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Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 83527-BD

INTERNATIONAL DEVELOPMENT ASSOCIATION

RESTRUCTURING PAPER

ON A

PROPOSED PROJECT RESTRUCTURING

OF THE

NATIONAL AGRICULTURAL TECHNOLOGY PROJECT

CREDIT NO. 4386-BD(Approved on February 7, 2008)

TO THE

PEOPLE'S REPUBLIC OF BANGLADESH

FEBRUARY 12, 2014

Sustainable Development DepartmentAgriculture, Irrigation and Natural Resources UnitBangladesh Country Management UnitSouth Asia Region

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bankauthorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective December 29, 2013)

Currency Unit = Bangladeshi Taka (tk)Taka 77.75 = US$1

US$ 1.539940 = SDR 1

FISCAL YEARJuly 1 - June 30

ABBREVIATIONS AND ACRONYMS

AGDP Agricultural Gross Domestic Product IPM Integrated pest managementAPL Adaptable Program Loan KGF Krishi Gobeshona FoundationAWD Alternate Wetting and Drying m millionBARC Bangladesh Agricultural Research Council MT metric tonCCMC Community Collection Marketing Center M&E Monitoring and EvaluationCGP Competitive Grants Program MIS Management Information SystemCIG Common Interest Group NAEP National Agricultural Extension PolicyDAE Department of Agricultural Extension NARS National Agricultural Research SystemDLS Department of Livestock Services NATP National Agricultural Technology ProjectDOF Department of Fisheries NATS National Agricultural Technology SystemEMF Environmental Management Framework NPV Net Present ValueEOP End of Project PCT Procurement Core TeamERR Economic Rate of Return PCU Project Coordination UnitFIAC Farmers' Information and Advisory Center PDO Project Development ObjectiveFM Financial Management PIU Project Implementation UnitFRR Financial Rate of Return PSC Project Steering CommitteeGAAP Governance and Accountability Action PVB present value of benefit

Plans PVC present value of costGOB Government of Bangladesh PY project yearHa hectare RDPP Revised Development Project ProposalHortex Horticulture Export Development RYGM Rice Yield Gap Minimization

Foundation SCDC Supply chain development componentHVC High Value Crops SMF Social Assessment and SocialHH Household Management FrameworkIA Implementing Agency SPGR Sponsored Public Goods ResearchIDA International Development Association USAID United States Agency for InternationalIFAD International Fund for Agricultural Development

Development WOP without project

Regional Vice President: Philippe Le Houerou

Country Director: Johannes C.M. Zutt

Sector Director: John H. SteinSector Manager: Simeon K. Ehui

Task Team Leader: Ousmane Seck/Pushina Kunda Ng'andwe

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BANGLADESH

RESTRUCTURING FOR THE NATIONAL AGRICULTURAL TECHNOLOGYPROJECT

CONTENTS

A. SUMMARY ...................................................... 5

B. BACKGROUND AND RATIONAL FOR RESTRUCTURING .................. 6

C. PROJECT STATUS ...................... 7........ ................. 7

D. PROPOSED CHANGES ....................... 8...... ............... 8

E. APPRAISAL SUMMARY ................ 11.... .................. 11

ANNEX 1. Results Framework and Monitoring ................................. 18

ANNEX 2. Operational Risk Assessment Framework (ORAF)................ ........ 23

ANNEX 3. Economic and Financial Analysis. .......................... ........ 25

ANNEX 4. Revised Project Costs and Financing.......... ................ ..... 38

ANNEX 5. Proposed Reallocation (SDR)...................................... 39

ANNEX 6. Geographic coverage of the original project and the restructured project............. 40

Annex 6(a). List of Selected Upazilas & Districts for NATP -1........................... 40

Annex 6(b). List of Selected Upazilas & Districts Being Added in the Restructuring ............ 41

ANNEX 7. Governance and Accountability Action Plan........................... 42

ANNEX 8. NATP (IDA 43860): Refund Status/Actions taken ......................... 44

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BANGLADESH

RESTRUCTURING OF THE NATIONALAGRICULTURAL TECHNOLOGY PROJECT

DATA SHEET

Basic InformationDate: February 12, 2014 Country Director: Johannes Sectors: Agricultural extension and researchC.M. Zutt (50%); Crops (30%); Animal productionSector Manager/Director: Simeon K. Ehui/ John (20%)Henry Stein Themes Rural policies and institutions (P);Project ID: P133251 Rural services and infrastructure (P)Team Leader: Ousmane Seck/Pushina K. Ng'andwe Environmental Category: B - Partial(co-TTL) AssessmentExpected Effectiveness Date: March 12, 2014 Expected Closing Date: December 31, 2014Lending Instrument: Adaptable Program Loan (APL)Additional Financing Type: Scaling-up

Basic Information - Original ProjectProject ID: P084078 Environmental Category: Category CProject Name: National Agricultural TechnologyProjectLending Instrument: Adaptable Program Loan (APL) Expected Closing Date: December 31, 2014Project ID: P084078

Restructured Project Financing Data[]Loan [] Credit [X] Grant [] Guarantee[ ] Other

Restructured Financing Plan (US$ m)Source Total Amount (US Sm)

Trust Fund Grant: (TFO 16036) 7.055Total Project Cost: 91.655

Client InformationRecipient: People's Republic of BangladeshImplementing Agencies: Ministry of AgricultureBuilding 4, Room 534Bangladesh SecretariatDhaka 1000, BangladeshTel (880-2) 716-0470; Fax: (880-2) 716-7040

[email protected] of Fisheries and LivestockBuilding 6, Room 509Bangladesh SecretariatDhaka 1000, BangladeshTel: (880-2) 716 1258 Fax: (880-2) [email protected]

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Estimated Disbursements (Bank FY/US$m)FY 2014 2015 2016 2017 2018Annual 18.8 12.905 7.5 8.0 1.160Cumulative 18.8 31.705 29. 98 37.98 39.14

Project Development Objective and DescriptionOriginal project development objective: The objective of the project, which is the first phase in a seriesof three APLs, is to improve the effectiveness of the National Agricultural Technology System (NATS)in Bangladesh.Revised project development objective: The objective of the project is to improve the effectiveness of thenational agricultural technology system, as measured by increase in agricultural productivity and farmincome in selected districts.

Safeguard and Exception to PoliciesSafeguard policies triggered:

Environmental Assessment (OP/BP 4.01) [x]Yes [] NoNatural Habitats (OP/BP 4.04) []Yes [x] NoForests (OP/BP 4.36) []Yes [x] NoPest Management (OP 4.09) [x]Yes [] NoPhysical Cultural Resources (OP/BP 4.11) []Yes [x] NoIndigenous Peoples (OP/BP 4.10) [x]Yes [] NoInvoluntary Resettlement (OP/BP 4.12) []Yes [x] NoSafety of Dams (OP/BP 4.37) []Yes [x] NoProjects on International Waters (OP/BP 7.50) []Yes [x] NoProjects in Disputed Areas (OP/BP 7.60) []Yes [x] No

Does the project require any waivers of Bank policies? []Yes [x] No

Conditions and Legal Covenants:There are no conditions of effectiveness. Other standard covenants, including for project execution andfiduciary issues will be the same as in the Original Credit Agreement.

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A. SUMMARY

1. This Project Paper seeks Board approval for a Level-I restructuring of the NationalAgricultural Technology Project (NATP). The proposed changes include: (a) revision of theProject Development Objective; (b) triggering of new safeguard policies; (c) up-grading of theenvironmental category from C to B; (d) reallocation of Credit proceeds; and (d) the addition ofgrant financing in the form of a US$23.715 million grant from the United States Agency forInternational Development (USAID) to support the costs linked to the scaling up of NATP. 1 Thisis the fourth restructuring of the project. The first restructuring became effective on June 16,2011 and aimed at increasing the threshold for contracts for goods, works and consultants'services subject to Prior Review. The second was approved on December 23, 2012 with theobjective of removing inconsistencies between the Development Project Proposal and theFinancing Agreement. The third restructuring was approved on December 2, 2013 and extendedthe International Development Association (IDA) Credit closing date to December 31, 2014.

2. Under the original Credit, research activities are national in scope, while extensioninvestments cover 120 Upazillas in 25 of the 64 districts, and supply chain investments cover 20Upazillas in 20 districts. The Government of Bangladesh (GoB) now considers the program to beits flagship program in the agriculture sector for institutional and policy reforms and fortechnology generation and dissemination.

3. Total financing of NATP currently amounts to US$82.0 million, financed through:(a) anIDA Credit (Credit 4386-BD - US$62.6 million), approved on February 7, 2008; and (b) anInternational Fund for Agricultural Development (IFAD) Loan (No. 739-BD - US$19.4 million),approved on December 13, 2007. Currently, US$ 64.75 million have been disbursed, of whichUS$7.4 million during this fiscal year. Another US$8.4 million will be disbursed by June 30,2014 bringing the total to US$15.8 million for this fiscal year. It is expected that further to theUS$8.85 million of the projected unspent balance as of June 30, 2013 and the US$7.055 of thefirst tranche of the grant will also be fully exhausted by the closing of the project.

4. In the restructured project, agricultural research and project management activities wouldbe national in scope; while the agricultural extension and supply chain development activities(SCDC) would be scaled up in a number of the most agro-climatically constrained and

2underserved districts. For extension services, six new districts will be covered, and work in5,000 villages located in 321 unions and 30 Upazillas. Supply Chain Development services willcover only five of these districts and within these, only five Upazillas (See Annex 6).

5. The restructuring would shift NATP's focus to a more intensive approach that would leadto a significantly higher increase in the adoption ratio of existing low-risk, high-rewardtechnologies and foster farmers' linkages to markets. the target beneficiaries remain the same-e.g., small and marginal farmers, including tenant/share cropping, landless, and female farmers.

1 The United States Agency for International Development (USAID) has pledged US$23.715 million in grant financing throughMarch 31, 2017 (TF071940). The first tranche of that grant, US$7.055 million, has already been approved and transferred to achild trust fund (TFO 16036). Additional tranches will be released based on grant funding requests and availability of the money,as per specifications of the donor.2 Gopalgonj; Madaripur; Shariatpur; Magura; Sirajganj; and Bhola.

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The restructured project is estimated to directly benefit about one million farmers, of which 30percent of the adopters would be women, and it is expected to foster 530,000 sustained adopters.

B. BACKGROUND AND RATIONAL FOR RESTRUCTURING

6. In its Sixth Five Year Plan (FY201 1-FY2015), GoB recognizes the need to enhance theincome earning opportunities for workers remaining in agriculture by raising land productivityand increasing the diversification of agricultural production to address growth and employmentimbalances. Agriculture is recognized as essential to poverty reduction and food security, and thebinding constraints to land that result from population growth and the pressures of urbanizationmake enhancing land productivity a top priority. In addition to improvements in productivity,significant emphasis is also placed on diversifying both crop and non-crop agriculture in order toraise farm incomes and promote commercialization. The Bangladesh Country Investment Plan(CIP), approved in 2010, provides guidance on priority investments to increase and diversifyfood availability in a sustainable manner and to improve access to food and nutrition.

7. GoB has made impressive progress in enacting institutional and policy reforms to supporta more decentralized and demand-driven agricultural research and extension system. Some of thekey achievements include: (i) successfully passing an amendment to the Bangladesh AgriculturalResearch Council (BARC) Act that provides a legal framework for BARC to set the agenda foragricultural research and have greater control over resource generation and management;(ii) setting up, for the first time in the country, a comprehensive framework and a multi-disciplinary platform for both competitive and sponsored public goods agricultural research;(iii) promoting a demand-led and decentralized planning and funding mechanism for agriculturalextension; and (iv) developing new agricultural extension policies for crops and for livestock.Apart from the institutional reforms being implemented, NATP has had notable achievementswhich are elaborated below.

8. A demand-led priority setting of research activities, along with a competitive grantmechanism has been established for the first time in the country and demonstrated to be effectivein accelerating technology generation and transfer. Twelve public institutions are implementing108 Sponsored Public Good Research sub-projects and 92 competitive grant sub-projects havebeen awarded and are being successfully implemented. This has led to delivery of an increasednumber of improved agricultural technology packages; translated into technical bulletins for easyuse by extension agents and farmers. This includes inter alia high yielding stress tolerantvarieties, especially for coastal saline, drought, and flood prone areas for rice as well as summertomato and jute.

9. Farmers' Information and Advisory Services (FIACs) established at the sub-district levelare becoming active one-stop rural hubs for technology access and dissemination that integratecrop, livestock, and fishery services. This has resulted in widespread adoption of recommendedtechnologies and agricultural practices. Over 2.1 million farmers, representing 43 percent of thefarm households in the project area, have adopted recommended technology packages andagricultural best practices that have increased their productivity. A special drive has beeninitiated to quickly multiply and make seeds available to farmers where Seed Producer Groupsare fast emerging as specialized seed producing small and medium enterprises. It is expected that

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adoption of recommended technology packages will be enhanced with an additional 250,000farmers during the next season.

10. Finally, a program on supply chain development is also being successfully piloted in 20Upazillas involving 12,438 farmers and will enable them to access city-based traders andsupermarkets. An independent impact evaluation is being carried out for the project and willinform on the change in household incomes.

11. In terms of enhancing institutional efficiency of national agricultural research andextension systems, an enabling environment and an appropriate incentive framework for careerdevelopment is being pursued. The skills gap and shortfall in manpower in research andextension are being addressed through continuous on the job training, mentoring and coaching,and through long term in-country and overseas training. The grant will leverage all theseemerging good practices, lessons and impacts to further accelerate agricultural productivity andincrease farmer incomes for the future.

12. USAID is providing the grant as part of its assistance strategy to help harmonize,coordinate and improve cost effectiveness in service delivery by streamlining implementationand simplifying administrative procedures through common implementation arrangements. TheGrant will contribute to further improving the effectiveness of the implementation of the newNational Agricultural Extension Policy (NAEP), strengthen the system created by the amendedBARC Act, and further harmonize with Government programs in line with the Paris Declarationand the five Rome Principles for Sustainable Global Food Security.

C. PROJECT STATUS

13. Despite a slow start, the project picked momentum and disbursed about 80 percent byDecember 31, 2013. The Project is rated satisfactory given that most outcome indicators andproject end-targets have already been met. The GoB has made impressive progress in enactinginstitutional and policy reforms to support a more decentralized and demand-driven agriculturalresearch and extension system. Some of the key project achievements include: (a) theBangladesh Agricultural Research Council (BARC) 3 Act amendment, which provides a legalframework for improved governance, institutional responsibility and management systems of thenational agricultural research institutes; (b) establishing a comprehensive framework and a multi-disciplinary platform for competitive and for sponsored public goods agricultural research, ofwhich about 40 percent cover the most agro-ecologically constrained ecosystems; (c) demand-led and decentralized planning and funding mechanism for agricultural extension; (d) newagricultural extension policies for crops and for livestock; and (e) improved research andextension services, through continuous on the job training, mentoring and coaching, and longterm in-country and overseas training.

14. An independent impact evaluation (September 2013) based on a sample survey of 6044Common Interest Groups (CIG), and Non-CIG/control farmers, evaluated the major agriculture

The amended Act is yet to be operationalized due to substantial delays in the selection process of consultants and the limitedlocal capacity for implementing critical related studies.

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technologies under NATP, which account for 60 percent of the demonstrations. The majorfindings include:

(a) The number of total adopters in the project area is estimated at 1,180,7654 which are 50percent more than the end of project (EOP) target. Weighted by farm size wise distribution,the targeted adoption rate by EOP is 19.1 percent of the total farmers, as against 28.7 percentestimated for the project. The highest adoption rate is among marginal farmers (31. percent).

(b) Agriculture productivity in the project area has increased between 14 to 52 percent for crops,54 to 65percent for livestock, and 60 to 76 percent for fisheries (as compared to a projectedaverage increase of 8 percent over the baseline values established in the Project AppraisalDocument). Productivity increases are higher for paddy, wheat, mustard, tomato andeggplant (brinjal) amongst marginal farmers; for cow rearing and tilapia farming for smallfarmers; and for lentil and carps farming for medium farmers; and

(c) Household net income increased up to 159 percent from 47 percent for marginal farmers; 31percent for small farmers, and 23 percent for medium farmers over the baseline. Dependingon farm type, the net income increase are as follows: (i) 23 to 47 percent for rice basedfarming system; (ii) 58 to 78 percent for rice plus diversification withpulses/oilseeds/vegetables; (iii) 54 to 55 percent for rice with diversification plus cowrearing; and (iv) 77 to 135 percent for rice plus diversification with beef fattening. Farmincome of landless and near landless families who adopted technology has increased by:(i) 51 percent for cow rearing; (ii) 68 percent for fish rearing; and (iii) 159 percent for beeffattening. The results show that mixed farming system with livestock and/or fish farminggenerate substantial impact on farm incomes, particularly for the 89 percent of farm familieswho are near landless, marginal, and small farmers. These achievements are highlycommendable with regard to the set target of 10 percent on average by EOP. Furtherimproving the performance of the project requires strengthening the effectiveness ofProducer Organizations at Union and Upazila levels, the federations of CIGs, to leverageother services for farmers through close partnership with Local Government, financialinstitutions and private operators.

D. PROPOSED CHANGES

15. The original Project Development Objective (PDO) is to improve the effectiveness of theNATS in Bangladesh. The PDO is proposed to be revised to match the performance indicators.The proposed new PDO is to improve the effectiveness of the NATS, as measured by increase inagricultural productivity and farm income in selected districts. The restructured project willcontribute to achieving the objective by scaling-up best agricultural technology packages andpractices under the original credit to six more districts.

16. The restructuring will trigger safeguard policies on Environmental Assessment (OP/BP4.01) and Pest Management (OP 4.09) that were not triggered for the original credit, which waslargely perceived as a research project with limited project activities on the ground. The project

4 Technology adoption is considered, only if adopted for more than one season and adopters are counted only once irrespective ofnumber of technologies adopted by them.

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will also trigger the Indigenous Peoples Safeguard (OP 4.10) given that the project to cover areaswith some tribal population (less than one percent of total project beneficiaries). Hence, thesafeguard category for the restructured project will be category B and the original project wouldbe reclassified as category "B".

17. Other changes include: (a) reallocating credit proceeds amongst expenditure categories tomeet the actual project cost requirements; and (b) integrating the activities to be financed by theUSAID grant into the overall NATP project scope, and thereby also integrating the baseline andtarget values of performance indicators into the Results Framework, which has been furtherstreamlined. The updated version of the project Operational Manual was finalized on June 10,2013 to reflect the proposed changes.

18. The proposed reallocation involves: (a) a decrease in Category (2) "CGP Grants underPart L.A of the Project" by SDR 650,000.00; (b) a decrease by SDR 1,220,000.00 of Category(3) "SPGR Grants under Part 1.B of the Project"; (c) an allocation of SDR 543,580.50 to 5(a)"Works, goods, local consultants' services, and Operating Costs"; and (d) an allocation of SDR1,326,419.50 to 5(b) "Training and foreign consultants' services" for additional training forfarmers, fiduciary teams of agricultural research institutes and scientists. The decrease incategory (2) and in category (3) is justified given that the project was not in position to call for a3rd round of sub-projects' proposals in the absence of clear direction for a follow-up operation toallow completion of these sub-projects. The percentage of expenditures to be financed (includingtaxes) remains unchanged. The revised allocation by category of expenditure is presented inAnnex 5. Changes in the components are described below.

19. Component 1. Agricultural Research Support (Total: Original Credit: US$33.60million; new USAID grant: US$1.7 million). The main objective of the restructuring is toscale-up the CGP and Sponsored Public Goods Research (SPGR) activities that were initiatedunder sub-components 1.A and 1.B of the project. The restructured project will supportadditional batches of CGP and SPGR Grants. The grants will have national coverage, butparticular emphasis on coastal zones and hill districts that are more prone to natural disasters andclimate risks and that have proportionately higher populations of poor and vulnerable people.The activities will build on the pluralistic agricultural research structure developed under NATP,particularly participatory and demand driven research methodologies. This component will helpdevelop and refine technologies that can bridge yield gaps and diversify production, includingthe introduction of high-value commodities and low-cost, high-impact post-harvest technologiesand marketing services. It would finance small equipment for subprojects, allowances forscientists and operating costs.

20. The restructured project will also contribute to enhancing institutional efficiency of theNational Agricultural Research System (NARS) by supporting a selected program of skillsdevelopment through short-term in-country training and a number of trainings abroad. Thesetrainings would predominantly focus on the development of the technical skills and researchcapacity that are specifically needed to manage the SPGR and CGP sub-projects.

21. Component 2. Agriculture Extension Support (Total: Original Credit: US$37.455million; USAID Grant: US$4.355 million). The objective of this component is to promote

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access to appropriate technology packages (including quality seeds and small equipment) andenhance their adoption by beneficiaries through a decentralized, demand-led extension servicethat is knowledge-based and accountable to farmers. It will extend the activities related toformation, mobilization, training and strengthening of CIGs under sub-components 2.A and 2.Bto six new districts and 30 new Upazilas using USAID grant money. The component will focuson better targeting, formation and strengthening of village level CIGs. It will use the sameinstitutional arrangements as set-up under the original credit.

22. To facilitate two way flow of information between farmers and other stakeholders,restructured project will also assist with additional short term training, exchange visits andworkshops on key technologies in the new districts as set under Sub-component 2.C. Finally, thecomponent will support the establishment of 200 FIACs at Union level as one-stop shops tobring knowledge exchange and interaction with extension services closer to the farmers. Thirtyof the best performing FIACs will be equipped with ICT devices on a pilot basis. Thiscomponent will be implemented by the Department of Agricultural Extension (DAE), theDepartment of Livestock Extension (DLS), and the Department of Fisheries (DOF).

23. Component 3. Development of Supply Chains (Total: Original Credit: US$9.8million; USAID Grant: US$0.5 million). The objective of this component is to increase anddiversify sources of income for project beneficiaries. Sub-component 3.A, will assist indeveloping additional Commodity Collection and Marketing Centers for high valuecommodities; pilot demonstration of post-harvest technologies; and provide capacity building offarmers, traders and entrepreneurs. It will further promote linkages of beneficiaries with traders,processors, transporters, and other private service providers. A prototype IT system will test howsuch actors can be linked to the supply chain network. Sub-component 3.B, will provide fundsfor training of the line departments' staff to improve their support to farmers in production andmarketing. This sub-component will also support training on business development, workshopsand exposure visits to emerging entrepreneurs in the value chain. Additional short term trainingwill be provided to the implementing agency (IA), both in-country and abroad.

24. Component 4. Project Management and Coordination (Total: Original Credit:US$10.8 million; USAID Grant: US$0.5 million).The objective of the component is to ensureefficient coordination and implementation of the project as a whole. The implementationarrangements for project management and coordination remain the same. The USAID grant willfinance the additional costs associated with the project management and coordination of projectactivities.

25. Results Monitoring and Evaluation. The Monitoring and Evaluation (M&E) systemestablished under NATP will be continued, consisting of: (a) internal implementation monitoringby each Project Implementation Unit (PIU); (b) annual participatory monitoring bybeneficiaries/groups; and (c) internal and external periodic assessments and evaluations,including concurrent progress monitoring, participatory stakeholder workshops, mid-termreview, and EoP outcome evaluation and implementation completion review. The ManagementInformation System (MIS) of NATP will be updated to accommodate the activities under therestructuring. The results framework under NATP has been revised to incorporate the baseline

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and targets for the new districts as outlined in Annex 1. There will be a consolidatedImplementation Completion and Results Report at project closure (December 31, 2014).

26. Sustainability. The key indicator for the sustainability of the design, strategy, andoperational models of the project is the strategic support that the Government of Bangladesh isproviding to NATP. The Ministry of Agriculture is showcasing NATP as its flagship program forthe sector. This is further reinforced by the promulgation of the newly drafted AgricultureExtension Policy and Livestock Extension Policy both of which were substantially informed bythe successful implementation experience of NATP.

27. Institutional Sustainability will be ensured by establishing robust farmers' institutions inthe form of CIGs, and building their capacity at the village level prior to networking at the inter-village level. All management efforts and coordinating activities aim to institutionalize and buildcapacity among these groups and organizations to ensure their effective functioning to benefitfarmers and apply principles of good governance and accountability.

28. Financial Sustainability of farmer institutions is being ensured through: (a) all equipmentand investments are owned and managed by farmer institutions, thus ensuring propermaintenance by generating adequate revenue (e.g. commissions in marketing and user fees forcollective equipment); (b) support through the project is restricted to one time investments,including capacity building costs; and (c) all operational expenses are generated by the farmersout of their increased incomes through adoption, marketing, input supply and/or value addition.

E. APPRAISAL SUMMARY

29. The restructuring would provide parallel co-financing through the USAID grant tosupport additional project activities as follows: (a) provision of additional batches of CGP Grantsand SPGR Grants for the carrying out of additional sub-projects under Parts 1.A and 1.B of theProject; (b) carrying out of activities under Parts 2.A, 2.B, 3.A and 3.B of the Project in selectedadditional districts and Upazilas; (c) carrying out of selected additional short-term trainingactivities under Parts 1.C and 2.C of the Project, and establishment of FIACs as a one stop shopfor farmers for knowledge exchange and interaction with extension services; and (d) provision oftechnical and logistical support for administering and coordinating the above-mentionedadditional Project activities. The above-mentioned activities will be incorporated under a newPart 5 of the Project in Schedule 1 to the Financing Agreement. More details of the additionalactivities financed with the additional financing under each component are provided in thefollowing.

F. Financial and Economic Analysis. NPV= US$28.0 Million; FRR= 23.4%; ERR= 25.2%

30. Grant Benefits. A cost-benefit analysis has been conducted to estimate the benefitsassociated with the Additional Financing based on the ongoing NATP experiences. Majorsources of benefits quantified are from: (a) increase in the yield of major cereal and high valuecrops (HVC)-for example, paddy, cabbage, tomato, brinjal, cucumber, bitter gourd, and potatoby about 12 to 16 percent in 360,445 farms; (b) reduction in production cost for boro paddy byabout 18 percent in 44,555 farms; (c) increase in livestock productivity by about 26 to 40 percent

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for milk and meat in 78,003 farms; (d) increase in fish productivity by about 45 percent in39,002 fish farms; and (e) increase in producer price realization by about 15 percent in 8,100farms. These farm level benefits are generated mainly through improved and tested technologiesand practices selected from NATP area impacts. As compared to NATP, the intensity ofcoverage in the expanded project area (6 new districts) will be 50 percent higher and is expectedto be more cost-effective. In addition, contrary to NATP, further interventions will include: (a)development of more integrated CIGs covering crops, livestock and fisheries; (b) provision ofsmall collective equipment and quality seeds to CIGs; and (c) inclusion of non-CIG members intrainings and exposure visits. The Economic and Financial Analysis (EFA) has conservativelyconsidered a phased technology adoption process extending over a five year period from initialadoption in order to capture the full technology benefits.

31. Returns to Investment: The project beneficiary profile includes women (30 percent),landless agricultural labor households (5 percent), landless farm households with less than 0.02ha of land (17 percent), marginal and small farm households with less than one ha of land (68%percent).The estimated economic rate of return (ERR) varies from 16.3 percent (value chaindevelopment) to 25.8 percent (agricultural extension support).The overall ERR for the project is25.2 percent, with a NPV of US$28 million. Agricultural research investments are allocatedproportionately to the crop, livestock, fisheries, and value chain development extensioninterventions. Annual incremental financial benefits are projected at US$16.8 million,contributed by agricultural extension support-crops (54 percent), livestock (26 percent), fish (16percent), and supply chain development (4 percent).The financial rate of return (FRR) isestimated at 23.4 percent. Sensitivity of project returns to 20 percent cost escalation, 20 percentdrop in technology adoption, CIG sustainability and agricultural productivity levels and delay inbenefits by two years was tested. The ERR remained above 17.3 percent and its probability ofexceeding the 12 percent is 91 percent.

32. Income, Employment and Poverty Impacts. On an average farm, financial income isprojected to increase by 35 to 46 percent as a result of the intervention. Mixed farming systemsare predominantly practiced with a combination of crops, livestock and/or fisheries in the newarea. With convergence, and full adoption of demonstrated technologies, incremental farmfinancial income for mixed farming systems will range from US$157 to US$172 per annum.Based on the poverty lines defined for rural Bangladesh, incremental gross margin will be able tolift at least 308,300 rural poor above poverty line, which is equivalent to 11 percent of thebeneficiaries. Annual farm employment incrementally generated will be 421,440 person days tobenefit about 40 percent of the total landless labor households within the new area.

33. Technical. The restructured project is designed to address technology gaps in the mostsensitive and hitherto underserved areas of Bangladesh. These areas are characterized bygeophysical and bio-ecological constraints that limit production and hinder productivityimprovement. The grant also seeks to coordinate the delivery of services by crop, fishery, andlivestock line agencies. To raise rural incomes, the grant addresses issues throughout the supplychain. Farm advisory services will be strengthened to disseminate information about farmingsystems, post-harvest solutions, and issues involving grading, transporting, and marketing.Farmers' adoption of technologies is facilitated by effective village and inter-village farmerorganizations which are well-informed and well-placed to influence farm-level decision making

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among their peers. The provision of seeds, improved livestock breeds, and demonstration ofsmall equipment and machinery, and services that link farmers to markets are strategicallyplanned to overcome the constraints that have traditionally impaired adoption rates of technologypackages. The inclusion of the bottom poorest farmers through wealth ranking and participatorytargeting will ensure that the technology packages are appropriately customized to theirresources and capabilities. The focus on agro-ecological issues such as climatic vulnerabilitiesand resulting mitigation measures will further improve the coping mechanisms and resilience offarmers to external shocks including disasters.

34. Social Safeguards. The expanded activities under the restructured project are unlikely toadversely affect any disadvantaged group. Research activities are determined through effectiveconsultations with the relevant stakeholders to ensure that the technologies developed by theresearchers are needs-based and suited to local agro-ecological conditions. The technologyadoption activities are highly participatory in nature and can therefore be expected to be self-selectively pro-poor, including the landless and women. Because the restructured project willexpand into areas where tribal people might live, OP 4.10 will be triggered. The SocialAssessment and Social Management Framework (SMF) for the original Project dated December9, 2007 has been updated in May 2013 to include Tribal People's Management Framework anddisclosed again. The plans include appropriate screening formats for project areas to determinewhether tribal people are present on specific project locations and templates to prepare locationspecific Tribal People's Development Plans in accordance with the SMF as and when required.Because no land acquisition or displacement of people is expected, OP 4.12 on InvoluntaryResettlement is not triggered. However, Component 2 involves the use of buried pipes forirrigation through consultation and agreement among farmers and land owners on mutuallybeneficial terms.

35. Environment Safeguards. All the districts selected under the restructured projectexpansion experience normal flooding during the monsoon season. There are also occasionalaggravated floods and droughts during winter while few other districts are prone to cyclones andtidal surges. The key environmental issues that require particular attention include: (a) salinewater intrusion into groundwater and surface water in select sites; (b) decrease in soil quality; (c)decrease of water quality particularly in ponds; (d) increase in the use of pesticides and chemicalfertilizers; (e) possible depletion of groundwater due to irrigation; and (f) food safety risks due topesticide residues. Because some of the target sites experience high levels of groundwaterdepletion, technologies and strategies that promote efficient use of irrigation water will continueto be emphasized.

36. The proposed project is reclassified as safeguard Category "B" from Category "C". Thereclassification is necessary to reflect the potential impacts associated with the implementation inthe new project areas. The potential adverse environmental impacts on human populations orenvironmentally important areas are less adverse than those of Category "A" projects, site-specific with no irreversible impacts and mitigation measures can be designed more readily.Environmental Assessment OP/BP 4.01 and Pest Management OP 4.09 are triggered. Thereclassification is necessary because the original project was largely judged as a research projectwith limited project activities on the ground. Therefore, the only requirement for the project wasto screen research projects for potential adverse impacts. However, NATP and the restructuring

13

implement numerous demonstration projects at the village level and has extensive adoption oftechnologies and activities in fisheries, animal husbandry, and agriculture by farmers. Theseactivities raise potential issues outlined in the previous that need to be addressed. Thereclassification requires the project to establish a proper environmental management andmonitoring framework for ensuring that adverse impacts are prevented or minimized and that thepositive impacts of the newly introduced technologies are monitored. The EnvironmentalManagement Framework (EMF) prepared for the original Project dated December 9, 2007 hasbeen updated on April 18, 2013 and disclosed again.

37. While neither OP 4.12 nor OP 4.10 were triggered for the original project, environmentalmanagement has been an integral part of NATP. Existing staff have been designated as theenvironment focal persons and the project implementation and monitoring budget also covers theactivities outlined in the revised EMF. The Project Coordination Unit (PCU) and each PIU havedesignated Environmental Management focal persons on the PIU, Upazila and CIG levels.Indicative budget allocation for environmental monitoring and implementation of activities hasbeen allocated by the PCU and each of the Implementing Agencies (lAs).

38. Governance and Accountability. Governance and accountability practices under NATPare considered to be reasonably effective in mitigating the risks of fraud and corruptionassociated with the implementation of the project and will continue to be used in the newdistricts covered by the restructured project (see Annex 7).The objective is to ensure institutionaleffectiveness and unhindered project implementation by adhering to three principal governancechallenges: (a) strengthening transparency and accountability; (b) developing capacity; and (c)fostering demand for good governance.

39. Strong farmer engagement has been developed under the districts so far covered byNATP in targeting beneficiaries, visioning, planning and implementing extension and supplychain activities as well as in selecting research priorities as a means to raise transparency andaccountability in program delivery at the local level. The project has adopted a GovernanceChecklist as a tool to identify and tackle these and other governance challenges at every stage ofproject design, the checklist will also be used during implementation to update the status ofchallenges and identify new risks and opportunities to strengthen governance in projectactivities. The main tools in the Governance and Accountability Action Plan (GAAP) for theproject would be: (a) Information Disclosure Policy; (b) Grievance and Complaints RedressMechanism; (c) Zero tolerance to corruption; (d) Fiduciary Best Practices; and (e) Farmer ScoreCards.

40. Information Disclosure Policy: All information about project objectives, activities,institutional arrangement, and benefits to farmers, researchers and traders, list of beneficiarieswill be disclosed in the NATP website.5 In compliance with the Right to Information Act 2009,information disclosure policy under the project envisages that all information, except thosewhich are likely to affect a competitive and fare bidding process, are made available to the keystake holders: farmers, researchers, traders and input suppliers. In the PCU and each of the lAs,one officer is designated as the Information Officer for this purpose. The lAs will publiclydisplay the list of beneficiaries under the project at various levels.

5 www.pcu-natp.gov.bd

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41. Grievance and Complaints Redress Mechanism: In each of the lAs, a hierarchical systemfor receiving and redressing complaints relating to project implementation will be established.The system will have 2-3 levels for redress and appeal. If the complainants are not satisfied bythe IA, the PCU will be the appellate body.

42. Zero Tolerance to Corruption: Any report on the financial misappropriation, fraud andenjoyment of undue personal benefits using project funds, assets or other resources will beimmediately investigated by the PIU/PCU and the persons responsible shall be immediatelyremoved from project responsibilities. If the persons involved are employees of theimplementing organizations, the matter needs to be reported to the organization withrecommendation to take appropriate disciplinary action. Where ever project funds aremisappropriated, appropriate action to recover the same from the person/s responsible shall beinitiated by PIU/PCU. In cases where demonstrating farmers, CIGs/ POs, Community Collectionand Marketing Centers (CCMCs), and Research Institutes/Researchers are involved, the projectfunding will be immediately suspended until the issue is resolved.

43. Fiduciary Best Practices: The procurement, financial management and accountingsystems remain the same. The procurement activities have to follow the approved procurementplans complying with the procurement methods, processes and procedures. The internal checkand balance mechanisms and external audits are also part of the fiduciary arrangement.

44. Farmer Score Cards: The project will use the farmer score card system to assessperformance and rate CIGs. This peer review system will check the functioning of CIGs usingindicators of institutional efficiency, participation, equity, and transparency and accountabilityaspects. The score card system in addition to ranking the performance will also haverecommendations for improving performance including a follow up action plan.

45. Other routine tools like review workshops at various levels, Bank's ImplementationSupport Missions and process monitoring of NATP will remain and continue to be used to checkwhether systems set up under the GAAP framework are functioning.

46. Implementation Arrangements. No changes in the institutional arrangements.

47. Financial Management (FM). An assessment of the lAs' FM arrangements was carriedout to determine whether the PCU of NATP (responsible for the implementation of the project)has adequate FM arrangements in place to implement the expanded activities and meet theminimum requirements stipulated in OP/BP1O.00.The FM arrangements assessed included thesystem of planning and budgeting, accounting, accountability mechanisms put in place forreporting, auditing, and internal controls. The PIU's arrangements, which would remainunchanged, are deemed as acceptable and considered capable of recording correctly alltransactions and balances, supporting the preparation of regular and reliable financial statements,safeguarding the project assets, and are subject to auditing arrangements acceptable to the WorldBank. The annual audit report for the financial year 2011-12 by the Foreign Aided Projects AuditDirectorate was submitted to the Bank in a timely manner. There is no material audit observationidentified by the Bank. The project submitted financial reports in a timely manner. However, it is

15

worth noting that during the previous restructuring in December 2012, a retrospective decrease infinancing percentage was proposed. As a result, US$2,171.28 had to be refunded to the Bank,since disbursements were made, but the financing percentage was subsequently decreased. TheBank issued a letter requesting refund of this amount in March 14, 2013 and a letter on February27, 2013 requesting refund of US$166,392.12 for expenses claimed in excess of financingpercentage from 2009 - 2010. The status of these refunds and actions planned are presented inAnnex 8.While the US$2,171.28 was already received by the Bank on December 26, 2013, therefund of the US$166,392.12 is expected to be received by March 31, 2014. As per the last FMreview during 1 0th mission, the ISR rating is 'Moderately Satisfactory'.

48. For utilization of eligible project expenditure, the PCU will maintain one DesignatedAccount where IDA and IFAD funds will flow on parallel mode under agreed terms andconditions. As in the present FM arrangement for NATP, Krishi Gobeshona Foundation (KGF),Horticulture Export Development Foundation (Hortex) and Project Implementation Units (PIUs)in other executing agencies, such as DAE, DOF, DLS, and BARC, will maintain separateoperating accounts. The PCU will be responsible for transferring IDA and IFAD funds to theoperating accounts on the basis of six-month estimated expenditure and approved work plans ofthese agencies. The PCU has also made a provision in the Revised Development ProjectProposal (RDPP) to cover the amount of taxes required under the restructuring with with USAIDgrant.

49. Since the activities under Component-I (Agriculture Research Support) will beimplemented by KGF in association with implementing partners (NARS Universities, non-government organizations, and private sector) as is the case under NATP, funds will be giveninitially to these implementing partners as mobilization advances and subsequent payments forthe completed activities will be made by KGF as per agreed terms and conditions. In respect ofgrants and transfers relating to operating accounts, withdrawal applications for documentationwould include only incurred expenses.

50. Procurement. The procurement of goods, works, consulting and non-consulting serviceswill be handled by the PCU and PIUs. All procurement activities, except procurement activitiesunder CGP and SPGR and expenditures under the headings of Incremental Operating Cost andTraining, will be governed by the Procurement Plans agreed upon between the Bank and the lAsinvolved. Each plan includes detailed information on the procurement guidelines, planning,particular methods of goods, works, consultancy, non-consulting services, and prior/post reviewrequirements.

51. Procurement Risks and Recommended Mitigating Measures. The procurement riskassessment for the operation can be considered as "substantial" from a public procurement pointof view. The assessment considered the impact of complexity in design resulting from the highnumber of procuring entities, the general environment for public procurement in the country, andthe procurement management capacity of the lAs involved. The lAs agreed on an action plan tomitigate risks and a relevant monitoring mechanism, involving sufficient staff, systematiccapacity building, as well as relevant monitoring and review.

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52. Oversight and Monitoring Arrangement for Procurement. The procurement plans datedMarch 18, 2013 for the first 18 months of the grant have been prepared by the lAs and reflectsthe increase in the allocation of category 5a. The procurement plans will be updated once everysix months and will be the basis of the Bank's procurement supervision plan. Fiduciary reviewsduring supervision missions will include reviews of a random sample of contracts and spotchecks of accounting records and financial reporting systems at the central, regional, district andvillage/site levels. Internal auditor reports will be reviewed and meetings held with them to gainadditional perspective. Issues identified will be recorded in the aide-memoires with post-missionfollow ups.

53. The Procurement Core Team (PCT), as already set up under NATP, will continue to beresponsible for supervising procurement activities under SPGR and CGP. It will also monitor allissues related to procurement fraud, corruption, collusion, coercion and obstruction, includingrelevant complaints from individuals or firms and relevant reports in the media, on behalf of thePCU and will advise the PCU on remedial measures.

Grant Effectiveness

54. There are no conditions for the effectiveness of the additional grant financing under therestructuring.

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ANNEX 1. Results Framework and Monitoring

Ori2inal Project Development Objective (PDO): Project Development Objective is to improve effectiveness of the national agricultural technology system in Bangladesh.

Revised Project Development Objective: Project Development Objective is to improve the effectiveness of the national agricultural technology system, as measured by increase in

agricultural productivity and farm income in selected districts.

D= Dropped Cumulative Target Value ResponsibiliPDO Level Results E C= Continue Unit of Data Source/

a Current Value Baseline Frequency ty for DataIndicators N= New Measure Methodology Cleto

R=Revised 2014 2015 2016

PDO1: Clients who have Baseline,adopted an improved D/R (moved 2014 and Independentagricultural technology Z to interm. Number 1,180,765 189,000 1,231,000 1,431,000 1,710,000 2016 Impact PCU/PIUspromoted by the project Outcomes) Evaluation, EoP

reviews

PD02: Increase in agricultural Baseline,producivityIndependentproductivity R ecnae25 9 33 33 35 2014 and Inendt

Crops R Percentage 2016 Impact PCU/PIUsLivestock R Percentage 60 15 68 68 70 Evaluation, EoPFisheries reviews

R Percentage 69 18 75 75 80

PD03: Increase in householdincomes Baseline,

Marginal farmers C Percentage 123 47 133 135 138 2014 and IndependentSmall farmers Impact PCU/PIUs

Medium farmers C Percentage 31 20 41 43 45 2016 Evaluation, EoP

C Percentage 23 18 33 35 38 reviews

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Intermediate Result (Component One): Agricultural Research Support

Intermediate Results C= Dropped Cumulative Target Value ResponsibiliIndicators ot. Unit of Baseline Data Source/

+ Contmnue Current Value Frequency ty for DataSMeasure Methodology frDtN= New 2014 2015 2016 Collection

R=Revised1: Public investment in D Percentage of 0.28 0.20 0.3 Annual Annual report BARCagricultural research AGDP'2: Scientists trained inidentified skill gaps.

* NA TP R Number 108 0 109* Annual Annual report BARC

* Restructured project 108 5 16 31

3: Research Proposalsapproved and implemented

uder CGP. 0 100* NA TP R Number 92 Annual Annual report KGF


4: Research Proposalsapproved and implementedunder SPGR.

* NA TP R Number 108 0 10 Annual Annual report BARC


5: Non-NARS partnersparticipating in CGP and shareof CGP funds allocated to 0 68*them Number 30 Annual Annual report KGF

* NA TP R Percentage 757* Restructuredproject 35 10 10

35 35 35 35

6 AGDP= Agricultural Gross Domestic Product7 27 independently and 48 in partnership with NARS Institutes/Universities

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t tD= Dropped Baseline Cumulative Target Value ResponsibilitIntermediate Results C= Continue IData Source/

+ Unit of Measure Current Value Restruc- Frequency y for DataIndicators 0 N= New Methodology

R=Revised tured 2014 2015 2016 Collection

6: New Research proposalsthat respond to technologyneeds identified in UpazilaExtension Plans. D Number 1088 0 110 Annual Annual report BARC

* NATP

7: Validation trialsconducted with CIGs andDAE. NA TP C Number 50 0 50 Annual Annual report BARC


8: New Technologies madeavailable for Extension. 0

* NA TP N Number 259 Annual Annual report BARC


Revised Intermediate Result (Component Two): Agricultural Extension Support

1: Public investment inagricultural extension D Percentage of 1.33 1.10 1.20 Annual Concurrent PCU/PIUs

AGDP M&E2: Functional CIGs formed Concurrent

* NA TP D Number 20212 0 18000 Annual M&E PIUs

3: Participation of Women. D Concurrent(AT-)Percentage 30 0 12 Annual ConurEn PIUs(NA TP-]1)M&

4: Upazila Extension Plans Concurrentprepared. D Number 120 0 120* Annual M&E PIUs

* NATP5: Extension micro plansimplemented at the Union 0 1345* Concurrentlevel C Number 1345 1345 321 321 321 Annual M&E PIUs

* NATP* Restructured project

8 14 in saline/ coastal zone; 7 in hilly ecosystem; 3 in haor ecosystem; 1 in drought; 1 in char land; 3 in ICT; 6 in policy; 7 in pollution and adulteration; 9 in pest management;9 3 variety of chickpea, lentil and garlic; 2 salt tolerant rice variety and hybrid tomato; 2 aromatic rice and jute varieties and 18 improved management practices.

20

D= Droped BaselineD tfopp Basut lee Cumulative Target Value Responsibilit

Intermediate Results C= Continue Restruc- Data Source/+Unit of Measure Current Value Frequency y for Data

Indicators 0 N= New tured qy MethodologyR=Revised 2014 2015 2016 Collection

6: Client days training 10000provided to farmersof which to women 9 R Number 10000 0 2200 Annual Concurrent PIUs

0NAT 10000 3000 3000 3000* Additional Financing 2000 600 600 600

7: Target beneficiary Marginal-farmers adopting new Marginal- 108500agricultural technologies or 31000 Small-management practices, of Small-81000 183750which % women Marginal- 247870 Medium- Medium-

26000 95750 Concurrent* NATP Number Sml 86530 M&EN R Medium-148240 M i Annual PIUs

Restructured project Percentage (1180765) Mar8gal-

24 Small-784655 150000 300000 400000Medium- 25 30 30148240(1180765)

248: FIACS functioning

* NA TP* Restructured project N Number 732 0 732 Annual Concurrent PIUs

M&E732 50 150 200

Revised Intermediate Result (Component Three): Supply Chain Development Component

1: Client days of trainingprovided to farmers,traders, public and privatestaff, of which women. R Number 1204510 100001 Annual Concurrent Hortex

* NATP Percentage 0 M&E

* Restructured project

12045 14500 17000 19000

10 10294 farmers and traders and 1891 line agencies officials" There was a mistake in the PAD. 100 should be read as 10000.

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D= Dropped D= DrppedCumulative Target Value ResponsibilitIntermediate Results a C= Continue Unit of Baseline C Data Source/

Current Value Frequency y for DataIndicators N= New Measure Restrutured Methodology

R=Revised 2014 2015 2016 Collection

2: CIGs linked to markets Concurrent*NTPD Number 252 0 200 Annual M EHortex9 NA TP M&E

3: Improved post-harvesttechnologies andmanagement practicesdemonstrated and C Number 32 Annual Mce Hortexadopted.

* NATPRestructured project 32 13 13 13

4: Farmers adoptingimproved production, andpost-harvest technology Marginal-3259and/or management Small-4307 Concurrentpractices, by farm size D Number Medium-2913 0 2000 Annual M&E Hortex

and farm type. (10478)* NATP

5: Commodity Collectionand Marketing Centersfunctioning. N Number 22 0 10 Annual Concurrent Hortex

* NATP M&E


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ANNEX 2. Operational Risk Assessment Framework (ORAF)

Project Stakeholder Risks Rating ModerateDescription: The target farmers, landless, marginal and small Risk Management: Project activities start with participatory identification of target farmers whose capacitiesfarmers may be excluded due to economic and social reasons. are built upfront to appreciate benefits of improved technology and systematically mobilized to form village

farmer institution (CIG) that will own the project and is the focal point for all project related activities.

Res: Satu: Nt Sag . Recurrent: 4 Due Date :Frequency:Client yet Due Implementation

Implementing Agency Risks (including fiduciary)Capacity Rating: Low

Description : The main project implementing agencies, BARC, Risk Management: There is a dedicated PIU/Team consisting of experienced and knowledgeable staff toKGF, DAE, DLS, DOF and HORTEX management and staff may spear head implementation. Similarly PCU will provide coordinating and back stopping support to PIUs. Thenot understand, accept and commit themselves to the farmer project will also invest in capacity building of all staff involved in project implementation including trainings,centered, de centralized, demand responsive and coordinate exposure visits, and workshops both within the country and outside.implementation mode

Resp: Status: Not Stage: Recurrent 1 Due Date: Frequency:Client yet due Implementation

Governance Rating: LowDescription: Political and bureaucratic interference in resource Risk Management: Governance and Accountability Action Plans (GAAP) have been prepared for all levelsallocation and selection of village for support, complaints and of project implementation including farmer organization level with the participation of relevant stakeholdersgrievances from staff and farmers not properly addressed and will be implemented. The GAAP will be reviewed annually and implemented.insufficient information disclosure on project activities.

Res: Satu: Nt Sag . Recurrent 4 Due Date :Frequency:Both yet due Implementation

Project RisksDesign Rating: Moderate

Description: The implementing agencies may spend more project Risk Management: The project has been designed to restrict delivery cost around 10 percent with -resources for delivery cost diluting program investments as well percentage of the program costs directly going for investments at farmer level. Clear implementation manualsas farm level investments. The process of inviting, appraising and detailing rules, guidelines and processes of implementation are being prepared followed by capacity buildingselecting research sub projects may take longer time. The project of project staff and farmer leaders.inputs will be distributed before targeting of farmers and their Resp: Status: Not Stage:institution building. The CCMCs may be working to accrue Client yet due Implementation Recurrent Due Date Frequency:benefits to traders than farmers.

Social & Environmental Rating: ModerateDescription: Environmental: Since the districts targeted by the Risk Management: An EMF has been prepared and outlines clear guidelines on water, soil andproject are located in climatically vulnerable areas, the potential pesticide/chemical management and specific indicators have been identified to monitor the implementation.risks are (1) possible depletion of groundwater due to irrigation; Project focal persons have been identified and staff will be trained.(2) saline water intrusion in groundwater and surface water in Inclusion of women in decision making positions within the farmer institutions are mandated in the bye-lawsselect sites; (3) decrease of soil and water quality; (4) increased and reinforced in the manuals. There are separate project indicators for women beneficiaries which will beuse of pesticides and chemical fertilizers; and (5) Food safety closely monitored. An SMF has been prepared.issues due to pesticide residues.

Women farmers may be excluded. Resp: Status: Stage: Both Recurrent 1 Due Date: Frequencys:

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Client Completed

Program & Donor Rating: LowDescription: The project is funded by US Aid as part of its Risk Management: The Administrative Agreement entered into between UAID and the World Bank detailingharmonization assistance to Bangladesh in coordination with common objectives, for the fund as well as respective roles and responsibilities have already been elaboratedInternational Development Association (IDA).There are chances and agreed upon. There will be joint supervisions.of changes in the policies and priorities of both institutions.

Resp: Status: Not Stage: Recurrent 1 Due Date: FrequencyBank yet due Implementation

Delivery Monitoring & Sustainability Rating: ModerateDescription: The implementing agencies may accelerate Risk Management: The process monitoring agency will monitor quality of implementation and instances ofimplementation sacrificing quality of delivery to show quick by passing implementation processes. The farmer institutional model with matured CIGs as foundation andresults. So also scaling up of the NATP model within the limited higher level Producer Organizations monitoring implementation quality will ensure sustainability ofproject period may also affect sustainability of institutions and institutions as well as the results achieved during the project. The monitoring of CGP and SPGR haveresults. specialized mechanisms. The farmer institution score cards will be implemented.

Resp: Status: Not Stage: Recurrent 1 Due Date: FrequencyBoth yet due Implementation

Overall Risk

Implementation Risk Rating: ModerateComments:

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ANNEX 3. Economic and Financial Analysis

1. The grant focuses on efficiency-led agricultural technology management to increaseproductivity and farm income for about 1.2 million small and marginal farm holders from sixproject districts (T-1).Total estimated cost of the project is $23.715M, including contingencies.The project is designed to enhance NARS institutional efficiency to support demand ledcompetitive and sponsored agricultural research (38%). Ready-to-use available agriculturaltechnologies (crops, livestock, and fisheries) will be effectively disseminated along with supportfor supply chain development to cover all the project area farmers through 6905 CIGs (57%).

T-1: Project BeneficiariesProject Supply

Beneficiaries Crops Livestock Fisheries Chain TotalCIGs 5000 963 642 300 6905CIG Farmers 100000 19260 9630 6000 134890Non-CIG Farmers 800000 154080 77040 12000 1043120Total Project 900000 173340 86670 18000 1178010Technology 675000 130005 65003 13500 883508Sustained Adopters 405000 78003 39002 8100 530105

2. Selected NATP technologies will be intensively disseminated through 21,326 technologydemonstrations. These demos will be organized through 6,905 CIGs covering 134,890 farmers,which in turn are linked to potential adopting farmers consisting of over one million non-CIGfarmers in the new area. While quantifying the project benefits, it is assumed that only 45 percentof all the farmers (about 530,000) directly impacted by the project through demonstrations andadoption groups will sustainably increase their farm level productivity. Benefits accruing tofarmers outside project sites and neighboring districts are not considered. The design of the grantis based on lessons learned from the low adoption ratio between CIG and Non-CIG farmersunder NATP due to its extensive approach (1345 Unions spread over 120 UZs of 25 Districts, 14CIGs per Union).About 1,180,765 farmers have sustainably adopted recommended technologyunder NATP in four years of implementation.

3. About 134,890 CIG farmer members will be trained to catalyze the technology disseminationand adoption process by targeting over one million non-CIG farmers in the project villages (T-1).During the project life, farmer-led extension strategies are projected to achieve a sustainableadoption rate of at least 45 percent among the project area farmers participated and/or exposed tothe demonstrated technologies. Expected project impacts for the technology adopters are: (a)increased crop productivity (cereals, pulses, oilseeds and high value crops); (ii) increasedlivestock productivity (milk and meat); increased fish productivity; and (iii) reduced productioncost (boro paddy).

4. The grant follows NATP design for scaling up best practices to cover newer areas within andbeyond NATP districts with focus on efficiency in the use of scarce resources and equity tocover resource constrained regions. Since NATP is in the fourth year of its implementation,available documentation on NATP impacts are used to project the likely impact of grantinvestments. Project benefits, due to agricultural extension support investments, are quantified as

25

follows: For crops, four major technologies namely, Rice Yield Gap Minimization (RYGM) andAlternate Wetting and Drying (AWD) in paddy; HVC and integrated pest management (IPM) inhigh value crops accounting for 60 percent of the demos, 72 percent of the technology adoptersand 69 percent of the crop CIGs; for livestock, two technologies namely cow rearing for milkand beef fattening accounting for 90 percent of the demos and for fisheries, two technologiesnamely polyculture and tilapia culture accounting for 85 percent of the demos under NATP areconsidered for quantifying the benefits due to investments in agricultural extension.

Database and Methodology Assumptions

5. The NATP unit has documented the yield, cost, and gross margin impact of the RYGM,AWD, HVC and IPM technology adopters while conducting the demo in which control plotperformance is also documented (PIU-DAE, 2012).12 Similarly, impact of livestock and fishproduction technologies demonstrated in NATP areas are documented by PIUs of DLS and DoF.When farmers adopt the demonstrated technology package on their own, increases inproductivity and gross margin will be lower than what is realized under the intensive guidance ofthe department staff in the CIG demos. To factor this, only 50 percent of the incremental benefitsdocumented by the NATP demos over the respective control plots in the CIG demos areconservatively considered for this analysis. Progress in technology adoption depends on thephasing of CIGs, technology demos, adoption and diffusion rates over time. To capture this, anadoption matrix was constructed based on the following assumptions: (i) adoption will start fromthe year following the completion of technology demo through CIGs; (ii) adoption progress tomatch with the phasing of CIGs in the NATP villages; (iii) adoption rate to reach a maximum of60 percent of the cumulative adopters as documented by DAE until now (until PY-4 of NATP);and (iv) full technology impact to be realized by the adopters in phases and with gradualprogression starting with 5 percent and ending with 60 percent after five years from the start ofthe adoption process. Based on secondary published data, the cost of production data asdocumented by PIU (DAE) in the demo and control CIGs is disaggregated by major inputcategories like labor, fertilizer, irrigation and all other remaining costs (UCPSCP, 2010). 13 This isbased on 24,625 farm surveys covering ten major crops representing all major productionregions.

6. For financial analysis, all inputs and paddy output are valued at market prices (2012) for thefinancial analysis. Project costs are converted into constant 2012 prices using appropriateinflators based on the Consumer Price Index for Bangladesh. For economic analysis, parityprices for relevant tradable goods like paddy, urea, diesel, TSP and MOP have been calculatedusing World Bank Commodity Price Projections. Financial prices of non-traded goods andservices have been adjusted using the SCF. For project analysis, 12 percent opportunity cost ofcapital and 20-year project life is considered. For the project period beyond the implementation

1 2Annual Progress Report, 2008-09, 2009-10 and 2010-11, National Agricultural Technology Project: Phase-1, PIU,Department of Agricultural Extension (DAE), Dhaka, March 2012.National Agricultural Technology Project(NATP-I):Phase-1, Progress Reports for Implementation Support Missions (ISM)(Livestock and Fisheries Extension Support), DLS and DoF.13Report on the Cost of Production of Aman, Aus and Boro Paddy, 2008-09, Updating and Extension of AgricultureCluster Plots and Survey of Cost of Production Project (UCPSCP), Bangladesh Bureau of Statistics, StatisticsDivision, Ministry of Planning, Government of Bangladesh, Nov 2010.This is based on 24,625 farm surveyscovering ten major crops representing all major production regions.

26

period, recurring costs @ 2.5 percent of the total costs is used for ensuring the operation andmaintenance of the project interventions.

Quantification of Benefits:

RYGM Technology:

7. Rice yield gap minimization T-2 NATP: RYGM Technogy Impact Summatechnology was intensively promoted in Ipett PWitthe NATP villages. Key elements of Unit Wot Wit

RYGM technology are: quality seeds, CIG s Covered Number 10

optimum age of seedlings, timely Toa Farmers exposed Number 100planting, balanced nutrient, water, and Total farmer adoe Number 400pest management. A total of 9410 demos

wee rgniedthoghCls ovrig Sustained farmer adopters Number 290640were organized through CIGs coveringAman, Aus and Boro seasons (T-2).Until Area under RYGM Ha 143870now, 188,200 CIG farmers are exposed Paddy Productivity t/ha 3.1 3.5and trained in RYGM technology. Gross Margin $/ha 164 209Through them, about 752,800 farmers Hired Labor Man-day 27 31are targeted for diffusing the Financial net surplus $ M/year 23.6 30demonstrated RYGM technology.Among these RYGM technology exposed farmers in the NATP villages, about 51 percent ofthem have so far adopted the demonstrated technology covering all three seasons. Beyondproject implementation period, it is projected that at least 60 percent of the total adopters willsustain their adoption levels every year.

8. Sustainability of RYGM is more likely at this level, since to meet the incremental seeddemand, the project has also trained 3971 farmers in quality seed production and preservationtechniques in the project villages. Annually, about 100 MT of quality paddy seed is produced bythe project trained farmers to supplement the seed availability to meet the demand from theRYGM technology adopters.

9. Averaged over three years (2008/09 to 20 10/11), RYGM demos registered 26 percentincrease in paddy productivity. This is scaled down to 12 percent increase in paddy productivity,and 27 percent increase in financial gross margin due to the project led large scale adoption ofRYGM technology by the project beneficiaries. Based on the agricultural census data, averageoperated area of the farm holding is 0.5 ha, with a cropping intensity of 165 percent. Paddyoccupies 75 percent of gross cropped area. 14 For RYGM adoption, we considered 80 percent ofthe paddy area of the adopters. Average paddy area under RYGM technology comes to 0.5 ha forthe adopting farmers. Following the adoption matrix approach, the project will graduallyprogress to reach the full potentials of RYGM adoption benefits by PY-l .

10. Total project costs (including management) for agricultural extension support for RYGMtechnology promotion during the implementation period, at constant 2012 prices, is estimated at

S2010 Year Book of Agricultural Statistics, 22nd edition, May 2011, Bangladesh Bureau of Statistics, StatisticsDivision, Ministry of Planning, GoB.

27

$8.13 M. Annual incremental financial net surplus from RYGM technology investments, basedon the assumptions as explained above, are projected at $6.4 million at full development, whichcovers 79 percent of the total project costs. Farm financial income will increase by $45 per ha byadopting the RYGM technology. Economic analysis of RYGM extension investments projectedan ERR of 35 percent with a NPV of $15.1 M over 20-year project life at constant 2012 prices(T-3).

11. Employment impacts. Landless agriculturallabor households (HHs) constitute 5 percent of all T-3 NATP: ERR Summary for RYGM (Million

HHs in the project area (HIES, 2010), which isequivalent to 49,500 HHs in the project area. A 15 Technology PVC PVB NPV ERRpercent increase in the use of hired agricultural RYGM $6.5 $21.6 $15.1 35%labor for farming operations is reported underRYGM in case of technology adopting farms. Scaling up over the RYGM technology adoptedareas, about 575,480 man-days are incrementally generated for the hired agricultural labor HHs.Due to seasonal nature of demand for hired labor, it is assumed that adoption of RYGMtechnology will provide at least 48 man-days of employment per landless HHs. This will benefit12,000 landless HHs, constituting 24 percent of the landless HHs in the project area. Annualwage income due to additional demand for hired farm labor will increase their HH income by$95 per year, which is 11 percent more than the without project (WOP) income (HIES, 2010).15

AWD Technology: T-4 NATP: AWD act SummaWithout With

12. Boro rice, grown entirely with impact Unit Proect Proectirrigation support, uses up to 4000 CIGs Covered Number 1824liters of water per kg of paddy CIG Farmers Covered Number 36480produced, due to flooding method of Total farmers exposed Number 182400irrigation throughout the growing Total farmers adopters Number 90260period. This results in wastage of Sustained farmer adopters Number 54160ground water and increased productioncost due to increased fuel cost forpumping irrigation. To minimize Paddy Priv $/ha 38 4.1irrigation cost and reduce groundwaterabstraction, NATP is intensively $/ 161 142promoting Alternate Wetting andDrying (AWD) method of irrigation instead of flooding method.

13. AWD technology was demonstrated through 1824 demos, organized through CGs coveringboro season. Until now, 36,480 CIG farmers are exposed and trained in AWD technology.Through them, about 145,920 farmers are targeted for diffusing the demonstrated AWDtechnology (T-4).Among these AWD technology exposed farmers in the NATP villages, about49 percent of them have so far adopted the demonstrated technology in Boro season. Beyondproject implementation period, it is projected that at least 60 percent of the total adopters willsustain their adoption levels every year.

"Average income for rural Bangladesh is $ 840 per annum for landless agricultural labor HHs, at constant 2012prices (HIES, 2010).

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14. Averaged over three years (2008/09 to 2010/11), AWD demonstrations registered 16 percentincrease in paddy productivity and 31 percent savings in water use. This is scaled down to 8percent increase in paddy productivity, and 48 percent increase in financial gross margin due toproject led large scale adoption of AWD technology by the project beneficiaries. Financial grossmargin from boro paddy cultivation is $ 189 per ha under WOP. Adoption of AWD in boropaddy cultivation enhanced the financial gross margin by $91 per ha, 48 percent more than theWOP gross margin levels. Incremental gross margin due to AWD is contributed by two sources.One, productivity increase by 8 percent, accounted for 68 percent of the incremental grossmargin (Fig. 1).Two, adoption of AWD helped in reducing the irrigation water use by 31percent. Hence, unit cost of production came down by 12 percent, contributing to 32 percent ofthe incremental gross margin from AWD in boro paddy cultivation.

15. For AWD adoption, we considered 40 percent of the paddy area of the adopters, since thistechnology is demonstrated only for boro paddy. Average paddy area under AWD technologycomes to 0.25 ha for the adopting farmers. Progress in AWD technology adoption is similar tothe adoption matrix formulated for RYGM technology adoption, with all the underlyingassumptions remaining same. Following this adoption matrix approach, the project will reach thefull potentials of AWD adoption benefits by PY-10.

16. Total project costs (including management) for agricultural extension support for AWDtechnology promotion during the implementation period, at constant 2012 prices, is estimated at

300

- m Reduced Cost250 Impacts

200 -m Productivity

150 - Impacts

100 Base LevelWithout Project With Project

Fig 1 AWD: Financial Gross Margin ($/ha)

$2.1 M. Annual incremental financial benefits fromAWD technology investments, based on the T-5 NATP: ERR Summary for AWD

assumptions as explained above, are projected at (Million $)$1.2 million at full development, which covers 57 Technology PVC PVB NPV ERRpercent of total project costs. Farm financial incomewill increase by $91 per ha by adopting the AWDtechnology. Economic analysis of AWD extension investments projected an ERR of 29 percentwith a NPV of $2.6 M over 20-year project life at constant 2012 prices (T-5).

High Value Crops with IPM Technology:

17. The project demonstrated the safe and efficient production of high value crops (cabbage,tomato, brinjal, cucumber, bitter gourd and potato) with quality HYV seeds and technology

29

package, including sex pheromone traps (for controlling fruit fly, shoot and fruit borer invegetables like cucurbits, brinjal etc.) and compost use. HVC with IPM technology wasdemonstrated through 5,346 demos, organized through CIGs. Until now, 106,920 CIG farmersare exposed and trained in this technology. Through them, about 427,680 farmers are targeted fordiffusing the demonstrated HVC technology.

W Gross Margin

WP Production Cost

WOP

40 50 60 70 80 90

Fig.2 IIVC/IPM: Efficiency Impact ($/t)

18. Among these HVC technology exposed farmers in the NATP villages, about 27 percent ofthem have so far adopted the demonstrated technologies. Beyond project implementation period,it is projected that at least 60 percent of the total adopters will sustain their adoption levels everyyear (T-6). Averaged over three years (2008/09 to 20 10/11), HVC and IPM demos registered 15percent and 6 percent increase in productivity and 32 percent and 42 percent increase in grossmargins respectively. This is scaled down to overall 5 percent increase in productivity, and 18percent increase in financial gross margin due to the large scale adoption of HVC and IPMtechnology packages by the project beneficiaries.

19. Averaged across high value crops, financial gross margin is estimated at $1,779 per ha underWOP. With the adoption of HVC and IPM technology, average financial gross margin increasedby $375 per ha, 21 percent more than the WOP gross margin levels. Incremental gross margindue to HVC/IPM is contributed by two sources. One, productivity increase by 3 percent,accounted for 60 percent of the incremental gross margin. Two, adoption of pheromone sex trapshelped in reducing the pesticide use by 37 percent, accounting for 40 percent of the incrementalgross margin. Consequently, unit cost of production came down by 8 percent, expanding theprofit margin by 18 percent in HVC cultivation (Fig. 2).For both HVC and IPM technologyadoption, we considered one-third of the non-paddy area of the adopters, since this technology isdemonstrated only for high value crops. Average land area under HVC/IPM technology comes to0.07 ha for the adopting farmers. Following similar adoption matrix formulated for other NATPtechnologies, the project will reach the full potentials of HVC/IPM adoption benefits by PY-10.

T-6 NATP: HVC and IPM Technology Impact Summary

HVC HVC & IPM CombinedUnit Without With Without With Without With

Impacts Project Project Project Project Project ProjectCIGs Covered Number 2415 2931 5346 5346CIG Farmers Covered Number 48300 58620 106920 106920Total farmers exposed Number 241500 293100 534600 534600

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Total farmer adopters Number 64900 78380 143280 143280

Sustained farmer adopters Number 38940 47030 85970 85970

Area under HVC ha 2650 3200 5850 5850

Gross Margin $/ha 1760 2039 1779 2154 3539 4193

Annual financial net surplus million $ 4.7 5.4 5.7 6.9 10.4 12.3

20. For economic analysis, we considered both these HVC and IPM technologies together. Totalproject costs (including management) for agricultural extension support for HVC and IPMtechnology promotion during the implementation period, at constant 2012 prices, is estimated at$2.23 M. Annual incremental financial benefits from HVC/IPM technology investments, basedon the assumptions as explained above, are projected at $1.9 million at full development, whichcovers 85 percent of total project costs. Averaged across the adopters of both these technologies,farm financial income will increase by $327 per ha for the technology adopters.

T-7 NATP: ERR Summary for HVC/IPM21. Economic analysis of HVC/IPM extension (Million $)investments projected an ERR of 34 percent with aNPV of $4 M over 20-year project life at constant Technology PVC PVB NPV ERR

2012 prices (T-7).Sustainability of HVC/IPMtechnologies for safe vegetable production proposedby NATP is more likely at this level. To meet the incremental demand for compost, the projecthas also promoted compost production and soil health management technologies thorough CIGbased 4,794 demos. About 95,880 CIG farmers are trained in these technologies and throughthem, 383,520 non-CIG farmers are exposed to these technologies until now. As per PIU-DAEdocumentation, 23 percent of total exposed farmers are active in producing annually 42,550 MTof compost for its use in safe production of HVCs.

22. It needs to be highlighted here that the capital cost of the development of RYGM, AWD,HVC and IPM technologies that happened in the past, before NATP is not captured here and tothat extent, the estimated returns to NATP investments can be considered over estimate. But atthe same time, as evidenced from the DAE documents, the NATP led diffusion effect of thesetechnologies is substantial and has already started spreading to farms outside the NATP projectareas, which are not captured in this analysis and to that extent, the estimated returns to theinvestments is considered to be very conservative.

Dhap Cultivation (Floating method)

23. While scaling up above major NATP-led technologies under the grant, the focus is also toconsider other technology options for promoting efficiency led agriculture technologydevelopment and adoption in the project areas. Among such technologies like sex pheromonetraps and compost production picked up based on NATP experience, some new techniques whichare indigenous technical knowledge (ITK) based will also be adapted and scaled up for largescale adoption. One example is dhap cultivation observed in the grant project area (Box. 1).16

16Haseeb Md. Irfanullah, Md. Abul Kalam Azad, Md. Kamruzzaman and Md. Ahsanul Wahed, Floating Gardeningin Bangladesh:A means to rebuild lives after devastating flood, Indian Journal of Traditional Knowledge, Vol.10(1), January 2011, pp. 3 1-3 8 .

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Box.lDhap Cultivation in grant project areas

In Gopalganj district, almost half of the agricultural land area is low lying and remain submerged forsix months in a year and even for longer period due to increased frequency of severe flooding.Thefarmers use their traditional techniques, knowledge and the conventional wisdom to cope with theflood and submerged condition. With an average farm holding size of only 0.5 ha and more than 15%of the households being landless, innovative methods of enhancing land use efficiency withadaptation to climate change is critical for the most vulnerable communities in the water loggedproject areas.Resource poor farmers of Gopalganj district have adopted an indigenous technicalknowledge of floating cultivation (Dhap cultivation), using the aquatic water hyacinth weeds,available during the water submergence period.

Floating platform or organic bed is prepared using layers of water hyacinth, and allowed todecompose fully before packing it with ash and plant compost to form a fertile cultivation ground fora wide range of crops and seedlings like spices and vegetables (chilies, water melon, musk melon,beans, cauliflower, cabbage, radish, tomato, eggplant, turnip, amaranth, spinach, coriander andginger) during monsoon and/or winter seasons.Dhap residues, after floating cultivation, are used onland plots to raise homestead vegetable gardens.The year-round activity promotes efficient land andwater resource use, organic farming, organic biomass production, soil quality, crop productivity,labor employment more in favor of women, house hold level nutrition security, and year roundincome for resource poor landless and marginal farmers especially during post-monsoon months.

24. The economic analysis of dhap cultivation is based on secondary published data. InGopalganj district, 9,877 dhaps are used covering 82 ha of floating bed area, benefiting 7,565farmers. Average bed size is 80 M2 per dhap and 108 M 2 per farmer. Studies have documentedthat by cultivating okra, ridge gourd, red amaranthus, and Indian spinach, the financial grossmargin realized is $101 per dhap and $137 per farmer (Fig 3).

Gross Margin

Returns

Cost

0 50 100 150 200 250 300

Fig. 3 Dhap Cultivation ($/farmer)

25. Dhap cultivation generated 25 person days of employment per dhap, half of which is forwomen labor. About 15 MT of compost material will be produced from 108 m 2 of dhapcultivated area through soil-less agriculture that can be used in agricultural land as compostmanure for enriching organic content of the soil. Promoting dhap cultivation by standardizing theindigenous techniques will contribute to effective adaptation strategies to mitigate the eco-specific climate change impacts.

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Project Impacts

26. Based on the NATP evidences as highlighted above and on the documentation done byPCU/PIUs, projected impacts for grant investments are assessed with the underlying assumptionsas follows: (i) maximum adoption rate to be sustained at 45 percent of the farmers exposed to thetechnologies; and (ii) full technology impact to be realized by the adopters in phases and withgradual progression starting with 5 percent and ending with 60 percent after five years from thestart of the adoption process. The rest of the assumptions and sources of data are similar to theNATP experiences as explained in para.4.

Agricultural Extension Support:

27. Impacts of agricultural extension support are summarized in T-8.Weighted agriculturalproductivity will improve by 12 to 16 percent for paddy and HVC, 26 to 40 percent for livestock(milk and meat), and 45 percent for fish for the technology adopters. Adoption of improvedtechnology in case of paddy will also save irrigation water and reduce the use of diesel in boroseason to reduce the cost of production by 18 percent. Adoption of sex pheromone traps for IPMin HVC will also reduce the cost of production. To achieve these impacts on a larger scale, about20,926 demos will be conducted covering seven technologies selected based on NATPexperience.

28. Paddy production technologies (RYGM and T-8 Grant: Impact Su maryAWD) will be sustainably adopted by 274,413 Impacts Unit WOP WPfarmers, covering an area of 124,807 ha. Annual Paddyfinancial gross margin from paddy technology Yield t/ha 3.2 3.5adopters will be $6.1 M at full development. HVC Gross Margin $/ha 167 215and IPM technologies will be sustainably adopted Productionby 130,587 farmers, covering an area of 8,888 ha. Cost $/t 42.3 34.7Annual financial gross margin from HVC and IPM Gross Margintechnology adopters will be $3.0 M at full HVC $/ha 1760 2039development. Fish production technologies IPM $/ha 2154(polyculture, semi-intensive tilapia culture and Fisintensive tilapia culture) will be sustainably adopted Fish Yedt/ha 2.7 4.0by 39,002 farmers, covering water spread area of Yield3,432 ha. Annual financial gross margin from fish Gross Margin $/ha 1436 2205technology adopters will be $2.6 M at full Livestock, perdevelopment. Livestock production technologies a il

(cow rearing for milk and beef fattening) will be Milk 1/day 2.0 2.5sustainably adopted by 78,003 farmers. Annual Meat k 37 52financial gross margin from livestock technology adopters will be $4.4 M at full development.Agricultural extension support investments will generate incremental financial benefits of $16 Mat full development, contributed by the adoption of crops (57%), livestock (27%) and fish (16%)production technologies by about 522,005 farmers in the project area.

Supply Chain Development Support

29. The SCDC of NATP benefitted 4,000 small farm holders to sell 10,000 MT of fresh farmproduce through project led network of 12 commodity collection and marketing centers

33

(CCMCs).CCMCs served both as a market place and a forum for CIG farmers to locallyaggregate, sort, grade and sell their products, in more significant quantities, guided by marketinformation. Promotion of business linkages between farmers, traders, and other serviceproviders helped each participating farmer to realize an additional income of $25 per MT in itssix months of operation during 2012.Annual turnover of NATP supported CCMCs varied from amedian value of $57,810 to an average value of $130,400.NATP CCMCs are still in growingphase as many of them are yet to start their full operations. The potential annual turnover perCCMC is taken as 1800 MT, as one of the NATP CCMC has already reached a maximum annualturnover of 1,600 MT of fresh farm produce. In order to achieve this, it is important to reachnon-CIG farmers through project CIGs.

30. Under the grant, 300 CIGs will be intensively guided to facilitate integration of 6,000 smallfarm holders and agribusiness enterprises into modern supply chains. Efficient market linkagesfor selected high value agro commodities will be promoted. About 400 demos of 20 selectivetechnologies from NATP experiences (post-harvest management, product aggregation, sanitaryand phytosanitary systems, value addition and market intelligence support, farmers-traderslinkages supply management) will be organized besides supporting ten CCMCs both as a marketplace and a forum for CIG farmers who can sell their products well sorted and graded, in moresignificant quantities, with more market information. Through 6,000 CIG farmers, another12,000 non-CIG farmers in the neighborhood villages will be targeted to increase the turnover ofCCMCs and make them financially self-sustainable beyond the project implementation period.Beyond project implementation period, it is projected that at least 45 percent of the total farmerswho are covered under SCDC interventions will sustain their adoption levels every year. Eachbeneficiary farmer will gain incremental financial gross margin of $33 per MT of fresh farmproduce traded through CCMCs, while contributing 5 percent of the turnover as CCMC charges.All ten CCMCs are projected to generate incremental financial gross margin of $0.72 M per yearat full project development.

Economic Analysis

31. Total project cost including project management costs and contingencies, is estimated at$23.7 M. Agricultural research investment costs will generate location specific technologiescontributing to productivity enhancement and cost reduction. Such technologies will bechannelized through the decentralized agricultural extension support through 6,905 CIGs. About134,890 CIG farmers will act as potential extension agents to diffuse the technologies, developedby agricultural research investments, for large scale adoption. This will sustain the incrementalbenefit flow for the 20-year project life considered in the analysis. Hence, agricultural researchinvestment component costs are proportionately allocated to the crop, livestock, fisheries andvalue chain development extension investments.

T-9 Grant: Economic Analysis Summary

Impacts NPV ($ M) FRR (%) NPV ($ M) ERR (%)Agricultural Extension Support $27.2 23.9% $30.2 25.8%Value Chain Development $0.7 16.5% $0.6 16.3%Overall Project $28.0 23.4% $30.8 25.2%

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T-10 Grant: Sensitivity Analysis Su mary ($ Million)

Sensitivity Scenarios NPV ERRBase Level $30.8 25.2%

Falling short of projected targets

Agriculture Productivity by 20% $17.7 20.7%CIG sustainability less by 20% $21.6 21.1%Adoption levels by 20% $20.7 22.3%

Escalation in project costs by 20% $25.4 21.7%Delayed implementation by two years $17.2 19.1%

Change in base level Costs & Benefits

Costs at 120% and Benefits at 80%1 $12.4 17.3%

32. Economic analysis is conducted for two components, namely agricultural extension supportand value chain development components and then aggregated for the project as a whole. Projectinvestments in agricultural extension support generated an ERR of 25.8 percent with a NPV of$30.2 M, at constant 2012 prices over 20-year project life (T-9).Value chain developmentinvestments returned an ERR of 16.3 percent with a NPV of $0.6 M. Overall project investmentsin both agricultural extension and value chain development components resulted in ERR of 25.2percent with a NPV of $30.8 M. For the project as a whole, FRR is estimated at 23.4 percentwith a NPV of $28 M.

33. Sensitivity analysis considered several scenarios like changes in costs and benefits, fall inprojected targets covering adoption rates, CIG's sustainability and agricultural productivitylevels (T-10).Minimum ERR of 17.3 percent is recorded when both costs and benefits changedby 20 percent from the projected levels. Next, delays in implementation and fall in agricultureproductivity levels reduced the ERR but still remained above 19 percent.

34. Risk analysis considered up to 20 percentescalation in costs, up to 20 percent fall inproductivity levels and up to two year delay in Risk analysis NPV, $M ERRthe realization of technology benefits and Expected value 12.0 17.1%evaluated their joint impact on ERR.Simulated ERRs, based on multiple runs,ranged from 6.1 to 24 percent, with a Minimum (9.5) 6.1%coefficient of variation of 18 percent. Maximum 28.0 24.0%Expected ERR, estimated by the risk model at17.1 percent is considered reasonably stable,since the probability of ERR exceeding 12 Probability of-ye outcome 5.5% 0 0.00percent level is 91 percent as predicted by therisk model (T- 11).Farm level Impacts

35. Equity Impacts: The grant will directly impact 883,508 farmers during the projectimplementation period, out of which about 60 percent of the farmers will sustain the projectimpacts during the project life. About 17 percent of these farmers are considered landless with a

35

farm holding size of less than 0.02 ha. Thirty-nine percent of the farmers are marginal farmholders with a farm holding size varying from 0.02 to 0.6 ha. Another 29 percent of the farmersare small farm holders with a farm holding size varying from 0.6 to 1 ha. Only 15 percent of thefarmers are holding more than 1 ha and remaining 85 percent are holding less than 1 ha of land.Thus small, marginal and landless farm families are predominantly targeted by the project.Livestock and fisheries interventions will help resource poor landless families.

36. Convergence Effects: The grant design will facilitate convergence of agricultural technologyextension interventions covering crops, livestock and fisheries with supply chain developmentinterventions. For instance, one union has about 3,800 families. As per design, each union willhave 15 crop CIGs, 02 fish CIGs and 03 livestock CIGs. The project interventions will impact2,100 crop farmers, 405 livestock farmers, and 200 fish farmers within one union. This includesboth CIG and non-CIG farmers. Thus, about 2/3rd of the farmers within the union will bedirectly impacted by the project interventions. Hence, convergence of crops, livestock andfisheries technologies demonstrated through CIGs and disseminated to non-CIG farmers withinthe union are more likely. This will be further aided through cross learning and experiencesharing among the CIGs within and across unions. Hence, the impact of technologies will bemuch more than what is captured in this economic analysis.

600

WOP m WP

450-

300

150

0Crop based Crop and livestock Crop and fisheries

Fig. 4 Grant: Farm income impacts

37. Income Impacts: For instance, in the project area, major farming systems are paddy based(21%), livestock based (5%), fish based (18%) and the rest are mixed farming systems (56%)with a combination of crops, livestock and/or fisheries. With convergence, and full adoption ofdemonstrated technologies, farm financial income for different farming systems are estimated(Fig. 4).Incremental gross margin is more ($156 to 172 per farm) in case of mixed farming typesas compared to crop based farms ($95 per farm).On an average farm financial income isprojected to increase by 35 to 46 percent due to project interventions, aided by both enhancedproductivity and reduced production cost in case of full technology adopters (Fig. 3).

38. Employment Impacts: Landless agricultural labor HHs constitute 5 percent of all HHs in theproject area (HIES, 2010), which is equivalent to 20,800 HHs in the project area. A 15 percentsustainable increase in the use of hired agricultural labor for farming operations is projected forthe technology adopting 530,105 farmers. This is equivalent to about 421,440 man-days of hired

36

farm labor. Due to seasonal nature of demand for hired labor, it is assumed that adoption ofagricultural technologies will provide at least 48 man-days of employment per landless laborHHs. This will benefit about 40 percent of the total landless labor households within the projectarea. Annual wage income due to additional demand for hired farm labor will increase their HHincome by $95 per family.

39. Poverty Alleviation Impacts: Averaged across major farm categories like crop, livestock, fishand mixed farming types, farm financial gross margin will increase by 43 percent. Incrementalfinancial gross margin for mixed farming HHs vary from $157 to 172 per annum. Based on thepoverty lines defined for rural Bangladesh, incremental gross margin for the mixed farmingHHs benefited by grant interventions will be able to lift at least 308,300 rural poor above povertyline, which is equivalent to 11 percent of the project benefited rural population.

17Average annual farm HH income in rural Bangladesh is $435/HH/year at constant 2012 prices (estimated fromHIES, 2010, Bangladesh Bureau of Statistics, Statistics Division, Ministry of Planning, GoB). Rural HHs, with anaverage family size of five, needs an annual per capita income of $178 and $206 (at 2012 prices) to be above lowerand upper poverty lines respectively.

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ANNEX 4. Revised Project Costs and Financing

Project Costs and Financing (US$ Million)IDA

(For districts covered by IDA USAID GrantComponent Credit) Percent (For districts added in the restructuring) PercentA. Agricultural Research Support 25,400,000 9,100000 100%A. 1 Competitive Grants Program 19,100,000 77% 4,100,000A.2 Sponsored Public Goods Research 6,300,000 72% 5,000,000B. Agricultural Extension Support 28,600,000 72% 11,445,000 100%C. Development of Supply Chains 3,600,000 77% 2,170,000 100%D. Project Management and Coordination 4,700,000 77% 1,000,000 100%Project Preparation Facility 300,000

62,600,000 73.9% 23,715,000 100%

USAID Grant Costs - By Expenditure Category

Allocation % of FinancingCategory of Expenditure (already committed) (exclusive of taxes)(1) Works, goods, services, training, and Operating Costs under Part 5 of the Project 16,335,000 100%-

(6,169,470)(2) CGP Grants under Part 5 of the Project 3,000,000 100%

(3 34,2 10)*(3) SPGR Grant under Part 5 of the Project 3,587,500 100%

(551,320)(4) Unallocated 792,500,000 100%

(0)*Total Amount 23,715,000 100%

(7,055,000)'()' refers to the currently Committed Grant amount of $7,055,000 pursuant to the Administration Agreement with USAID, which is the first of several expected installmentstowards a total grant of estimated US$23,715,000 for recipient executed activities.

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ANNEX 5. Proposed Reallocation (SDR)

Allocation according to existing FinancingAgreement Proposed Reallocation Addition/(Reduction) Revised Allocation_

Category IDA IFAD Total IDA IFAD Total IDA IFAD Total(1) Works, goods, 16,146,132.73 4,940,000.00 21,086,132.73 16,146,132.73 4,940,000.00 21,086,132.73services, trainingand operatingcosts(2) CGP Grants 2,900,000.00 900,000.00 3,800,000.00 -650,000.00 -220,000.00 -1,017,000.00 2,250,000.00 680,000.00 2,930,000.00under Part 1.A ofthe Project(3) SPGR Grants 7,200,000.00 2,300,000.00 9,500,000.00 -1,220,000.00 -300,000.00 -2,658,000.00 5,980,000.00 2,000,000.00 7,980,000.00under Part 1.B ofthe Project(4) Refund of 171,701.77 171,701.77 0.00 171,701.77 0.00 171,701.77ProjectPreparationAdvance5 (a) Works, 8,308,585.00 2,800,000.00 11,108,585.00 543,580.50 70,000.00 462,000.00 8,852,165.50 2,870,000.00 11,722,165.50goods, localconsultants'services, andOperating Costs5 (b) Training and 4,673,580.50 1,360,000.00 6,033,580.50 1,326,419.5 450,000.00 3,213,000.00 6,000,000.00 1,810,000.00 7,810,000.00foreignconsultants'servicesTotal 39,400,000.00 12,300,000.00 51,700,000.00 0.00 0.00 0.00 39,400,000.00 12,300,000.00 51,700,000.00

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ANNEX 6. Geographic coverage of the original project and the restructured project

Annex 6(a). List of Selected Upazilas & Districts for NATP -I

Number Of Upazilas Per Year of InclusionDistricts District

Total Selected 1st Year 2nd Year 3rd Year

Mymensingh 12 8 Sadar, Trishal Fulbaria, Phulpur, Gafargaon, Haluaghat, MGuaa

Kishoregonj 12 4 Sadar Bhairab, Kuliarchar KatiadiSherpur 5 3 Nalitabari Sribordi NaklaTangail 11 8 Sadar,Madhupur Bhuapur, Deldwar*, Ghatail, Kalihati Shakipur, GoplalpurGazipur 5 4 Sadar Kaliakoir, Kapasia* Sreepur

Narshindhi 6 5 Sadar Belabo*, Monohardi, Sibpur PolashDhaka 6 2 Savar* Dhamrai

Comilla 15 6 Daudkandi, Sadar* Chandina, Laksam, Nagolkot, ChadhagramBramanbaria 8 4 Sadar Akhaura, Kasba Nabinagar

Chandpur 8 4 Sadar, Hajigonj, Shaharasti Matlab (Uttar)Chittagong 14 6 Mirsharai*, Hathazari, Anwara, Patya, Sandwip Rangunia

Cox's Bazaar 8 3 Sadar Ramu TeknafSy1het 12 6 Sadar, Golapgonj Beanibazar, Jaintapur Fenchugonjn Dakhin Surma

Moulavibazar 7 6 Sadar, Kulaura Barlekha, Srimongal*, Kamalgonj, RajnagarKustia 6 4 Sadar Bheramar, Mirpur Kumarkhali

Jhenaidha 6 3 Sadar Kaigonj, Kutchandpur

Jessore 8 8 Sadar Chowgacha Abhoynagar, SarshaBhagerpara, Keshobpur, Jhikorgacha*Monirampur

Khulna 9 5 Dakope, Paikgacha Batiaghata, Dumuria RupshaSatkhira 7 3 Sadar Kalaroa, TalaRajbari 4 3 Sadar Baliakandi, Pangsa

Faridpur 8 3 Sadar Modhukhali, AlphadangaNatore 6 4 Natore Baroigram, Lalpur SingraBogra 12 6 Sadar, Shibganj* Shrerpur, Sonatola, Kahalu Dhunot

Dinajpur 13 6 Sadar, Parbatipur*, Khansama, Kaharol, Chirir BirganjDinajpur_______ 13 6 Sadar' Bandar

Rangpur 8 6 Sadar, Pirganj Pirgacha, Mithapukur Badarganj, Kaunia

Total 25 209 120 35 60 25

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Annex 6(b). List of Selected Upazilas & Districts Being Added in the Restructuring

Total Nos. Proposed Upazilas proposed for restructuredDistrict under Special features of the district

of Upazilas Restructuring project

Low lying area with salinity and water logged, erraticGopalgonj Sadar; rainfall with low cropping intensity. Potential for "Dhap"oKsudlpr; Kasgipani cultivation and high value crop introduction at the border of

ponds, Gher, fallow lands.Low lying area with salinity and water logged, erratic

Sadar; Rajoir; Kalkini rainfall with low cropping intensity. Potential for "Dhap"Madaripur Shibchar cultivation and high value crop introduction at the border of

ponds, Gher, fellow lands.Low lying area with salinity and water logged, erratic

Sadar;Zajira;Bhedarganj rainfall with low cropping intensity. Potential for "Dhap".a6ara cultivation and high value crop introduction at the border of

Gosairhatponds, Gher, fellow lands.Drought prone and erratic rainfall area. Potential for crop

Magura 4 4 Sadar; Sreepur; Mohommadpur; Shalikha intensification and diversification, especially high valuecrops, oil seeds, spices, etc.

aygong;Kamarkhanda Flood prone area with dishes. Potential for cropSirajgang 9elkuchi; Chauhali intensification and diversification, especially high value

crops, oil seeds, spices, etc.

Sadar; Char Fasson Saline area with sudden storm and water logged. Potential

Bhola 7 7 Doulatkhan;Borhanuddin; Tojumuddin; for "Dhap" cultivation, crop intensification andMonpura diversification, especially high value crops, oil seeds, spices,Lalmahan ec

6 districts 35 30 30 Upazilas etc.

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ANNEX 7. Governance and Accountability Action Plan

ResponsibleIssue Risk Mitigation Actions Proposed Organization

Component-1 Agricultural Research SupportERIE/HRD * Sustaining and proper placement of trained manpower 1. Management plan for trained BARC/NARS

manpower institutes2. New requirement as well as utilization

plan for MS, PhD scholar and trainedscientists

Implementation of * Priority may change due to changing of environment, 1. Periodic review and updating in every BARC, NARSResearch farmers and market demand five years institutesPrioritiesMonitoring & * Weak internal monitoring systems in place 1. Monitoring formats developed and use BARC, NARSEvaluation of * Dedicated manpower and understanding of monitoring 2. Conduct monitoring periodically and institutesresearch activities formats not equal at all levels report made available to PIUs and PCU

Research * Some research sub-projects may not be completed 1. Linking with NATP 2nd Phase BARC, NARSmanagement within the project period 2. Institutionalization of the research institutes

* CGP projects* SPGR

Research- * Adequate seed of newly released developed varieties 1. Request to BADC and NARS BADC, NARSExtension linkage from CGP and SPGR may not be available for institution (breeder seed) to produce institutes,

conducting validation trails at different Agro-ecological large quantities of seed extensionsZones agencies

Component-2Agriculture Extension SupportFunctionality of * Sustainability of CIG 1. Development of Byelaws for CIGs DAE, DLS,CIGs 2. Initiate savings program DOF, Hortex

3. Arrangement for seed money to CIGsand POs

4. Linking with marketing channel5. Formation of functional sub group of

CIGs with rules and targeting6. Registration of CIG

42

ResponsibleIssue Risk Mitigation Actions Proposed Organization

Producer * Functionality of POs 1. Capacity and confidence building DAE, DLS,Organizations * No logistic facilities available for POs activities for both CIG and POs as DOF, Hortex(POs) * Confidence of CIG farmers on POs regarding sharing market players

benefit occurred from sale proceed

FIAC * Sustainability of LEAF and CEAL 1. Business plan for sustainability of DAE, DLS,* Service of LEAF and CEAL are not available during LEAF and CEAL will be developed DOF

all working daysMonitoring & * Inconsistent data flow due to multi-dimensional 1. Refinement of specific monitoring PCU, DAE,Evaluation of project activities tools for each component based on DLS, DOF andextension lesson learned. Hortexactivities

Agricultural * Implementation requires time because of the 1. Refinement will be made based on DAE, DLS,Extension Policy involvement of different stakeholders comments and suggestions received DOF(DAE, DLS, DOF) from stakeholders

Component -3 Supply Chain Development ComponentAgri-business * Syndication of market forces 1. Provision of cooling facilities at CCMC Hortex, DAE,Management, * Inadequate quantity with required quality produced to 2. Establishment of contract farming DLS, DOFvalue chain/ link with market 3. Enhancement of quality assurancesupply chain system

Compnent-4 Project Management and CoordinationProcurement * Fraudulent and corruption practices may occur 1. PCT auditing and back stopping PCT

* Fluctuation of dollar rateEnvironmental * Non-compliance with environmental and social 1. Strict monitoring on environmental and PCU, BARC,and social safeguards social safeguard by PCU and PIUs KGF, DAE,safeguard 2. Invite citizen participation in public DLS, DOF and

awareness building Hortex

43

ANNEX 8. NATP (IDA 43860): Refund Status/Actions taken

Reference Subject Actions taken/Status

World Bank letter Refund of US$166,392.12 A discussion was held at the 9 1h Projectdated February 27, for which no deductions Steering Committee (PSC) meeting held2013 were made from the on July 07, 2013.1t was decided that the

applications for Project would keep a provision in the 3 rd

inconsistency in the eligible revised Development Project Proposalfinancing percentage from (DPP) to refund the fund to IDA fromWithdrawal Application No- GOB fund. Accordingly, PCU has kept a3, 6, 7, 8, 9, 10, 11, 12 and provision in the 3 rd revised DPP. The 3 rd

13 (from May 2009 to revision of the DPP is under process byMarch 2010). the Planning Commission and the refund

is expected to be settled by March 31,2014 once the RDPP is approved.

World Bank letter Refund US$2,171.28 which The refund was received by the Worlddated March 13, 2013 was claimed excess from Bank on December 26, 2013.

IDA & less from IFAD dueto incorrect financingpercentage during therestructuring period.

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