ANNEX 4

CONCEPT NOTE ON FAO-UNIDO JOINT IMPLEMENTATION OF COMPONENT 2 OF THE PROJECT

SUPPORT TO EMPLOYMENT CREATION IN MONGOLIA (SECiM)

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CONTENTS

Table of content……………………………………………………………………………………………………2Abbreviations………………………………………………………………………………………………………3Background....................................................................................................................................................4

Methodology..................................................................................................................................................5

Sustainability of the action..........................................................................................................................10

Risk assessment...........................................................................................................................................10

Role of implementing Partners – FAO and UNIDO....................................................................................10

Management Structure.................................................................................................................................12

The Project Management Unit (PMU).........................................................................................................12

The Project Steering Committee (PSC).......................................................................................................12

Annex 14

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Abbreviations and Acronyms

CTA Chief Technical Adviser

CSO Civil Society Organization

FAO Food and Agriculture Organization of the United Nations

FGD Focus group discussion

GAP Good agricultural practice

GMP Good Manufacturing Practice

HACCP Hazard Analysis and Critical Control Point

IAA Inter-Agency Agreement

MoIA Ministry of Industry and Agriculture

MSME Micro, Small and Medium-sized Enterprises

NPC National Project Coordinator

PMU Project Management Unit

SECiM Support employment creation in Mongolia

UNIDO United Nations Industrial Development Organization

VC Value chain

VCA Value chain analysis

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Background

The agriculture sector plays a major role in the economy of Mongolia. Livestock husbandry and crop production are the main agricultural subsectors. The animal husbandry sector accounts for almost 10% of the total export earnings in Mongolia, constituting about 80% of total agricultural production and employing 35% of the country’s total labour force. According to 2013 projections, crop production in Mongolia was expected to supply 82%, 100%, 54% and 1% of the demand for wheat, potato, vegetables and fruits respectively.

Apart from being the main provider of food for the population, agriculture provides an important source of employment, particularly in rural areas of the country. Agriculture accounts for over 70% of employment in these areas. With 25% of the population living below the poverty line, and one third of the youth unemployed and underqualified, the creation of employment opportunities and improvement of livelihoods is a high priority of the Government. The Government is addressing the employment challenges of Mongolia through the development of employment policies.

Against this background, FAO and UNIDO were invited by the European Union to jointly formulate and implement a project to support employment creation in Mongolia (SECiM). The objective of the intervention to be financed by the European Union, is to assist the country to establish a well-functioning labour market capable of supporting a dynamic, diversified economy, while ensuring competitiveness and sustained economic and employment growth and to implement a strategic approach for employment, addressing its specific employment challenges in line with international policies and best practices.

The project component to be jointly formulated by FAO and UNIDO will, through a value chain approach, address the needs of all actors committed to a) the livestock chain for food (meat and milk) and non-food items (wool, leather, cashmere) and b) the vegetable chain, both of which have a high potential for job creation in terms of quantity and quality, with a focus on poor households. Emphasis will be given to the development and maintenance of public-private partnerships to meet market demands for skills that match needs in the relevant value chains in the rural development sector, building on experiences of both UN Agencies and other donors in the country.

FAO has a long established presence in Mongolia that dates back to 1973, when Mongolia became a member of FAO. This presence was continued and heightened with the establishment of an FAO Mongolia office in 2009, with the FAO Representative in China as head, and in 2013, the permanent posting of a Deputy FAO Representative in the country. FAO currently enjoys a good working relationship with the Government of Mongolia through the Ministry of Industry and Agriculture (MoIA) and currently serves as the Secretariat for the MoIA-led Working Group on Food Security and Agriculture recently established in Mongolia to coordinate interventions by the development partners in the country.

FAO has valuable direct in-country experience of improving vegetable and livestock production systems in Mongolia, and in supporting agri-food value chain development, as well as capacity-building in small-scale vegetable production for enhancing food and nutrition security in rural areas. Some recent relevant Government Cooperation and Trust Fund projects implemented by FAO in the country include the following:

GCSP/MON/001/JPN - Increasing the supply of dairy products in Mongolia by reducing post-harvest losses and restocking.

GCP/MON/004/PRC - Technical assistance under the South-South Cooperation with the People’s Republic of China in Support of the National Food Security Programme in Mongolia

GCP/MON/006/EC - Enhancing food and nutrition security for vulnerable segments of the population of Mongolia through capacity building in small-scale vegetable production.

GCP/MON/007/ITA - Quality meat for consumers. UTF/MON/009/MON - Integrated livestock based livelihood support project

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TCP/MON/3105 - Improved meat hygiene and commercial meat processing, TCP/MON/3303 - Enhancing food and nutrition security for vulnerable segments of the

population of Mongolia through capacity building in small-scale vegetable production. TCP/MON/3401 - Strengthening the capacity of Mongolia to implement Codex. TCP/MON/3404 - Strengthening of Plant Protection Institutional Capacity. TCP\MON\3503 - Assistance to Mongolian Organic Agriculture.

At the global and regional levels, FAO has a track record of promoting economic activity, enhancing agricultural and agro-enterprise development for livelihoods improvement and employment generation. FAO’s work on value chains, includes the greening of values chains and gives strong attention to business and marketing skills, agricultural sector support services, producer and private sector organizations, collaboration and partnering between public and private sectors and with civil society organizations (CSOs), and the socio-economic and sectoral impacts of policies affecting agri-food value chains. In the area of rural development, FAO has a track record of promoting activities that bring greater economic diversity and dynamism to rural areas, thereby providing employment and income-generating opportunities for rural women and young rural people across the socio-economic ladder. FAO engages with the public sector, the private sector and CSOs at all levels to ensure a unified and coherent approach to creating decent employment opportunities for rural youth and women. These social dimensions, in addition to FAO’s ability to organize multi stakeholder activities and platforms, are key comparative advantages that FAO brings into the partnership.

UNIDO has been actively engaged with its national and international partners to bring its expertise and technical skills to the design and development of a variety of livelihood, capacity-building, and productive capacity establishment initiatives. UNIDO has been able to provide project-targeted communities and enterprises with an effective means of dependence on humanitarian aid flows as well supporting the economic development in the Organization’s programme areas.

As a result of the expertise and operational modalities developed in various environments, UNIDO has designed a holistic capacity building approach for the development and provision of effective and realistic strategies for the development of industrial infrastructure, improvement of employment and income opportunities, and the reduction of poverty levels. This approach is based on a number of critical success factors:

A people centred focus A flexible delivery model Identification of assets and appraisal of needs at the local level Appropriate and relevant technology transfer and skills development Strengthening income flows Adding value to local resources Promoting market access and linkages

This project reflects this approach and is tied to these factors. As a result, the project will be able to directly focus on industrial empowerment, which will help to facilitate greater participation in the local community and the sector wide economic development process.

Furthermore, the core professional capacities of UNIDO combined with its global experience gathered in providing technical assistance in the food industry in general and the livestock ( including non-food by-products) and fruits and vegetable sectors specifically, as well as the significant funding obtained from a multitude of donor sources demonstrate the UNIDO competence in this area.

Methodology

Capitalizing on the strengths and comparative advantages of both UN agencies, the project will adopt the value chain approach (VCA) as a guiding framework geared toward enhancing growth and income generating opportunities for farmers and enterprises in rural areas, as well as the creation of jobs within the value chains. The VCA will be complemented by cutting-edge strategies on enterprise development, gender and youth mainstreaming, greening the value chain, capacity-building and policy

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support assessment. Entry points for specific service provision that will benefit women and youth across the value chains will be identified, potentials for green product development will be assessed and pursued, and an enabling environment in terms of policies and programs will be mapped and will serve as input to continuing strategic enhancements. Innovation is a must in any sustainable chain development, thus opportunities for such will likewise be identified.

Enhancement of environmental sustainability and safeguarding the cultural values and nomadic lifestyles of the livestock herders in all activities of the VCs will be an integral part of all project activities to ensure “sustainable production and green consumption. In this regard, the good agricultural practices and principles encapsulated in the FAO publication titled “Save and Grow” and those espoused in the FAO initiative on “Climate Smart Agriculture” and the FAO initiative on “Globally Important Agriculture Heritage Systems,” will be systematically applied.

Strengthening of the agriculture extension services will be given prominence to ensure capacity building for enhancing knowledge, skills, attitudinal and behavioural changes aimed at increasing production and improving the quality and safety of the products and by-products of the value chains.

Promotion of public private partnerships and facilitating linkages between input suppliers, producers, financial/credit institutions, agro-processors, transporters, the market; and strengthening of coordination among all role players will be aggressively pursued.

Strong involvement of the counterparts increases ownership but also decreases the risk of delay in implementation. Clear division of responsibilities among the different stakeholders and results oriented management and monitoring including early application of corrective measures is of utmost importance to keep to the envisaged timeline.

A results based management approach will be used throughout implementation by carrying out participatory baseline surveys, mid-term reviews and terminal evaluations to ensure that measurable indicators and achievable targets against which the project performance will continuously be measured to ensure the desired project outputs and outcomes are achieved.

The project will benefit from experiences of the Organizations’ previous and ongoing agro-industrial projects in Mongolia and in different situations and environments. Both agencies are actively involved in projects and project components targeting the envisaged sectors, particularly FAO, that is involved in Mongolia. This project will strongly build on the experience gained in Mongolia. In addition, the implementation strategy will involve the newly developed capacities in order to sustain the previous impact but also to avoid a competitive situation for raw materials.

Value Chain Guiding Framework

The intent is to develop vegetable value chains and livestock sector value chains (foci to be specifically identified later) for the production of food (meat, milk and other dairy products) and non-food high value products (leather, wool, cashmere, etc.). A sustainable value chain is one where value adding activity is enhanced by stages/levels of the chain, each level delivering a value that the consumers are demanding and willing to pay for. These value adding units are usually comprised of Micro, Small and Medium-Sized Enterprises (MSMEs) which deliver a value added product and in the process create opportunities for livelihoods development and employment. In keeping with their mandates, FAO’s activities and interventions will focus on addressing micro and small livestock food based (meat and milk) and vegetable enterprises, while UNIDO will address the medium and large scale enterprises of the livestock food based (meat and milk) and vegetable sectors; as well as the livestock non-food based enterprises.

An in-depth value chain assessment of the selected sectors, (vegetable and livestock sector) will be undertaken in order to benchmark the current situation and to identify the initial possibilities (market, technical, structural, etc.). This will be followed by technical and market assessments of the initially selected products for development and value adding, using key baseline surveys, informant interviews

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and focus group discussions (FGD). Actual piloting with technical assistance on the selected commodity per component from market identification, product development, technology transfer, as well as upgrading of food safety practices in conformance with market requirements, and market introduction, access and performance assessment will be undertaken.

Possibilities for clustering and collective activities (purchase of inputs, marketing, later on branding) to achieve economies of scale will be a major consideration in project design and implementation. Similarly, collective research and development will be looked into for product development, application of appropriate technologies, and food safety considerations. Such collective activity will extend from the downstream to the upstream part of the value chains to ensure holistic approaches in chain development.

Selection of the commodities to be targeted will be governed by a joint agreement between the implementing institutions, beneficiaries and the government of Mongolia.

Enterprise Development

The major strategy is the development and strengthening of MSMEs within the crop sector and in livestock value chains. The foci will be the upgrading of traditional enterprises such as food (vegetable, milk and meat) processing enterprises, through the provision of low cost, low input appropriate technologies as well as capacity building to improve diversification, quality, safety, and packaging, geared toward initially supplying local and later on export markets. Given the significant role and involvement of women in food processing activities, this would, in the process, mainstream gender initiatives as well.

An equally important dimension of the strategy is to engage private sector participation at the outset, e.g., the Mongolian National Chamber of Commerce and Industry and other sector specific institutions. Private sector investment in areas that will serve collective requirements of enterprises, such as technology, transport, quality and safety management (GAP, GMP, HACCP, etc.), cold chain development and packaging, among others, will be promoted. It is also the private sector which will take the lead in research and development and innovation. The socialization of schemes and techniques to budding MSMEs are crucial private sector contributions that will further strengthen the chain or capacitate the weakest link (farm and processing MSMEs) in the chain. Public private sector partnership (PPP) is a possible approach to address infrastructure requirements (such as certified testing laboratories, cold storage facilities to support cold chain development, pack-house facilities, etc.). Providing a voice in terms of policy support is also a key role that can be played by the National Chamber of Commerce and Industry and sector specific organisations.

Mainstreaming Gender and Youth Concerns

Women’s contribution to agriculture and development, on one hand, is often underreported and undervalued. The contribution of youth, on the other hand, is underutilized. Efforts to address these situations are constrained by the lack of disaggregated data on women, men, and youth, which limits a proper understanding of, and consequently addressing, the challenges and opportunities for women and youth development. Specific data on the employment status, economic activity, hours of paid and unpaid work and leave, income, work conditions and barriers to employment, on a geographical basis within the country, will contribute significantly to better understanding situations, identifying issues and consequently formulating measures to address gender and youth issues. To this end, participatory surveys that consider the afore-cited gaps will be undertaken. The data generated will be analyzed and resultant outputs will serve as inputs to actual formulation of gender and youth related interventions in both project components. Also along the value chains, the enhanced role of women (and youth) can be identified (farm management, harvesting vegetables, marketing, etc.).

In view of the fact that a majority of the unemployed youth is educated, rather than waiting for employment, once trained on enterprise set-up and management, they could be equipped to establish their enterprises along the value chain and themselves create employment for others. The youth

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(together with health and environmentally conscious adults) can be targeted as well as major consumers for “green” products. The youth are quick to pick up developments, follow trends and even be trendsetters, so they are good market targets for green products.

Capacity Building

Investing in gender sensitive education and vocational training tailored to the needs of rural areas is a must for gender mainstreaming. In the same manner, facilitating access of youth to productive assets and markets and the means to overcome obstacles to the implementation of new and low cost, low input appropriate technologies and approaches are imperative.

Moreover, increasing the level of education by enhancing the relevance of the education system to labor market needs, will provide the much needed bridge to cross over the area of enhanced livelihood and employment opportunities. To this end, specific formal and informal training needs and curricular packages will be identified and designed, respectively on a per project component basis.

These activities will be done jointly and in accordance with component 1 of the SECiM project focusing on the national regulatory framework through support to the implementation of the National Employment Policy.

A training need assessment (TNA) will form part and parcel of each project component, not only in terms of the requirement across the value chain but also in support of MSME development as well as gender and youth mainstreaming. Without preempting the results of the TNA to be undertaken this early, two major areas of training needs are immediately identifiable, namely:

a) Entrepreneurship Capacity building programmes and awareness-raising of the gains that could be derived from entrepreneurship is a key area for development for women and youth as well as for strengthening existing MSMEs. Not only will these empower women to build upon traditional home grown skills and indigenous technologies, but they will also provide eye opening opportunity identification options for the youth.

b) Basic management and technical skillsBasic management and technical skills relating to fundamental areas necessary for enterprises to sustain themselves will be developed. These include strategic management capacities (i.e. the ability to manage entry into new markets and organizing labour and capital to respond to the changing markets, technologies, regulations, and investment planning), functional management skills (i.e. skills required in production, finance, purchasing and marketing to improve production of capital, quality control etc.).

c) Extension capacity enhancementThe expanded agricultural activity expected out of value chain development will bring about enhanced activities at the production level. Such expansion will increase the demand for extension services both at the public but also the MSME levels. Capacity building programs directed to extension providing institutions are needed as well to enhance service delivery.

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Rural Employment

An absence of decent work options pushes youth and women towards vulnerable employment, under-employment and labour migration, none of which would allow them to earn a decent living. In addition to boosting employment creation and enterprise development through the development of professional skills, the project will 1) place emphasis on improving their working conditions and on assuring social protection through awareness raising on the technical and legal aspects of occupational safety; 2) focus on vocational training of the youth for technical and artisanal skills development, including training in the use of tools, equipment and technologies to improve safety and ensure health services for them; 3) promote awareness about workers’ rights in rural enterprises, and provide training on the development of employment contracts, for example and 4) promoting awareness of youth and women on collective bargaining and its benefit.

Fostering Green Consciousness

Focusing on promising green sectors would strengthen the ability to cope with climate change and environmental degradation, and could also turn environmental challenges into business opportunities. Programs that would build on capacities to create business opportunities in green sectors, such as organic agriculture and environmentally friendly agro-processing, will be explored. Efforts will be made to promote the application of agricultural techniques that maintain land productivity in a sustainable manner, such as the replacement of chemical inputs with biological nutrient inputs, soil and water conservation as well as reducing losses and promoting energy efficiency across the value chain.

The development of “green products” in keeping with Mongolia’s green image, primarily by encouraging and supporting farmer and entrepreneur initiatives for the efficient use of water, land, energy and other inputs will be promoted. This will integrate consideration for environmental consequences in the production systems being supported. The market potential of Mongolia as a “green producer” will be capitalized on, in the positioning of products as “safe and green products” of Mongolia. Along this line, three major sub-strategies will be developed: first, enabling farms to produce healthy and nutritious products; second, building capacities on entrepreneurship, particularly of the youth; and third, enhancing a sense of patriotism by patronizing locally produced products.

Institutional and Policy Support

Enhanced awareness and the handholding type of brokering to economic activity options will help target beneficiaries to gradually leave their nomadic lifestyles and be integrated into the realm of agricultural and consequently economic development. Creation of support systems both in technical and cultural aspects of the activities (such as household clusters, help desks, information centers, etc.) could pave the way to enhance social and eventually economic integration. All these will be undertaken with utmost consideration and respect to safeguard cultural values and traditions.

Likewise, organizational development is a key component, as farmer groups, cooperatives, clusters (both famers and MSMEs) are necessary pillars of any successful value chain intervention. Mature and well managed farmer groups and cooperatives generally have the greater chance of project success, though they need to be capacitated in terms of good agricultural practices (GAPs) and good manufacturing practices (GMPs) and hazard analysis and critical control point implementation (HACCP), value chain, enterprise development and the technical aspects of post harvest management, product development and quality enhancement.

The challenge is also to design policies and institutions which provide incentives to start profitable activities, to invest in innovative approaches, new technological and commercial knowledge, and to shift into higher productivity and learning intensive sectors which can create opportunities to accumulate capabilities.

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While funding support is not a component of the project, enabling and facilitating smooth access to financial schemes, enhancing capacities of public and private institutions to provide financial services in a way that they are within easy access and with affordable rates, are good starting points of financial intervention.

Envisaged activities

Both agencies will jointly conduct activities outlined, based on the division of labour outlined in the appended table. A list of possible activities is elaborated as Annex 1. These will be elaborated during project formulation.

Sustainability of the Proposed Action

The project is based on the principle of ownership by the counterparts and beneficiaries since a demand (and not supply) driven approach has proven successful in many countries, especially in the previous projects implemented by FAO and UNIDO in Mongolia itself.

Careful consideration will have been given in selecting the project areas and the project counterparts.

The local authorities and farm management are made aware that sustainable and more efficient use of raw material produced locally will bring an advantage in the mid to long-term.

The additional capacities and capabilities acquired from the project will enable them to improve their operation.

Risk assessment

Risk Risk assessment and mitigation measuresChallenge of multiple partner structure

Low, as FAO and UNIDO have cooperated in several projects around the world

Long implementation period Low, as the project is well planned and both FAO and UNIDO carry a broad experience in implementing projects in areas with complicated environments

Low capacity of target group Low, since implementation will be done using a step by step approach and since stakeholders will be well assessed

Little interest from final beneficiaries

Low, as they already have showed big interest in other projects

Low commitment of partners Low, as stakeholders have shown high interest and commitment during project development phase and assessment.

Effectiveness of tools Low, as the tools planned to be used have proven to be efficient in several different projects around the world and especially also in Mongolia

Political risks Low, as the sector strategy is high on the agenda of the Government. Political changes may of course impact negatively

Environmental risks Low to medium. Especially: unforeseeable whether condition may impact negatively.

Social risks Low to medium: occupational hazards are unlikely under the governing system. In addition, the scattered and isolated geographical of the nomadic herders could pose a medium risk, but with FAO’s vast experience in working with the nomadic herders in Mongolia and in other countries this risk can and will be mitigated.

Role of implementing Partners – FAO and UNIDO

In light of the above, and in view of FAOs proven technical competence and expertise in livestock production systems, animal health, breeding and disease control management, as well as in micro and small scale meat, vegetable and dairy value chain development, and in crop post-harvest and meat and milk post-production systems management (storage, transportation cold chain development) in

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Mongolia and in other countries; and UNIDO’s expertise and its experience in the wool and leather sectors; and in the medium and large scale meat, milk and vegetable value chain development, both in the country and around the globe; including both Agencies’ strong focus on food safety across the food chain, FAO has a clear comparative advantage in addressing the farm-based issues and micro and small enterprise issues under the project, while UNIDO has a clear advantage in addressing the medium and large scale enterprises of the meat, milk and vegetable VCs and the non-food (wool, leather, cashmere, etc…) issues.

However, given the critical importance of animal husbandry and breeding for the production of quality non-food products (wool, leather, cashmere, etc.), FAO would also play a role in the development of non-food livestock value chains.

The extent of involvement of the collaborating parties will be governed by the responsibilities and accountabilities summarized in Table 1.

Table 1: Partners Activities and Responsibilities by Project Components

Activities Project Components

Crop Sector – Vegetables &

Animal fodder

Livestock sector

Food Non Food

TechnicalInput supply (including food safety considerations) FAO FAO FAOEnvironmentally friendly production (including GAP) FAO FAO FAOHealth, breeding, animal nutrition/soil fertility enhancement, disease control and management FAO FAO FAO

Post harvest management (harvesting, treatment, storage, grading, cold chain development) research, development and innovation with food safety as a cross cutting dimension

FAO FAO UNIDO

Value adding (processing and, packaging) research, development and innovation with food safety as a cross cutting dimension

Micro: FAO Micro: FAO UNIDOSmall: FAO Small: FAO Small: UNIDO

Medium:UNIDO Medium:UNIDO Medium:UNIDO

Infrastructure FAO, UNIDO FAO, UNIDO FAO, UNIDO

Socio Economic FAO, UNIDO FAO, UNIDO FAO, UNIDO

Market AssessmentSpecific sector products

Micro: FAO Micro: FAO Micro: UNIDOSmall: FAO Small: FAO Small: UNIDO

Medium : UNIDO Medium: UNIDO Medium: UNIDOEnterprise development(including enterprise capacity building)

Micro: FAO Micro: FAO UNIDOSmall: FAO Small: FAO Small: UNIDO

Medium: UNIDO Medium: UNIDO Medium: UNIDOSocial issues – Gender, rural employment (women, men, youth) FAO, UNIDO FAO, UNIDO FAO, UNIDO

Rural Employment - rural employment creation, vocational training, social protection, decent work, workers rights, collective bargaining

FAO FAO FAO

Communication and visibility FAO/UNIDO FAO/UNIDO FAO?UNIDOOrganizational Development(farmer groups, cooperatives, clusters, etc) FAO FAO UNIDO

Enabling Environment FAO, UNIDO FAO, UNIDO UNIDO

Policy support assessment (development of an evidence base for policy support) FAO, UNIDO FAO, UNIDO FAO, UNIDO

Institutional and program mapping FAO, UNIDO FAO, UNIDO FAO, UNIDOTotal Indicative Budget (EUR4,150,000.00) EUR800,000.00 EUR1,6750,000.00, EUR1,700,000.00

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Results integration FAO / UNIDO

The policy and institutional mapping component of the project is geared towards identifying on-going programs being implemented in the country, in order to identify complementarities and overlaps. The idea is to maximize gains as part of the holistic strategic approach and to avoid the wastage of resources. The project will network with ongoing and past projects to harmonize efforts, including but not limited to, the EU supported project with the Mongolian Standardization Agency, and to link to certification, when export potentials are seen in the longer term.

Duration

The project will be for a four (4) year duration starting in 2015.

FUNDING

The total funding requested from the EU will be EUR4,150,000.

FAO will provide co-funding support of US200,000 through a Technical Cooperation Project (TCP). This TCP project will be formulated concurrently with the formulation of SECiM project and will provide technical support to the development of training materials, the implementation of training and will partially cover the cost of technical backstopping support from FAO-RAP and HQ officers.

UNIDO will contribute in kind around 150,000 € through the following activities: project management (€   28,885.36/year; around 2.5 man months of project managers/year), Field office (€ 9,358.79/year); around two weeks of field office staff for monitoring/year).

 

Management Structure

Following on initial in-country policy level discussions, FAO was confirmed as the leader of the "Delegation Agreement" with the EU, which will include UNIDO. The project would, therefore, be anchored in FAO Mongolia. FAO and UNIDO would jointly develop an implementation strategy.

As the lead implementing agency, FAO will be vested with the overall responsibility for implementing the project. An Interagency Agreement (IAA) will regulate the internal relations from drafting the ground rules, to managing initiated meetings (by any of the parties) including addressing cross cutting concerns. Each institution shall be in charge of their respective component activities as reflected in Table 1. Cross component updates and sharing of insights will be undertaken through regular meetings, to keep track of activities and progress.

The establishment of a pool of experts enabled to spread acquired know how to other provinces of the country will build the backbone for replication and sustainability. The linkage to the pool of experts developed in previous projects implemented by FAO and UNIDO in the country will create the necessary embedding of the experts in an existing structure.

The roles and responsibilities of the main stakeholder groupings that are in charge of the development, implementation and supervision of the project activities are described in Table I above.

The Project Steering Committee (PSC)

The MoIA is the key counterpart and will function as the Head of the Project Steering Committee (PSC). The PSC will also comprise representatives of the target sectors. In order to secure the linkage to the private sector and the scientific bodies, a representative of the farmers, the Chamber of Commerce as well as from the Agricultural Department of the University of Ulaanbaatar will be

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invited to join the PSC. UNIDO as well as FAO will each nominate their representatives on the PSC as well. As Donor, the EU will have a seat in the PSC.

The main functions and responsibilities of the PSC will be to: (i) advise the project on strategic directions of support activities to be provided; (ii) ensure the effective cooperation between all involved stakeholders; and (iii) advise on the effectiveness of the ongoing activities, including the annual work plan. In this connection, the project will aim to achieve co-ordination and cooperation through multi-stakeholders workshops. This arrangement will promote the involvement of all stakeholders and will ensure national ownership and sustainability of the planned project activities.

The Project Management Unit (PMU)

The project will establish a flexible management structure, namely, a Project Management Unit (PMU), to implement and supervise the project. The PMU will be based in Ulaanbaatar and will be located in the FAO Mongolia office backstopped and supported by FAO-Beijing, the FAO Regional Office in Bangkok and FAO Headquarters in Rome, as well as from UNIDO through the UNIDO Regional Office in Beijing and UNIDO Headquarters in Vienna, Austria. The organizational and operational structure of the PMU will be designed to ensure that the project management team has the autonomy and the capacity to effectively conduct its day-to-day operations and/or to make any amendments necessary to the project’s action/activity plans in accordance with approval of the project steering committee (PSC) so as to ensure that consistent progress is made during the project implementation phase. Wherever feasible, the PMU will look for cooperation with ongoing projects or capacities established by both ongoing and completed projects.

The PMU will have a small permanent staff comprised of: (i) a Chief Technical Adviser (CTA), (ii) a National Project Coordinator (NPC); and (iii) basic administrative support. The CTA will be based in the FAO Office in Ulaanbaatar.

The CTA will be responsible for the technical aspects of project implementation and the coordination of its activities according to the counterparts’ priorities and ensuring proper coordination with other ongoing projects. The NPC will assist the CTA in the daily field operations, ensuring that all contract obligations as well as the committed contribution from the counterparts are met at the project site. He/she will follow up at the place of action on the project activities progress and make the necessary contacts and efforts to ensure that the set targets will be met.

When necessity arises, the PMU will be assisted for specific activities by expertise from the two implementing agencies and/or national and international consultants. Project personnel will be recruited, with an emphasis placed on accountability and transparency, in accordance with the Agencies’ usual recruiting procedures.

Communication.

Both FAO and UNIDO will vigorously undertake communication and publicity activities aimed at maximizing the visibility of the project, the EU as Donor and FAO and UNIDO as project implementing agencies.

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Annex 1Indicative Activities

Result 1 - Value chain operators in the livestock sector will derive better incomes and increased employment possibilities arising from increased and higher quality production and added value development.

Meat and Milk sectors:

Conduct an in depth lifestock value chain analysis to assess the potential of proposed initiatives to improve income generation and employment creation. This analysis includes an environment and gender survey and will consider possible impact on the environment and gender of any development selected for support.

Provision of assistance in the implementation of the newly adopted livestock related legal framework regarding food safety and animal health

Select pilot producer communities, discuss and agree proposals targeting value chain (meat and milk) development showing potential to meet stated project objectives.

Where possible, encourage and support establishment of producer groups and self-formed/self-run cooperative business initiatives targeted at adding value to primary production (meat and milk), as well as developing linkages with other players in the market/processing paradigm, thereby promoting and defending producer interests.

Coordinate provision of technical advice on improved husbandry at primary level in selected pilot locations, which target improved output of higher value livestock products.

Support the improvement of animal health and eradication of animal diseases. Coordinate provision of technical advice on improved husbandry at primary level in selected pilot

locations, which target improved output of higher value livestock products. Encourage and help prepare applications and business plans for support from agencies (Chingis

Fund, Banks etc.) to provide means for developing viable business proposals in all aspects of the value chain utilizing COMFAR as an accepted tool by Mongolian banks.

Mobilise the support of available extension and research services, supporting these service with appropriate capacity building programmes as consulted and agreed with them.

Select processors in the meat, milk, leather and wool sectors to enable the linkage of selected producers to strengthened outlets for their produce.

Promote and encourage meaningful linkages between primary producers, processors and markets for higher value quality products (meat, milk); as well as other livestock products and by-products (wool, leather, and cashmere). The project will engage with Chambers of Commerce and relevant Trade associations to forge market linkages which help locally produced products access markets. This will include provision of targeted capacity building programmes as discussed and agreed with these support organisations.

Coordinate with Veterinary and Food Safety monitoring services in supporting and advising all stakeholders in the value chain. The project will provide targeted capacity building programmes as discussed and agreed with these organizations.

Provision of assistance to pilot slaughterhouses and meat processing units in their endeavors to meet national and international market requirements.

Introduce good manufacturing practices and appropriate technologies in the meat and milk sector allowing the production of value added products and increasing the efficient utilization of the raw material

The initial markets for products will be high-end consumers – urban supermarkets, restaurants, the mining industry, other major buyers requiring higher standards at every stage of the value chain who are prepared to reward all concerned stakeholders in a fair and equitable way.

Where possible, encourage and support the production of organic meat products, followed by acquiring accompanying certification to achieve credible recognition and consequent premium pricing in the market.

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Strengthen institutions providing (common) services to private (large and small-scale) slaughterhouses as well as meat and milk processing units. (e.g., Mongolian meat exporters association, …)

Identify the needs of the sector in terms of vocational training Link the staff to private and public scientific organisations in the country and abroad Develop a curriculum for staff of the meat and milk processing sector Establish viable models for improved access of value chain actors to finance (including

microfinance)

Leather sector:

The main problems to be addressed in the hides and skin sector are (i) hides and skins improvement: due to lack of proper slaughter facilities, lack of individual

skills of the personnel operating in the meat industry, the quality of the hides and skins produced in the country is rather poor. In fact the first problem that is in evidence is the large number of holes and deep flay cuts on the hides. These defects cause the hides to be devalued in the international market. A second major defect in this sub-sector is the method of conservation mainly in rural areas.

(ii) Pollution control and reduction from tanning units: Tanneries use and pollute large quantities of water, fertile soil is contaminated, and tannery workers often suffer from skin diseases caused by chemicals. The lack of pollution control regulations may deprive tanneries of significant export opportunities and business partnerships with foreign companies due to consumer concerns related to environmental issues.

Develop an improvement scheme for hides and skins to maximize the economic output in this sector.

Undertake a feasibility study on the rehabilitation of the existing leather industry estate in Ulaanbaatar or the establishment of a new leather industry park in Mongolia.

Develop feasibility studies on potential options of byproduct manufacturing using byproducts produced in the leather industry park

Improve the infrastructure for supplying raw hides and skins. Train and assist with implementation of appropriate flaying using appropriate tools/equipment,

preservation and grading system including pricing. Develop guidelines and practical examples (pilot applications) of using cleaner production

methods in tanneries Develop a database of raw material (hides and skins) supply, manufacturing capacities, production

and export/import activities, investments and employment Develop guidelines on functions, services, staffing, financing, management and operation of the

leather-based industry association; give technical advice on their implementation; operationalize the structure and selected functions

Establish a leather-related industrial and trade database along with trained operators Strengthen technical knowledge and skills of selected managers, designers and especially

instructors and enabling them to (re)train others in the local leather-based industry

Cashmere Sector:

Visits to the vertically operating Mongolian cashmere/wool factories showed that little industrial engineering knowledge is applied or available. In spinning, machine settings (drafting systems) are not in accordance with fibre lengths, changing mechanisms are not operating. In knitting and weaving, unacceptably low efficiencies were found. In garment production, linking of panels is conducted by operators with low perception and dexterity; etc.,

Process and recipe optimization is required to reduce the colour differences to an acceptable level. Introduction of “Computerized colour matching” will eliminate subjective and fault prone colour assessments and provide subsequently a possibility of objective colour communication with the customers.

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The University of Science and Technology has well trained professors and teachers for the textile industry. However, their knowledge is more focused on teaching and testing rather than on industrial applications. Focus of this project is therefore to complete the knowledge of selected faculty members to assist meaningfully the industry on “good manufacturing practices” and “best available practices”.

The selected faculty members should after completion of their “hands-on” training , be able to benchmark the performance of the various sections in the cashmere value chain (from fibre sorting to the packing of the cashmere apparel products), identify the issues preventing optimal performance and recommend remedial actions.

At the end of the project, the professors will be able to design and conduct “analytical method training” systems for a variety of textile industry jobs, e.g. spinner, weaver knitter, linker, etc. This “analytical method training” system will include operator testing, screening and selecting based on intelligence, perception and dexterity. If properly applied, it will prevent that operators will be employed for jobs which they are not capable to perform in. Results will be higher operator efficiencies and productivity combined with an increase of quality.

Proposed interventions: Increase the quality of bleached and dyed cashmere fibres. Assess present bleaching recipes and

methods. Test and introduce optimized bleaching recipes and methods. Assess applied dye recipes and methods.

Test and introduce optimized dye recipes and methods. Establish a “Consultancy service for the cashmere/wool industry” at the Mongolian University of

Science and Technology Provide sector specific training activities organized in consultation with the industry. Establish benchmarks for each process in the Mongolian cashmere/wool value chain. Develop analytical method training systems to advise local cashmere/wool goods producers in all

processes in the cashmere/wool value chain.

Result 2 - Value chain operators in the vegetable sector will derive better incomes and increased employment possibilities arising from increased and higher quality production and added value development.

CROP GROWING SECTOR – Cereals, Fruits and Vegetables:

Partly due to Government policy and support, vegetable growing has increased and has potential to significantly reduce dependence on imported products, increase producer income in rural and peri-urban areas, and provide increased employment opportunities in the processing and marketing sectors. In a sector analysis, Mercy Corps addressed following issues as constraints of the vegetable sector:1) Fertilizer is not always applied appropriately or in adequate amounts; especially lacking is

adequate nitrogen application.2) Information on the physical characteristics of the vegetable seed used, including planting date,

length of growing period, maturity date, open-pollinated or hybrid, and determinate or indeterminate variety are often not known.

3) Business and Marketing plans are often based on optimistically high yields. This distorts the true economic viability of the vegetable cultivation activities.

4) Most vegetable sites are too large in size for the available labor force.5) The organic matter levels in most site soils are below adequate for optimum vegetable production6) Current weed management practices are ineffective.7) The insecticide currently in use for cabbage pests is largely ineffective.8) The level of technical training of local consultants in some cases is inadequate.9) Relatively high soil and water pH values are found in many areas.10) Although most sites are still relatively new, the concept of crop rotation is not yet being

considered.11) In a few cases, farmers were attempting to irrigate fields by hand from wells.

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The Project will support- increasing the availability, quality, value and saleability of vegetables being produced- Link producers with the market for quality raw materials for further processing, by supporting

initiatives to produce added value products that will create sustainable increased employment at each stage of the value chain.

Proposed activities: Conduct an in depth vegetable value chain analysis to assess the potential of proposed initiatives

to improve income generation and employment creation. This analysis includes an environment and gender survey and will consider possible impact on the environment and gender of any development selected for support. Select pilot vegetable producer communities, discuss and agree proposals targeting value chain development showing potential to meet stated project objectives.

Where possible, encourage and support establishment of producer groups and self-formed/self run cooperative business initiatives targeted on adding value to primary production, as well as developing linkages with other players in the market/processing paradigm, thereby promoting and defending producer interests.

Introduce new and high-quality seeds Assist in improving soil preparation and treatment Introduce appropriate pest management. Introduce technologies for expanded growing periods with increased energy efficiency

Increase the capacity of storing facilities Introduce appropriate processing, conservation and distribution technologies. Coordinate provision of technical advice on improved husbandry at primary level in selected pilot locations, which target improved output of higher value vegetables and vegetable products.

Encourage and help prepare applications and business plans for support from agencies (Chingis Fund, Banks etc) to provide means for developing viable business proposals in all aspects of the value chain utilizing COMFAR as an accepted tool by Mongolian banks. Mobilise the support of available extension and research services, supporting these service with appropriate capacity building programmes as consulted and agreed with them. Select processors in the vegetable sector to enable the linkage of selected producers to strengthened outlets for their produce.

Provide assistance to pilot vegetable processing, storage units in their endeavors to meet national and international market requirements.

Introduce good manufacturing practices and appropriate technologies in the vegetable sector allowing the production of value added products and increasing the efficient utilization of the raw material Promote and encourage meaningful linkages between primary producers, processors and initially local markets for higher value quality vegetables and vegetable products. The project will engage with Chambers of Commerce and relevant Trade associations to forge market linkages which help locally produced products access markets. This will include provision of targeted capacity building programmes as discussed and agreed with these support organsiations.

Encourage growers (individually, but preferably as organized groups/coops etc); to engage with high-end consumers – urban supermarkets, restaurants, the mining industry, other major buyers requiring higher standards at every stage of the value chain who are prepared to reward all concerned stakeholders in a fair and equitable way.

Where possible, encourage and support the production of organic vegetables, followed by acquiring accompanying certification to achieve credible recognition and consequent premium pricing in the market.

Strengthen institutions providing (common) services to private (large and small-scale) vegetable storing and processing units.

Identify the needs of the sector in terms of vocational training Link the staff to private and public scientific organisations in the country and abroad Develop a

curriculum for staff of the vegetable processing sector Establish viable models for improved access of value chain actors to finance ( including

microfinance)

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