioliperformance) through a National of training to local staff and ensuringManagement Committee (NMC) effective inter-agency coordinationcomprising of representatives of MAWR,NSC, SDAP, KS, and RADS (SAR,paras. 4.21 - 4.23)

MIS to collect, process, and disseminate Range, depth and quality of market Mid-term review of the progress inrelevant market information for the information coverage and dissemination: component implementationa; assess

benefit of agricultural producers, including number and types of arrangemenits and impact.processors, traders and policy-makers, commodities (inputs and outputs); prices

(farm gate, wholesale and retail); use ofstanardseand grades (by commodity);type of information covered --local,national, international; specializedcommodity/market reports prepared;(Frequency and media used for

C

NarrtiveSiinMat e ef'nac lnd60rs M:: . . :ii:.'. t6eJhg.aiid SuperviWoqN1ni:rng d Sprv'o''.'''.'''a"'.... ....-'I..' y'--;t'- ............ .... l, 't'','.",........ ........ :~ M ii~ : e,informiiationi dissemiiiationi.

MIS to iicrease tranisparenicy of market Extent of use of standards and grades in Field surveys by MIS regionial offices,transactionis: transimiit incenitives and market infor-mationi for priority jointly withi RADCs.opportunities to agricultural producers: commodities. and dissemination ofimprove producers' bargaining position: iniformationi on standards and grades tostimulate competition among traders: and public.expand processors' and consumerschoices in pr-oduct selectioni.

68

ANNEX B

KYRGYZ REPUBLICAGRICULTURAL SUPPORT SERVICES PROJECT

DETAILED PROJECT COST ESTIMATES

LIST OF TABLES

Table 1. Project Cost Summary by Components

Table 2. Project Cost by Expenditure Accounts

Table 3 Project Cost by Financing Agencies

Table 4. Project Costs by Expenditure Accounts and Financing Agencies

Table I

Kyrgyz RepublicAgricultural Support Services Project

Project Cost Summary by Components

Foreign Component(SON Million) (USS Million) s percent as percent

Local Foreign Total Local Foreign Total of Total of Base Costs

A. Land and Agrarian Reform 14.22 55.87 70.09 0.81 3.19 4.01 80 15

B. Rural Advisory & Development Services(RADS)Advisory and Development Services 34.80 25.46 60.26 1.99 1.45 3.44 42 13Training, Credit & Secretariat 23.04 60.24 83.28 1.32 3.44 4.76 72 18Field Demonstrations and Adaptive Research 9.07 13.29 22.36 0.52 0.76 1.28 59 5Group Development 5.81 15.22 21.02 0.33 0.87 1.20 72 5

Subtotal Rural Advisory & Development Services(RADS) 72.71 114.20 186.91 4.15 6.53 10.68 61 41

C. Seed Industry DevelopmentCrop Breeding Institute (CRI) 3.78 24.59 28.37 0.22 1.41 1.62 87 6Forage Breeding Institute (FPRI) 1.87 5.85 7.71 0.11 0.33 0.44 76 2Super Elite and Elite Seed Production 2.17 16.40 18.57 0.12 0.94 1.06 88 4Commerdal Seed Multiplication 3.54 24.70 28.25 0.20 1.41 1.61 87 6Seed Unit in MAWR 1.80 7.54 9.33 0.10 0.43 0.53 81 2Offidal Variety Testing 6.20 27.75 33.95 0.35 1.59 1.94 82 7Seed Certification 3.15 4.78 7.93 0.18 0.27 0.45 60 2

Subtotal Seed Industry Development 22.51 111.60 134.11 1.29 6.38 7.66 83 30

D. Crop ProtectonPlant Quarantine 5.65 5.32 10.97 0.32 0.30 0.63 49 2Plant Protection 2.12 10.20 12.32 0.12 0.58 0.70 83 3

Subtotal Crop Protection 7.77 15.53 23.29 0.44 0.89 1.33 67 5

E. Agriculture Market InformationMarket Information System 10.79 15.69 26.49 0.62 0.90 1.51 59 6

Subtotal Agriculture Market lnformaton 10.79 15.69 26.49 0.62 0.90 1.51 59 6

F. Project Implementation Unit 6.84 6.69 13.53 0.39 0.38 0.77 49 3

Total BASELINE COST 134.83 319.58 454.42 7.70 18.26 25.97 70 100Physical Contingencies 4.53 17.05 21.58 0.26 0.97 1.23 79 5Price Contingencies 3842 1340 51.82 2.20 0.77 2.96 26 11

Total PROJECT COST 177.78 350.04 527.82 10.16 20.00 3016 66 116

Table 2


Project Cost Summary by Expenditure Accounts

Foreign Component(SON Millon) (USS Million) s percent s percent

Local Foreign Total Local Foreign Total of Total of Bas Costs

1. Investnent Cost

A. CMI Works 9.59 2.40 11.99 0.55 0.14 0.69 20 3B. Equipment

Laboratory Equipment - 10.07 10.07 - 0.58 0.58 100 2Field Equipment - 79.63 79.63 - 4.55 4.55 100 18Offic Equipront 7.94 44.90 52.85 0.45 2.57 3.02 85 12

Subtotal Equipmnt 7.94 134.60 142.54 0.45 7.69 8.15 94 31C. Vehicles - 27.20 27.20 - 1.55 1.55 100 6D. Contacted Services 10.22 6.32 16.54 0.58 0.36 0.95 38 4E. Technical Assistance

Intemational Costs - 60.90 60.90 - 3.48 3.48 100 13Local Support Expenses 5.41 - 5.41 0.31 - 0.31 - 1

SubtotaleTchnical Assisance 5.41 60.90 66.31 0.31 3.48 3.79 92 15F. Training

Oversea Training - 12.53 12.53 - 0.72 0.72 100 3Local Training 17.53 - 17.53 1.00 - 1.00 - 4

Subtotal Training 17.53 12.53 30.06 1.00 0.72 1.72 42 7G. Fafn Development (Credit) Fund 31.50 31.50 - 1.80 1.80 100 7

Total Investment Costs 50.70 275.44 326.13 2.90 15.74 18.64 84 72

11. Recurrent Costs

A. Operating Expenses 44.14 44.14 88.29 2.52 2.52 5.05 50 19B. Incremental Salaries 39.99 - 39.99 2.29 - 2.29 - 9

Total Recurrent Costs 84.14 44.14 128.28 4.81 2.52 7.33 34 28Total BASELINE COSTS 134.83 319.58 454.42 7.70 18.26 25.97 70 100

Physical Contingencies 4.53 17.05 21.58 0.26 0.97 1.23 79 5Price Contingencies 38.42 13.40 51.82 2.20 0.77 2.96 26 11

Total PROJECT COSTS 177.78 350.04 527.82 10.16 20.00 30.16 66 116

0

Table 3

Kyrgyz RepublicProject Costs by Components and by Financing Agencies

Components by FinancIars(Us$ Million)

SheepDevelopmnt Local

IDA IFAD Project BENEFICIARIES GOVERNMENT SWISS GTZ KHF Total For. (Excl.Amount % Amnount % Amount % Amount % Anount % Amount % Amount % Amount % Amount % Exch. Taxes)

A. Land and Agraan Reform 3.41 727 - - - 0.06 1.2 0.47 9.9 - - - - 0.76 16.2 4.69 15.6 3.61 1.08

B. Rural Advtsory a Developnent Services(RADS)Advisory and Development Services 1.54 36.7 0.73 17.4 0.47 11.2 0.49 11.6 0.53 12.7 0.43 10.3 - - 4.19 13.9 1.58 2.61Trainig, Credi6&Serretariat - 3.98 74.9 1.06 19.9 0.14 2.6 0.14 2.6 - - - - - 5.31 176 3.57 1.75

Field Demonstrations and Adaptive Research - - 1.41 92.3 - 0.06 3.8 0.06 3.8 - - - - 1.53 5.1 0.84 0.69Group Devebpment - . 0.99 71.8 - - 0.02 1.3 0.37 26.9 - - - 1.37 4.6 0.92 0.46

Subtotal - - 7.92 63.8 1.79 14.4 0.67 5.4 0.70 5.7 0.90 7.3 0.43 3.5 - 12.41 41.1 6.90 5.50

C. Seed Indusbry DevelopmentCrop Breeding InsttAte (CRI) 1.78 95.1 - - - * 0.09 4.9 0.00 - - - - - - 1.87 6.2 1.58 0.29

Forage Breeding lnstitute(FPRI) 0.47 90.9 - - - - 0.05 9.1 .0.00 - - - - - - - 0.51 1.7 0.37 0.14

Super Elte and Elte Seed Production 1.20 100.0 - - - - - 0.00 - - 1.20 4.0 1.06 0.15

Commercial Seed Mutiplication 1.84 100.0 - - - - * 0.00 - - - - - - 1.84 6.1 1.60 0.24

SeedUnftinMAWR 0.53 91.3 - - - - 0.05 8.7 - - - - - 0.59 19 0.45 0.13

Otriial VarietyTesting 1.83 81.9 - - - 0.19 8.3 0.22 9.8 - - - - - 2.24 7.4 1.77 0.47Seed Certificatlon 0.43 83.5 0.09 16.5 0.00 - 0.52 1.7 0.29 0.23

Subtotal 8.10 92.3 - 0.41 4.7 0.27 3.1 - - - 8.78 291 7.12 1.65

D. Crop ProtectionPlant Quarantine 0.58 76.7 - - - - - 0.18 23.3 - - - - - 0.76 2.5 0.34 0.42

Plant Protection 0.74 90.0 - - - - 0.08 10.0 - - - - - * 0.82 2.7 0.66 0.16

Subtotal 1.32 83.6 - - - - - 0.26 16.4 - - 1.58 52 1 00 0.59

E. Agriculture Market InformationMarket Information System 1.22 68.8 - - - - 0.11 6.2 0.44 25.0 - - - - - - 1.77 5.9 0.96 0.80

F. Projec Implementation Uni 0.94 100.0 1.79- - 0.00 -2 7 0 3 -1 0.94 3.1 0.40 0.63TotelProject Cost 14.98 49.7 7.92 26.2 1.79 5.9 1.25 4.1 2.14 7.1 090 3,0 0.43 1.4 0.76 25 30.16 100.0 20.00 10.16

Table 4


Project Cost by Expenditure Accounts and by Financing Agencies(Including contingencies)

(USS Million)

SheepDevelopment Local

IDA IFAD Project BENEFICIARIES GOVERNMENT SWISS GTZ KHF Total For. (Excl.Amount % Amount % Amount % Amount % Amount % Amount % Amount % Amount % Amount % Exch. Taxes)

I. Investment CostsA. Civil Works 0.77 91.6 0.07 8.4 - - - - 0.00 - - - - - - 0.84 2.8 0.15 0.69B. Equipment

Laboratory Equipment 0.63 94.9 0.03 5.1 - - - - - - - - - 0,66 2.2 0.66 -Field Equipment 4.84 93.4 0.34 6.6 - - - - - - - - - - 5.19 17.2 5.19 -

Ofrice Equipment 2.87 80.9 0.47 13,2 0.02 0.5 - - 0.12 3.5 0.05 1.3 0.02 0.6 - - 3.55 11.8 2.95 0.59Subtotal 8.34 88.8 0.84 9.0 0.02 0.2 - - 0.12 1.3 0.05 0.5 0.02 0.2 - 9.39 31.1 8.80 0.59

C. Vehicles 0.99 56.3 0.63 35.6 0.04 2.0 - - 0.07 4.0 0.04 2.0 - 1.76 5.8 1.76D. Contracted Servtces 0.28 22.5 0.96 77.5 - - - 0.00 - - - - - 1.24 4.1 0.43 O.81E. Technical Assistance

IntemationalCosts 1.30 36.2 0.90 25.1 0.47 13.0 - - 0.37 10.3 - 0.55 15.4 3.60 11.9 3.80LocalSupportExpenses 0.14 37.4 0.14 38.1 0.01 3.5 - - 0.08 21.0 037 1.2 - 0.37

Subtotal 1.44 38.3 1.04 26.3 0.48 12.1 - - - - 0.37 9.3 - 0.63 159 3 97 13.1 3.60 0.37F. Training

OverseaTraining 0.31 41.4 0.33 43.4 0.11 15.3 - - - 0.75 2.5 0.75 -

LocalTraining 0.10 7.2 0.71 51.2 0.44 32.2 - - - - - - - 0.13 9.3 1.38 4.6 - 1.38Training 0.41 19.3 1.03 48.5 0.56 26.2 - - - - - - - 0.13 61 213 7.1 0.75 1.38G. Farm Development (Credit) Fund - - 1.80 100.0 - - - - - - - - - _ 1.80 6.0 1.80 -

Total Investment Cost 12.23 57.9 6.38 30.2 1 09 52 0.12 0.6 0.49 2.3 0.06 0.3 0.76 36 2113 70.1 17.30 3.8'

II. Recurrent CostA. Operating Expenses 2.30 38.2 1.03 17.1 0.04 0.7 0.85 14.2 1.43 23.7 0.20 3.3 0.17 2.8 - 6.02 20.0 2.71 3.32B. Incremental Salaries 0.45 14.9 0.50 16.8 0.65 21.6 0.39 13.1 0.59 19.6 0.22 7.2 0.20 6.8 - - 3.01 10.0 - 3.01

Total RecurrentCost 2.75 30.4 1.54 17.0 0.69 7.7 1.25 13.8 2.01 22.3 0.42 4.6 0.37 41 - - 903 29.9 2.71 6.32Total by Financing Agency 14.98 49.7 7.92 26.2 1.79 5.9 1.25 4.1 2.14 7.1 0.90 3.0 0.43 1.4 0.76 2 5 3016 100.0 20.00 10 16

-.1

73

Annex C

KYRGYZ REPUBLIC


Project Implementaiton Plan

A. Implementation Plan

1. Chart 1 presents key elements of the project's implementation plan.

B. Procurement Plan

2. Indicative procurement plan for the five-year project plan is presented in Table 1. Theprocurement plan for Project Year I will be reviewed with IDA during negotiations.

C. Disbursements

3. Disbursement percentages for IDA financing; estimated disbursement schedule,estimated disbursment profile and flow of funds are provided in Tables 2, 3, 4 and figure 1respectively.

D. Supervision Plan

4. Table 5 presents the supervision plan. The IDA and IFAD will coordinate supervisionactivities to avoid duplication and reduce supervision costs.

E. Technical Assistance and Training

5. Activity-wise details for technical assistance and training have been included in Annex 9of the Implementation File. A list of TORs is provided in Table 6.

Agricultural Support Services Project Annex CDraft Implementation Plan Chart 1

1998 1999 2000 2001 2002 1 2003ID Task Name Duration Start Finish Q4Q1| Q2 Q30401|020304|Q|Q2|03|040Q1 Q21030401|Q2|0304|Q1|Q2 Q3 Q4

1. PROJECT IMPLEMENTATION 316.2w 1/1198 12131103

2 Appoint procurement specialist 67d 1/6/98 3/31/98

3 Recruit local staff 1296d 2/1/98 12/31/02

4 Prepare procurement plan for Project Year 1 13.4w 1/6/98 3/31/98

5 Prepare Proj.. work plan, budget, monitoring, procurement, reporting & supv. 1320d 1/1/98 12/31/02

6 Tender contract and appoint a Project Implementabon Adviser 27.2w 1/1/98 6/30/98

7 Establish financial management system for PIU & project agencies 27.2w 1/1/98 6/30/98

Establish & maintain project accounts 145.2w 4/1/98 12/31/00

9 Prepare Mid-term Project Implementation Report for IDA review 13.2w 10/2/00 12/31/00 .10 Prepare Implementation Completion Report 26.4w 7/1/03 12/31/03

1 2. LAND AND AGRARIAN REFORM COMPONENT 285w 211/98 6/30103 . | -

12 (a) Preparaton AcUvIties 259.2w 211198 12131/02

13 Recruit LAR advisor & field legal speciaist 26.6w 4/1/98 -9/30/98 .

14 Canry out legal review 40.2w 4/1/98 12t31/98

15 Procure RCLAR equipment 17.8w 6/1/98 9/30/98

16 Recruit M&E specialist 13.2w 6/1/98 8/28/98

17 Establish M&E 30.8w 9/1/98 3131199

Employ public informaton specialist 30.8w 9/1/98 3/31/99

1S 9Prepare public information materals 30.8w 9/1/98 3/31/99 -20 Recruit aucion specialist 13.4w 7/1/98 9/30/98*

21 Prepare land auction procedural manual 13.6w 10/1/98 12/31/98

22 LAR Training of Local ALRF Aucbon Commissions 154.4w 2/1/98 12/31/00

23 Procurement of Land Certificates, complete ICB, sign contract 13.6w 6/1/98 9/1/98

24 Procure Land Certificates 223.4W 10/1/98 12V31/02_

25 io) Support for Rayon CLAR's 123.2w 6/1/98 9/30/00 __

26 Contracd with Ag. Academy for Trng. of Trainers, Drafted & Signed 9w 6/1/98 -7/31/98.__


1998 999 2000 2001 2002 2003ID Task Name Duration Start Finish Q401|QQ21031041Qi4Q2l3Q401Q2Q2031 1102|Q30Q4|1QQ2103|Q4|Q1|02|0310427 Recruit training specalist Ow 6/11/98 7131198

28 Train core trainers 13.4w 9/1/98 11/30/98

29 Training of CLAR and Village Govemment staff 109.8w 9/1/98 9/30/00

30 Procure CLAR Equipment (for Chui oblast) 1 8w 711/98 10131198

31 (c) Farn Restructuring Support Services 262.6w 7/1/98 6/30/03 _

32 Prepare Farm Restru. Service (FRS) contract with Kara-Balta 4.4w 9/1/98 9/30/98

33 Prepare FRS training materials 27w 711/98 12/31/98 _

34 Conduct FRS farmer training seminars 218.8w 11/1/98 12/31/02

35 Procure survey equipment for land share mapping (6 oblasts) 105.4w 7/1/98 6/30/00

36 Hire Incremental staff for land share mapping 52.8w 7/1/98 6/30/99

37 Update and Issue Land Certificates 253.8w 8/31/98 6/30/03

38 3. RURAL ADVISORY & DEVELOPMENT SERVICES (RADS) 289.8w 1/1/98 6/30/03 _

39 (a) Central Level 237.6w 1/1/98 61.0;02 _ -_

40 Est. RADS Found., RASC & RASC sec. by a charter approv. by govt & spon. 4.2w 1/6/98 1/31/98

41 Appoint RASC chairman and GM for RASC secretariat 66d 4/1/98 6/30/98

42 Recruit staff for RADS 330d 4/1/98 6/30/99 -43 Technical Advisor 1188d 1/1/98 6/30/02

44 Merge SDP's advisory service with RADS 26.8w 3/31/98 9/30/98

45 (b) Regional level (6 oblasts) 257w 2/15/98 12/31/02 _

_ _ __. _ I , .~~~~~~~'V '46 Appoint RADC managers 73w 2/15/98 6/30/99

47 Recruit RADC staff 66w 4/1/98 6/30/99

48 Recruit rayon staff 79.2w 4/1/98 9/30/99

49 Establish rayon level RADC committees 74.8w 5/1/98 9/30/99

50 Establish regional steering committees ( RSC) 18w 6/1/98 10/1/98 ,

51 Rehabilitate office buildings 52.8w 7/1/98 6/30/99 _

52 Start inital training (staff and farmers) 79.4w 7/1/98 12/931/99

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~U


1998 1999 2000 2001 2002 2003ID Task Name __ _ Duration Start Finish Q4 Q 2|030Q4Q1 IQ2. 3|Q4 Q1 Q2|03|Q4|01|203|Q4 01|203Q401 Q2030Q53 Procure equipment 79.4w 7/1/98 12131/99

54 Group training, feld trials &demonstration 236.8w 7/1/98- 12/31/02 w55 (c) Adaptive Research 275.3w 4/11/98 6/30/03 _

56 At RADC's - 275.8w 4/1/98 6130/03 -

57 Review existing facilites 26.6w 4/1/98 9/30/98

58 Prepare yearl program and budget 17.8w 6/1/98 9/30/98

59 Rehabilitate farm buildings 79.4w 7/1/98 12/31/99 -60 Procure farm/lab equipment 26.4w 5/3/99 11/1/99

61 Implement trials 253.6w 9/1/98 6/30/03

62 C-o nt-raCt-e _ Resea rc_h 262.6w 7/1/98 6130/03 -

63 Prepare 3 prionty programs 27w 7/1/98 12/31/98 _

64 Appoint program leaders 52 8w 7/1/98 6/30/99

65 Prepare/evaluater.bids = 184.4 7/1/98 12131/01

66 Implement program 253.6w 9/1/98 6/30/03

67 (d) Farm Development Fund (managed by KAFC) 287.6w 1/15/98 6/30/03

68 Signature of Framework Agreement 11.8w 1/15/98 3/31/98

69 Prepare supplementary Guidelines and Approach 18w 7/1/98 10/31/98

70 Annual Work Plan and Budget 4.6w 7/1/98 7/31/98

71 Establish KAFC regional Offices (3) 52.8w 7/1/98 6/30/99

72 Organize UNDP Farmer Groups, prepare subloans applications 118w 7/15/98 10/9/00 _

73 Group Loan - appraisal and disbursements 262.6w 7/1/98 6/30/03 _

74 (e) Implement Pilot Credit Activities(through RADS Foundation) 262.6w 7/1/98 6/30/03 _

75 4. SEED COMPONENT [ 318.8w 1Z115197 12/31/03__ ______ _ _.___ ._ .......... .. ............................... _ .._._ 31.w , 1 2 31/0.3.

76 CRI and FPRI - Variety Acquisition and Development 316.2w 11/98 12/31/03

77 Procure critical equipment (under PPF) 20w 1/1/98 5/12/98

78 Prepare for IDA review annual seed breeding program 191 .2w 7/1/98 2/15/02 _ i


1_ _ _ _ | 1998 I 1999 2000 2001 1 2002 1 2003ID _ Task Name ____ _ Duration Start Finish Q40Q1 Q2341 Q2 Q3|Q4 Q1 Q2304 |Q 02 |Q3Q4 Q1 Q20Q30Q40Q1 Q2 0Q3Q479 1 st year seed breeding program 6w 7/1/98 8/10/98

80 2nd year seed breeding program 6w 1/4/99 2/12/99

81 3rd year seed breeding program 6w 1/3/00 2/11/00

82 4th year seed breeding program 6w 1/1/01 2/9/01

83 5th year seed breeding program 6w 1/7/02 2/15/02

84 Prepare plan and specifications for the first year procurement 4.8w 1/16/98 2/15/98

85 Obtain germplasm from International Institutes 210.4w 7/1/98 6/30/02 _

86 Select topics /areas for first year program 13.4w 7/1/98 9/30/98

87 Technical assistance and staff training 289w 7/1/98 12/31/03

88 Prepare and approve training program 52.8w 7/1/98 6/30/99

89 Initial training/information visits to outside centers (under PPF) 37.6w 7/16/98 3/31/99

90 Staff training 289w 7/1/98 12/31/03 . _

91 Technical assistance for ureeding programs 184.4w 7/1/98 12/31/01 - _

92 Rehabilitation of buildings 79.4w 711/98 12131199

93 Bishkek stes 27w 7/1/98 12/31/98

94 Outstations 66w 10/1/98 12/31/99

95 Procurement of equipment 79.4w 7/1/98 12131/99

96 Bishkek sites 27w 7/1/98 12/31/98

97 Outstations 66w 10/1/98 12/31/99

98 Multiplication of Super Elite and Elite Seed 236.8w 7/1/98 12/31/02

99 Prepare sub project feasibility studies 52.8w 7/1/98 6/30/99

100 Approve subloans 52.6w 9/1/98 8/31/99

101 Repair existing equipment 52.8w 7/1/98 6/30/99

102 Prepare specifications for new equipment 27w 7/1/98 12/31/98

103 Procure equipment 21.6w 2/1/99 6/30/99 -104 Prepare building rehabilitation plans 18w 7/1/98 10/31/98


1998 1 999 2000 2001 2002 2003ID Task Name Duration Start Finish Q4 I92|Q31Q4IQ1 IQ2LQ3|Q4IQ1 Q21031Q4 IQI1Q2|Q3|4 Q1|Q2|Q3|Q4Q1| Q2|Q3|Q4105 Tender building rehabilitation contract 18w 9/1/98 12/31/98

106 Rehabilitate Buildings 61.4w 11/1/98 12/31/99 -

107 Production of Super Elite and Elite seed 227.8w 9/1/98 12/31/02 I I108 Pilot Commercial Seed Production 282.8w 2/15/98 6130103 _ i iI i n _

109 Agree selection criteria with IDA 2.6W 2/15/98 3/1/98 I I110 Select pilot seed farms (3) 13.4w 5/1/98 7/31/98

111 Approve subloans, prepare contracts and loan arrangements 52.8w 7/1/98 6/30/99 . -

112 Procure equipment 39.4w 10/1/98 6/30/99 I

113 Production of commercial seed 222.8w 4/1/99 6/30/03

114 Performance monitoring 222.8w 4/1/99 6/30/03 |115 Training workshop and study tour 4.4w 7/15/99 8/13/99

116 Variety and Seed Testing Organization 216.8vW 312198 4i12102 u _

117 Tec. Asst. for draviing up building & lab. rehab.. plans (unider ppf) 13.2w 4/1/98 6/30198 j

118 Procure emergency equipment needs (under ppf) 13.2w 4/1/98 6/30/98

119 Prepare procurement proposals for Rehab plans 17.8w 4/1/98 7/31/98

120 Relocate Bishkek seed testing laboratory 26.2w 9/1/98 2/26/99 .

121 Rehabilitation of other buildings 22w 3/1/99 7/30/99 , _

122 Procure equipment (variety testing and seed certification) 114.2w 4/1/98 5/31/00 _

123 Training and technical assistance 216.8w 3/2/98 4/12/02_ __ .. _ . .

124 Appoint variety testing specialist 66w 71/98 9/30/99 -

125 Seed certification specialist 66w 7/1/98 9/30/99 -

126 Study tours 66w 711198 9/30/99 -

127 CRI & FPRI annual Seed breeding programs 216.8w 3/2/98 4/1V02 l0

133 Local training 70.4w 6/1/98 9/30/99 -

134 Seed Unit in MAWR 214.2w 12/15/97 12/31/01

135 Prepare, clear and issue LOI for recruitment of Seed spec..(under PP 7.8w 12/15/97 2/2/98

.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.


1998 | 1999 2000 2001 | 2002 2003ID Task Name Duration Start Finish Q4|Q1 |Q2|Q3|Q4Q1| Q2|Q3|Q4|Ql Q2|Q3|Q4Q1| Q2|Q3|Q4Q1| Q2|Q3|Q4Q1| Q2|Q3|Q4136 Select technical experts following response to LOI 9w 3/1/98 4/30/98 *137 Establish National Seed Association 27w 7/1/98 12/31/98

138 Appoint Seed Specialist and counterpart 184.4w 7/1/98 12/31/01 I139 Appoint sub-group of Proj.. St. Comm. to oversee Impi.. of Seed comr 4w 1/1/98 1/27/98 I140 Adopt policy guidelines for seed certification 26.8w 7/1/98 12/30/98 .141 Submit Law on Plant Breeders Rights to Parliament 9w 7/1/98 8/31/98

142 Procure equipment and vehicle 27w 7/1/98 12/31/98

143 Implement Training program 171.2w 9/30198 12/31/01 .

144 6. Crop Protection and Plant Quarantine 271.4w 5/1/98 6/30/03

145 (a) Crop protection 271.4w 6/1198 6/30/03

146 Submit draft law on pesticides and pest control to Parliament 13.4w 7/1/98 9/30/98

147 Introduce pesticide registration system 70.4w 9/1/98 12/31/99

148 Techmncal assistance with laboratory plans and specification (PPF) 17.8w 5/1/98 8/31/98

149 Rehabilitate Bishkek and Osh laboratories 66w 10/1/98 12/31/99

150 Procure equipment for Bishkek and Osh 66w 10/1/98 12/31/99

151 Procure equipment for 6 oblast centers 66w 10/1/98 12/31/99

152 Plan for consolidation of rayon centers 6.8w 3/1/99 4/1999

153 Prepare crop protection and plant quarantine manual 52.8w 7/1/98 6/30/99

154 RADCs to advise farmers on use of pesticide in IPM context 262.6w 7/1/98 6/30/03 .155 Training and technical assistance 235.6w 1/1/99 6/30/03

156 Technical assistance 25.8w 1/1/99 6/30/99 I

157 Staff training 235.6w 1/1/99 6/30/03

158 (b) Plant quarantine 88.2w 5/1/98 12/31/99

159 Visit to EPPO (under PPF) 18w 7/1/98 10/31/98

160 Technical assistance with laboratory plans and specification 4.4w 5/1/98 5/31/98

161 Rehabilitate quarantine centers at Bishkek and Osh 79.4w 7/1/98 12/31/99

_ . , ___ _-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'


1 1998 1 1999 2000 2001 200 2003ID Task Name Duration Start Finish Q40Q1 0Q20Q30Q41 Q Q2Q Q401 Q30Q43 Q101Q2|Q30Q4|Q1 02Q3|Q4|1 TQ2|3|Q4162 Procure equipment 79.4w 7/1/98 12/31/99

163 6. Agricultural Market Information 75.4w 1/31)98 6/30/99

164 Establish MIS by a decree 4.8w 1/31198 2/28/98 I.

165 Establish Advisory Groups 27w 7/1/98 12/31/98

166 Fommalise MAWR unit, complete staffing, establish work program 27w 7/1/98 12131198

167 stablish sub-units in oblasts 27w 7/1/98 12/31/98

168 Extend MIS to other 4 oblasts S2.8w 7/1/98 6/30/99

coCD

Kyrgyz Republic - Agricultural Support Services Project Annex C

Procurement Plan Table I

1 2 3 4 5 6. Estimated Schedule *See details in Project Implementation Schedule (Annex 10)

Component Type No. of Estimated cost Procurement Pre- Document Invitation to Contract Contractsubpackages (IJS!) method qualification preparation bid Award/ Completion

Signing

Land and Agrarian Reform

Office Equipment G 4 1,456,809 ICB NA 5/98 Spread over Project Years 1998-2001

Vehicles G 15 660,321 IS NA 5/98 Spread over Project Years 1998-2001

Issuance of Land Certificates G 1 750,000 ICB NA 7/98 Spread over Project Years 1998-2002

Total 2,867,130

Seed DevelopmentRehabilitation ofBuildings CW 1 105,425 NCB NA 5/98-6/98 7/98-8/98 | 9/98-10/98 | 11/98-12/98

Rehabilitation of Buildings CW 1O 368,294 MW NA 5/98 Spread over Project Years untill year 2000

Lab Eqpt., Field Eqpt.,Office Equipment G 16 4,820,758 ICB NA 5/98 Spread over Project Years untill year 2000

Lab Eqpt., Field Eqpt.,Office Equipment G 21 505,086 IS NA 5/9S Spread over Project Years untill year 1999

Vehicles G 1 12,129 IS NA 5/98 Spread over Project Years untill year 2001

Consultant Services for CRI, FPRI, Seed CF 5 621,445 QCBS NA 5/98 Spread over Project Years untill year 2001Unit in MAWR, Official Variety Testing& Seed Certification DivisionConsultant Services for CRI, FPRI, Seed CF 2 63,390 LC NA 5/98 Spread over Project Years untill year 2001Unit in MAWR, Official Variety Testing& Seed Certification Dih i,n __on

Consultant Services for CRI, FPRI, Seed CF 5 69,724 IND NA 5/98 Spread over Project Years untill year 2001

Unit in MAWR, Official Variety Testing& Seed Certification DivisionTraining TR 8 238,498 NA

Total _ 6,804,749

Crop Protection __.

Rehabilitation of Buildings CW 2 246,700 NCB NA 5/98 Spread over Project Years 1998-1999

Rehabilitation of Buildings CW 2 49,340 MW NA 5/98 Spread over Project Years 1998-1999

Lab Eqpt., Field Eqpt.,Office Equipment G 10 546,384 IS NA 6/98 Spread over Project Years 1999-2000

Lab Eqpt., Field Eqpt.,Office Equipment CG 2 22,588 NS NA 6/98 Spread over Project Years 1999-2000

Vehicles G 1 35,640 NS NA 5/98-6/98 7/98-8/98 9/98-10/98 11/98-12/98

Vehicles G 1 73,278 IS NA 5/98-6/98 7/98-8/98 9/98-10/98 11/98-t2/98

Consultant Services for Plant Quarantine CF 6 87,334 IND NA 6/98 7/98-8/98 9/98-10/98 11/98-12/98& Plant ProtectionTraining TR 2 63,390 NA

Total -__ . 1,124,654 _

Agriculture Market Information

Office Equipment G 4 324,685 IS NA 5/98 Spread over Project Years until year 2001

Office Equipment C 1 20,417 NS NA 5/98-6/98 7/98-8/98 9/98-10/98 11/98-12/98

Vehicles G 3 62,370 IS NA 5/98 Spread over Project Years until year 2001

Consultant Services for CF 4 262,605 QCBS NA 5/98 Spread over Project Years until year 2001

KAMIS,NSC,SDAM & KYSTKYAGTech. Project.Consultant Services for CF 4 19,552 SS NA 5/98 Spread over Project Years until year 2001KAMIS,NSC,SDAM & KYSTKYAGRO co

Tech. Project. .

Training TR 3 109,029 NATotal - 798,657 _

Kyrgyz Republic - Agricultural Support Services ProjectProcurement Plan

1 2 3 4 5 6. Estimated Schedule

Component Type No. of Estimated cost Procurement Pre- Document Invitation to Contract Contract

slicesitenis/ method qualification preparation bid Award/ Completionsubpackages Signing

Project Implementationt Unit

Office Equipment G 2 27,076 NS NA 5/98-6/98 7/98-8/98 9/98-10/98 11/98-12/98

Vehicles G 1 17,820 NS NA 5/98-6/98 7/98-898 9/98-10/98 11/98-12/98

Consultant Services Implementation CF 1 277,207 QCBS NA 5/98 Spread over Project Years 1998-1999

Adviser,Consultant Services Impact CF 2 208,960 QCBS NA 5/98 Spread over Project Years 1998-1999Evaluation & for Mid-term reviewContracted services Monitoring and CF 1 69,597 LC NA 5/98 Spread over Project Year until year 2002

EvaluationContracted services local Support CF I 39,411 SS NA 5/98 Spread over Project Year until year 2002

Total _ 640,071

Operating CostLand and Agrarian Reform l

Incrc:-r ,rt':iI Salaries 34.072 1 NAOpera:his Expenses 508,159 NA

Total 542,231Seed DevelopmentIncremental Salaries 86,648 NA

Operating Expenses 1,204,080 NATotal 1,290,728

Crop ProtectionIncremental Salaries 27,698 NA

Operating Expenses 173,923 NATotal 201,621

Agriculture Market InformationIncremental Salaries 93,765 NA

Operating Expenses 324,654 NATotal 418,419

Project Imptementation UnitIncremental Salaries 206,876 NAOperating Expenses 88,278 NA

Total 295,154 NA

Total Procurement For IDA , 14,980,000 Figures may slightly differ due to roundingCW - Civil Works; costing less than USS100,000 each, are classified as minor works, but these cosld be consolidated to beprocured as NCBs. Possibilities of consolidation are indicated by an asterisk.('). Similarly National Shopping contracts could also be consolidated for purposes ofprocurement through Intemational ShoppingG -GoodsCF - Consulting Firms SS -Single Source rTR - Training LC -Least CostICB - International Competitive Bidding Operating Expenses - inclades vehicle maintenance, office consumables, chemicals. fertilizers etc.NCB- National Competitive Bidding PY - Project YearQCBS - Quality Cost Based Selection IND - IndividualIS - Intemational Shopping CF -Consulting Firms

83

Annex CTable 2

Kyrgyz Republic


IDA Disbursements(US$ million)

% of expendituresAmount to be financed

Civil Works 0.60 100% foreign expenditures and90% of local expenditures

Goods 8.25 100% of foreign expenditures;100% of local expenditures(ex-factory cost); and 80%of local expenditures for otheritems procured locally

Consultants' 1.80 100%Services and Training

Operating Costs 2.36 100% until June 30, 1999; 85% until June30, 2000; 65% until June 30, 2001; 45%until June 30, 2002; and 20% thereafter.

Refunding of 0.50Project PreparationAdvance

Unallocated 1.47

TOTAL 14.98

84

Annex CTable 3


Estimated Disbursement Schedule(US$ million)

IDA Fiscal Year Disbursements Cumulative Disbursementsand Quarter by Quarter by end of Quarter

19991st Quarter 0.5 0.52nd Quarter 0.5 1.03rd Quarter 0.5 1.54th Quarter 0.5 2.0



2002ist Quarter 1.0 8.22nd Quarter 1.0 9.23rd Quarter 1.0 10.24th Quarter 1.0 11.2


20041st Quarter 0.5 14.72nd Quarter 0.3 15.0

Figures may slightly differ due to rounding. SDR amount is equivalent of US$14.98 million.

Annex C

Kyrgyz Republic Figure 1


Flow of Funds /1

I IDA | IFAD

Credit Loan

[ Ministry of Finance & Economy l | Ministry of Finance & Economyl

AkF PIU Financial

(MAWR) Institution

(Agency) Grant Equity

. . vv ._ ._ ._ __ - RADS Kyrgyz AgriculturalV Project Implementing Seed FarmsKyrgyz Agricultural

Agencies |Foundation Finance Corporation

A A

Oblast level KAFC

RADCs Oblast/Rayon

Offices

Rayon Farmers &

Centes Farmer Groups

/1 Govemment budgetary contribution will be channeled through a Project Account (SAR, para 3.37). Bilateral donors will disburse grants following their respective procedures.

01

R* Represents cost recovery andlor subloan repayments.-s

86

Annex D

Kyrgyz Republic


Financial and Economic Analysis

List of Tables

1. Yields of Main Crops (1989-1996)

2. Areas of Main Crops and Changes in Cropping Pattern, 1989-96

3. Financial Crop Budgets for Selected Crops (Wheat, Barley and Maize)

4. Financial Crop Budgets for Selected Crops (Sugarbeet, Lucerne, Cotton)

5. Farm Model 1: Individual Household in Kara Balta (Financial)

6. Farm Model 2: Peasant Farm in Kara Balta (Financial)

7. Farm Model 3: Individual Household in Osh (Financial)

8. Farm Model 4: Family Farm in Osh (Financial)

9. Economic Prices for Main Inputs and Outputs

10. Economic Crop Budgets for Selected Crops (Wheat, Barley and Maize)

11. Economic Crop Budgets for Selected Crops (Sugarbeet, Lucerne, Cotton)

12. Farm Model 1: Individual Household in Kara Balta (Economic)

13. Farm Model 2: Peasant Farm in Kara Balta (Economic)

14. Farm Model 3: Individual Household in Osh (Economic)

15. Farm Model 4: Family Farm in Osh (Economic)

16. Economic Analysis: Base Scenario and Switching Value (1): ReducedFarm Household Participating Rate

17. Economic Analysis: Switching Values 2 and 3: Reduced Benefits and HigherProject Cost

87

Annex DTable I

Yields of Main Crops (1989 - 1996) (tons/ha)

Average Average Change1989 1990 1991 1989-1991 1992 1993 1994 1995 1996 1994-1996 1989-1996

Wheat 3.1 2.64 2.24 2.66 2.73 2.62 1.7 1.83 2.3 1.9 -27%Barley 2.27 2.37 2.06 2.23 2.36 2.16 1.5 1.3 1.7 1.5 -33%Grain Maize 6.81 6.18 5.85 6.28 5.13 4.52 3.53 3.74 4.0 3.8 -40%Potato 13.4 13.6 13.7 13.57 12.4 10.8 9 9.9 11.4 10.1 -25%Sugar-beet 16.9 16.9 15.6 16.47 21.3 18.8 11.6 12.3 13.3 12.4 -25%Cotton 2.75 2.73 2.45 2.64 2.44 2.42 2.02 2.2 2.3 2.2 -18%Tobacco 2.53 2.16 2.12 2.27 2.08 2.19 1.92 2.1 2.1 2.0 -11%Vegetables 21.5 19.6 18 19.70 15.4 14 11.5 10.3 11.2 11.0 -44%Source: National Statistics Comittee, Kyrgyzstan() Over 5 years for sugar-beet

Yield Trends from 1989 to 1996 (base 0 in 1989)

30%

20%-

1<s 199 / > 1992 993 \ 1994 1995 1G96

l4\Wheat

|-1V \, - ------ ---------------- \ \|Barley-fr-Gtain Maize-* Potato

-20% - --------------------- X ~~~~~~~~~~~-* Sugar-beet-e-Cotton

4-Tobacco

430% - --------------------- ,- vegetables

-60%

88

Annex D

Table 2

Areas of Main Crops (1989 - 1996) (thousand hectares)

Change1989 1990 1991 1992 1993 1994 1995 1996 1989-1996

Wheat 196.8 193.6 193.6 248.4 338.3 333.1 363.9 451.5 129%Barley 250.3 266.4 290.1 263.5 235.5 206.7 150.7 108.4 -57%Grain Maize 66.3 65.7 62.3 54.7 40.7 36.6 35 45.6 -31%Potato 22.6 25.2 22.5 27.2 26.6 34.2 43.8 49.2 118%Sugar-beet - 0.1 0.8 6.3 11.7 9.8 13.5 14.3Cotton 26.9 29.7 25.9 21.5 20.3 26.5 33.2 31.7 18%Tobacco 19.9 19.1 19.9 20.8 22.2 18.9 8.5 8.7 -56%Vegetables 23.4 20.7 19.5 22.2 14.9 22.4 32.2 32.8 40%Source: National Statistics Comittee, Kyrgyzstan(*) Over 5 years for sugar-beet

Main Changes in the Cropping Pattern from 1989 to 1996 (base 0 in 1989)

140%

120% - -- - - -. . .--

100% -- . ... -. . . .. -. . . ---

- *+Wheat

6 0% - --------- --- --- --------------------- --------- - U - B arley

/ -Grain Maize i40% ...... . .. ... -- -/-------------- -- --------- --- X Potato I

l|) Cotton

-|--Tobacco

0 -4--Vegetables

-40%

89

Annex DTable 3

Table 3. Financial Crop Budgets for Selected Crops (Wheat, Barley, Maize)

Existing Technology Potential Improved TechnologyUnit Quantity Unit Value Value Quantity Unit Value Value % increase

Winter wheatYield ton 1.9 2,500 4,750 2.7 2,500 6,750 42%By-product ton 2 40 80 3 40 120 50%Seed kg 230 4 (920) 200 4.0 (800) -13%N fertilizers 150 2.20 (330)P fertilizers 100 2.20 (220)K fertilizers 100 2.60 (260)Pesticides 2 100 (200)Herbicides kg 2 150 (300) 2 150 (300) 0%Irrigation m3 3400 0.020 (68) 3400 0.020 (68) 0%Mechanized Cultivation Is/ha 1 800 (800) 1 800 (800) 0%Mechanized Harvesting Is/ha 1 1,000 (1,000) 1 1,200 (1,200) 20%Transporation ton/SOkm 1.9 100 (190) 2.7 100 (270)Sub-total cash costs (3,278) (4,448) 36%Gross Margin 1,552 2,422 56%Labour requirement daylha 20 20 0%Return per labour som/day 78 121 56%

BarleyYield ton 1.5 2,500 3,750 2.2 2,500 5,500 47%By-product ton 1.2 40 48 1.2 40 48 0%Seed kg 170 4 (680) 160 4.0 (640) -6%N fertilizers 150 2.20 (330)P fertilizers 100 2.20 (220)K fertilizers 50 2.60 (130)Pesticides 1 100 (100)Herbicides kg 1.5 150 (225) 2 150 (300) 33%Mechanized Cultivation Is/ha 1 800 (800) 1 800 (800) 0%Mechanized Harvesting Is/ha 1 800 (800) 1 1,000 (1,000) 25%Transporation ton/50km 1.5 100 (150) 2.2 100 (220)Sub-total cash costs (2,655) (3,740) 41%Gross Margin . 1,143 1,808 58%Labour requirement day/ha 20 20Return per labour som/day 57 90 58%

MaizeYield ton 3.8 1,500 5,700 6.3 1,500 9,450 66%By-product ton 5 40 200 10 40 400 100%Seed kg 25 8 (200) 25 8.0 (200) 0%N fertilizers 300 2.20 (660)P fertilizers 200 2.20 (440)K fertilizers 100 2.60 (260)Pesticides 1 100 (100)Herbicides kg 4 70 (280)Irrigation m3 3500 0.020 (70) 3500 0.020 (70) 0%Mechanized Cultivation Is/ha 1 1,000 (1,000) 1 1,000 (1,000) 0%Mechanized Harvesting Is/ha 1 1,500 (1,500) 1 2,000 (2,000) 33%Transporation ton/50km 3.8 100 (380) 6.3 100 (630)Sub-total cash costs (3,150) (5,640) 79%Gross Margin 2,750 4,210 53%Labour requirement day/ha 40 40Return per labour som/day 69 105 53%Basic assumptions:1) Yields: Existing technology corresponds to average yield 1994-1996 in the country; Improved technologyis conservativey assumed to reach the average yields from 1989 to 1991 (see Table 1)2) Source for input quantities and costs: specially commissioned farm management survey in Kara-Balta, June 1996,by TACIS advisers. Survey on 12 different farms (unit costs have been updated in 1997).

90

Annex DTable 4

Table 4. Financial Crop Budgets for Selected Crops (Sugarbeet, Luceme, Cotton)

Existing Technology Potential Improved TechnologyUnit Quantiy Unit Value Value Quantity UnitValue Value % increase

SugarbeetYield ton 12.4 - 16.5Processed main product ton 1.38 8,000 11,022 1.83 8,000 14,667 33%By-product: pulp ton 13.8 80 1,102 18.3 80 1,467 33%Mollasses 1.05 100 105 1.75 100 175Off-farm processing (6,000) (7,500)Seed kg 12 50 (600) 12 50.0 (600) 0%N fertilizers 120 2.2 (264) 200 2.2 (440)P fertilizers 75 2.2 (165) 100 2.2 (220)K fertilizers 20 2.6 (52) 50 2.6 (130)Pesticides 2 60 (120)Herbicides kg 2 110 (220) 2 110 (220) 0%Irrigation m3 5000 0.020 (100) 5000 0.020 (100) 0%Mechanized Cultivabon Is/ha 1 800 (800) 1 800 (800) 0%Mechanized Harvesting Istha 1 100 (100) 1 150 (150) 50%Transporation ton/SOkm 1.38 100 (138) 1.83 100 (183) 33%Sub-total cash costs (2,439) (2,963) 22%Gross Margin 3,791 5,845 54%Labour requirement day/ha 20 20 0%Retum per labour som/day 190 292 54%LucemeYield ton 6 500 3,000 9 500 4,500 50%Seed kg 5 40 (200) 5 50.0 (250) 25%P fertilizers 50 2.2 (110)K fertilizers 50 2.6 (130)Irrigation m3 5500 0.020 (110) 5500 0.020 (110) 0%Mechanized Cultivation Islha 1 200 (200) 1 200 (200) 0%Mechanized Harvesting Is/ha 1 400 (400) 1 600 (600) 50%No transportation 6.00 - - 9.00 - -

Sub-toal cash costs (910) (1,400) 54%Gross Margin 2,090 3,100 48%Labour requirement day/ha 50 50Retum per labour sornfday 42 62 48%CottonYield ton 2.2 2.64 20%Processed product ton 0.69 12,400 8,525 0.83 12,400 10,230By-product ton 1.4 1,200 1,650 1.7 1,200 1,980Off-farm processing (2,300) (2,300)Seed kg 135 3.6 (486) 120 3.6 (432)N fertilizers kg 500 2.2 (1,100) 400 2.2 (880)P fertilizers kg 125 2.2 (275) 200 2.2 (440)K fertilizers kg 20 2.6 (52) 100 2.6 (260)Farmnyard manure ton 0.9 300 (270) 0.9 300 (270)Pesticides 4 130 (520) 5 130 (650)Herbicides kg 6 70 (420)Irrigation m3 9000 0.020 (180) 9000 0.020 (180)Mechanized Cultivation Is/ha 1 1,250 (1,250) 1 1,400 (1,400)Transporation ton/50km 0.69 100 (69) 0.83 100 (83)Sub-total cash costs (4,202) (5,015) 19%Gross Margin 3,673 4,896 33%Labour requirement day/ha 170 180Return per labour 0orn/day 22 27 26%Basic assumptions:1) Yields: Existing technology corresponds to average yield 1994-1996 in the country; Improved technologyis conservativey assumed to reach the average yields from 1989 to 1991 (see Table 1)2) Source for input quantities and costs: specially commissioned farm management survey in Kara-Balta, June 1996,by TACIS advisers. Survey on 12 different farms (unit costs have been updated in 1997).

Annex D 9 1Table 5

Farm Model 1. Individual Household in Kara-Balta (1): Financial -Amounts in Som

W/o project With project Incremental % increase

total area (2), including 10 10 - 0%Wheat 4 4 - 0%Barley 2 2 - 0%Maize 1 1 - 0%Sugarbeet 1 1 - 0%Lucerne 2 2 - 0%Operating costs per ha (3):Wheat (3,278) (4,448) (1,170) 36%Barley (2,655) (3,740) (1,085) 41%Maize (3,150) (5,640) (2,490) 79%Sugarbeet (2,439) (2,963) (525) 22%Lucerne (910) (1,400) (490) 54%Total operating costs (25,831) (36,675) (10,845) 42%Credit Requirements (3) (5,422)Income per ha (4)Wheat 4i.830 6,870 2,040 42%Barley 3,798 5,548 1,750 46%Maize 5,900 9,850 3,950 67%Sugarbeet (net of processing) 6,229 8,808 2,579 41%Lucerne 3,000 4,500 1,500 50%Gross Margin (for the farm)Wheat 6,208 9,688 3,480 56%Barley 2,286 3,616 1,330 58%Maize 2,750 4,210 1,460 53%Sugarbeet 3,791 5,845 2,054 54%Lucerne 4,180 6,200 2,020 48%Total Gros margin 19,215 29,559 10,344 54%

Fixed Costs (@ Som 100 per ha) 1,000 1,000 . 0%

Net income before taxes 18,215 28,559 10,344 57%

Land Tax (c} Som 100 per ha) 1,000 1,000 0%

Net income after tax 17,215 27,559 10,344 60%

Net income per person (6 members) 2,869 4,593 1,724 60%

Net income per ha 1,721 2,756 1,034 60%(1) Source: Specially commissioned farm survey in Kara-Balta, June 1996 by TACIS advisers(2) Synthesis of individual farms interviewed during the su .ey(3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings(4) Source: Tables 3 and 4

Calculation of Financial Rate of ReturnYear 1 2 3 4-20

Investment Cost (a) (9,531)Recurrent Cost (b) (713) (713) (713) (713)Net Income w/o project (c) 17,215 17,215 17,215 17,215Net Income with Project (c) 17,215 20,663 24,111 27,559Incremental Net Benefit - 3,448 6,896 10,344Incremental Net Benefit due to Project (d) - 1,379 2,758 4,138

Net Benefit Stream (W/P) (10,244) 666 2,045 3,424FRR 25%(a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605)(b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605)(c) See Table Above(d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits,and the Rural finance project the remaining 40%.

Annex D 0Table 6

Farm Model 2. Peasant farm in Kara-Balta (1) Financial - Amounts in Som


total area (2), including 47 47 0%Wheat 20 20 0%Barley 16 16 0%Maize 2 2 0%Sugarbeet 3 3 0%Lucerne 6 6 0%Operating costs per ha (3):Wheat (3,278) (4,448) (1,170) 36%Barley (2,655) (3,740) (1,085) 41%Maize (3,150) (5,640) (2,490) 79%Sugarbeet t2,439) (2,963) (525) 22%Lucerne (910) (1,400) (490) 54%Total operating costs (127,116) (177,370) (50,254) 40%Credit Requirements (3) (25,127)Income per ha (4)Wheat 4,830 6,870 2,040 42%Barley 3,798 5,548 1,750 46%Maize 5,900 9,850 3,950 67%Sugarbeet (net of processing) 6,229 8,808 2,579 41%Lucerne 3,000 4,500 1,500 50%Gross MarginWheat 31,040 48,440 17,400 56%Barley 18,288 28,928 10,640 58%Maize 5,500 8,420 2,920 53%Sugarbeet 11,372 17,535 6,163 54%Lucerne 12,540 18,600 6,060 48%Total Gros margin 78,740 121,923 43,183 55%

Fixed Costs (@ Som 100 per ha) 4,700 4,700 - 0%


Land Tax (@ Som 100 per ha) 4,700 4,700 - 0%


Net income per household (5 HHs) 13,868 22,505 8,637 62%


Net income per ha 1,475 2,394 919 62%(1) Source: Specially commissioned farm survey in Kara-Balta, June 1996 by TACIS advisers(2) Synthesis of individual farms interviewed during the survey(3) Assumed to be 50% of incremental input req ,rements, the remaining 50% being financed by savings(4) Source: Tables 3 and 4


Investment Cost (a) (9,531)Recurrent Cost (b) (713) (713) (713) (713)Net Income per HH wlo project (c) 13.868 13,868 13,868 13,868Net Income per HH with Project (c) 13,868 16,747 19,626 22,505Incremental Net Benefit - 2,879 5,758 8,637Incremental Net Benefit due to Project (dl 1,152 2,303 3 455

Net Benefit Stream (W/P) (10,244) 438 1,590 2,741FRR | 21%(a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605)(b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605)(c) See Table Above(d) Only 40% arre attributed to the project. the Irrigation would bring 20% of benefits,and the Rural finance project the remaining 40%.

Annex D 93Table 7

Farm Model 3. Individual Household in Osh (1): Financial - Amounts in Som

total area (2), including 6 6 0%Wheat 2 2 0%Cotton 2 2 0%Maize 1 1 0%.Lucerne 1 1 - 0%Operating costs per ha (3):Wheat (3,278) (4,448) (1,170) 36%Cotton (4,202) (5,015) (813) 19%Maize (3,150) (5,640) (2,490) 79%Lucerne (910) (1,400) (490) 54%Total operating costs (35,282) (49,397) (14,116) 40%Credit Requirements (3) (7,058)Income per ha (4)Wheat 4,830 6,870 2,040 42%Cotton (net of processing) 7,875 9,910 2,035 26%Maize 5,900 9,850 3,950 67%Lucerne 3,000 4,500 1,500 50%Gross MarginWheat 3,104 4,844 1,740 56%Cotton 7,347 9,791 2,445 33%Maize 2,750 4,210 1,460 53%Lucerne 2,090 3,100 1,010 48%Total Gros margin 15,291 21,945 6,655 44%

Fixed Costs (@ Som 100 per ha) 600 600 - 0%


Land Tax (@ Som 100 per ha) 600 600 - 0%



Net income per ha 2,348 3,458 1,109 47%(1) Source: Specially commissioned farm survey in Osh, May 1996 by TACIS advisers(2) Synthesis of individual farms interviewed during the survey(3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings(4) Source: Tables 3 and 4


Investment Cost (a) (9,531)Recurrent Cost (b) (713) (713) (713) (713)Net Income per HH w/o project (c) 14,091 14,091 14,091 14,091Net Income per HH with Project (c) 14,091 16,309 18,527 20,745Incremental Net Benefit - 2,218 4,436 6,655Incremental Net Benefit due to Project (d) - 887 1,775 2,662

Net Benefit Stream (WIP) (10,244) 174 1,061 1,949FRR 14%(a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605)(b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605)(c) See Table Above(d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits,and the Rural finance project the remaining 40%.

Annex DTable 8 94

Farm Model 4. Family Association in Osh (1) Financial - Amounts in Som

'M j W rcrMenitap increase

total area (2), including 20 20 - 0%Wheat 8 8 - 0%Cotton 6 6 - 0%Maize 4 4 - 0%Lucerne 2 2 - 0%Operating costs per ha (3): Wheat (3,278) (4,448) (1,170) 36%Cotton (4,202) (5,015) (813) 19%Maize (3,150) (5,640) (2,490) 79%Lucerne (910) (1,400) (490) 54%Total operating costs (121,714) (168,516) (46,802) 38%Credit Requirements (3) (23,401)Income per ha (4)Wheat 4,830 6,870 2,040 42%Cotton (net of processing) 7,875 9,910 2,035 26%Maize 5,900 9,850 3,950 67%Lucerne 3,000 4,500 1,500 50%Gross MarginWheat 12,416 19,376 6,960 56%Cotton 22,040 29,373 7,334 33%Maize 11,000 16,840 5,840 53%Lucerne 4,180 6.200 2,020 48%Total Gros margin 49,636 71,789 22,1154 45%

Fixed Costs (@ Som 100 per ha) 2,000 2,000 0%


Land Tax (c Som I 00 per ha) 2,000 2,000 - 0%



Net income per person (30 members) 1,521 2,260 738 49%

Net income per ha 2,282 3,389 1,108 49%(1) Source: Specially commissioned farm survey in Osh, May 1996 by TACIS advisers(2) Synthesis of individual farms interviewed during the survey(3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings(4) Source: Tables 3 and 4


Investment Cost (a) (9,531)Recurrent Cost (b) (713) (713) (713) (713)Net Income per HH w/o project (c) 11,409 11,409 11,409 11,409Net Income per HH with Project (c) 11,409 13,255 15,101 16,947Incremental Net Benefit - 1,846 3,692 5,538Incremental Net Benefit due to Project (d) 738 1,477 2,215

Net Benefit Stream (10,244) 25 764 1,502FRR 10%(a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605)(b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605)(c) See Table Above(d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits,and the Rural finance project the remaining 40%.

95

Annex D

Table 9

Calculation of Economic Prices for main inputs and outputs

Wheat Maize Sugar Cotton Urea Super P otassium

Parity Price Import Import Import Export Import Import Import2005 World Price in 1990 price (1) US$Ston 125 98 225 1,458 136 118 902005 World Price in 1997 price (2) US$ 1 ton 161 125 289 1,869 163 141 108

Quality Adjustment % 10% 10% 10% 0% 0% 0% 0%Insurance/freight US$ /ton 20 20 40 (30) 10 10 10CIF in USS USS/ ton 164 132 300 1,839 173 151 118CIF in Som (@ US$S=Som 17.5) Som I ton 2,878 2,319 5,249 32,185 3,022 2,643 2,061

Handling at boarder (at 3%) Som / ton 86 70 157 (966) 91 79 62Marginofimporter(at5%) Som/ton 144 116 262 (1,609) 151 132 103Transportfrom Boarder to mill (3) Som/ton 100 100 100 (100) 100 100 100Economic Price at mill gate Som I ton 3,208 2,604 5,769 29,510 3,364 2,954 2,326

Processing cost (4) Som / ton 4,000 (9,443)

Transport from producerto mill (5) Som I ton (100) (100) (100) 100 (100) (100) (100)Bagging (1.5%) Som / ton (48) (39) (87)Economic Farm gate price Som/ton 3,060 2,465 9,583 20,167 3,264 2,854 2,226

Financial Pnice Sam/ton 2,500 1,600 8,000 12,400 2,200 2,200 2,600Conversion Factor Som/ton 122% 164% 120% 163% 148% 1300% 2 86%

(1) Commodity Markets and the Developing Countries, a WB Quarteriy, November 1997. Average between 2005 and 2010projected prices in 1990 constant dollars. See Table Al. For instance: wheat price is average between US$ 128.7 and 121.7 per ton.

(2) Conversion of 1990 prices into 1997 prices multiplying by the G-5 MUV indexes: 128.2 for agriculture and 119.8 forfertilizers (base 100 in 1990). See Table A3

(3) Average of 100 km at Som 1 per ton/km (on major roads)

(4) @ Som 4,000 per ton of sugar. @ 32% of price for cotton

(5) Average of 50 km at Som 2 per ton/km (on rural roads)

96

Annex DTable 10

Economic Crop Budgets for Selected Crops (Wheat Barley, Maize)

Existing Technology Potential Improved TechnologyUnit Quantity Unit Value Value Quantity Unit Value Value' % increase

Winter wheatYield ton 1.9 3,060 5,814 2.7 3,060 8,262 42%By-product ton 2 40 80 3 40 120 50%Seed kg 230 4 (920) 200 4.0 (800) -13%N fertilizers 150 3.26 (490)P fertilizers 150 2.85 (428)K fertilizers 100 2.23 (223)Pesticides 2 100 (200)Herbicides kg 2 150 (300) 4 150 (600) 100%Irrigation m3 3400 0.100 (340) 3400 0.100 (340) 0%Mechanized Cultivation Is/ha 1 1,200 (1,200) 1 1,200 (1,200) 0%Mechanized Harvesting Is/ha 1 1,500 (1,500) 1 1,800 (1,800) 20%Transporation ton/50km 1.9 100 (190) 2.7 100 (270)Sub-total cash costs (4,450) (6,350) 43%Labour Cost 20 20 (400) 20 20 (400)Gross Margin 1,044 1,632 56%Labour requirement day/ha 20 20 0%

BarleyYield ton 1.5 2,500 3,750 2.2 2,500 5,500 47%By-product ton 1.2 40 48 1.2 40 48 0%Seed kg 170 4 (680) 160 4.0 (640) -6%N fertilizers 150 3.26 (490)P fertilizers 100 2.85 (285)K fertilizers 50 2.23 (111)Pesticides 1 100 (100)Herbicides kg 1.5 150 (225) 2 150 (300) 33%Mechanized Cultivation Is/ha 1 1,200 (1,200) 1 1,200 (1,200) 0%Mechanized Harvesting Is/ha 1 1,200 (1,200) 1 1,500 (1,500) 25%Transporation ton/50km 1.5 100 (150) 2.2 100 (220)Sub-total cash costs (3,455) (4,846) 40%Labour Cost 20 20 (400) 20 20 (400)Gross Margin (57) 302Labour requirement day/ha 20 20

MaizeYield ton 3.8 2,465 9,367 6.3 2,465 15,530 66%By-product ton 5 40 200 10 40 400 100%Seed kg 25 8 (200) 25 8.0 (200) 0%N fertilizers 300 3.26 (979)P fertilizers 200 2.85 (571)K fertilizers 100 2.23 (223)Pesticides 1 100 (100)Herbicides kg 4 70 (280)Irrigation m3 3500 0.100 (350) 3500 0.100 (350) 0%Mechanized Cultivation Is/ha 1 1,500 (1,500) 1 1,500 (1,500) 0%Mechanized Harvesting Is/ha 1 2,250 (2,250) 1 3,000 (3,000) 33%Transporation ton/50km 3.8 100 (380) 6.3 100 (630)Sub-total cash costs (4,680) (7,833) 67%Labour Cost 40 20 (800) 40 20 (800)Gross Margin 4,087 7,298 79%Labour requirement day/ha 40 40Retum per labour som/day 102 1 182 79%Basic assumptions:1) Yields : Existing technology corresponds to average yield 1994-1996 in the country; Improved technologyis conservativey assumed to reach the average yields from 1989 to 1991 (see Table 1)2) Source for input quantities and costs: specially commissioned farm management survey in Kara-Balta, June 1996,by TACIS advisers. Survey on 12 different farms (unit costs have been updated in 1997).

97

Annex DTable 11

Economic Crop Budgets for Selected Crops (Sugarbeet, Lucerne, Cotton)

Existing Technology Potential Improved TechnologyUnit Quantity Unit Value Value Quantity Unit Value Value % increase

SugarbeetYield ton 12.4 - 16.5Processed main product ton 1.38 9,583 13,203 1.83 9.583 17,568 33%By-product: pulp ton 13.8 80 1.102 18.3 80 1,467 33%Mollasses 1.05 100 105 1.75 100 175Off-farm processing 1.38 6,000 (8,267) 1.83 6,000 (11,000)Seed kg 12 50 (600) 12 50.0 (600) 0%N fertilizers 120 3.3 (392) 200 3.3 (653)P fertilizers 75 2.9 (214) 100 2.9 (285)K fertilizers 20 2.2 (45) 50 2.2 (111)Pesticides 2 60 (120)Herbicides kg 2 110 (220) 2 110 (220) 0%Irrigation m3 5000 0.100 (500) 5000 0.100 (500) 0%Mechanized Cultivation Is/ha 1 1,200 (1,200) 1 1,200 (1,200) 0%Mechanized Harvesting Is/ha 1 150 (150) 1 225 (225)Transporation ton/50km 1.38 100 (138) 1.83 100 (183)Sub-total cash costs (3,458) (4,098) 19%Labour Cost 20 20 (400) 20 20 (400)Gross Margin 2,285 3,712 62%Labour requirement day/ha 20 20 0%Retum per labour som/day 114 186 62%

LucerneYield ton 6 500 3,000 9 500 4,500 50%Seed kg 5 40 (200) 5 50.0 (250) 25%P fertilizers 50 2.9 (143)K fertilizers 50 2.2 (111)Irrigation m3 5500 0.100 (550) 5500 0.100 (550) 0%Mechanized Cultivation Is/ha 1 300 (300) 1 300 (300) 0%Mechanized Harvesting Is/ha 1 600 (600) 1 900 (900) 50%No transportation 6.00 - - 9.00 -

Sub-total cash costs (1,650) (2,254) 37%Labour Cost 50 20 (1,000) 50 20 (1,000)Gross Margin 350 1,246 256%Labour requirement day/ha 50 50Return per labour som/day 7 25 256%

CottonYield ton 2.2 2.64 20%Processed product ton 0.69 20,167 13,865 0.83 20,167 16,638By-product ton 1.4 1,200 1,650 1.7 1,200 1,980Off-farm processing (3,450) (3,450)Seed kg 135 3.6 (486) 120 3.6 (432)N fertilizers kg 500 3.3 (1,632) 400 3.3 (1,306)P fertilizers kg 125 2.9 (357) 200 2.9 (571)K fertilizers kg 20 2.2 (45) 100 2.2 (223)Farmyard manure ton 0.9 300 (270) 0.9 300 (270)Pesticides 4 130 (520) 5 130 (650)Herbicides kg 6 70 (420)Irrigation m3 9000 0.100 (900) 9000 0.100 (900)Mechanized Cultivation Is/ha 1 1,875 (1,875) 1 2,100 (2,100)Transporation ton/50km 0.69 100 (69) 0.83 100 (83)Sub-total cash costs (6,153) (6,953) 13%Labour Cost 170 20 (3.400) 180 20 (3,600)Gross Margin 2,512 4,614 84%Labour requirement day/ha 170 180Return per labour _ somday 15 26 73%Basic assumptions:1) Yields: Existing technology corresponds to average yield 1994-1996 in the country; Improved technologyis conservativey assumed to reach the average yields from 1989 to 1991 (see Table 1)2) Source for input quantities and costs: specially commissioned farm management survey in Kara-Balta, June 1996,by TACIS advisers. Survey on 12 different farms (unit costs have been updated in 1997).

Annex D 98Table 12

Farm Model 1. Individual Household in Kara-Balta (1) - Economic - Amounts in Som


total area (2), including 10 10 - 0%Wheat 4 4 - 0%Barley 2 2 - 0%Maize 1 1 - 0%Sugarbeet 1 1 - 0%Luceme 2 2 - 0%

Operating costs per ha (3):Wheat (4,450) (6,350) (1,900) 43%Barley (3,455) (4,846) (1,391) 40%Maize (4,680) (7,833) (3,153) 67%Sugarbeet (3,458) (4,098) (640) 19%Lucerne (1,650) (2,254) (604) 37%Total operating costs (36,148) (51,532) (15,384) 43%Credit Requirements (3) (7,692)Income per ha (4)Wheat 5,894 8,382 2,488 42%Barley 3,798 5,548 1,750 46%Maize 9,567 15,930 6,363 67%Sugarbeet (net of processing) 6,143 8,210 2,066 34%Lucerne 3,000 4,500 1,500 50%Gross Margin (for the farm)Wheat 5,777 8,128 2,351 41%Barley 686 1,403 717 105%Maize 4,887 8,098 3,210 66%Sugarbeet 2,685 4,112 1,427 53%Lucerne 2,700 4,492 1,792 66%Total Gros margin 16,735 26,233 9,498 57%



Land Tax (@ Som 100 per ha) - 0%



Net Income per ha 1,524 2,473 950 62%(1) Source: Specially commissioned farm survey in Kara-Balta, June 1996 by TACIS advisers(2) Synthesis of individual farms interviewed during the suivey(3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings(4) Source: Tables 3 and 4

Calculation of Economic Rate of ReturnYear 1 2 3 4-20

Investment Cost (a) (9,531)Recurrent Cost (b) (713) (713) (713) (713)Net Income w/o project (c) 15,235 15,235 15,235 15,235Net Income with Project (c) 15,235 18,401 21,567 24,733Incremental Net Benefit - 3,166 6,332 9,498Incremental Net Benefit due to Project (d) 1,266 2,533 3,799

Economic Stream (10,244) 553 1,819 3,086Economic Rate of Return 23%(a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605)(b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605)(c) See Table Above(d) Only 40% arre attributed to the project. the irrigation would bring 20% of benefits,and the Rural finance project the remaining 40%.

Annex D 99Table 13

Farm Model 2. Peasant farm in Kara-Balta (1) - Economic - Amounts in Som


total area (2), including 47 47 - 0%Wheat 20 20 - 0%Barley 16 16 - 0%Maize 2 2 - 0%Sugarbeet 3 3 - 0%Lucerne 6 6 - 0%Operating costs per ha (3):Wheat (4,450) (6,350) (1,900) 43%Bariey (3,455) (4,846) (1,391) 40%Maize (4,680) (7,833) (3,153) 67%Sugarbeet (3,458) (4,098) (640) 19%Lucerne (1,650) (2,254) (604) 37%Total operating costs (173,914) (246,027) (72,113) 41%Credit Requirements (3) (36,057)Income per ha (4)Wheat 5,894 8,382 2,488 42%Barley 3,798 5,548 1,750 46%Maize 9,567 15,930 6,363 67%Sugarbeet (net of processing) 6,143 8,210 2,066 34%Lucerne 3,000 4,500 1,500 50%Gross MarginWheat 28,883 40,640 11,757 41%Barley 5,488 11,228 5,740 105%Maize 9,775 16,195 6,420 66%Sugarbeet 8,056 12,336 4,280 53%Lucerne 8,100 13,476 5,376 66%Total Gros margin 60,302 93,875 33,573 56%



Land Tax (@ Som 100 per ha) 0%

Net income after tax S3,252 86,825 33,573 63%



Net income per ha 1,133 1,847 714 63%(1) Source: Specially commissioned farm survey in Kara-Balta, June 1996 by TACIS advisers(2) Synthesis of individual farms interviewed during the survey(3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings(4) Source: Tables 3 and 4


Investment Cost (a) (9,531)Recurrent Cost (b) (713) (713) (713) (713)Net Income per HH w/o project (c) 10,650 10,650 10,650 10,650Net Income per HH with Project (c) 10,650 12,889 15,127 17,365Incremental Net Benefit - 2,238 4,476 6,715Incremental Net Benefit due to Project (d) 895 1,791 2,686

Economic Stream (10,244) 182 1,077 1.973Economic Rate of Return 15%(a) Total Investment Cost of the project (US$ 18.8 million) divided by the number of households (33,605)(b) Annual Recurrent Cost of the project (US$ 1.41 million) divided by the number of households (33,605)(c) See Table Above(d) Only 40% arre attributed to the project. the irrigation ..ould bring 20% of benefits,and the Rural finance project the remaining 40%.

Annex DTable 14 100

Table 7: Farm Model 3. Individual Household in Osh (1) - Economic - Amounts in Som

W/o p!oject With project Incremental % increase

total area (2), including 6 p I 0%Wheat 2 2 0%Cotton 2 2 0%Maize 1 1 - 0%Lucerne 1 1 - 0%Operating costs per ha (3):Wheat (4,450) (6,350) (1,900) 43%Cotton (6,153) (6,953) (800) 13%Maize (4,680) (7,833) (3,153) 67%Lucerne (1,650) (2,254) (604) 37%Total operating costs (L-,016) (69,927) (19,911) 40%Credit Requirements (3) (9,956)Income per ha (4)Wheat 5,894 8.382 2,488 42%Cotton (net of processing) 12,065 15,168 3,103 26%Maize 9,567 15,930 6,363 67%Lucerne 3,000 4,500 1,500 50%Gross MarginWheat 2,888 4,064 1,176 41 'XoCotton 11,824 16,429 4,605 39%Maize 4,887 8,098 3,210 66%Lucerne 1,350 2,246 896 66%Total Gros margin 20,950 30,837 9,887 47%

Fixed Costs (@ Som 100 per ha) 900 900 - 0%


Land Tax (@ Som 100 per ha) - 0%



Net income per ha 3,342 4,989 1,648 49%(1) Source: Specially commissioned farm survey in Osn, May 1996 by TACIS advisers(2) Syntresis of individual farms interviewed during the iurvey(3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings(4) Source: Tables 3 and 4


Investment Cost (a) (9,531)RecurrentCost(b) (713) (713) (713) (713)Net Income per HH w/o project (c) 20,050 20,050 20,050 20,050Net Income per HH with Project (c) 20,050 23,345 26,641 29,937Incremental Net Benefit - 3,296 6,591 9,887Incremental Net Benefit due to Project (d) 1,318 2,637 3.955


Annex DTable 15 101

Table 8: Farm Model 4. Family Association in Osh (1) - Economic -Amounts in Som


total area (2), including 20 20 0%Wheat 8 8 - 0%Cotton 6 6 - 0%Maize 4 4 - 0%Lucerne 2 2 - 0%Operating costs per ha (3):Wheat (4,450) (6,350) (1,900) 43%Cotton (6,153) (6,953) (800) 13%Maize (4,680) (7,833) (3,153) 67%Lucerne (1,650) (2,254) (604) 37%Total operating costs (172,903) (238,643) (65,739) 38%Credit Requirements (3) (32,870)Income per ha (4)Wheat 5 894 8,382 2,488 42%Cotton (net of processing) 12,065 15,168 3,103 26%Maize 9,567 15,930 6,363 67%Lucerne 3,000 4,500 1,500 50%Gross MarginWheat 11,553 16,256 4,703 41%Cotton 35,472 49,287 13,815 39%Maize 19,550 32,391 12,841 66%Lucerne 2,700 4,492 1,792 66%Total Gros margin 69,275 102,425 33,151 48%

Fixed Costs (@ Som 100 per ha) 3,000 3,000 0%


Land Tax (@ Som 100 per ha) _ 0%

Net Income after tax 66,275 99,425 33,151 50%



Net income per ha 3,314 4,971 1,658 50%(1) Source: Specially commissioned farm survey in Osh May 1996 by TACIS advisers(2) Synthesis of individual farms interviewed during the s irvey(3) Assumed to be 50% of incremental input requirements, the remaining 50% being financed by savings(4) Source: Tables 3 and 4


Investment Cost (a) (9,531)Recurrent Cost (b) (713) (713) (713) (713)Net Income per HH w/o project (c) 13,255 13,255 13,255 13,255Net Income per HH with Project (c) 13,255 15,465 17,675 19,885Incremental Net Benefit - 2,210 4,420 6,630Incremental Net Benefit due to Project (d) - 884 1,768 2,652


102

Annex D3

Table 16

Economic Analysis: Base Scenario and Switching value 1 Plow coverage rate)

PYl PY2 PY3 PY4 PY5 PY6 PY7 PY8 PYg PY', PY11-20

Project Economic CostsInvestment costs (1) (US$'000) 7,590 6,690 3160 1,620 810

Recurrent Costs (1) (US$000) 1,350 1,540 1,540 1,490 1,410 1,410 1,410 1,410 1,410 1410 1,410

Sub-total Economic Costs 8,940 8,230 4,700 3,110 2,220 1,410 1,410 1,410 1,410 1,410 1,410

Base Scenario: Expected participation and adoption rates (2)Number of participating HHs (3) 11.202 22,403 33,605 33.605 33,605 33,605 33,605 33,605 33,605 33605

Net Economic Benefit per HH (Som) (4) 8,182

Net Economic Benefit per HH (US$) 468

Net Benefit per HH attributed to project (US$) (5) 187

Sub-total Economic Benefits - 2,095 4,190 6,285 6,285 6,285 6,285 6,285 6,285 6,285 6,285

NET ECONOMIC FLOW BASE SCENARIO (8,940) (6,135) (510) 3,175 4,065 4,875 4,875 4,875 4,875 4,875 4,875

Net Present Value (12%) 9,929Economic Rate of Return (20 years) 20 l

Switching Value 1: Reduced Participating Rate (6)Number of participating HHs (4) 8,103 16,207 24,310 24,310 24,310 24,310 24,310 24.310 24,310 24,310

Net Economic Benefit per HH (US$) (5) 468

Net Benefit per HH attributed to project (US$) (6) 187Sub-total Economic Benefits - 1,516 3,031 4,547 4,547 4,547 4,547 4,547 4,547 4,547 4,547

NET ECONOMIC FLOW SWITCHING VALUE 1 (8,940) (6,714) (1,669) 1,437 2,327 3,137 3,137 3,137 3,137 3,137 3,137

Net Present Value (12%) (168)IEconomic Rate of Return (20 years) 12%

(1) Source: COSTAB in constant terms (w/o price contingencies) including physical contingencies. Individual farm models in tables 5-8 and 12-15 are based on the total investment

cost of US$18.8 million (including physical contingencies) and annual recurring cost of US$1.41 million. ERR of the project as a whole is based on a slightly higher investment cost

at US$19.87 million (induding physical contingencies), and recurring costs of US$1.35 million in projectyear 1 and US$1.54 million from project year2 onwards mainly to include

the cost of issuance of land certificates added during negotiations. This increase in the investment/recurring costs will only marginally reduce FRRsIERRs for individual

farm models.(2) Percentages are derived from conservative estimates of the coverage of existing services evaluated between 47% and 70% (see IFAD pre-appraisal report),

Key parameters are the following:i) Number of Farming Households at full development (3) 143,000 (estimates of the MAWR: see I FAD pre-appraisal report)

ii) Coverage Rate et full development 47%

iii) Adoption Rate of Proposed Technologies 50%iv) Combined Participating Rate [ii) x iii)] 24%

v) Incremental Number of beneficiaries at full dvt |i) x iv)] 33,605

(3) Progressively phased in to reach in 4 years the previously estimated participattng number of households(4) Average economic benefits per HH of the four economic farm models (obtained by replacing financial prices by economic prices). Available on file.(5) About 40% of previous: the irrigation would bring 20% of benefits (10% of yield increases in addition to the main benefit of that project which is to stop any further

deterioration of the scheme) and the Rural finance project the remaining 40%.(6) Assuming a reduced coverage rate or a reduced adoption rate of proposed technologies resulting in a reduced participation rate;

Key parameters are the following:i) Number of Farming Households at full development 143,000

ii) Coverage Rate et full development 34%iii) Adoption Rate of Proposed Technologies 50%iv) Combined Participating Rate [ii) x iii)J 17%

v) Incremental Number of beneficiaries at full dvt [i) x iv)] 24,310

103

Annex DTable 17

Economic Analysis: Base Scenario and Switching value 2 and 3: reduced benefits and Increased costs

PYl PY2 PY3 PY4 PY5 PYW PY7 PY8 PY P PY10 PY11-20

Project Economic CostsInvestment costs (1) (US$'000) 7,590 6,690 3,160 1,620 810RecurrentCosts(1)(US$'000) 1,350 1,540 1,540 1,490 1,410 1,410 1,410 1,410 1,410 1,410 1,410Sub-total Economic Costs 8,940 8,230 4,700 3,110 2,220 1,410 1,410 1,410 1,410 1,410 1,410

Switching Value 2: Reduced Benefits (2)Number of participating HHs (3) 11,202 22,403 33,605 33,605 33,605 33,605 33,605 33,605 33,605 33,605Net Economic Benefit per HH (Som) (4) 5,957Net Economic Benefit per HH (US$) 340Net Benefit per HH attributed to project (US$) (5) 136Sub-total Economic Benefits - 1,525 3,050 4,575 4,575 4,575 4,575 4,575 4,575 4,575 4,575NET ECONOMIC FLOW SWITCHING VALUE 2 (8,940) (6,705) (1,650) 1,465 2,355 3,165 3,165 3,165 3,165 3,165 3,165Net Present Value (12%) 0Economic Rate of Return (20 years) 12°

Switching Value 3: Higher costs than expected (6)Inflated Investment costs 10,426 9,190 4,341 2,225 1,113Intlated RecurrentCosts 1,854 2,115 2,115 2,047 1,937 1,937 1,937 1,937 1,937 1,937 1,937Sub-total Inflated Economic Costs 12,280 11,305 6,456 4,272 3,050 1,937 1,937 1,937 1,937 1,937 1,937Number of participating HHs (3) 11,202 22,403 33,605 33,605 33,605 33,605 33,605 33,605 33,605 33,605Net Economic Benefit per HH (US$) (4) 468

Net Benefit per HH attributed to project (US$) 187Sub-total Economic Benefits - 2,095 4,190 6,285 6,285 6,285 6,285 6,285 6,285 6,285 6,285NET ECONOMIC FLOW SWITCHING VALUE 3 (12,280) (9,210) (2.266) 2,013 3,236 4,348 4,348 4,348 4,348 4,348 4,348Net Present Value (12%) (0) Economic Rate of Return (20 years) 12%1

(1) Source: COSTAB in constant terms (w/o prce contingencies) including physical contingencies. All investment costs included. Recurrent expenses continue after PY6(2) Assuming lower increases in farm incomes than expected. Key assumptions are the following:

i) NumberofFarming Households at full development (3) 143,000 (estimates of the MAWR: see IFAD pre-appraisal report)II) Coverage Rate et full development 47%iii) Adtoption Rate of Proposed Technologies 50%iv) Combined Participating Rate [ii) x iii)] 24%

v) Incremental Number of beneficiaries at full dvt [i) x iv)J 33,605vi) Lower Farm Benefits than Expected by (2): 27%(3) Progressively phased in to reach in 4 years the previously estimated participating number of households(4) Average economic benefits per HH of the four economic farm models (obtained by replacing financial prices by economic prices). Available on file.(5) About 40% of previous: the irrigation would bring 20% of benefits (10% of yield increases in addition to the main benefit of that project which is to stop any furtherdeterioration of the scneme) and the Rurai finance project the remaining 40%.

(6) Assuming unexpected increases in project investment and recurrent costs. Key assUmptions are the following:i) Number ot Farming Housenolds at full development 143.000ii) Coverage Rate et full development 47%iii) Adoption Rate of Proposed Technologies 50%iv) Combined Participating Rate [ii) x iii)J 24%

v) Incremental Number of beneficiaries at full dvt [i) x iv)3 33.605vi) Higher Costs than expected by 37%

IBRD 28979

705 75~

ED

K A Z A K H S T A N

K ~T A2omv r A A K S T> Ao Nlo T. ~ ~ ~ ~ .

\\-}giv .

p ,x '"'" '<;<,<, oTxogw _-

0 titi t : 0 r00;;;fjil- 005Q^;00VIT Sii ^) C;;;|;.;{: .AGRICULTURAL SUPPORT SERVICES PROJECT

ToDusbenbe TAJIKISTAN os8 = g - tE_;; X

PR ECTCOMPONEN~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~POJET OMONNT

70~~~~~~~~ ' ' oXDsabei;" g3T Mw

A CROP PROTECT ON/SEED DEVELOPMENT

gX / ei KAZAKHSTAN , RUSSIAo .X MARKET \NFORMATION~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ MRRT IPOMAIO

K A C A K H S T A N LA N D A N D A O R A R A N REAPAR MI

H'

R,<iiMNo ILOMEIESITOTER RAS

N.- -w 6 t ' B -D I,RE:'o 2 S O ID0

OTHER ROADS

ISAI

R 8Jk/~L OBLAST CAPITALS

ISLAMLIC T

._. -\' Pp4 INA Tso&Mdced ~mF<G erMu i NATIONAL CAPITAL

ROHI IRA "5 CIN P~, xxso,,,on i,omodo,yoA,SAoFl, z epao,,b o, En - OBDAST BOUNDARIES

AFGHANISTAN C,. "R '0'"" en seeorc pbcotcsb~drsn -l - INTERNATIONAL ROUNDARIES

U Z BE I S