World Bank ?· FAO/ECU - FAO Emergency ... 56 Table Al Consultant Selection Arrangements ... Annex 8 Documents in Project File ..... 65. Kosovo Emergency Farm Reconstruction ...

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  • Document of

    The World Bank

    Report No: 20237-KOS

    PROJECT APPRAISAL DOCUMENT

    ON A

    PROPOSED TRUST FUND GRANT

    IN THE AMOUNT OF US$10.0 MILLION EQUIVALENT

    TO THE UNITED NATIONS INTERIM ADMINISTRATION IN KOSOVOFOR THE BENEFIT OF KOSOVO, FEDERAL REPUBLIC OF YUGOSLAVIA

    (SERBIA AND MONTENEGRO) (KOSOVO)

    FOR AN

    EMERGENCY FARM RECONSTRUCTION PROJECT

    June 5, 2000

    Environmentally and Socially Sustainable Development UnitEurope and Central Asia Region

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  • CURRENCY EQUIVALENTS

    (Exchange Rate Effective June 2, 2000)

    Currency Unit = Deutsche MarkDM 1.0 US$0.49US$1.0 = DM 2.1

    FISCAL YEAR

    January 1 - December 31

    ABBREVIATIONS AND ACRONYMS

    AAH - Action Against HungerEFRP - Emergency Farm Reconstruction Project

    FAO - Food and Agriculture Organization of the United NationsFAO/ECU - FAO Emergency Coordination Unit in Kosovo

    MCI - Mercy Corps IntemationalMTS - Mother Theresa Society

    NGO - Non Governmental OrganizationPIP - Project Implementation PlanPMT - Project Management Team

    SDC - Swiss Development CorporationSOE - Statement of Expenditures

    UNMIK - United Nations Interim Administration in KosovoTSS - Transitional Support Strategy

    Vice President: Johannes F. LinnCountry Manager/Director: Christiaan J. Poortman

    Sector Manager/Director: Laura Tuck, Kevin M. CleaverTask Team Leader/Task Manager: Severin Kodderitzsch

  • KosovoFederal Republic of Yugoslavia

    (Serbia and Montenegro) (Kosovo)Emergency Farm Reconstruction Project

    CONTENTS

    A Project Development Objective ................................................................ 2

    1. Project development objective ................................................................ 22. Key performance indicators ................................................................ 2

    B Strategic Context ................................................................ 2

    1. Sector-related Country Assistance Strategy (CAS) goal supported by the project .........22. Main sector issues and Government strategy ............................................................... 33. Sector issues to be addressed by the project and strategic choices .............................. 5

    C Project Description Summary ................................................................ 6

    1. Project components ................................................................ 62. Key policy and institutional reforms supported by the project ...................................... 93. Benefits and target population ................................................................ 94. Institutional and implementation arrangements .......................................................... 10

    D Project Rationale ............................................................... 14

    1. Project alternatives considered and reasons for rejection ................................. .......... 142. Major related projects financed by the Bank and/or other development agencies ........ 153. Lessons learned and reflected in the project design .................................................... 174. Indications of borrower commitment and ownership .......................... ....................... 175. Value added of Bank support in this project .............................................................. 18

    E Summary Project Analysis .............................................................. 18

    1. Economic .............................................................. 182. Financial .............................................................. 203. Technical .............................................................. 214. Institutional .............................................................. 245. Environmental .............................................................. 246. Social .............................................................. 257. Safeguard policy .............................................................. 29

    F Sustainability and Risks .............................................................. 30

    1. Sustainability .............................................................. 302. Critical risks .............................................................. 313. Possible controversial aspects .............................................................. 32

  • G Main Grant Conditions .................................................. 32

    1. Effectiveness conditions .................................................. 322. Other .................................................. 32

    H Readiness for Implementation .................................................. 32

    I Compliance with Bank Policies .................................................. 33

    Annexes

    Annex 1 Project Design Summary ................................................ 34Annex 2 Detailed Project Description ................................................ 40Annex 3 Estimated Project Costs ................................................ 49Annex 4 Cost Benefit Analysis Summary ................................................ 50Annex 5 Financial Summary ................................................ 53Annex 6 Procurement and Disbursement Arrangements ................................................ 55

    Table A Project Costs by Procurement Arrangements ................................................ 56Table Al Consultant Selection Arrangements ...................... .......................... 57Table B Thresholds for Procurement Methods and Prior Review ........................ ............ 60Table C Allocation of Grant Proceeds ................................................ 61

    Annex 7 Project Processing Schedule ................................................ 63Annex 8 Documents in Project File ................................................ 65

  • Kosovo

    Emergency Farm Reconstruction Project

    Project Appraisal Document

    Europe and Central Asia Regional OfficeECSSD

    Date: June 5, 2000 Team Leader: Severin KodderitzschCountry Manager/Director: Christiaan J. Poortman Sector Manager/Director: Laura Tuck, Kevin CleaverProject ID: P069325 Sector: AL- Livestock, AY - Other AgricultureLending Instrument: Grant from Trust Fund for Kosovo Theme(s): Rural Development, Poverty Reduction

    Poverty Targeted Intervention: N

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

    For Loans/Credits/Others:Amount (US$m): 10.0Proposed terms: N/A

    Grace period (years): N/AYears to maturity: N/ACommitment fee: N/A

    a Nt L 1L- ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.....GOVERNMENT 0.00 0.00 0.00SPECIAL FINANCING 1.30 8.70 10.00GOVERNMENT OF THE NETHERLANDS 0.00 1.80 1.80BIILATEA AGENCIES (UNIDENTIFIED) 2.40 10.80 13.20Total: 37 13 50

    Recipient: UTNITED NATIONS INTERIM ADMINISTRATION IN KOSOVO (UNMIK)Responsible agency: UNMIK THROUGH FAO/UNDepartment of Agriculture under the Joint Interim Administration Structure (JIAS)Address: Government Building, Pristina, KosovoContact Person: Mr. M. Farinelli, Co-Head of the JIAS Department of AgricultureTel: 1-212-963.84.42, ext5671 Fax: 1-212-963-8603 Email: farinelliaun.org

    Other Agency(ies):Food and Agriculture Organization of the United Nations (FAO/UN)Address: Viale delle Terme di Caracalla 00100 Rome, ItalyContact Person: Mr. L. Thomas, Sr. Operations Officer, Special Relief Operations Service, Technical CooperationDepartment, FAOTel: 39-06-557.55.042 Fax: 39-06-57.05.31.52 Email: 1aurentjacques.thomas(ifao.or=

    Estimated disbursements (Bank FY/US$M):

    Annual 8.2 1.8Cumulative 8.2 10.0

    Project implementation period: 18 months (1.5 years)Expected effectiveness date: 07/01/2000 Expected closing date: 12/31/2001

  • A. Project Development Objective

    1. Project development objective: (see Annex 1)

    The Emergency Farm Reconstruction Project (EFRP) has the objective of helping jumpstart agriculturalproduction over the next two to three cropping seasons and to support re-launching of the rural economy byinvesting in key farm assets (cattle and farm mechanization) and key agricultural services (veterinaryservices, and policy analysis and formulation capacity). In doing so the project would support vulnerablehouseholds in targeted villages and municipalities in attaining minimum levels of agriculture production andfood security through replaced farm assets and improved veterinary services.

    2. Key performance indicators: (see Annex 1)

    Key performance indicators of the development objective would include the following:

    * Increase of share of land cultivated for agricultural production in targeted villages.

    * Increase of yield levels for crop and livestock production in targeted villages.

    Increase in number of vulnerable households in targeted villages consuming adequate amount ofmilk and bread according to dietary standards.

    * High share of distributed anirnals and their offspring still in beneficiary households and used forrestocking purposes at project end.

    Number of veterinarians operating in Kosovo (ratio per animal and area); increased use of, and satisfactionwith, veterinary services; reduction in number of animal death resulting from unavailability of veterinaryservices or required veterinary equipment; increase in artificial insemination (AI) services provided andused.

    B. Strategic Context1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: not applicable Date of latest CAS discussion: not applicable

    The Transitional Support Strategy (TSS, document number: R99-178, which substitutes for the CAS in thecase of Kosovo) was endorsed by the Board on October 7, 1999. The TSS identifies an emergencyagriculture restart operation as part of the Bank's financial assistance program for FY00 in the area ofeconomic restart and private sector development (one of four key strategic areas of Bank support inKosovo).

    -2-

  • 2. Main sector issues and Government strategy:

    Conflict Damages. As a direct consequence of the conflict in Kosovo between March and June 1999, some75 percent of the rural population was subject to mass migration: some 43 percent of the rural populationtook refuge abroad and a further 32 percent became internally displaced. By September 1999, around 85percent of families that had previously left their homes had already retumed to their village of origin. As aresult of this disruption (and prior months of rising and often violent tensions in 1998) agriculturalproduction as well as related processing industries almost came to a standstill in 1999: the spring croppingseason of 1999 was largely forgone and the 1999 wheat harvest was a fraction of normal levels (45 percentof 1997 production). Kosovo currently relies on commercial imports (mainly from Macedonia, Albania,Montenegro and Greece) and large-scale donor relief aid to meet its food demands.

    Farm assets were damaged on a systematic and massive scale in the course of the conflict. The replacementvalue of losses of animals, destroyed farm buildings, and agricultural machinery is conservatively estimatedbetween US$750 and 800 million. The majority of livestock (cattle: 50 percent, small ruminants: 65percent, poultry: 85 percent) which contributed around half of the value of agriculture production has beenlost or killed. Over half of the agriculture mechanization (tractors: 55 percent, combine harvesters: 75percent ) are lost or need repair. Many farm buildings (stables, sheds and storage space) have beendestroyed, as have the dwellings of many rural families. While fallow land and the loss of cattle can beobserved throughout Kosovo, the loss of agriculture mechanization and farm buildings is moreconcentrated in the western municipalities. Results from a farm damage assessment commissioned by theFood and Agriculture Organization of the United Nations (FAO) and the World Bank suggests that thefollowing group of eight municipalities has been the most severely damaged : Skenderaj/Srbica,Gllogoc/Glogovac, Decan/Decani, Vushtrri/Vucitm, Kline/Klina, Peje/Pec, Istog/Istok andGjakove/Djakovica.

    Past Legacies. Beyond the immediate damages of the conflict, Kosovo is also struggling to address pastlegacies. The first relates to a backlog on the economic transition agenda. Prior to the severe curtailment ofKosovo's autonomy status within FRY in 1989, the agriculture sector was subject to numerous economicdistortions over a long period of socialist planning. A system of (partly implicit) subsidies and taxes onvarious economic activities resulted in inefficient farm structures by 1989. A majority of small familyfarms (limited by law to 10 hectares) were integrated by contractual arrangements with the large-scaleagrokombinat and cooperative sector which provided subsidized farm inputs and protected markets forprimary produce. These arrangements have ceased since the early 1990s. Though many instruments of thepast economic regime have been largely abolished (for instance, high levels of trade protection and activeprice policies, input subsidies and subsidized credit), structural issues persist. At the farm level this isreflected in the continued prevalence of small farm size, little marketed surplus, and low labor productivity;and on the part of the processing industries in terms of a pending privatization process for thesocially-owned agrokombinats, and often outdated and uncompetitive technologies. Secondly, a 'decade ofneglect' has severely compounded conflict damages to the sector. The near standstill in the agriculturesector is compounded by some 10 years of neglect. Around the early 1990s, experienced staff in keymanagerial and technical positions in the processing industries but also the agriculture administration werereplaced. The new cadre managed and maintained the enterprises poorly. Almost no formal services (suchas veterinary and advisory services) were provided to the pre-dominantly privately owned farms. Access tofarm inputs (such as fertilizers and agro-chemicals) was severely limited. Investments into farm andprocessing equipment were curtailed during that period resulting in an aging of farm machinery assets andthe obsolescence of processing technologies. Land markets slid into infornality because of high transactioncosts, compounded by laws that prevented ethnic groups from selling land to each other and poorperformance by land agencies. Two major irrigation schemes constructed in the late 1970s with Bank

    -3 -

  • funding have fallen into disrepair since 1990.

    Opportunities. Kosovo has shown impressive resilience based on private sector initiatives in the face ofadversity. Kosovars developed informal parallel structures of considerable extent covering a wide range ofagriculture services such as input and mechanization supply, veterinary services, and processing facilities.These parallel structures, mnarked by an impressive capacity for private initiative and which were able toaddress some though certainly not all constraints during the 1990s, are now coming into the open...

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