Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No: 343 14-SN

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 24.7 MILLION

(US$35.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF SENEGAL

FOR THE

AGRICULTURAL MARKETS AND AGRIBUSINESS DEVELOPMENT PROJECT

IN SUPPORT OF THE FIRST PHASE OF THE

AGRICULTURAL MARKETS AND AGRIBUSINESS DEVELOPMENT PROGRAM

February 1,2006

Environmentally and Socially Sustainable Development 4 (AFTS4) Country Department 14 Africa Region

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit

Currency Unit

CFAF580 = US$ l .OO US$1.45 = SDR1.OO

AEPP AgMARKETS AFD AfDB A M P A N C A R

APL ARM ASEPEX

ASPOP CFAA C I D A CLC CMS CNCAS

CNCR

DAIH

DAPS

DGR/BR/LA

D M A

ESW

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

Agricultural Export Promotion Project Agricultural Markets and Agribusiness Development Program/Proj ect Agence FranCaise de De'veloppement (French Development Agency) Afr ican Development Bank Administrative and Accounting Manual o f Procedures Agence Nationale pour le Conseil Agricole et Rural (National Agency for Agricultural and Rural Counsel) Agence de Promotion des Investissements et des Grands Travaux (Private Investment Promotion Agency) Adjustable Lending Program Agence de Re'gulation des Marche's (Market Regulation Agency) Agence Se'ne'galaise de Promotion des Exportations (Senegalese Export Promotion Agency) Agricultural Services and Producer Organizations Project Country Financial Accountability Assessment Canadian International Development Agency Acronym missing Cre'dit Mutuel du Se'ne'gal (Mutual Credit o f Senegal) Caisse Nationale du Cre'dit Agricole du Senegal (Senegal National Agricultural Credit Bank) Cadre National de Concertation et de Coope'ration des Ruraux (National Council o f Rural Cooperation) Direction des Ame'nagements et des Infrastructures Hydroagricoles (Hydro- agricultural Infrastructure and Development Directorate) Direction de I'Analyse, de la Pre'vision et de la Statistique (Planning, Analysis and Statistics Directorate) Direction du Ge'nie Rural/Barrages de Re'tention/Lacs ArtiJiciels (Directorate o f Rural C iv i l WorURetention Basins/Artificial Lakes) Direction de Maintenance des Ame'nagements (Infrastructure Maintenance Directorate) Economic Sector Work

EU EurepGAP F M S FNRAA FOMAED

FOS-F&L GNB GPS HACCP I T C IP KPI NRIP O & M O M V S PACR PAOA P A D E N P C U PDMAS

PIM PIPP PIS POAS P P A H PPP PRSP SAED

SMEs/SMIs S O N A C 0 S SRV TPC

European Union Euro-Retailer Produce Working Group for Good Agricultural Practice Financial Management System/Specialist Fonds National de Recherche Agricole et Agro-Alimentaire Fonds de Maintenance des Adducteurs et Drains du Delta (The Delta Irrigation Infrastructure Operation & Maintenance Fund) Fondation Origine Sknkgal-Fruits et Lkgumes Groundnut Basin Global Positioning Systems Hazard Analysis and Critical Control Point Information Technology and Communication Implementation Progress K e y Performance Indicators National Rural Infrastructure Project Operation and Maintenance Organisation pour la Mise en Valeur du Jleuve Se'nkgal Projet d'Appui aux Communaute's Rurales de la Valle'e dufleuve Skne'gal Projet d 'Appui aux Opkrateurs de 1 'Agro-alimentaire Projet d 'Appui au Dkveloppement des Niayes Project Management and Coordination Unit Programme/Projet de De'veloppement des Marche's Agricoles au Se'nkgal (Agricultural Markets and Agribusiness Development ProgradProj ect) Project Implementation Manual Private Investment Promotion Project Project Information System Plan d 'Occupation et d 'Affectation des Sols (Land Use and Habitation Plan) Pollution Prevention and Abatement Handbook Public-Private Partnership Poverty Reduction Strategy Paper Sociktk Nationale d 'Ame'nagement et d'Exploitation des Terres du Delta du fleuve Se'nkgal et des Valle'es du Fleuve Sknkgal et de la Falkmk Small and Medium Enterprises/ Small and Medium Industries Socie'te' Nationale de Commercialisation des Ole'agineux du Skne'gal Senegal River Valley Total Project Cost

Vice President: Gobind T. Nankani

Sector Manager: M a r y A. Barton-Dock El Hadj Adama Tour6

Country Director: Madani M. Tall

Task Team Leader:

FOR OFFICIAL USE ONLY

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

CONTENTS Page

A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 1

Country and sector issues .................................................................................................... 1 1 . 2 . Rationale for Bank involvement 1

3 . Higher level objectives to which the project contributes .................................................... 2

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

B . PROJECT DESCRIPTION ................................................................................................. 3

1 . 2 . 3 . 4 . 5 .

Program Objectives and Phases .......................................................................................... 3

Project development objective and key performance indicators ........................................ 5

Project components ............................................................................................................. 5

Alternatives considered and reasons for rejection ............................................................ 10

Lessons learned and reflected in the project design ............................................................ 8

C . IMPLEMENTATION ........................................................................................................ 10 1. Partnership arrangements .................................................................................................. 10

Institutional and implementation arrangements. ............................................................... 11

Monitoring and Evaluation o f Outcomes/Results ............................................................. 12

Critical r isks and possible controversial aspects ............................................................... 13

Credit conditions and covenants ....................................................................................... 14

2 . 3 . 4 . Sustainability ..................................................................................................................... 12

5 . 6 .

. . .

D . APPRAISAL SUMMARY ................................................................................................. 14 1 . Economic and financial analysis ....................................................................................... 14

2 . Technical ........................................................................................................................... 16

3 . Fiduciary ........................................................................................................................... 16

4 . Social ................................................................................................................................. 17

5 . Environmental., ................................................................................................................. 17

6 . Safeguard policies ............................................................................................................. 18

7 . Policy Exception and Readiness (checklist) ..................................................................... 19

Annex 1 . Country and Program Background .......................................................................... 21

Annex 2 . Major Related Projects Financed by the Bank and/or other Agencies ................. 27

Annex 3 . Results Framework and Monitoring ......................................................................... 28

Annex 4 . Detailed Project Description ...................................................................................... 31

Annex 5 . Project Costs ................................................................................................................ 41

Annex 6 . Implementation Arrangements ................................................................................. 43

Annex 7 . Financial Management and Disbursement Arrangements ..................................... 45

Annex 8 . Procurement Arrangements ..................................................................................... 54

Annex 9 . Economic and Financial Analysis .............................................................................. 64

Annex 10 . Safeguard Policy Issues ............................................................................................ 69

Annex 11 . Project Preparation and Supervision ...................................................................... 72

Annex 12 . Documents in the Project F i l e .................................................................................. 74

Annex 13 . Statement of Loans and Credits .............................................................................. 75

Annex 14 . Country at a Glance .................................................................................................. 76

Annex 15 . Maps IBRD 34487 ..................................................................................................... 78

SENEGAL

AGRICULTURAL MARKETS AND AGRIBUSINESS DEVELOPMENT PROJECT

PROJECT APPRAISAL DOCUMENT

AFRICA

AFTS4

Date: February 1,2006 Country Director: Madani M. Tal l Sector ManagedDirector: Mary A. Barton- Dock industry (15%)

Team Leader: El Hadj Adama Toure Sectors: Agricultural marketing and trade (50%); Irrigation and drainage (35%); Agro-

Themes: Rural markets (P);Rural services and infrastructure (S);Rural non-farm income generation (S);Trade facilitation and market access (S) Environmental screening category: Partial Assessment

Project ID: PO83609

Lending Instrument: Adaptable Program Loan

~

[ ] Loan [XI Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (US$m.): 35.00 Proposed terms: Standard terms with 40 years maturity

AS SOCIATION L O C A L FARMER ORGANIZATIONS 1 .o 11.0 12.0 Total: 26.9 33.2 60.1

Borrower: Republic o f Senegal Ministry o f Economy and Finance 7, Avenue Carde Dakar, Senegal Phone: 221 821 03 78 Responsible Agency: Projet de De'veloppement des Mavche's Agvicoles et Agvo-Alimentaives au Se'ne'gal Ministry o f Agriculture and Hydraulics Dakar, Senegal Phone: 221 822 46 03 Email: sgagri@sentoo. Sn

Fax: 221 822 41 95

Fax: 221 823 32 68

FY Annual Cumulative

Re$ PAD D. 7 Have these been approved by Bank management?

2007 2008 2009 2010 2011 2012 Total 4.0 7.0 7.0 7.0 6.0 4.0 35.0 4.0 11.0 18.0 25.0 31.0 35.0

I s approval for any pol icy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Ref: PAD C.5

[ ]Yes [XINO

[XIYes [ ] N o J

[XI Yes [ ] N o Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3 Contribute to sustainable increase in non-traditional agricultural exports and revenue growth o f project producers.

Project description [one-sentence summary of each component] Re$ P A D B.3.a, Technical Annex 4

The development objective o f the f i rst phase o f the Agricultural Markets and Agribusiness Development Program i s to increase non-traditional agricultural exports and farm revenues for project producers. The end-of-project outcome indicators wil l be as follows: (i) an increase o f non-traditional agricultural exports from the 2004 level o f 13,000 tons to 30,000 tons by 2010; and (ii) a 60 percent increase in farm incomes o f small family farms, the project’s primary target group.

Component A: Improving Domestic Marketing Conditions: This component aims at improving food safety and the performance o f the domestic distribution channels for crop and livestock products. This component comprises four subcomponents: (i) Domestic Supply Chains Consolidation; (ii) Rural Market Infrastructure; (iii) Knowledge Management; and (iv) Development o f Animal Products Markets.

Component B: Development of Agricultural Exports: This component aims at expanding non-traditional agricultural exports (Le., horticultural products, confectionary nuts, essential oils and spices, and processed foodstuffs) by leveraging the results achieved under the pi lot Agricultural Export Promotion Project (AEPP). This component comprises three subcomponents: (i) Innovation and Quality Management; (ii) Agricultural Export Infrastructure; and (iii) Building Agricultural Export Institutions;

Component C: Development of Private Irrigation: The component aims at promoting demand-driven, public-private partnership for investments in irrigation to support the expansion of agribusiness across Senegal. This component comprises four subcomponents: (i) Construction o f Public Irrigation Infrastructures in the Senegal River Delta; (ii) Promotion o f irrigation for crop diversification in the Senegal River Delta; (iii) Promotion o f Micro-irrigation for Crop Diversification in the Niayes zone, the Groundnut Basin and Tambacounda Region; and (iv) Knowledge Management and Strategic Studies.

Component D: Project Coordination and M&E: The component wi l l ensure sound planning and coordination o f project activities and effective use o f resources. I t comprises two subcomponents: (i) coordination and management; and (ii) monitoring and evaluation o f the project’s performances.

Which safeguard policies are triggered, if any? Re$ PAD D. 6, Technical Annex 10 6. Safeguard Policies Triggered Yes N o

Environmental Assessment (OP/BP 4.01) X Natural Habitats (OP/BP 4.04) X

Pest Management (OP 4.09) X Cultural Property (OPN 1 1.03)

Involuntary Resettlement (OP/BP 4.12) X Safety o f Dams (OP/BP 4.37)

Forests (OP/BP 4.36)

X Indigenous Peoples (OD 4.20)

X X Projects on International Waterways (OP/BP 7.50)

Projects in Disputed Areas (OP/BP 7.60)

X

X

X

Significant, non-standard conditions, if any, for: Re$ PAD C.6 Board presentation: There i s no Board condition

Loadcredit effectiveness:

(a) The Borrower has recruited key staff o f PCU, including the project coordinator, a financial management specialist, a procurement specialist, and a monitoring and evaluation specialist, al l with qualification and experience acceptable to the Association;

(b) The Borrower has: (i) adopted the Project implementation Manual (PIM), and the Project Administrative, Financial and Accounting Manual (PAFAM), in form and substance acceptable to the Association; and (ii) installed accounting software at PCU, acceptable to the Association;

(c) The Borrower has hired an external auditor under terms and conditions acceptable to the Association;

(d) The Borrower has entered into agreements, in form and substance acceptable to the Association, with SAED and ANCAR, respectively, for the implementation o f some o f the activities to be carried under Parts A and C: and

(e) The Borrower has taken al l actions necessary on i t s part to put the infrastructures built under AEPP (the airfreight terminal at the international airport o f Dakar, and the packing house at Sangalkam) under private management under terms and conditions acceptable to the Association.

Covenants applicable to project implementation:

(i) (a) N o t later than December 31, 2006, the Borrower shall have established a Foundation Origine Sknkgal - Fruits et Lkgumes, with terms o f reference acceptable to the Association; and (b) not later than June 30, 2008, the Recipient shall have entered into an agreement with said entity, under terms and conditions acceptable to the Association, for the implementation o f some o f the activities to be carried out under Part B o f the Project;

(ii) (ii) The Borrower shall submit to the Association SAED’s annual audited financial statements, not later than six months after the end o f i t s fiscal year.

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

Senegal’s Poverty Reduction Strategy Paper (PRSP, 2002-2005) emphasizes wealth creation, capacity building, social services, and assistance to vulnerable groups. It focuses, among other priorities, on rural poverty, since the incidence o f poverty in rural areas ranges from 72 to 88 percent, compared to 44 to 59 percent in urban centers. In response to this growing concentration o f poverty in rural areas, the PRSP highlights the need for increased investment in agricultural systems, rational use o f natural resources, reinforcement o f rural development, and development o f diversified agriculture. In addition to the PRSP, in 2003 Senegal issued a Letter of Development Pol icy for the Groundnut Sector, and in 2004 adopted the Agricultural Orientation L a w (Loi d ’Orientation Agro-Sylvo-Pastorale), which outlines the Government’s vision for modernizing the agriculture sector over the next 20 years. The country has also designed a strategy for export development (STRADEX) and i s currently preparing an Accelerated Growth Strategy (AGS) which includes agribusiness as a major pillar.

Senegal’s robust economic growth since 1994 was not led by the agricultural sector and has only marginally benefited rural areas, where 52 percent o f the population lives and o f which 59 percent rely on agriculture. During the last two decades, agriculture has experienced stagnant production, declining productivity, and continued dominance by small farmers whose production i s largely rain fed and complemented by animal husbandry.

However, since 2000 the sector has shown signs o f recovery, notably in horticultural exports, cereals and poultry production, thanks in part to the Government’s commitment to support the sector and implement reforms through the Bank-supported Agricultural Services and Producer Organizations Project (ASPOP). Nonetheless, numerous constraints continue to limit the country’s potential for accelerated agricultural growth. The most serious include: (a) food safety and quality issues, (b) access to investment and working capital, (c) poorly functioning market infrastructures, (d) inefficient distribution channels, and (e) weak irrigation infrastructures that account for less than four percent o f total arable land.

2. Rationale for Bank involvement

In September 2005, the Bank set forth the Afr ica Action Plan (AAP) as a centerpiece o f i t s response to the commitment that development assistance to Afr ica wil l be coordinated and well used at the country level. One o f the prime objectives underpinning the AAP i s strengthening the drivers of growth, for which the Bank intends to focus i t s efforts to strengthen the private sector, expand exports, substantially increase investment to close the infrastructure gap, scale up regional integration, build sk i l ls for growth and competitiveness, and make agriculture more productive. The AgMARKETS program would be one o f the best implementing instruments o f the AAP for Senegal, as this program focuses o n expanding Senegal’s private-led agricultural exports through upgrading irrigation and market infrastructures, building public and private sectors’ capacities for competitiveness, and making irrigated agriculture more productive.

Through the AgMARKETS program, the Bank would also directly support Senegal’s Accelerated Growth Strategy (AGS), which has made this program i t s main implementing tool in agriculture and agribusiness development for shared growth. The design o f the AGS, under preparation, relies on the several high-quality strategic studies commissioned by, and underpinning, the preparation o f the AgMARKETS program. Furthermore, both the Bank and

1

the client have long called for such a program to consolidate and expand the achievements o f the pi lot Agricultural Export Promotion Project (AEPP), which performed successfully. Finally, with the AgMARJSETS program, the Bank would complement i t s rural portfolio in Senegal, identified in the FY03-05 Country Assistance Strategy (CAS), and which includes the ASPOP, the Afr ica Emergency Locusts Project (AELP), the Integrated Coastal and Marine Resource Management Project (GIRMaC), the National Rural Infrastructure Project (NRIP), and the forthcoming Local Developement National Program (PNDL). The ASPOP i s building the basis for effective demand-driven agricultural services and has introduced innovative extension mechanisms and institutions, such as the Agricultural and Agro-processing research Fund (FNRAA) and the National Agency for Rural Counsel (ANCAR). A N C A R wil l continue delivering agricultural extension services to producer organizations under the ASPOP, and wil l also facilitate access o f specialized advisory services to eligible supply chains participants-as an implementing agency o f the proposed project. The NRIP focuses on improving rural livelihood conditions by facilitating access to basic services and by building capacity for local governments (Communaulks vuvales). By building this rural portfolio, which i s clearly aligned with the AAP and the AGS, the Bank has demonstrated i t s visionary outlook in Senegal.

The World Bank has a comparative advantage in supporting this operation since i t has played a leading role in supporting Senegal's key projects in the rural sector. The Government and other donors also perceive the Bank as being committed to a leadership role in this operation. Exercising this leadership, the Bank i s working closely with the International Finance Corporation (IFC) and other donors that have demonstrated an interest in participating in this project to further the objectives o f the program, the AGS and the AAP.

3. H i g h e r level objectives to which the project contributes

The project i s fully aligned with the PRSP and country's sector strategies. Thus, i t should contribute to the borrower's objective o f poverty reduction and economic growth among the rural poor through the creation o f employment and the increase o f income. It would also act as an implementation tool for the 2003-05 CAS, particularly in agricultural export promotion, in small-scale and private irrigation and in the commercialization o f agricultural products. These areas are at the center o f current discussions concerning a PRSP update, and wil l be essential in the preparation o f the next CAS. In addition, agribusiness i s one o f five focal sectors in the country's Accelerated Growth Strategy (AGS) and its development has been shown to be an effective response to rural unemployment. The draft AGS aims at a seven to eight percent average annual economic growth over the next 10 years, based on the rapid development o f the following export-oriented and labor-intensive sectors: (i) agriculture and agribusiness; (ii) textile and clothing business; (iii) information and communication technologies and services; (iv) tourism, arts and crafts; and (v) fisheries. The AGS i s expected to be finalized and adopted by mid-2006. I t s adoption would refocus current sector strategies for the aforementioned focal areas. Moreover, through increased incomes and employment in rural areas, the project wi l l also contribute to the Millennium Development Goals o f eradicating extreme poverty and hunger.

The CAS originally anticipated the Bank's intervention in agricultural diversification and access to markets through a Poverty Reduction Strategy Credit (PRSC). Subsequently, the Bank proposed a stand-alone project, and informed the Board o f this change through the "Memorandum and Recommendation o f the President o f IDA to the Executive Directors on Assistance to Senegal under the Enhanced HIPC Debt Initiative" (Report No. P7620-SN, March 24,2004).

2

B. PROJECT DESCRIPTION

1. Program Objectives and Phases

The proposed project wil l be the first phase o f a ten-year Adaptable Program Lending (APL) consisting of two phases, each lasting five years. The programmatic approach o f the APL appeared to be the better option compared to a one-time Specific Investment Lending (SIL) option. This i s because the APL allows for the management o f risks associated with the participatory creation o f human capital and institutional infrastructure that are necessary for the sustainable development o f the agribusiness sector in Senegal, while at the same time taking advantage o f actions initiated by the pi lot AEPP (Cr.3017-SE). The project i s also consistent with the fact that market infrastructure and irrigation development often require roughly a decade to fully mature.

The long-term objectives o f the Agricultural Markets and Agribusiness Development Program (AgMARKETS) by 201 5 are to: (i) increase horticultural and non-traditional agricultural exports from their current level o f 13,000 tons to 50,000 tons; and (ii) double farm revenues o f producers supported by the program. Specifically, the program would: (i) rationalize and improve domestic markets o f crops and animal products; (ii) promote and expand exports o f higher value- added, non-traditional agricultural exports (Le., horticultural products, confectionary nuts, essential oils, aromatic plants, e.g., bissap--Hibiscus sabdarifa, and processed foods, in the Niayes zone where the costs o f land, labor and water are increasing rapidly; (iii) develop private irrigation to support the expansion o f commercial agriculture in the Senegal River Valley; (iv) revitalize the confectionery groundnut sector and support the modernization o f activities in the broader Groundnut Basin; and (v) improve the collection and commercialization o f f ru i ts and cashew nuts in Casamance. The Program wil l rely on beneficiary participation and ownership in the design, implementation, and monitoring o f i t s activities through a supply chain approach. The ten-year program cost i s estimated at US$l50.0 million: approximately US$60.0 mi l l ion for the f i rst phase and about US$90.0 mi l l ion for the second phase (see Table 1 below).

Table 1. AgMARKETS Program Phases and Cost (US$ Million)

IDA Government Beneficiaries Other Donors Total

Phase 35.0 13.1 12.0 0.0 60.1

Phase 45.0 15.0 20.5 9.4 89.9

Total 80.0 28.1 32.5 9.4 150.0

The first phase of the program aims at increasing horticultural and non-traditional agricultural exports from 13,000 tons to 30,000 tons and farm revenues o f project-supported producers by 60 percent. I t would deal with major constraints hindering agribusiness development in the shorter term, and would initiate building blocks for longer term development prospects. This f i rst phase would: (a) consolidate the results o f the pi lot AEPP operation and emphasize institutional capacity building; (b) develop sk i l ls for food quality management; (c) establish public-private partnership for effective management o f the sector; and (d) define and test infrastructure and competitive business models for the domestic and export markets. The primary intervention areas would be in the traditional export region o f the Niayes, the promising Senegal River Delta and part o f the Groundnut Basin. In addition, some pi lot activities will be carried out in other regions, in particular in Casamance, the eastern regions (Tambacounda) and the Senegal River

3

Valley. The first phase wil l also firmly establish the Fondation Origine Senegal - Fruits et Legumes (FOS-F&L), a non-profit private organization to be endowed with the soft assets and cold storage infrastructure created under the pi lot project and the AgMARKETS program with public funds, as wel l as with contributions from other benefactors, within the framework o f Senegal's legislation. The FOS-F&L's board wil l hire professional private managers to run i t s operations. Thus, the program wil l ensure that the operation o f project-built infrastructure would not suffer f rom cumbersome administrative red-tape, or eventual conflict o f interests if run by a non-cohesive trade association. The f i rst phase wil l also support studies for the preparation o f the second phase. The f i rst phase's total project cost i s estimated to be US$60.1 million, o f which US$35.0 mi l l ion in contributions from IDA, a Government contribution estimated at US$13.1 million, and beneficiaries' contribution (including private sector for specific public- private partnership initiatives) estimated at about US$12.0 million. Contribution from other donors i s expected through parallel financing.

The second phase o f the program wil l expand on the results achieved in the f i rs t phase and consolidate the institutional framework for agricultural export promotion (Fondation Origine Se'ne'gal - Fruits & Le'gumes in particular). It wil l expand the approach to other supply chains and regions o f the country. Emphasis wi l l be placed on irrigation development, i.e.: (a) restructuring the irrigation system in the Niayes zone by working to supply water to producers through a water distribution system outside of, and managed independently from, the urban potable water system; (b) successfully expanding small-scale irrigation models notably in the broader Groundnut Basin; (c) developing public irrigation infrastructure in support o f private investment in the Senegal River Valley; and (d) supporting market facilities development in Casamance. The cost o f the second phase i s estimated at about US$90.0 million.

Institutional responsibilities for the program's implementation. The coordination and management o f the program i s the responsibility o f the Ministry o f Agriculture and Hydraulics (MAH). Implementation of the program wil l involve relevant public institutions (Ministry o f Trade, Ministry o f Infrastructure; Ministry o f Livestock; the irrigation development agency, Socie'te' Nationale d 'Arne'nagement et d 'Exploitation des Terres du Delta du fleuve Se'ne'gal et des Valle'es du Fleuve Se'nkgal et de la Fa1e'rne'-SAED; ANCAR; the Private Investment Promotion Agency-APIX; research institutions) and private institutions (Fondation Origine Se'nkgal, professional associations, service providers, etc). IFC, the French Development Agency (AFD), and the Canadian International Development Agency (CIDA) have contributed to the preparation o f the project. The World Bank i s collaborating with AFD and the European Union (EU) and projects financed by these institutions within the framework o f the overall AgMARKETS Program.

The triggers to allow movement from the first to the second phase are as follows:

0 The Fondation Origine Se'ne'gal-Fruits & Le'gumes, which has been created and endowed with the horticultural export-related soft and physical assets developed under the AEPP and the AgMARKETS Project, has been implementing Component B as stated in the Agreement with the Project Management and Coordination Unit ;

Infrastructures and other markets facilities created or upgraded with project support are under private management;

0

4

5

Annual beneficiary’s contribution to the Delta Irrigation Infrastructure Maintenance Fund (FOMAED) for the operation and maintenance (O&M) of irrigation infrastructure created or rehabilitated by the project are recovered by at least 80 percent.

2. Project development objective and key performance indicators The development objective of the first phase of the Agricultural Markets and Agribusiness Development Program is to increase non-traditional agricultural exports and farm revenues for project-supported producers. The end-of-project outcome indicators will be as follows: (a) an increase of non-traditional agricultural exports from the 2004 level of 13,000 tons to 30,000 tons by the completion of the project; and (b) a 60 percent increase in farm revenues of supported producers, the project’s primary target group. Key output indicators will be as follows: (i) at least 5 subprojects for each of the five targeted supply chains in the domestic market have been funded through the Matching Grant mechanism and implemented; (ii) one third of the producers supported by the project have implemented SénéGAP Protocol; (iii) Senegal has received EU accreditation related to EC No 1148-2001 on check on conformity to the marketing standards applicable to fresh fruits and vegetables; and (iv) at least 2,500 hectares for irrigation have been developed or improved by small farmers and agribusiness SMEs supported by the Project for crop diversification and export. Other intermediate outcomes per component are identified and described in Annex 3 (Results Framework and arrangements for results monitoring). This annex also summarizes tools and techniques for data collection and analysis. The Monitoring and Evaluation (M&E) section of the project implementation manual will provide detailed performance indicators for all project supported activities, including management and monitoring of safeguards. 3. Project components Component A: Improving Domestic Marketing Conditions (TPC US$10.10 million, IDA US$6.35 million1) aims at improving food safety and the performance of the domestic distribution channels for crop and livestock products. The target beneficiaries are producers, producer associations, trade associations, local authorities, and small- and medium-scale enterprises (SMEs) engaged in crop and livestock. This component consists of four subcomponents: Subcomponent A1 – Domestic Supply Chains Consolidation will undertake three main activities: (a) test innovative partnership business models adapted to small producers and SMEs in key promising supply chains for the domestic and regional markets; (b) assist eligible small producers and SMEs interested in applying these innovations to implement well-defined Business Development Projects (subprojects); and (c) conduct related diagnostic assessments and studies. Funding for subprojects will include beneficiaries’ contribution and project’s grants set at different levels for smallholders and SMEs. The types of subprojects, eligibility criteria for activities and beneficiaries, beneficiaries’ contribution and the level of matching grants are summarized in Annex 4 and detailed in the Project Implementation Manual (PIM). Subcomponent A2 – Rural Market Infrastructure. The activities under this subcomponent are as follows: (a) design and building of innovative rural collective platforms for handling the following key products: onions, tubers, bananas and confectionary groundnuts; and (b) initial 1 See Table 10, Annex 5, for summary of IDA Financing

assistance in operating these logistic facilities, to fine-tune a quality management system. Later (within one year following completion o f works), the project wi l l undertake to transfer their management to the private sector. These platforms wil l serve as models for future development in the second phase.

Subcomponent A 3 - Knowledge Management wil l (a) develop and implement an overall marketing and communication strategy for domestic supply chains; (b) put in place a rural market information system ( M I S ) to generate and disseminate domestic market knowledge and information; and (c) promote knowledge sharing by disseminating results o f the tests conducted by the project and achievements of, and lessons learned from, the funded subprojects.

Subcomponent A 4 - Development o f Animal Products Markets wil l focus on modernizing the domestic supply chains for animal products. I t wil l be structured along three broad themes: (a) improvement o f food safety in the marketing o f animal products; (b) modernization o f the marketing channels for red meat; and (c) modernization o f the marketing channels for poultry and eggs. Such modernization implies capacity building o f key participants, strategies for development and promotion o f products, building o f model market infrastructure for handling animal products, and a development fund (grants) to support the implementation o f innovative business models.

Component B: Development of Agricultural Exports (TPC US$21.35 million, IDA US$12.02 million) aims at expanding non-traditional agricultural exports (i.e., horticultural products, confectionary nuts, essential oils and aromatic plants, and processed foodstuffs) by leveraging the results achieved under the pi lot AEPP. The project will develop a close public- private partnership with the target beneficiaries: producers, exporters, trade associations and the Fondation Origine Sdnkgal-Fruits et Lkgumes (FOS-F&L). This component consists o f three subcomponents :

Subcomponent B 1 - Innovation and Quality Management wil l undertake the fol lowing activities: (a) diversify products and production zones, following the mechanisms developed under AEPP; (b) develop centers o f innovation and training, using existing training institutions in key regions; (c) establish SeneGAP-a set o f guidelines benchmarked with the quality standard for fresh agricultural produce required by EU’s importers, the Euro-Retailer Produce Working Group for Good Agricultural Practice (EurepGAP), to implement modalities o f compliance with EurepGAP for small-scale farmers; and (d) assist Senegal in i t s effort to obtain EU accreditation for i t s f ru i ts and vegetables destined for exportation. This accreditation wi l l allow i t to measure the country’s h i t s and vegetables chains’ compliance with the European Community’s Regulation (EC) No, 1148/2001.

Subcomponent B2 - Agricultural Export Infrastructure wil l (a) develop collective, post-harvest infrastructure and services (e.g., warehousing/packaging/cold storage facilities at farm gate level) in production zones; (b) build, in partnership with the Port Authority o f Dakar and a private investor a container handling/freight facility area at the port o f Dakar; and (c) restructure, for enhanced functionality, the existing Saint-Louis Agrop6le (a multipurpose storage, refrigeration and processing facility in Pal, a town in the region o f Saint-Louis). To support these activities, the project wil l finance technical assistance for designing the facilities and their management model, and wil l contribute to c iv i l works and equipment.

Subcomponent B3 - Building Agricultural Export Institutions wil l (a) contribute to further the development o f the Fondation Origine Sknkgal-an institution for which the GOS i s making a

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cash contribution o f CFAF 400 mi l l ion over the years 2006, 2007, and 2008 ; (b) strengthen the capacities of producers/exporters’ organizations; and (c) consolidate the market information system through an integrated and dynamic database, market intelligence on export markets, and the successful publication I-FLEX developed under AEPP.

Component C: Development o f Private Irrigation (TPC US$23.00 million, IDA US$11.57 million) aims at promoting demand-driven, pro-poor investments in irrigation to support the expansion of agribusiness across Senegal. The target beneficiaries are primarily small farm- families, but also include small and medium-scale enterprises, as wel l as larger enterprises both local and foreign. Activities under this component wil l be conducted in collaboration with other projects committed to upgrading key rural infrastructure in the Senegal River Valley. Such collaboration will ensure more coherent public investments and water management, and provide for better mitigation of potential negative impacts o f a rapid development o f irrigation schemes in the area. These other projects include the Bank-supported Long Term Water Supply Project (LTWSP), Senegal River Basin Multipurpose Water Resources Development Program (MWRD) under preparation, HIV/AIDS and Malaria programs, and the French-supported Projet d ’Appui aux Communautks Rurales de la Valle‘e du Se‘ne‘gal (PACRV). This component comprises four subcomponents :

Subcomponent C1 - Construction o f Public Irrigation Infrastructures in the Senegal River Delta wil l build the fol lowing critical public infrastructures: (a) recalibration and rehabilitation o f works on the Lampsar River; and (b) creation o f secondary canals that will connect to tertiary canals o f private investors (including smallholders). The project will also support technical studies for the recalibration and construction o f works o n the Gorom-Aval River, rehabilitation o f Boundoum’s structure on the Lampsar River, as wel l as studies for the opening o f the Krankaye’s canal. These critical infrastructures are needed to attract private investors to develop innovative irrigation schemes for crop diversification.

Subcomponent C2 - Promotion o f Irripation for Crop Diversification in the Senepal River Delta wil l help smallholders, small and medium-sized enterprises (SME) and agribusiness enterprises establish innovative irrigation schemes adapted to their business plans, and support technical advisory services to ensure the viability of the schemes. The project wil l complement investors’ capital with matching grants set at different levels for family-farms, SMEs, and agribusiness enterprises. The types of subprojects, eligibility criteria for activities and beneficiaries, beneficiaries’ contribution and the level of matching grants are summarized in Annex 4 and detailed in the PIM. The grant wi l l support consultant services, c iv i l works and irrigation equipment.

Subcomponent C3 - Promotion o f Micro-Irrigation for Crop Diversification in the Niayes zone, the Groundnut Basin and Senegal Oriental wil l (a) carry out demonstrations o f irrigated activities adapted to each region; (b) help smallholders in these regions establish innovative irrigation schemes adapted to their business plans; and (c) support technical advisory services to ensure the viability o f the schemes. In the groundnut region in particular, the project wil l emphasize the use o f excess water from existing village boreholes and small water-catchment dams (basins de retention) to diversify production away from traditional production. The project wil l complement the investment o f smallholders (the target beneficiaries) with grants for local consultants, c iv i l works and irrigation equipment.

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Subcomponent C4 - Knowledge Management and Strategic Studies wil l assist the country to assess opportunities and constraints, and define a strategy for rapid irrigation development as part of the preparation o f the second phase o f the program. Specifically, the project wil l undertake the following activities: (a) design the master management plan for the Lac de Guiers; (b) assess the irrigation and diversification potential o f the mid and upper valley o f the Senegal River; (c) design the national development plan for irrigation; and (d) strengthen the capacity o f SAED in M&E.

Component D: Project Coordination and M&E (TPC US$4.45 million, IDA US$3.86 million) comprises the following two subcomponents.

Subcomponent D 1 - Proiect Management and Coordination. The P C U wil l coordinate and consolidate the annual work plans and budgets and oversee the financial management and procurement o f al l the other implementing agencies. Under this subcomponent, the project wil l finance: (i) P C U staff, equipment and operating costs; (ii) technical assistance provided by the Market Integrator Firm, and local consultants on specific issues (technical, legal etc.), and audits; and (iii) capacity building for project staff, including focal points within the implementing agencies and other technical partners, through training and study tours.

Subcomponent D 2 - Monitoring and Evaluation. The activities consist o f coordination o f M&E- related activities for component A, By and C that wil l be performed by the implementing agencies, and specific tasks that cut across the project components. These include mapping o f out-growers and service providers in project areas; monitoring subprojects financed under a matching grants mechanisms-Le., contracts with implementing agencies, monitoring safeguards; updating project key performance indicators; elaborating and editing periodic reports; and carrying out impact evaluations (economic, social, environmental) and studies on business environment (access to land and investment credit). The project wil l finance equipment (computers and servers, personal digital assistants-PDAs, etc.), goods (software, digitized maps), and consultant services for technical assistance, training, and operating costs.

4. Lessons learned and reflected in the project design

The design o f AgMARKETS reflects: (i) the Bank’s overall experience in implementing projects in Senegal; (ii) the findings o f recent Economic Sector Works (ESWs); and (iii) lessons learned in previous projects, particularly the pi lot AEPP in Senegal, the Integrated Development Program for Irrigated Agriculture in Mauritania (PDIAIM) and the Tunisia Export Development Project (EDP 1)-particularly i t s mechanisms for effective support to small and medium private initiatives using public resources.

Slow disbursement of donor-funded projects i s a major issue in Senegal. This project wil l support institutional arrangements that encourage results-based subcontracting to implement project activities, and take advantage of the Bank’s new Country Financing Parameters, notably flexibility on disbursement percentages to speed-up implementation and disbursement performance.

Opportunities and constraints in agricultural and agribusiness growth have been the subject o f the Integrated Framework (IF) study and other recent ESWs. Senegal i s well positioned to compete in a large number o f high-value products, but the weakness o f market infrastructure i s a major constraint limiting the country’s agricultural export potential. The ESW on food safety has revealed significant health r i sks in domestic markets for agricultural products, particularly

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animal products, and has recommended urgent measures to address regulatory, infrastructure, and quality issues in these markets.

A bottom-up inclusive approach, rather than a top-down approach, i s key to building capacity and assuring sustainability. The conventional wisdom in many export promotion projects in the region was that an ‘apex’ or ‘federated’ CfaitiBre) export organization was necessary for success. Often, such a structure was created as a condition o f credit effectiveness. But apex organizations are difficult to develop within industries where intense internal competition persists and where a few large exporters dominate, such i s the case in Senegal. Thus, the AEPP developed instead a ‘bottom-up’ and inclusive approach in order to generate demand for such a structure. Working through the two existing associations (Organisation Nationale des Producteurs et Exportateurs horticoles du Se‘ne‘gal, ONAPES; and the Se‘ne‘galaise d ’Exportation des Produits Agricoles, SEPAS), AEPP generated a consensus and an effective demand for an ‘apex’ organization in the form o f the private Fondation Origine Senegal-Fruits & Le‘gumes, which was acceptable to al l actors. The concept found an inspiring basis from similar, successful institutions, such as CAPESPAN Foundation in South Africa, Fundacidn Chile in Chile, Negev Foundation in Israel and the British Columbia Agricultural Investment Foundation in Canada.

The standard four to five year project period i s too short to build sustainable institutional capacity. Building institutional capacity i s particularly difficult when i t involves public-private partnerships, as the process i s often complicated and the direction difficult to predict. Such complications come from an emphasis being placed on the ‘software’ side o f investment operations, while adequate implementation time and a longer te rm commitment are required to address i t s growth and thus ensure i t s sustainability.

Foreign firms with business know-how are an effective means o f providing the hands-on demonstration o f the sk i l ls necessary to shift institutionalhusiness paradigms. This form o f “international technical assistance” wil l provide in-house expertise and issue-specific study tours, combined with critical factors to successfully develop the professionalism o f local operators.

Accumulation of soft assets i s critical for triggering private sector investment and growth. The processes of initiating and sustaining growth are distinct activities, but both depend on the accumulation of soft assets in the form o f new business models, management capabilities, systems o f distribution, market access, and newly developed products. When markets for these “knowledge assets” do not yet exist, accumulating them requires public sector investment in high quality ”learning by doing” processes l i ke those supported under the AEPP (examples include the Referentiel Qualite‘ and the web-based Information Bullet in on fmits and vegetable Exports I- FLEX).

Creative ways to develop and sustain social capital are worth exploring. Social capital can take the form o f a recognized brand name which will effectively differentiate products in terms o f their quality. Once acquired, “brand equity” can be leveraged as an additional investment in institutional capital. Furthermore, allowing federated organizations to take over the financial control o f fixed assets combined with leasing out these assets to generate cash f low could also be an effective way of developing and maintaining social capital.

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The infrastructure investment process can be an important tool for institutional development, for institutional capacity building and sustainability. Infrastructure development allowed for the fusion o f the various social capital or software elements o f the project.

Timely availability of Government contributions i s crucial. As the Government commits i tsel f to a larger share o f operational expenses, timely provision o f counterpart funds commensurate with the level o f the borrower’s commitment i s crucial to ensure satisfactory implementation o f proj ect activities.

5. Alternatives considered and reasons for rejection

The project wil l be implemented as an APL. This instrument was selected in order to align the financing process with the operation’s decade-long development perspective that includes phasing the activities. A one-time S I L operation with a shorter duration would be inappropriate because the contemplated activities clearly call for a longer time period.

The Community-Driven Development (CDD) approach similar to an expanded NRIP was also considered and rejected. Whereas this approach i s well suited for small-scale market infrastructure at the village level, i t i s not designed to undertake large-scale market infrastructures that involve key stakeholders located in large market towns or cities. This wil l reach beyond the jurisdictional boundaries and capacities o f local communities, be they urban or rural.

Another rejected alternative was to incorporate the project’s activities under the ASPOP. By design, the ASPOP supports producer organizations and provides them with basic farm management services. I t i s therefore ill-equipped to work with individual private-sector enterprises and exporters’ associations as i t could not provide these players with the specialized services they will require. Attempting to do so would risk stretching the ASPOP to the point o f ineffectiveness.

The project rather follows a private-sector centered supply chain approach. This consists of identifying with the key stakeholders the weak l i n k s in the export and domestic food chains and partnering with the private sector (individual enterprises and associations) to replace such “value subtracting” l i n k s with “value adding” l inks . This will be achieved by improving the business environment for vendor integration, upgrading technology, and supporting reengineering processes. The participatory approach, regarding the provision o f public goods, i s particularly important when private investment i s at stake.

AgMARKETS wil l also complement other operations in addressing rural poverty and agriculture development in Senegal by building on the existing reforms and institutional framework for agriculture services begun under the ASPOP, and on improving living conditions generated in rural areas by CDD-type projects such as NRIP and the Social Fund Project.

C. IMPLEMENTATION

1. Partnership arrangements

The Bank’s involvement complements activities and policies o f other international agencies. The Canadian International Cooperation Agency (CIDA) has funded a number o f preparatory studies, including the following: strategic framework for non-traditional agricultural exports, development o f market infrastructures, quality management system, and assessment o f women’s role in horticultural exports. C I D A i s also assisting the Government in elaborating the Niayes

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zone integrated development plan that relies on studies undertaken by the Bank-funded Long- term Water Supply Project to create the foundation for the medium-term restructuring o f the region’s irrigation framework. The French Development Agency (AFD) funded studies in irrigation pol icy and land security to contribute to project preparation.

AFD and the European Union (EU) wil l also complement IDA in the implementation o f the overall AgMARKETS program through parallel financing. AFD wil l contribute to the objective o f the overall program through (i) an on-going project (Projet de Promotion d’une Agriculture Competitive et Durable, PACD) that provides assistance in international trade negotiations to agencies such as the Senegalese Export Promotion Agency (ASEPEX), the Senegalese Norms and Standards Association, and the National Codex Alimentarus Committee, as well as assistance related to research on agricultural supply chains; and (ii) an up-coming project (Projet d’Appui aux Communaute‘s Rurales de la Valle‘e du Fleuve Senegal, PACR) to assist rural communities and relevant local administrations in land and rural infrastructure issues. The EU has committed to fund studies and activities related to the revitalization o f the groundnut sector (Programme de Relance de la Filiere Arachide), which wil l include setting up an agricultural information system for the Groundnut Basin, and an important feeder roads program in the Kaolack and Tambacounda regions.

The project wil l work with IFC and collaborate with the Bank-Funded Private Investment Promotion Project (PIPP). I t s intervention wil l focus on facilitating investment in a small number o f keystone Public-Private Partnership (PPP) projects that have been identified as critical for strengthening value chains in both the export and domestic markets such as the Fruit and Vegetable terminal in the Port of Dakar. Within this framework, the Bank-funded PIPP wil l lead the pol icy dialogue on business environment and wil l facilitate the promotion o f direct private investment in agribusiness through APIX, one o f i t s implementation agencies. Additionally, through the Private Enterprise for Africa (PEP-Africa), the project wil l provide technical assistance to the P C U and i t s clients.

2. Institutional and implementation arrangements

The project’s management structure wil l be articulated around three bodies: the Steering Committee (CP), the Project Management and Coordination Unit (PCU), and the implementing agencies: SAED, and A N C A R will implement activities under components A and C; the P C U wil l ini t ial ly implement Component B and then hand i t over to the FOS-F&L once the latter becomes operational (by project midterm). In addition, three regional Subprojects Approval Committees (SAC) wil l be created in each region of focus (Niayes, Senegal River Valley, and the broader Groundnut Basin). The project coordination, management, implementation, monitoring and evaluation procedures are detailed in the Project Implementation Manual (PIM) and the Project Administrative and Accounting Manual o f procedures (AMP), which clarify each organ’s role and responsibility.

The P C U wil l collaborate on specific areas with other partners, such as producer/exporter associations, the Directorate of Livestock, the Directorate o f Rural Works (DGRBRLA), the Senegalese Export Promotion Agency (ASEPEX), the Investment Promotion Agency (APIX), and the Market Regulation Agency (ARM).

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3. Monitoring and Evaluation of Outcomes/Results The M&E will provide ready access o f the project’s results to al l major stakeholders through periodic reports, newsletters, and special programs in existing media. Because this i s a follow- up operation, the project wil l rely on the processes developed under the AEPP and will require minimal additional capacity building in M&E and upgrading o f the Information Technologies and Communication (1TC)-based information system initiated by the pi lot project. I t wi l l also benefit from information systems developed by SAED for irrigation activities in the Senegal River Valley. The project’s M&E system will also include collaboration with producer and exporter associations in collecting and processing data.

The M&E system will be designed to measure project development and component performance indicators, assess project compliance with environmental and safeguards standard, and monitor process and gauge effectiveness o f project management o f inputs (Annex 3). Specialized staff wi l l monitor crop production and exports data (including in European markets), needed to estimate the project’s outcome and results indicators. The project team wil l review the result indicators every six months while a team o f consultants wil l be in charge o f external evaluation and provide an annual assessment o f the project’s outcomes.

4. Sustainability

During preparation, the Government funded the “bridging” o f operations for the AEPP and facilitated the smooth transition between the two operations. In so doing, the Borrower has demonstrated i t s ownership o f the AEPP and i s likely to continue i t s support to the current operation.

However, the sustainability of the project wil l depend ultimately on the private sector’s continued ability to gain profits from domestic and export food supply chains. Secure land ownership wil l allow the private sector to undertake the medium to long-term investments needed to take advantage of market opportunities. The improved rural and market infrastructure wil l provide the necessary support to private investment, with increased organizational and managerial capacities combined with better market information. Armed with such an approach supply chain actors wil l be better equipped to manage their assets in a sustainable manner.

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Risks T o project development objective Variations in international commodity prices resulting in changes in EU or WTO policies

Natural disasters including agricultural pests, climatic variation, drought or floods. T o component result Component A Rent-seekers prevent markets innovation in order to maintain acquired privileges

Component B Changes in demand in target markets (Europe) or increased competit ion f r o m

Risk Mit igat ion Measures

Support diversification o f products and market to ensure that exporters and producers do not become vulnerable to the fluctuation o f the price o f one commodity.

Promote sound design o f infrastructure at the production and processing levels to mitigate the effects o f natural disasters

Strong information and education

competitors. Component C Continued physical and environmental degradation o f irrigated schemes lead to abandonment o f large areas o f irrigated lands.

Overall risk rating

Risk Rating with Mit igation

campaigns wi l l position the majori ty o f stakeholders with the project and wil l prevent negative actions. Diversify products and markets and constantly improve quality.

The extensive experience o f the implementing agency (SAED) should mitigate this risk. An effective O M pol icy i s being implemented in the SRV. The project will promote environmentally friendly irrigation technologies.

H i g h

Modest

Negligible

Modest

Modest

Modest

Financial risk

At the countrv level

The Country Financial Accountability Assessment (CFAA) has identified the Public Financial Management (PFM) r i sks as modest. Nonetheless, the Government i s taking actions to address the issues identified. The Government has given priori ty to improvement in these areas, as it has become evident that shortcomings in public sector performance are among the main constraints to economic development and poverty reduction in Senegal.

At the project leve l

Because o f the moderate fiduciary risk at country level, IDA has taken special measures to ensure adequate financial management o f its portfolio. Project management staff i s appointed o n a competitive basis and Bank funding i s following special mechanisms to mitigate fiduciary risk, IDA projects are invariably audited by independent and competent auditing f i r m s . Annex 7 identif ies key r isks at the project level and provides a basis for determining how they should be addressed.

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6. Credit conditions and covenants

Effectiveness conditions

The Borrower has recruited key staff o f PCU, including the project coordinator, a financial management specialist, a procurement specialist, and a monitoring and evaluation specialist, a l l with qualification and experience acceptable to the Association; The Borrower has: (i) adopted the Project Implementation Manual (PIM), and the Project Administrative, Financial and Accounting Manual (PAFAM), in form and substance acceptable to the Association; and (ii) installed accounting software at PCU, acceptable to the Association; The Borrower has hired an external auditor under terms and conditions acceptable to the Association; The Borrower has entered into agreements, in form and substance acceptable to the Association, with SAED and ANCAR, respectively, for the implementation o f some o f the activities to be carried under Parts A and C; and The Borrower has taken al l actions necessary on i t s part to put the infrastructures built under AEPP (the airfreight terminal at the international airport o f Dakar, and the packing house at Sangalkam) under private management under terms and conditions acceptable to the Association.

.

.

.

.

Legal covenants

(i) (a) N o t later than December 31, 2006, the Borrower shall have established a Foundation Origine Sbnbgal - Fruits et Lbgurnes, with terms o f reference acceptable to the Association; and (b) not later than June 30, 2008, the Recipient shall have entered into an agreement with said entity, under terms and conditions acceptable to the Association, for the implementation o f some o f the activities to be carried out under Part B o f the Project;

(ii) The Borrower shall submit to the Association SAED’s annual audited financial statements, not later than six months after the end o f i t s fiscal year.

D. APPRAISAL SUMMARY 1. Economic and financial analysis

An illustrative Cost Benefi t Analysis was carried out for the private agricultural enterprise models in the project’s three primary intervention areas: Niayes, Senegal River Delta and Groundnut Basin. In addition, an analysis based on the pol icy analysis matrix (PAM) methodology was performed to assess the importance o f wages, employment by gender in horticultural production (for the export and domestic market) and livestock .production. The direct benefits o f the project’s investments in capacity building and safeguards were not measured because o f the inherent dif f iculty in quantifying them.

Private horticultural enterprise models bv region

The analysis considers three private enterprise models (smallholders, collector/exporter, and producer/exporter) investing in fruits and vegetables in the Niayes zone and Senegal River Delta, and two enterprise models (smallholders and medium producers) in the Groundnut Basin. The

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analysis assumes that the Niayes zone and Senegal River Delta produce horticultural products (green beans, cherry tomatoes, melons, mangoes, and herbs) for the export and domestic markets, while the Groundnut Basin produces onions, sweet potatoes, confectionary groundnuts for the domestic market. Smallholders produce for the domestic market and enter in contract- farming with collectors/exporters and producers/exporters to produce horticultural products for export. Collectors/exporters do not engage directly in production. Producers/exporters rely f i rst on their own production for export and secondly on smallholders to make up the volume demanded by importers.

Economic

ERR NPV Models Financial

JRR NPV

Smallholder Medium producer

The economic analysis o f the project shows high economic rate o f return ranging from 25% to 75% depending on the enterprise model. The results are strong in al l models across the three regions and indicative o f the economic and financial profitability o f private investment in supply chains identified within the project (see Table above, Annex 9 and details in project files). They are particularly strong in the Niayes zone and the Senegal River Delta and very encouraging in the Groundnut Basin, a region in need o f revitalization. One must note that the magnitude o f the net present value (NPV) i s much more reflective o f the assumed size and not the profitability o f the farm model.

The sensitivity analysis (Annex 9) suggests that the investments in the Niayes zone and Senegal River Delta are sound, except for the collector/exporter business model. The results, however, also suggest that investments in the Groundnut Basin are more risky. This i s a warning s i g n that indicates to the project the following: only consider outstanding business proposals coming from this area, conduct a thorough r isk analysis before approval, and closely monitor and evaluate the implementation o f the business plans being supported.

37% 155,371 41% 88,722 41% 192,257 34% 85,595

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The resulting impact o f horticultural production on the economy adds credence to the notion that this sector plays an important role in providing employment and wages to rural men and women-arguably one o f the most important yardsticks o f shared growth. A prospective analysis of the livestock sector suggests that the project-induced improvement wi l l lead local products (red meats and poultry) to gain market shares in domestic market at the expense o f imported products.

2. Technical The strategic prof i le for Senegal was identified following the selection o f supply chains based on the study o f a strategic framework for developing non-traditional and horticultural exports for the domestic, national and export markets in the country. The studies identified where Senegal could address most efficiently the growing demand for such products domestically, regionally and internationally. The findings were shared with stakeholders in the sector and key supply chains were subsequently established. They wil l provide the focus for the project’s efforts during the f i rs t phase.

The strategic choices and technological options for irrigation are sound. They include the selection o f crops for developing diversification in the Senegal River Delta so as to relieve the Niayes zone currently under threat. The emphasis has been placed on basic irrigation infrastructure in support to private investment, and more efficient and environmentally-friendly irrigation technologies, such as drip irrigation. SAED’ s forty-year experience in irrigation would further ensure the success o f developing irrigation infrastructure in the Delta. Moreover, coordination with projects such as OMVS’s MPWDP, LTWSP and AFD’s Rural Communes Support Project in the SRV will ensure coherence in implementing the Master Plan for Water Management in the Delta, improve access to land and land user rights security, and increase effectiveness in addressing potential negative environmental impacts from rapid development o f irrigation in the area.

The development and implementation of support structures for the marketing o f agricultural products wil l benefit from AEPP’s experience. The project will place emphasis on a clear definition o f the management framework of each structure prior to i t s construction.

3. Fiduciary

Financial management An assessment of the project’s financial management (FM) arrangements has been carried out and the conclusion i s that the financial management arrangements for the project need to be improved before project effectiveness in order to satisfy the Bank’s minimum requirements under OPh3P10.02 and thus be adequate to provide, with reasonable assurance, accurate and timely information on the status of the project required by IDA. Therefore the following actions need to be implemented prior to Credit effectiveness: (i) recruiting a qualified and experienced F M S (financial management specialist); (ii) setting up the accounting software; (iii) developing an administrative and accounting manual; and (iv) recruiting an external auditor. An action plan, attached in Annex 7, details the project financial management and disbursement arrangements.

Procurement

The procurement assessment concludes that capable procurement staff exist in A N C A R and SAED, the project’s main implementing agencies. However, training on new Bank procurement guidelines wil l be required both for al l procurement staff in the P C U once recruited, and in

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SAED and ANCAR. Nevertheless, the quality o f the project's manuals (implementation and procedures) wil l be critical to the work o f the project procurement staff. A Procurement Plan- covering activities planned for the f i rst eighteen months o f the project-has been prepared and was finalized during negotiations. I t will be referenced in the Financing Agreement as stated in the revised guidelines o f M a y 1, 2004. The methods defined therein wi l l be mandatory and subject to declaration o f misprocurement.

4. Social Family farming. The agricultural export industry in Senegal appears to be on the brink o f significant structural changes. Recent development in transportation and the advent o f EurepGAP certification have intensified competition and favored large and better organized/managed farms to the detriment o f smaller ones. In this evolving environment viable roles remain for small-scale farmers, but clearly not in every product l ine and not in every market niche. Moreover, the changing business environment places a premium on strategic alignment. The conditions o f success for these small farmers in the export and domestic markets are related to their access to technology, their ability to organize themselves, and their alignment to domestic and international markets. Competitive pressures are much stronger in the export market than in the domestic market. However, this circumstance wil l begin to change as the domestic market becomes increasingly sensitized to quality differentiation, sophisticated market channels, and core vendor selection. The project wil l pay specific attention to small farmers by preparing them to link to performing export and domestic chains by: (i) building their knowledge base; (ii) facilitating their access to affordable irrigation plots; (iii) facilitating their access to adequate technologies; and finally (iv) facilitating contract farming.

Gender equity. AEPP has demonstrated the substantial positive impact o f horticultural exports on women in terms o f employment generation, increased revenues, and health (food safety). A specific study has been carried out during the project preparation to better understand the mechanisms by which AgMARKETS wil l help mainstream gender equity.

5. Environmental

The main issue that arose during preparation was the potential impact from development o f irrigation in The Senegal River Valley on protected areas (e.g., Re'sewe Spe'ciale de la Faune du Ndiael -which i s an international wetland RAMSAR site- and Re'sewe Sylvo-Pastorale du Ferlo). I t i s unlikely that the development of irrigation within the project scope in this region wil l have any adverse impacts on such areas. The direct impacts associated with irrigation systems would be waterborne diseases (bilharzia, malaria) and infestation with aquatic weeds (Salvinia, Typha, Eichhornia). Irrigated agriculture could also lead to soil salinization and water pollution through the intensive use of fertilizers and pesticides. I t i s likely, however, that the environmental impacts of irrigation infrastructure wil l be limited given that: (i) the targeted areas in the f i rst phase wil l be in the upland lower Delta; and (ii) new irrigation technologies, such as drip irrigation that wil l be promoted with the project, are environmentally friendly. In the first phase, the project wil l finance a study for the Lac de Guiers master plan for agro-pastoral development to ensure that investments in the second phase wil l be environmentally friendly. The project wil l also assist SAED to better address environmental and natural resources management issues in the Delta and around the Lac de Guiers in collaboration with other Bank- supported projects in the area.

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6. Safeguard policies The safeguard screening category i s S2 and the environmental screening i s Category B. In light of this, the Government has prepared and disclosed the following documents: (i) an Environmental and Social Management Framework; (ii) an Integrated Pest Management Plan (PMP)-addressing issues in the agricultural export and domestic markets; and (iii) a Resettlement Policy Framework (RPF)-accounting for the fact that the precise locations o f the project’s activities are not known in advance. In addition, the Referential Quality prepared under the pi lot Agricultural Export Promotion project provides a comprehensive approach for dealing with international standards such as EurepGAP for horticultural exports. An Environmental Impact Assessment wil l be carried out for each infrastructure and sensitive subprojects once known. And, within the EIA and as specified in the Technical Manual, the project wil l establish a “chance find” procedure for cultural property in the event that archaeological or historical relics are discovered. The Safeguards documents have been widely disclosed in the country and submitted to the Bank for disclosure prior to appraisal o f this project.

To comply with the International Waterways policy, on M a y 2004 the Government o f Senegal notified other riparian governments o f the proposed AgMARKETS project through OMVS. The project wil l not rehabilitate dams or finance any new ones. However, irrigated areas in the Senegal River delta wil l use water provided from the Manantali and the Diama dams (which were inspected and found to be safe in September 1999 and April 2004, respectively). The AgMARKETS project wil l collaborate with the Senegal River Basin Multipurpose Water Management Project (MWMP) to ensure that appropriate dam safety measures are being applied by OMVS. As for the small dams located within Senegal’s borders, the project will support their safety inspection before their use for irrigation.

The Government o f Senegal is familiar with the Bank’s Safeguard Policies, having successfully met their requirements under other Bank-funded projects such as the ASPOP, NRP, the Energy Sector Investment Project, and the AEPP. For this project, specific measures recommended in the environmental and social assessment reports are included in the project design and reflected in the implementation manual. These include recruitment o f an environmental and social evaluation specialist as core staff o f the P C U and training o f corresponding focal points within the executing agencies. Further, an additional criterion in the process o f selecting subprojects that ensure gender mainstreaming was added. Table 4. Safeguard Policies Triggered b y the Project

Yes No X Environmental Assessment (OP/BP/GP 4.0 1)

Natural Habitats (OP/BP 4.04) X Pest Management (OP 4.09) X Cultural Property (OPN 11.03, being revised as OP 4.1 1) Involuntary Resettlement (OP/BP 4.12) X Indigenous Peoples (OD 4.20, being revised as OP 4.10) Forests (OP/BP 4.36) X Safety o f Dams (OP/BP 4.37) Projects in Disputed Areas (OP/BP/GP 7.60) Projects on International Waterways (OP/BP/GP 7.50)

X

X

X

X X

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Annex 1. Country and Program Background

Senegal: Agricultural Markets and Agribusiness Development Project

The economic recovery has yet to benefit rural areas. The relatively strong growth o f the country’s economy over the last ten years, averaging five percent per year, was led by non-labor intensive sectors and, thus mostly bypassed the 64 percent o f the active population that live in rural areas and depend on agriculture-related activities. In the mid-1990s, per capita agricultural output (mainly cereals and other staple food crops) and agro-food production fe l l sharply while cereal imports (rice and wheat essentially) rose dramatically from 28 to 93 kg per capita. Consequently, the primary sector’s share o f GDP fell f rom 25 percent in the early 1960s to less than 20 percent in 2000s, with the agricultural sector dropping from 16 percent to less than 10 percent-mainly a cause o f the depletion o f the groundnut sector. No t surprisingly, while the poverty level decreased by 10.8 points overall in Senegal in 1994-2001, i t f e l l by only 5.8 points in the rural areas. In urban areas, the poverty level ranged from 44 to 59 percent in 2001, while ranging from 72 to 88 percent in rural areas. The other poverty indicators in rural areas were as unfavorable, with 76 percent illiteracy, 39 percent school enrollment, 64 percent access to clean water, 42 percent access to health services, 5.4 percent o f households with electricity, and 34 percent chi ld malnutrition rate.

Agriculture remains largely dominated by rain fed crops and extensive animal husbandry. Agricultural revenues stem from the production o f millet and groundnuts on, respectively, 38 percent and 37 percent o f the cultivated land. Irrigated agriculture accounts for less than five percent o f arable land and i s concentrated in the Senegal River Valley (76,000 ha), Casamance (25,000 ha, including the Anambe valley) and the Niayes zone around Dakar (10,000 ha). Irrigated areas are not used to their full potential except in the Niayes zone, which produces the majority o f export crops. The livestock sub- sector represents 38.5 percent of the primary sector and contributes 7.5 percent to GDP (1998-2003 average). Since 1987, this sector has recorded a steady growth rate o f three percent, reaching six percent in 2000. In 2003, the animal stock was estimated at three mi l l ion head o f cattle, 8.5 mi l l ion sheep and goats, and more than 26 mi l l ion chickens, However, with a production o f 113,000 tons o f meat the same year, the rate of exploitation o f livestock remains weak and domestic consumption relies increasingly on imports o f animal products to meet demand.

Recent years have witnessed a slight recovery in agricultural production-particularly in horticulture exports and poultry-and an increase in public expenditures for the rural sector as part of the poverty reduction strategy. The Bank’s contribution to these developments includes the agricultural services reforms undertaken since 1999 and the recently closed pi lot Agricultural Export Promotion Project. The newly adopted Loi d ’Orientation Agro-Sylvo-Pastorale intends to consolidate the sector reforms and better articulates the sector strategy with the PRSP. The prospects for cotton and groundnuts look promising, provided that the ongoing reforms are fully implemented.

Horticultural exports were insignificant prior to the 1970s, before a private investor formed a company, BUD Senegal, and began producing vegetables for export because o f the favorable climate offered by the Niayes zone and i t s proximity to the Dakar airport. However, disputes over i t s labor practices and political interference forced BUD Senegal

21

to depart, and a promising effort collapsed. As a result, exports o f horticultural products fell f rom 13,000 tons in 1977 to less than 6,000 tons in 1997/98. The Bank-supported pi lot Agricultural Export Promotion Project (AEPP), initiated in 1998, contributed to a recovery o f the sector. At the close o f the project in 2004, Senegal’s horticultural exports had increased from 6,000 to 14,000 tons and the Origine Se‘nkgal gained credibility in European markets alongside the traditional Kenyan, Moroccan and Israeli brands. Foreign direct investment i s increasing in the sector and agribusiness i s now considered one o f the five pillars o f the Government’s Accelerated Growth Strategy.

Table 6. Senegal: Recent Trend in Fresh Produce Exports Senegal - Fresh produce exports Year ending September 98 99 00 01 02 03 04 French beans 4.9 5.4 5.4 5.5 5.1 4.8 5.6 Cherry tomatoes 0.9 0.8 1.6 2.2 2.3 3.5 3.8 Mango 0.3 0.7 0.6 0.9 2.0 2.6 3.4 Other 0.5 0.8 0.9 0.6 0.7 0.3 0.5 Total volume (‘000 T) 6.6 7.7 8.5 9.2 10.1 11.2 13.3 CIF value (million Euros) 14.1 17.0 19.5 21.7 24.0 26.8 31.6 I Poultry has grown rapidly since 1990 (8 percent annually). Local enterprises are exporting day-old chicks and poultry feed to neighboring countries. However, local enterprises cannot compete against what increasingly appears to be the dumping o f chicken parts from European and American countries, in spite o f a 20 percent import duty.

Potential sources of growth and prospects for agricultural markets development. Ample evidence suggests that agriculture could be a sound engine for shared growth and poverty reduction, provided that appropriate action i s taken and investment i s increased.

Horticultural and non-traditional crop exports to international and regional markets. Recently updated studies conducted under the auspices o f AEPP and International Trade Center attest to the potential for expanding horticultural exports from the current 13,000 tons in 2004 to 50,000 tons or more within the next decade (see Tables 6 and 7). Senegal has a favorable climate and i s well-positioned geographically to supply both tropical products and off-season h i t s and vegetables to European clients, and possibly markets in Nor th America and the Middle East. Increased availability o f refrigerated ocean transport from Dakar to Europe wil l permit the shipment o f larger volumes at less cost than i s currently possible with the use o f air transport. Studies have identified a number o f horticultural products whose production could be expanded or grown in Senegal for foreign markets in addition to those already exported, such as green beans, cherry tomatoes, mangoes and melon. These products include watermelon, papaya, okra, asparagus, sweet corn, snow peas and miniature vegetables. Senegal could also explore new markets for medicinal plants and organic vegetables that wil l open up new avenues for the economy. Furthermore, the country could gain a much larger share in the West African market for products such as onions, potatoes and other vegetables. The region currently imports large quantities o f these three products annually, mainly from the Netherlands-Senegal currently accounts for one ha l f o f these exports. Greater domestic production wil l both substitute for imports and provide a surplus for export to neighboring countries.

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Niche products: Growing the exports o f sesame, cashews and hibiscus, for example, requires the provision o f relatively l i t t le support to Senegalese farmers. Low-income farmers, particularly women, can produce them with l i t t le capital outlay. Thus, promoting these crops wil l have a significant impact on poverty reduction. Moreover, initiatives undertaken in this area wil l rapidly expand i f backward and forward linkages (production, collection and logistics) are better developed.

Table 7. Fruits and Vegetables Imports in the European Union in 2004 Senegal-Volume Total Volume EU annual exported to EU Imported in EU import growth Value CIF

Produce (~1,000 tons) (~1,000 tons) 2000-20004 (%) (Million e)

Green bean 5.6 154.1 16 303.4 Melon 0.3 255.9 12 282.0 Tomato 3.9 199.0 5 275.5 Mango 3.0 168.0 9 273.7 Avocado 115.8 1 150.5 Okraiherbs and other vegetables 0.2 68.8 8 145.5 Sweet pepper 56.3 28 91.6 Strawberry 33.3 7 72.9 Green lemon 46.5 43 64.6 Papaya 41.0 25 63.2 Sweet potato 26.1 19 52.3 Peas 19.9 6 51.8 Sweet corn 19.4 12 47.3 Zucchini 34.6 28 45.0 Asparagus 17.5 16 34.0 Watermelon 50.5 22 32.8 Pepper 13.5 7 30.3 Total 13.0 1,699.2 8 YO 2,827.3

Source: PDMAS/GEOMAR-International. April, 2005.

Grape 379.1 8 810.9

Groundnut and rain fed crops, however, wil l continue to determine the pace o f agricultural growth in the short-to-medium-term. Cotton and g roundnu ts40 percent o f cultivated land-are undergoing reforms and privatizations may render them more attractive in the longer term. Moreover, groundnut o i l faces a stagnant market, but there i s an opportunity, not yet fully exploited, for confectionery groundnuts. Rapid urbanization, growing local ago-processing and animal feeding industries could sustain an expanding demand for some commercial crops such as maize and other staple food.

Pastoral production for export remains restricted to skins and hides. The main constraint to exporting beef products to the European Union i s the incidence o f hoof-and-mouth disease V i v r e aphteuse) in Senegal. To compound the problem, competition in the domestic market for higher quality products (meats and milk) i s a big challenge. Nonetheless, returns on investment and productivity gains in this sector could be substantial, in light o f the fact that developing the sector requires little capital and relatively unsophisticated technologies.

Food safety issues should be properly addressed and domestic market conditions and functioning need to be improved for many o f these investments to become viable.

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Issues and challenges for agriculture sector competitiveness Quality Issues. For al l these products quality i s the primary issue. Stringent European health standards for confectionery groundnuts and horticultural products, combined with food safety issues in the local markets, call for a better organization and effectiveness o f the country’s certification and quality control structures. Furthermore, a cleanliness and grading culture should be introduced in local markets, and producers and exporters should upgrade their technical and managerial skil ls, as wel l as gain greater access to operating capital to address this issue.

Access to investment and operating capital: Although Senegal’s banking sector i s one o f the healthiest in West Africa, lack o f investment capital for new ventures and long-term credit for existing commercial enterprises i s a serious constraint to expanding agribusiness. I t seriously constrains small farmers in their attempt to access new market opportunities.

Irrigation and associated issues (land and water). The Niayes zone, an area along the seacoast north o f Dakar, i s the region where most commercial horticultural production i s concentrated. I t has several advantages (climate, qualified labor force, proximity to export infrastructure), but i t s potential i s limited by the scarcity o f land and water as i t competes against an ever expanding urbanization. While profound restructuring o f the water supply i s needed in the medium term to maintain high value-added horticultural crops in this region, alternatives should be offered for business expansion in the short term, notably with new production areas in the Senegal river delta.

Infrastructure. Improved infrastructure i s a requirement at every leve l to reduce the substantial loss o f quality in perishables that occurs between harvesting in the field and loading on an export carrier. Important public investments in support o f export development have been made these last few years with the AEPP and other programs and need to be completed with a cold storage freight facility in the port o f Dakar. Producers and small operators need basic handling facilities. Development o f a domestic market for some o f the products mentioned has been hampered by the lack o f wholesale produce markets. The existence o f a reliable domestic market wi l l allow better distribution f low and incite new entrepreneurs to produce, first for the local market and later for the export markets, as they build capacity and improve quality.

Building a strategic framework for agriculture competitiveness

The Government will address the above constraints for the development o f the sector through its proposed two-phase, ten-year Agricultural and Agribusiness Markets Development Program (AgMARKETWPDMAS) in a two-pronged approach: supply chain and public-private-partnership. The program wil l consolidate the conditions for rapid agricultural growth (notably in the newly developed product lines) driven by greater competitiveness in domestic and export markets.

The long-term objectives o f the Agricultural Markets and Agribusiness Development Program (AgMARKETS) by 201 5 are to: (i) increase horticultural and non-traditional agricultural exports f rom their current level o f 13,000 tons to 50,000 tons; and (ii) double the revenues of producers supported by the program. Specifically, the program would: (i) rationalize and improve domestic markets o f crops and animal products; (ii) promote and

24

expand exports o f higher value-added, non-traditional agricultural exports (Le., horticultural products, confectionary nuts, essential oils, aromatic plants (e.g., bissap - Hibiscus sabdarifa, and processed foods) in the Niayes zone where the costs o f land, labor and water are increasing rapidly; (iii) develop private irrigation to support the expansion o f commercial agriculture in the Senegal River Valley; (iv) revitalize the confectionery groundnut sector and support the modernization o f activities in the broader Groundnut Basin; and (v) improve the collection and commercialization o f f ru i ts and cashew nuts in Casamance. The Program wil l rely on beneficiaries’ participation and ownership in the design, implementation, and monitoring o f i t s activities through a supply chain approach. The ten-year program cost i s estimated at US$l50.0 million: approximately US$60.0 mi l l ion for the f i rst phase and about US$90.0 mi l l ion for the second phase.

The first phase o f the program aims at increasing horticultural and non-traditional agricultural exports from 13,000 tons to 30,000 tons and farm revenues o f project- supported producers by 60 percent. It would deal with major constraints hindering agribusiness development in the shorter term, and would initiate building blocks for longer term development prospects. This f i rst phase would: (a) consolidate the results o f the pi lot AEPP operation and emphasize institutional capacity building; (b) develop sk i l ls for food quality management; (c) establish public-private partnerships for effective management o f the sector; and (d) define and test infrastructure and competitive business models for the domestic and export markets. The primary intervention areas would be in the traditional export region o f the Niayes, the promising Senegal River Delta and part o f the Groundnut Basin. In addition, some pi lot activities will be carried out in other regions, in particular in Casamance, the eastern regions (Tambacounda) and the Senegal River Valley. The f i rst phase wil l also firmly establish the Fondation Origine Senegal- Fruits et Legumes (FOS-F&L), a non-profit private organization to be endowed with the soft assets and cold storage infrastructure created under the pi lot project and the AgMARKETS program with public funds, as wel l as with contributions from other benefactors, within the framework o f Senegal’s legislation. The FOS-F&L’s board wil l hire professional private managers to run i t s operations. Thus, the program wil l ensure that the operation o f proj ect-built infrastructure would not suffer from cumbersome administrative red-tape if run by a non-cohesive trade association. The f i rs t phase wil l also support studies for the preparation o f the second phase. The f i rst phase’s total project cost i s estimated to be US$60.1 million, o f which US$35.0 mi l l ion in contributions from IDA, Government contribution estimated at US$11.6 million, private sector participation for specific public-private partnership initiatives estimated at about US$12.0 million, and from other contributors amounting to US$1.5 mil l ion.

The second phase of the program wil l expand on the results achieved in the f i rst phase and consolidate the institutional framework for agricultural export promotion (Fondation Origine Sbnbgal- Fruits & Lbgumes in particular). I t wil l expand the approach to other supply chains and regions o f the country. Emphasis will be placed on irrigation development, i.e.,: (a) restructuring the irrigation system in the Niayes zone by working to supply water to producers through a water distribution system outside of, and managed independently from, the urban potable water system; (b) successfully expanding small- scale irrigation models notably in the broader Groundnut Basin; (c) developing public irrigation infrastructure in support o f private investment in the Senegal River Valley; and

25

(d) supporting market facilities development in Casamance. The cost o f the second phase i s estimated at about US$90.0 million.

26

Annex 2. Ma jor Related Projects Financed by the Bank and/or other Agencies

SENEGAL: Ai

Sector Issues

Bank-Financed

Sector reforms and enabling environment

Agricultural Export and Diversification

Rural Infrastructures

Other development Agencies AFD

AfDB

EU

C I D A

-icultural Markets and Agribusiness Development

Project

Agricultural Services and Producer Organizations Project (Closed) Private sector Adjustment credit (Ongoing) Private Investment promotion Project (Ongoing). Agricultural Export Promotion Project. (Closed)

National Rural Infrastructure Project (IFAD co- financing) (Closed) Casamance Emergency Recovery Credit (Ongoing)

Support to Rural Communities in the Senegal River Val ley (Projet d'appui a m communautes rurales de la Vallee du fleuve Senegal, PACR, under preparation)

Competitive and Sustainable Agriculture Project (promotion d lune Agriculture Cornpe'titive et Durable, PACD ongoing)

Small-scale Irrigation Support Projet (Tambacounda, Fatick and Kolda regions)( ongoing)

Revitalization o f the groundnut industry (Programme de relance de Ia j l iB re Arachide, ongoing)

Agroprocessing micro-enterprises support project (Projet d'appui aux opkrateurs de 1 'agro-alimentaire, PAOA ongoing)

Last Supervision Ratings

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Annex 3. Results Framework and Monitoring

Senegal: Agricultural Markets and Agribusiness Development Project

Results Framework

project-supported producers

Intermediate Outcomes I------ Component A. - Competitiveness o f selected products for domestic markets i s improved. - A national food safety and good agricultural practice framework i s implemented - Competitiveness o f selected supply chains for domestic markets has increased.

Component B: Conditions for sustained agricultural exports are improved

Component C: A sound irrigation framework for crop diversification and export i s established.

Component D: The project i s technically and financially well managed

Project Outcome Indicators

- Horticultural and non-traditional agricultural exports reach 30,000 tons by the end o f Phase I. - 60% increase in farm revenues o f producers supported by the project at the end o f Phase I.

Key Intermediate Output Indicators

Component A. - At least 5 Subprojects for each o f the five targeted supply chains in the domestic market have been funded through the Matching Grant mechanism and implemented. - At least 2 consolidation markets are upgraded. - Local production o f onion and banana covers 75% and 50% o f domestic consumotion resoectivelv Component B. -The Fondation Origine Senegal - Fruits & Ligumes i s satisfactorily implemented. - 2,000 farming families are engaged in exports crops and 113 o f them have implemented SeneGAP Protocol. - Senegal has received EU accreditation related to EC No 1148- 2001 on check on conformity to the marketing standards applicable to fresh fruits and vegetables

Component C. - 2,500 ha for small farmers and agribusiness SMEs - Operation and maintenance cost are fully recovered from project beneficiaries

Component D. - 75% o f beneficiaries are satisfied with the project Information system - Project Implementation Progress rate S at any time, - M&E and management indicators update on a regular basis, including environmental and social indicators.

Use of Project Outc Information

YEAR-5. Low level achievement in horticultural exports wi l l lead to revision o f the strategic framework for agricultural export. Producer revenues gauge efficiency and impact o f the project in targeting small farmers.

Y1-Y5 Results wil l be used to adjust project intervention for each selected product and supply chains portfolio.

Yl-Y5. - Export volumes wil l be analyzed to regularly adjust the strategic profile - Flag effectiveness in linking smallholder farmers to international markets - Gauge the project effectiveness in addressing quality and international standards.

Y1-Y5. Measure contribution to building sustainable productive assets for smallholders.

YR1 -YR5. Wi l l help make timely decision regarding the correct implementation o f the overall project.

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Monitoring and evaluation of outcomes/results The M&E system wil l be designed to measure project development objectives and component performance indicators, assess project compliance with environmental and safeguards standards, monitor progress in implementing activities, and assess effectiveness o f project management o f inputs. The M&E system i s based on measurable indicators detailed in the project implementation manual, including monitoring safeguards and gendedsocial inclusion. M&E i s an important part o f the PCU’s responsibilities which includes providing timely and accurate information about the project implementation progress and outcomes to the Government, beneficiaries, and the Bank. The P C U wil l also ensure that measurable performance indicators are in place for the implementing agency including regular update on specific project data they are in charge o f collecting.

The M&E system will be articulated around three sets o f elements: . Monitoring tools for performance indicators: Planning and monitoring processes o f project activities (inputs) wil l require the following tools: annual work plans and budgets (AWPB) and procurement plans (PP) developed through appropriate software. Outputs indicators associated with each component, such as irrigation plots developed, numbers and type o f business plans elaborated and subsequent number and type o f subproject funded, farmers and enterprises reached either through supply chains-related matching grants or training programs, wil l be monitored through an integrated database. Baseline data wil l derive from due diligence reviews o f supply chains.

Approaches for outcomes and impact evaluation: the following approaches wil l be used to measure the project PDO indicators. Specialized staff wil l conduct market intelligence and monitor exports data in European Markets as done under the pi lot export promotion project. Variation in participant producer’s revenues wil l be measured using baseline data from the feasibility study o f each selected subproject and evaluation report at completion. U s e o f a standard template for subproject feasibility studies and completion report wil l ensure that required information i s gathered. Furthermore, household surveys wil l be carried out soon after effectiveness, around the project mid term review, and at completion, to measure the project impacts in areas o f focus (Niayes, Senegal River Delta and Groundnut Basin). A double difference approach using panel data wi l l be applied as performed with National Rural Infrastructure Project.

The M&E wil l provide ready access o f the project’s results to al l major stakeholders, through a website, periodic reports, newsletters, and special programs in existing media. Because this i s a follow-up operation that rel ies on the processes developed by the pi lot project (AEPP), the P C U wil l require little additional capacity building in M&E and upgrading the ITC-based information system initiated during the pi lot project (ijlexsenegalm andpdmas.org).

.

29

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Annex 4. Detailed Project Description

Senegal: Agricultural Markets and Agribusiness Development Project

There i s ample evidence to suggest that horticulture and non-traditional crops could be a sound engine o f shared growth and poverty reduction for Senegal, provided appropriate action i s taken to face the sector’s main challenges. These challenges are related to quality management, access to capital, promotion o f sustainable irrigation technologies, and development o f export and domestic market facilities. By adequately addressing these challenges, the Agricultural markets and agribusiness development program (AgMARKETS), wil l build a framework for sustainable agriculture competitiveness in the country.

This annex provides further information on the program’s specific approach and features outlined in Section B3 and B 4 o f the document’s main text. I t comprises three sections. The introductory section describes the strategic approach on which the overall program wil l rely to achieve i t s development objectives; the second specifies the development objectives o f each phase o f the program; and the third describes in detail the f i rs t phase’s components, with a cost estimate for each.

1. Project strategic approach The strategic approach underlying the Agricultural Markets and Agribusiness Development Project i s two-fold: (i) the supply chain approach, and (ii) the use o f public-private partnerships. The project’s guiding principle i s the focus on family farmers. The project involves the integration o f family farms and small-scale enterprises into farm-to-market value chains in ways that enhance the competitiveness o f the entire supply chain. The project will identify where, in specific export and domestic food chains, weak l i n k s currently exist, and then work to replace these weak or “value subtracting” l i n k s with “value adding” l i n k s by improving the business environment for vendor integration, upgrading the technology being used, and reengineering processes that currently operate in a stand-alone mode.

The public-private partnership wil l involve institutional development and methods refinement, design o f innovative business models, and funding o f demonstration subprojects. In both i t s domestic and international market development activities, the project wil l focus on developing specialized competencies and capabilities that enhance overall chain competitiveness. For example, one set of initiatives will involve enhancing the market information available to chain participants so that they can make better decisions. Another set involves providing risk management services to food chains, which includes institutional development and methods refinement for creating security interests in land, farm product inventories, accounts payable and intellectual property.

Because the products/services that wi l l be developed have the characteristics o f community goods in which individual enterprises have inadequate incentive to invest, the project wil l design innovative business models to supply these products/services to enhance the supply chains.

The project wi l l rely on demonstrated subprojects to enhance value chains through the following sequential steps: (i) in-depth review o f promising supply chains to identify critical points for appropriate treatment; (ii) test o f new business models to support collective investments for several categories o f enterprises producing community goods; and (ii) expansion o f successful initiatives o f value addition and competitiveness enhancement, mostly through matching grants.

31

Some o f these new value-enhancing services, successful initiatives, techniques and methods emerging from the project wil l be embedded in exiting small and medium businesses; others wil l be taken up by new business start ups, joint ventures between existing companies, and new forms of business associations. The development o f new business enterprises wil l lead to the use o f specific farm to market chains. However, the project’s primary focus wil l not be on creating new enterprises per se.

2. Project development objectives and key indicators The development objective o f the first phase o f the Agricultural Markets and Agribusiness Development Program i s to increase non-traditional agricultural exports and farm revenues for proj ect-supported producers. The end-of-proj ect outcome indicators wil l be as follows: (i) an increase o f non-traditional agricultural exports from the 2004 level o f 13,000 tons to 30,000 tons by 2010; and (ii) a 60 percent increase in farm incomes o f small family farms, the project’s primary target group.

K e y output indicators are as following : (i) at least 5 subprojects for each o f the five targeted supply chains in the domestic market have been funded through the Matching Grant mechanism and implemented; (ii) one third o f the producers supported by the project have implemented SeneGAP Protocol; (iii) Senegal has received EU accreditation related to E C No 1148-2001 on check on conformity to the marketing standards applicable to fresh f ru i ts and vegetables (iv) at least 3,000 hectares for irrigation have been developed or improved by small farmers and agribusiness SMAES supported by the Project for crop diversification and export.

The triggers to allow movement from the first to the second phase are as follows:

The Fondation Ovigine Sknkgal-Fruits & Lkgumes, which has been created and endowed with the horticultural export-related soft and physical assets developed under the AEPP and the AgMARKETS Project, has been implementing Component B as stated in the Agreement with the Project Management and Coordination Unit.

Infrastructures and other markets facilities created or upgraded with project support are under private management.

Annual beneficiary’s contribution to the Delta Irrigation Infrastructure Maintenance Fund (FOMAED) for the operation and maintenance (O&M) o f irrigation infrastructure created or rehabilitated by the project are recovered by at least 80 percent.

Other performance indicators per component are identified and described in Annex 3 (Results Framework and arrangements for results monitoring). This annex also summarizes tools and techniques for data collection and analysis. The Monitoring and Evaluation (M&E) section o f the project implementation manual provides detailed performance indicators for a l l project supported activities, including management and monitoring o f safeguards.

32

3. Project components Component A: Improving Domestic Marketing Conditions (TPC US$lO.lO million, IDA US$6.35 million) This component aims at improving food safety and the performance o f the domestic distribution channels for crop and livestock products. The target beneficiaries are producers, producer associations, trade associations, local authorities, and small and medium-scale enterprises (SME) engaged in crop and livestock agribusiness. This component comprises four subcomponents:

Subcomponent A 1 - Domestic Supply Chains Consolidation (US$2.32 million). Under this subcomponent, the project wi l l undertake three sets o f activities:

(a) Test innovative business models adapted to small producers (nine programs) and SMEs (five programs) in promising supply chains for domestic and regional markets. These supply chains include onion, banana, meats and poultry, confectionery groundnut, and processed foods including high quality rice.

(b) Assist eligible small producers and SMEs interested in applying these innovations to implement well defined Business Development Projects (subprojects). Such funding for selected subprojects wi l l be allocated through a competitive process that wil l include a beneficiary’s contribution in the form of capital, and project grants set at different levels for smallholders and SMEs, as detailed in the Project Implementation Manual (PIM). Eligible subprojects wil l include commercial partnerships with traders and local agro-industries, technical assistance for introduction or development o f new product lines, and packaging and logistic innovations (see summary table).

(c) Conduct related diagnostic studies to draw lessons and update the supply chain baskets and identify new areas o f focus.

Subcomponent A 2 - Rural Market Infrastructure (US$l .OO million). The activities under this subcomponent are as follows: (a) design and building o f innovative rural collective platforms (PGZes agricoles Zogistiques et de mise en marchi-PALMM) for handling the following key products: onions, tubers, bananas and confectionary groundnuts; (b) init ial assistance in operating these logistic facilities, to f ine tune a quality management system. Later (within one year following completion o f works), the project wil l undertake to transfer their management to the private sector. These platforms wil l serve as models for future development in the second phase or for other initiatives.

This subcomponent will finance consultant services to design blueprints for facilities and management models for various types o f rural markets. I t wil l also finance equipment and public works, and operating cost at ini t ial stage, for four demonstrative PALMMs.

Subcomponent A 3 - Knowledge Management (US$0.30 million). This subcomponent wil l (a) develop and implement an overall marketing and communication strategy for domestic supply chains; (b) put in place a rural market information system (RMIS) to generate and disseminate domestic market knowledge and information; and (c) promote knowledge sharing by disseminating results o f the tests conducted by the project and achievements of, and lessons learned from, the funded subprojects.

Activities under this subcomponent wil l take advantage o f the Senegalese telecommunication system, one o f the best in Africa. I t will build upon on-going successful programs undertaken by

33

private firms, such as Wireless Application Protocols (WAP), or implemented by public institutions (Market Regulation Agency, Food Security Authority, and the Agricultural Research Inst i tute-ISM).

The project wi l l fund consultant services (technical assistance to the P C U for designing the system); non-consultant services (data providers, newspapers, radio and TV broadcasting); equipment (computers, Personal Digital Assistant, WAP-mobiles phones); and operating cost for the PCU, implementing agencies, and participating producers organizations. The project wi l l also support training o f staff and beneficiaries, as well as study tours. Such tours wil l be held in various locations around the world where information technology i s making a difference in small farmers’ access to markets. The expansion o f the system i s envisioned within a broader program the Government o f Senegal i s preparing with the European Union’s support.

Subcomponent A 4 - Development o f Animal Products Markets (US$2.74 million). This subcomponent wi l l focus on modernizing the domestic supply chains for red meat and poultry. I t wil l be structured around three broad themes: (a) improvement o f food safety in the marketing o f these products by defining and implementing a comprehensive Animal Products Food Safety Toolkit, through consultant services, training, and operating cost for the relevant bodies within the Ministry o f Livestock; (b) modernization of the marketing channels for red meat; and (c) modernization o f the marketing channels for poultry and eggs.

The modernization o f marketing channels, in particular, wil l involve capacity building o f key participants; strategies for the development and promotion o f products; building o f model market infrastructure for handling animal products; and a development fund (matching grants, see summary table) to support the implementation of innovative business models. Activities under this subcomponent wil l be limited in the f i rst phase o f the project to the Groundnut Basin around Kaolack and Mbour areas for meat, and the area around Dakar for poultry.

Component B: Development of Agricultural Exports (TPC US$21.35 million, IDA US$12.02 million)

This component aims at expanding non-traditional agricultural exports (Le., horticultural products, confectionary nuts, essential oils and spices, and processed foodstuffs) by leveraging the results achieved under the pi lot Agricultural Export Promotion Project (AEPP). The project wil l develop a close public-private partnership with targeted beneficiaries: producers, exporters, trade associations and the Fondation Origine Sknkgal - Fruits et Lkgumes (FOS-F&L). This component comprises three subcomponents.

Subcomponent B1 - Innovation and Quality Management (US$5.30 million) wil l undertake the fol lowing activities:

(a) Diversification of products following the mechanisms developed under AEPP, and expansion o f export-oriented horticultural areas in less constrained regions such as the Senegal River Delta. This wil l be done through a matching grant mechanism (see summary table) and wil l fol low the three steps described in subcomponent A l .

(b) Development o f three centers of innovation and training for horticulture and non-traditional crops in key regions (the Niayes zone, Groundnut Basin, Senegal River Delta), using existing training infrastructure;

34

(c) Development o f SeneGAP, smallholder EurepGAP Interpretation Guidelines benchmarked with EurepGAP, which wil l be used in Senegal and recognized by market partners as equivalent to EurepGAP; and on this basis, work out sustainable compliance modalities for small-scale farmers, leading to EurepGAP certification o f groups o f small-scale farmers. The project wil l support consultant and non-consultant services for preparing the guidelines, benchmarking and monitoring compliance with EurepGAP, and training o f farmers;

(d) Support to the country in i t s quest to obtain EU accreditation for compliance with the marketing standards applicable to fresh fruit and vegetables Regulation (EC) N o 1148/2001, The project wil l finance additional equipment and procurement o f goods for laboratories, local and international consultant’s services for technical assistance to, and training of, staff o f concerned national institutions such as the Plant Protection Directorate and Ceres-Locustox.

Subcomponent B 2 - Agricultural Export Infrastructure (US$6.07 million) will:

(a) Develop in three key locations collective post-harvest infrastructure and services tailored to farmer’s needs and capabilities. The design o f these integrated facilities (PkrimBtres logistiques amknage‘es en zones de production agricoles -PLAZA) will include warehousing, packaging, and cold storage functions at farm gate level;

(b) Build, in partnership with the Port Authority o f Dakar and a private firm, a container handling/freight facility at the port o f Dakar on approximately 10,000 sq m; and

(c) Restructure, for enhanced functionality, the existing Saint-Louis AgropSle (a multipurpose storage, refrigeration and processing facility in Pal, 30 Km South o f Saint-Louis).

To support these activities, the project wil l finance technical assistance for designing the facilities and their management model, and wil l contribute to c iv i l works and equipment.

Subcomponent B 3 - Building Agricultural Export Institutions (US$0.65 million) will:

(a) Contribute to the development o f the Fondation Origine Sbnkgal - Fruits et Lkgumes (FOS- F&L) - establishment o f which has drawn CFAF400 mi l l ion from the coffers o f the GOS- through capacity building. The project, through the Market Integrator, wil l assist the FOS-F&L in the design and implementation o f i t s business plan and core services. The export facilities developed under AEPP and subcomponent B 2 wil l be transferred to the FOS, which wil l take over the P C U around the project medium-term as Component B’s main implementing agency. The project wil l work closely with ASEPEX to build the synergies needed to support Senegal’s private exporters.

(b) Strengthen the capacities o f producers/exporters organizations: the project wi l l assist these associations to improve services to their members by strengthening their leaders’ capacities. The activities wil l include, but wil l not be l imited to, strategic training on specific themes such as organizational management, international trade and standards, quality management, and study tours.

(c) Consolidate market information system, through an integrated and dynamic database, market intelligence on export markets, and continuation o f the successful publications (I-FLEX) developed under AEPP.

35

Component C: Development of Private Irrigation (TPC US$23.00 million, IDA US$11.57 million)

The component aims at promoting demand-driven, public-private partnership for investments in irrigation to support the expansion o f agribusiness across Senegal. The target beneficiaries are primari ly small-farm families, but also include small and medium-scale enterprises, as well as larger enterprises-both local and foreign. Activities under this component wil l be conducted in collaboration with other projects committed to upgrading key rural infrastructure in the Senegal River Valley. Such collaboration wil l ensure more coherent public investments and water management, and provide for better mitigation o f potential negative impacts o f a rapid development o f irrigation schemes in the area. These other projects include the Bank-supported Long Term Water Supply Project (LTWSP), Senegal River Basin Multipurpose Water Resources Development Program (MWRD) under preparation, HIVIAIDS and Malaria programs, and the French-supported Projet d ’Appui aux Communautks Rurales de la Vallke du Se‘nkgal (PACRV). This component comprises four subcomponents.

Subcomponent C1 - Construction o f Public Irrigation Infrastructures in the Senegal River Delta (US$4.94 million) wil l build the following critical public infrastructures:

(a) Recalibration and rehabilitation o f works on the Lampsar River;

(b) Creation o f secondary canals that wil l connect to tertiary canals o f private investors (including smallholders); and

(c) Technical studies for the recalibration and construction o f works on Gorom-Aval River, and the opening o f the Krankaye’s canal.

These critical infrastructures are needed to attract private investors to develop innovative irrigation schemes for crop diversification. The Project wil l develop a close partnership with other projects committed to upgrading irrigation infrastructure in the Senegal River Valley. For example, the Bank-supported Senegal River Basin Multipurpose Water Resources Development Program (MWRD-OMVS) wil l finance upstream works (upgrading the downstream o f Gorom River and opening the canal o f Krankaye, estimated to cost US$3.5 million) that are critical to water services for the project area. The French-supported Projet d’Appui aux Communautks Rurales de la Valle‘e du fleuve Sknkgal (PACR) wil l focus on feeder roads (estimated US$645,000) and assistance to local government and public institutions in land administration within the project area. Both OMVS and PACR wil l work in parallel with the project through co-financing arrangements because o f timing in preparation and Board date.

Subcomponent C2 - Promotion of irrigation for crop diversification in the Senegal River Delta (US$3.47 million) will help smallholders, SME and agribusiness enterprises establish along the Lampsar River up to 2,500 ha of innovative irrigation schemes, mainly with drip irrigation adapted to their business plans. I t wil l also support technical advisory services to ensure the viability o f the schemes. The project wil l complement investors’ capital with grants set at different levels for family-farms (50 percent o f investment cost), SMEs (20 percent), and agribusiness enterprises as detailed in the project implementation manual. The types o f subprojects, eligibility criteria for activities and beneficiaries, beneficiaries’ contribution and the level o f matching grants are summarized in Table 8 and detailed in the PIM. The grant wil l support consultants’ services, c iv i l works and irrigation equipment.

36

Subcomponent C3 - Promotion o f Micro-irrigation for Crop Diversification in the Niaves zone, the Groundnut Basin and Tambacounda Region (US$1.94 million) will:

(a) Carry out demonstrations adapted to each region;

(b) Help smallholders in these regions establish innovative irrigation schemes adapted to their business plans (about 700 ha with drip irrigation); and

(c) Support technical advisory services to ensure the viability o f the schemes.

In the groundnut region, in particular, the project wi l l emphasize the use o f excess water from existing village boreholes and small water-catchments dams (basins de retention) to diversify production away from traditional groundnut production. The project wil l complement the investment o f smallholders (the targeted beneficiaries) with grants as detailed in the project implementation manual (see summary table).

Subcomponent C4 - Knowledge Management and Strategic Studies (US$1.23 million) wil l assist the country to assess opportunities and constraints and define a strategy for rapid irrigation development as part of the preparation o f the second phase o f the program. In particular, the project wil l undertake the following activities:

(a) Design the master management plan around the Lac de Guiers;

(b) Establish the irrigation potential o f the mid and upper valley o f the Senegal River;

(c) Design the restructuring plan for irrigation in the Niayes zone;

(d) Elaborate the national irrigation development plan; and

(d) Strengthen the capacity of SAED in M&E in project’s specific areas o f interest such as private irrigation and land management.

Component D: Project Coordination and M&E (TPC U S 4 . 4 5 million, IDA US$3.86 million)

The component wil l ensure sound planning and coordination of project activities and effective use o f resources. I t comprises two subcomponents: (i) coordination and management; and (ii) monitoring and evaluation o f the project’s performances.

Subcomponent D 1 - Proiect Management and Coordination (US$3.52 million). The PCU will coordinate and consolidate the annual work plans and budgets and oversee the financial management, and procurement o f al l the other implementing agencies. Under this subcomponent, the project wi l l finance: (i) the PCU staff and operating costs, as wel l as costs incurred due to project activities carried out by the regional implementing agencies; (ii) technical assistance provided by the Market Integrator Firm, and local consultants on specific issues (technical, legal etc), and audits; (iii) capacity building for project staff, including focal points within implementing agencies and other technical partners, through training and study tours.

Subcomponent D 2 - Monitoring and Evaluation o f Project’s Performances (US$0.34 million). The activities consist o f the coordination, within the PCU, o f M&E related activities performed by the implementing agencies for components A, B, and C, and specific tasks that cut across the project components. Theses include: (i) mapping of out-growers and service providers in project areas; (ii) monitoring subprojects financed under matching grants mechanisms, contracts with

37

implementing agencies, safeguards and social measures for compliance with Bank and local policies; (iii) updating project key performance indicators; elaborating and editing periodic reports; and (iv) carrying out studies, including impact evaluations (economic, social, environmental).

The project will finance equipment (computers and servers, PDA, etc.), goods (software, digitized maps), consultant services for technical assistance, training, and operating costs.

38

Table 8. Summary table of matching grants for subprojects

Characteristics + Eligible

beneficiaries

Eligible activities

Business partnerships

organizations o f horticultural products for the domestic and export markets

producersiexporters associations in traditional and non-traditional agricultural exports

agribusiness enterprises in domestic and export markets.

. Producers and producers’

- ProducersiExporters and

. Small and medium-scale

. Development o f business plans

. Implementation o f business and feasibility studies

plans (including Improved seeds and agricultural inputs, Farm equipment, Post-harvest equipment, Production infrastructure, Packaging materials, Technical assistance)

Domestic market

. SME: 10 Export market 1 Smallholders: 12 . SME: 10

Smallholders: 23

Types of subprojects

Irrigation

organizations o f horticultural products for the domestic and export markets . ProducersiExporters and producersiexporters’ associations in traditional and non-traditional agricultural exports Small and medium-scale agribusiness enterprises in domestic and export markets.

1 Investors (local and foreign)

= Producers and producers’

. Development o f business plans and feasibility studies Irrigation infrastructure and equipment (including civil works, dripiaspersion irrigation equipment, protection fences, etc.),

(including improved seeds and inputs) . Training

Senegal River Delta (2,500 ha) including: . 1,400 ha for associations o f

smallholders (with up to 2 ha per family and collective schemes o f 5-20 ha per producer organization). . 600 ha for micro and small-scale private enterprises (of 10-20 ha) . 500 ha for agribusiness enterprises

Other regions (1,000 ha), including 270 ha in large-forage schemes in the Niayes

1 270 ha in small-forage schemes in the Niayes

1 320 ha o f extension in schemes for banana production in Tambacounda region . 60 ha o f irrigation scheme development in Groundnut region

1 Start-up production plan

Livestock . Producers and producers organizations o f animal products (red meat and poultry products) . Small and medium-scale enterprises in livestock production, processing and marketing

1 Traders, butchers and processors o f animal products . Trade associations in livestock production, processing and marketing

. Development o f business plans and feasibility studies. . Implementation of business plans including infrastructures and equipment (production, processing, and marketing) ; improved animal feed and health inputs; and training in compliance with SPS norms

. Cattle fattening around Dakar : 144 producers . Sheep fattening around Dakar : 192 producers . Cattle fattening around Mbour : 173 producers . Sheep fattening around Mbour : 2 16 producers

1 Village-level poultry production: 18 1 producers . Butcher stalls: 14 . Modem butcheries: 2 . Poultry butcheries: 1 . Improved market stands: 52 (26 for red meat and 26 for poultry)

39

1 Characteristics

Funding level

Beneficiaries’ contribution

Eligibil i ty criteria

Technical

Particular criteria r

Business partnerships

. Smallholders: up to

. SMEs: up to US$ 80,000 uss50,000

. Smallholders: 20% . SME: 50%

. Beneficiary (producer, producers organization, SME) has at least a 3-year experience in a supply chain targeted by the project . Beneficiary resides in project area . Beneficiary i s wi l l ing to undergo training related to the demonstration tests and relevant to hisiher business plan . Beneficiary maintains an effective financial management system or subscribes to a “management center”

1 T h e subproject addresses a key constraint to the improvement o f the supply chain . T h e subproject follows a technological package or process validated b y the project . Internal rates o f return equals or exceed 10%. . T h e subproject has no negative environmental impact or, if needed, appropriate mitigation measures w i l l be implemented

women and youth groups receive special treatment through a selection criterion accounting for 20% o f the total ooints

. Subprojects submitted b y

Types of subprojects

Irrigation

Senegal Delta - (Schemes for agricultural diversification up to 20 ha) : US$3,800/ha . Small forages in Niayes Regon (schemes up to 3 ha): US$3,000ha

1 Large forages in Niayes Region (schemes up to 30 ha) : USS 3,000ha . Scheme for banana production (up to 10 ha): US$4,000ha Water catchments in Groundnut Basin (schemes up to 5 ha): USS 2,000ha

. Associations o f smallholders

. SME (up to 20 ha) 80% . Beneficiary (producer, producers

50%

organization, SME) has at least a 3-year experience in irrigated production o f agricultural products for export targeted b y the project

1 Beneficiary i s engaged in agricultural diversification . Beneficiary resides in project area . Beneficiary pays O&M’s fees and charges o f project-financed irrigation infrastructure . Beneficiary maintains an effective financial management system or subscribes to a “management center” . T h e subproject complies w i th the level o f investment and technical norms demanded by SAED . Internal rates o f return equals or exceed 10%. . T h e subproject has no negative environmental impact or, if needed, appropriate mitigation measures w i l l be implemented

. Subprojects submitted by women and youth groups receive special treatment through a selection criterion accounting for 20% o f the total points

Livestock

. Small-scale producers: - Village poultry production :

up to US$160 / producer - Sheep production: up to

US$ 1,200iproducer - Cattle production: up to US$

1900iproducer . Poultry processing: up to US$

Distributiodmarketing o f animal products: up to US014,OOO /enterprise

30,00O/processor

. Private operators (red meat and poultry production): 50%

. Beneficiary has at least a 3-year experience in a supply chain targeted by the project

1 Beneficiary resides in project area . Beneficiary i s wil l ing to undergo training related to the demonstration tests and relevant to hisiher business plan . Beneficiary maintains an effective financial management system or subscribes to a “management center”

. The subproject addresses a key constraint to the improvement of the supply chain . T h e subproject complies wi th thc level o f investment and technical norms demanded by SAED . The subproject has no negative environmental impact or, if needed, appropriate mitigation measures w i l l be implemented

. Subprojects submitted b y women and youth groups receivc special treatment through a selection criterion accounting foi 20% o f the total points

40

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Annex 6. Implementation Arrangements

Senegal: Agricultural Markets and Agribusiness Development Project

1. Partnership arrangements The Bank’s involvement i s in l ine wi th the activities and policies o f other international agencies. The Canadian International Development Agency (CIDA) funds a number o f preparatory studies (Strategic framework non-traditional export products, development o f markets infrastructures, quality management system, and assessment o f women’s role in horticultural exports). C I D A also assists the Government in designing an integrated development plan for the Niayes zone. This plan, combined with studies undertaken through the Bank-funded Long Term Water Supply Project wil l be used as the foundation for the medium-term restructuring o f the irrigation framework in the Niayes zone.

The French Development Agency (Agence FvanCaise de Diveloppement-AFD) funded studies in irrigation pol icy and land security and wil l co-finance (in parallel) part o f Component C in the Senegal River Delta. The European Union (EU) has committed to finance studiedactivities on agricultural information systems and economic promotion in the Groundnut Basin. I t wil l also provide support to develop feeder roads in Tambacounda and Kaolack regions.

The project wil l link up with IFC and wil l collaborate with PSD’s operation in Senegal (PIPP). The role o f IFC could most usefully be oriented toward facilitating investment in a small number o f keystone projects identified as critical for strengthening value chains in both the export and domestic markets. I t could take the form o f transaction preparation and/or direct IFC co-investment. For example, IFC wil l act as financial advisor in preparing the public- private-partnership transactions such as the facility Fruit & Vegetable Terminal planned in the Port o f Dakar. The PIPP, through one o f i t s executing agencies, MIX, wil l facilitate this process by assisting strategic investors with administrative procedures for their settlement, and wil l lead the pol icy dialogue on business environment.

2. Institutional and implementation arrangements

The project’s governance management structure wil l be articulated and organized around three bodies: the Steering Committee (CP), the Project Management and Coordination Unit (PCU), and the implementing agencies (SAED, A N C A R and FOS-F&L). In addition three regional Subprojects Approval Committees (SAC) wil l be created in each region o f focus (Niayes, Senegal River Valley, and the broader Groundnut Basin). The project coordination, management, implementation, monitoring and evaluation procedures wil l be governed by provisions detailed in the Project Implementation Manual (PIM) and the Project Administrative and Accounting Manual o f Procedures (AMP) which defines roles and assignments o f each participant.

The CP wil l be chaired by the Ministry in charge o f agriculture and will includes other relevant Ministries (Finance, Livestock, Infrastructures, Commerce, Environment, APE, to cite a few), the private sector including producer apex organizations, and coordinators o f parallel projects. The CP wil l oversee the project’s implementation-validation o f yearly report, annual work plan and budget.

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Implementation o f the project activities wil l be coordinated by the P C U in charge o f the fiduciary aspects o f the project, Most o f the project activities wil l be contracted out to appropriate public or private entities for implementation. SAED, ANCAR, and the Fondation Origine Senegal - Fruits et Lkgumes will be the main implementing agencies: SAED for activities undertaken in the Senegal River Valley, A N C A R for activities in the extended Groundnut Basin; the FOS-F&L wil l take over the P C U and act as implementing agency o f the component B within two years following project effectiveness. The P C U wil l consolidate annual work plans and budgets and oversee the financial management, procurement, as well as monitoring and evaluation o f project activities.

The P C U wil l be staffed with a limited qualified number o f experts and assisted by an international firm (Market Integrator) with relevant experience in agribusiness. Three approval committees (AC) wil l be created at the local level to ensure transparency in the process o f selecting and approving subprojects. AC’s composition and functioning are described in the P I M (see Figure 1 o f Annex 7). The P C U wil l collaborate on specific areas with the following partners: (i) producer/exporter associations in organizing training sessions and workshops to the benefit o f their members and in collecting and processing M&E data; (ii) the Directorate o f Livestock in implementing the Food Safety Action Plan; (iii) the Directorate o f Rural Works (DGRBRLA) in providing technical assistance to A N C A R in implementing tests on irrigation technologies in the Groundnut Basin; (iv) the Senegalese Export Promotion Agency (ASEPEX) in promoting export activities; (vii) the Investment Promotion Agency (APIX) in promoting Foreign Direct Investments and works related to the improvement o f business environment; and (viii) the Market Regulation Agency (ARM) in domestic markets information and regulation.

Figure 2 o f Annex 7 shows the organizational chart o f the PCU.

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Annex 7. Financial Management and Disbursement Arrangements

Senegal: Agricultural Markets and Agribusiness Development Project

1. Executive Summary and conclusions The Project wil l be implemented by a Project Coordination Unit (PCU) under the supervision of a Steering Committee. The P C U wil l be made up o f a Coordinator, a Financial Management Specialist (FMS), a procurement specialist, a Monitoring and Evaluation Specialist and four technical specialists (Irrigation, Horticulture, Livestock and Environmental and Social). The figure in annex 1 describes the organizational chart o f the project and the PCU.

An assessment o f the project’s financial management (FM) arrangements has been carried out and the conclusion i s that the financial management arrangements for the project need to be improved before project effectiveness in order to satisfy the Bank’s minimum requirements under OP/BP 10.02 and wil l then be adequate to provide, with reasonable assurance, accurate and timely information on the status o f the project required by IDA. Therefore the following actions need to be implemented prior to the Credit effectiveness: (i) recruitment o f a qualified and experienced FMS; (ii) setting up the accounting software; (iii) development o f an administrative and accounting manual; and (iv) recruitment o f an external auditor. A detailed action plan i s attached in Table 12 o f this FMA.

2. Staffing arrangements

An FMS with experience and qualifications satisfactory to the Association wil l be recruited. H e wi l l work under the supervision o f the Coordinator o f the P C U and wil l work closely with the financial focal points o f A N C A R and SAED. H e wil l also report periodically to the Director o f the Debt and Investment (DDI) o f the Ministry o f Economy and Finance.

As far as financial management i s concerned, the FMS wil l have the responsibility for collecting and controlling invoices, maintaining the books, entering data in the accounting software, managing project’s bank accounts, keeping the books o f accounts and preparing the financial reports, as wel l as withdrawal and direct payments applications. The FMS’ terms o f reference (TORS) have been drawn up and the recruitment process should be completed by effectiveness (see action plan in Table 12).

3. Accounting and Financial Management Procedures and Computerized Management Information System

Accounting Policies and Procedures The P C U will apply the existing private accounting system in Senegal (SYSCOA) issued in 1998. This system i s based on the Plan Comptable traditional in French-speaking countries, with several innovations mirroring some principles set in International Accounting Standards at the time. The SYSCOA has a three-tier structure (full reporting basis; simplified basis; cash basis). The P C U wil l be eligible for the simplified system.

A procedures manual wil l be developed and wil l provide al l the required details on accounting and financial procedures. I t wil l set out in particular: (i) the institutional arrangements and the relationship between al l the parties o f the project (Steering committee, PCU, SAED, ANCAR, beneficiaries, etc.); (ii) the planning and budgeting arrangements; (iii) the treasury procedures; and (iv) the procurement procedures, reporting formats and arrangements.

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The P C U wil l s i g n a framework contract with SAED and A N C A R under terms acceptable to IDA to implement project activities under their respective responsibilities. As discussed during the appraisal mission, the management fees were calculated based on the amount disbursed for such activities.

Accounting Software

A sound computerized information system will be established at the PCU. This system will be updated in such a way as to furnish all o f the following data: unaudited Financial Report, Financial Statements, Withdrawal applications, Bank reconciliations and al l financial reports. The books o f account will also be maintained electronically in this software.

4. Reporting and Monitoring The P C U wil l prepare and furnish to the World Bank an unaudited financial report, in form and substance satisfactory to the World Bank. I t will:

Set forth sources and uses o f funds for the project, both cumulatively and for the period covered by the said report, showing separately funds provided under the Credit, and explaining variances between the actual and planned uses o f such funds; Describe physical progress in project implementation, both cumulatively and for the period covered by said report, and explain variances between planned and actual project activities; and Set forth the status o f procurement under the project, as at the end o f the period covered by the said report.

The first unaudited financial report shall be furnished to the World Bank no later than 45 days after the end o f the f i rs t calendar quarter after the Credit effectiveness date, and shall cover the period from the incurrence o f the f i rs t expenditure under the project through the end o f such f i rst calendar quarter; thereafter, each unaudited financial report shall be furnished to the World Bank no later than 45 days after each subsequent calendar quarter, and shall cover such calendar quarter.

The P C U wil l also be required to produce, no later than June 30 o f the following fiscal year, audited annual financial statements. These financial statements wil l be subject to periodic audits (see paragraph o n audits). Formats for the unaudited financial report and financial statements have been defined during the appraisal mission and confirmed during negotiations,

5. Internal Audit

In Senegal, the Directorate for Debt and Investment (DDI) within the Ministry in charge o f Finance controls ex ante all the expenditures and withdrawal applications before sending them to the Bank. This i s not a satisfactory internal audit arrangement and does not provide the assurance o f the continuing adequacy and conformity o f PCUs with project’s procedures. The Bank wil l therefore pay particular attention to the internal control during the supervision missions.

6. External Audit

External auditors with experience and qualifications satisfactory to the World Bank wil l conduct an annual audit o f the project’s financial statements. This audit should be carried out in accordance with International Standards on Auditing (ISA), and include such tests and controls as the auditor considers necessary under the circumstances.

(i)

(ii)

(iii)

46

Audit Report

1) Project f inancial statements

2) Special Opinions: matching grant

3) SAED annual f inancial statements

All the audit reports wil l b e submit ted to the B a n k within s ix months after year end (12/3l/n).

Entity D u e Date

PCU June 30

PCU June 30

SAED June 30

7. Disbursement arrangements

Disbursement Methods

The project wil l start with the disbursement methods based o n Reimbursement, Special Account Advance, D i rec t Payment and Special Commitment. These methods wil l b e used in the beginning o f the project. The project i s expected t o shi f t to the quarterly unaudi ted f inancial report based disbursement as soon as the B a n k i s satisfied with the abi l i ty o f the implement ing entity.

Minimum Value of Applications

The minimum value o f D i rec t Payment and Special Commi tment wil l b e CFAF150.00 million.

Reporting on Use of Loan Proceeds

In i t ia l ly , the support ing documentation for replenishment applications should b e a summary sheet and a Statement of Expenditures and records evidencing el ig ib le expenditures against contracts valued at US$500,000 for works, US$250,000 for goods, US$lOO,OOO for consul t ing f i rms and US$50,000 for ind iv idua l consultants.

The supporting documentat ion for requests f o r direct payment should b e records evidencing el ig ib le expenditures (copies o f receipts, suppliers’ invoices).

The project wil l submit o n a monthly basis a B a n k statement and a reconci l iat ion o f the designated account together with the replenishment application.

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All supporting documentation for statements o f expenditures (SOEs) wil l be retained at the P C U and must be made available for review by periodic World Bank review missions and external auditors. Fund flows are described in Attachment 3.

The format o f the quarterly unaudited financial report has been agreed upon during the negotiations and was attached to the disbursement letter.

Designated Account

The designated account wi l l be managed by the PCU. I t i s expected that the Director o f Debt and Investment department in the Ministry o f Finance, who is the main authorizer (ovdonnateur) o f capital expenditures in Senegal, wil l delegate the management o f the designated account to the PCU. The designated account wi l l be located in a Commercial Bank acceptable to the Bank.

The currency o f the designated account wil l be the CFA franc and the total allocation wil l be CFAF 1 billion.

Categories

(1) Works

(2) Goods

Counterpart Funding

The Government must make al l arrangements necessary to ensure the timely mobilization o f the counterpart funds needs for project implementation. The government contribution wil l be mobilized in the form o f fiscal revenues (VAT contribution).

Amount o f the Credit Allocated to be financed

(expressed in SDR) 4,940,000

2,190,000

YO o f expenditures

100% o f foreign expenditures and 90% o f local expenditures

100% o f foreign expenditures and

Disbursements by category:

The table below sets out the expenditure categories to be financed out o f the Credit proceeds. The allocations for each expenditure category are the following:

Table 11. Disbursement Categories

(3)

(4)

(5) (6) (7) (8)

90% o f local expenditures Consultants’ services and audits 5,640,000 100% o f foreign expenditures and

90% o f local expenditures Non-consultant Services 430,000 100% o f foreign expenditures and

90% o f local expenditures Training 1,060,000 100% Matching Grant 4,440,000 100% o f amount disbursed Operating costs 2,820,000 100% Reimbursement o f Project 850,000 Amount payable pursuant to Preparation Facil ity (PPF) Section 2.07 o f the General

(9) Conditions

Unallocated 2,330,000 I TOTAL I 24.700.000 I I

48

8. Financial Covenants The standard financial covenants are included in the Financing Agreement.

9. Loan Conditions

Negotiations conditions

All conditions negotiations have been met.

Effectiveness conditions

The Borrower has recruited key staff o f PCU, including the project coordinator, a financial management specialist, a procurement specialist, and a monitoring and evaluation specialist, al l with qualification and experience acceptable to the Association; The Borrower has: (i) adopted the Project Implementation Manual (PIM), and the Project Administrative, Financial and Accounting Manual (PAFAM), in form and substance acceptable to the Association; and (ii) installed accounting software at PCU, acceptable to the Association; The Borrower has hired an external auditor under terms and conditions acceptable to the Association; The Borrower has entered into agreements, in form and substance acceptable to the Association, with SAED and ANCAR, respectively, for the implementation o f some o f the activities to be carried under Parts A and C; and The Borrower has taken al l actions necessary on i t s part to put the infrastructures built under AEPP (the airfreight terminal at the international airport o f Dakar, and the packing house at Sangalkam) under private management under terms and conditions acceptable to the Association.

.

.

.

.

Legal covenants

(i) (a) N o t later than December 31, 2006, the Borrower shall have established a Foundation Orzgine Se'ne'gal - Fruits et Lkgumes, with terms o f reference acceptable to the Association; and (b) not later than June 30, 2008, the Recipient shall have entered into an agreement with said entity, under terms and conditions acceptable to the Association, for the implementation o f some o f the activities to be carried out under Part B o f the Project;

(ii) The Borrower shall submit to the Association SAED's annual audited financial statements, not later than six months after the end o f i t s fiscal year.

10. Supervision Plan O n a regular basis (at least once a year), the system wil l be reviewed and assessed. The un- audited financial reports wil l be reviewed as wel l as the audit reports.

49

Table 12. Action Plan for the project financial management

Action Tasks

Recruitment o f a financial management specialist

Staffing

Procedures Development o f the administrative and accounting manual Draft Manual Final Manual including IDA’S comments Recruitment o f an auditor satisfactory to External audit

Entity Target Completion Date

PCU 1 February 20,2006

PCU

November 15,2005 January 3 1,2006

PCU 1 January 3 1,2006 IDA

Accounting Setting up the accounting system PCU 1 March 20,2006 software satisfactory to IDA Management Signature o f framework contracts wi th PCU 1 Effectiveness conventions SAED and ANCAR

50

Annex 7. Attachment 1 : AgMARKETS Project’s Institutional Chart

Annex 7. Attachment 2: The organizational chart o f the PCU.

51

Annex 7. Attachment 3: Flow o f Funds and Information

DESIGNATED ACCOUNT (Commercial Bank - Dakar)

COUNTERPART FUNDS Commercial Bank - Dakar

MATCHING GRANT BENEFICIARIES. small farmerdexporters, out-

+ Payments

'Direct payments

< + Withdrawal applications

Supporting documents

52

Annex 7. Attachment 4: Financial Risk Assessment

O v e r a l l I nhe ren t Risk I C o n t r o l Risk 1. Implementing Entity 2. FundsFlow 3. Counterpart Funds

4. Staffing

7. External Audit

8. Reporting and Monitoring

9. Information Systems

Overa l l C o n t r o l Risk

I

Lisk As M

X X X X X

X X

X

X

X

I

I x x

-+

Comments

The proposed financial management (FM) action p lan attached in Annex 1 wil l help reduce the risks.

I d e m inherent risk

A project account wil l be opened and supplied prior t o Credit Effectiveness The F M S wil l be recruited under TORs acceptable to IDA The preparation o f a manual i s Dart o f effectiveness conditions The bank wil l pay attention to the internal control system during supervision missions Prior to Credit Effectiveness, an external auditor under TORs acceptable to IDA will be recruited The Bank wil l assist the P C U in defming the format o f the quarterly reports Transaction-based disbursement wil l be used during the first

wi l l be installed at the PCU The action p lan in Table 12 wil l be implemented by effectiveness.

H : High M : Moderate L: low

N/A: Not Applicable

53

Annex 8. Procurement Arrangements

Senegal: Agricultural Markets and Agribusiness Development Project

I C B Works ICB Goods N C B Works N C B Goods Shopping

Direct contract Community participation

A. General Procurement for the proposed project wi l l be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated M a y 2004; and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” dated M a y 2004, and the provisions stipulated in the Legal Agreement. The general description o f various items under specific expenditure categories i s described below. For each contract to be financed by the Loadcredit, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed upon between the borrower and the Bank project team in the Procurement Plan. The Procurement Plan wil l be updated at least annually or as required to reflect the actual project implementation needs and improvement in institutional capacity.

Applicable procurement methods and related thresholds are as follow:

More than or equal to US$l,OOO,OOO More than or equal to US$250,000 Less than US$l,OOO,OOO Less than US$250,000 Less than US$50,000 Main ly Irrigation equipment for innovative testing. Related to Matching Grants. Procedures set in Technical Execution Manual

I Procurement Method I Thresholds of aDDlicabilitv/Comments I

Quality and Cost Based Selection

Least Cost Selection (LCS) Selection Based on the Consultants’ Qualifications (SQC)

Single Source Selection (SSS) Individual Consultants

(See procurement plan) Routine and standard assignments, less than us$100,000

Less than US$75,000 Ma in l y support to project implementation (e.g., contracts with SAED and ANCAR) (see Consultant Services Guidelines)

54

Procurement Method Thresholds o f applicability/Comments

Procurement of W o r k s : Works procured under this project, would include, inter aZia, irrigation infrastructure, markets facilities, extension and equipment o f innovation centers within existing research and training centers, a Horticultural terminal at the Port o f Dakar, and livestock facilities. The procurement wi l l be done using the Bank’s Standard Bidding Documents (SBD) for al l ICB, and National SBD agreed upon with the Bank for al l NCB.

Works

Goods

Direct contracting Consultants (Firms) Consultants (Individuals)

Procurement o f Goods: Goods procured under this project would include, inter alia, irrigation equipment, cold storage equipment, vehicles, office supplies, agricultural inputs and related equipment. The procurement wil l be done using the Bank’s SBD for al l I C B and National SBD agreed upon with the Bank for al l NCB. Irrigation equipment for innovative testing would be procured using direct contracting through the Internet or researcWdevelopment centers.

Domestic preference could be included in bidding documents for works and goods procured through ICB.

For Works and Goods, Specific Procurement Notices (SPN) are mandatory for I C B and N C B procurement methods. Notifications for I C B wil l be published as a Special Procurement Notice in UN Development Business online and the project website (www.pdmas.org).

Procurement of non-consulting services: non-consulting services may include related services such as transportation, insurance, installation, and commissioning, training and initial maintenance. Bidding documents to be used on such cases wil l be agreed upon with the Bank.

Selection of Consultants: Consulting firms wil l be required, inter alia, for irrigation, architecture (Markets facilities including for Livestock), technical assistance on marketing and logistics and finance for agribusiness (Market Integrator), audit and individuals including core project staff, and qualified individual consultants on various areas including quality management, design o f business plans, agronomists, etc.

Request for expression o f interest are mandatory for any selection o f consulting f i r m s on a competitive basis.

Short lists o f consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f Paragraph 2.7 o f the Consultant Guidelines.

US$500,000 and above and f i rst 2 NCB contract US$250,000 and above and first 2 NCB contract All US$lOO,OOO and above US$50,000 and above

The PCU wil l s i g n agreements (“Conventions”) with two implementing agencies at local level (public agencies): A N C A R and SAED, as well as with Fondation Origine Senegal - Fruits et Lkgumes when established, and after capacity assessment. From the procurement point o f

55

view, this means that singZe source contracts will be signed with such entities after the Bank’s approval. As needed, agreements wi l l be signed with other public agencies (Conventions), such as AGETP for works and related supervision. Contracts with private agencies may be signed on a single source basis, after the Bank’s approval, for the implementation o f activities in their areas o f expertise, in particular with POs (Producer Organizations).

Operational Costs: incremental recurrent expenditures incurred on account o f the Project implementation (PCU and implementing agencies), including office supplies, fuel and maintenance o f vehicles, maintenance o f equipment, telephone and other communications charges, costs related to administration o f works, bank and services fees, travel and supervision, but excluding salaries o f officials o f the Borrower’s c iv i l service (unless expressly agreed upon with the Bank, based on the Country Financing Parameters). They wil l be procured using the implementing agency’s administrative procedures reviewed and found acceptable to the Association.

Others: Matching Grants wil l support implementation o f some activities o f the Project, intev alia, for: (i) Business partnership subprojects for export and domestic markets (including technical assistance to entrepreneurs and services providers ; (ii) Investments in small-scale irrigation subprojects; (iii) Investments in livestock-related subprojects. The Manual o f Procedures, reviewed and found acceptable to the Association, wi l l establish conditions for application to such grants, and modalities o f their use.

B. Assessment of the agency’s capacity to implement procurement (during appraisal mission)

Procurement activities wi l l be carried out by three entities: - - -

P C U for overall activities (Components A, B and D); A N C A R for Component A and C (Private irrigation) in the Groundnut Basin ; SAED for Component C (Private irrigation) in the Senegal River Valley.

1) pcU: will be responsible for procurement issues related to components A, B and D, which includes equipmentigoods, some c iv i l works and selection o f consultants. For major works, including consultants for supervision, the P C U may sign Delegated Management Contract(s) with AGETP. At technical level, P C U wil l be staffed with around 10 professionals, including a Coordinator, a Procurement Specialist, a Financial Manager, three technical specialists, an M&E specialist and an Assistant. A Market Integrator (consultant firm) wil l also advise the P C U on technical aspects. At the time o f the assessment, the P C U was not yet established, and the Procurement Specialist not yet selected. I t i s expected that, before the medium-term review o f the project, a recently created Fondation Ovigine Senegal (FOS) wi l l take over the P C U and act as implementing agency for the agricultural export component. Accordingly, an assessment o f this FOS will be made at that time.

2) ANCAR: wil l be responsible for procurement related to Component A and Component C (Private irrigation) in the Groundnut Basin. This i s a technical procurement support (draft bidding documents, make evaluations but contract signature and payments to be done by PCU). A N C A R has almost 300 agents, including 63 agricultural advisors, and almost 46 percent o f i t s staff i s at the headquarters. A N C A R was created to implement a Bank-funded project (ASPOP) in early 2000, and since then it has been managing

56

Bank funds. Since the beginning, the same Procurement Officer has worked for ANCAR, and has gained some experience in working with Bank procedures. H e attended regional procurement training in Dakar, Senegal centers o f CESAG (procurement o f goods and selection o f consultants-twice) and ISADE (procurement o f works). The Procurement Officer reports to the General Director o f ANCAR, but he i s subject to internal control from an Internal Controller. In addition, under ASPOP arrangements, bidding documents are reviewed by a procurement specialist in the ASPOP Fiduciary Unit. However, for AgMARKET related bidding documents the review wil l be performed by the P C U procurement specialist.

3) SAED: with i t s headquarters located in Saint-Louis (north o f Senegal), SAED will be responsible for procurement related to Component C (Private irrigation) in the Senegal River Valley. This i s technical procurement support (draft bidding documents, make evaluations-but contract signature and payments to be done by PCU). SAED has extensive experience in procurement, with a large range o f partners (AFD, KFW, BAOAD, BADEA, etc.), but has not executed any Bank project/activity since 1994. By law, SAED has i t s own procurement commission (don’t have to go through the national contract commission). There i s a Division des Marchks et Commandes (DMC- Procurement and Supply Division) within the Human Resources and Administration Department. D M C i s responsible for the procurement procedures (launch procedures, evaluation). However, there i s no formal Procurement Specialist appointed to SAED. The drawing up o f bidding documents (including technical aspects) as well as the monitoring of execution i s made by Operations Officers (generally engineers) who are staff o f another Department at SAED. D M C i s staffed with a Chief o f the Division and a Chief o f the Procurement Section. Both have some procurement experience but almost none on Bank procedures.

Implementing agencies procurement capacity assessment was carried out by the World Bank procurement specialist on June 29, 2005 for A N C A R and on July 1, 2005 for SAED. The assessment reviewed the organizational structure for implementing the project and the interaction between the procurement specialist and the Ministry’s relevant central unit for administration and finance.

Most o f the issues/risks concerning the procurement component for implementation o f the project have been identified and include:

- -

pcV: P C U i s not yet established, and the Procurement Officer not yet recruited; ANCAR: (i) Procurement Officer position lacks incentive, especially due to its l ow salary level; (ii) the PO needs to update his knowledge o f Bank 2004 procurement guidelines; SAED: SAED has no experience in World Bank procedures, although i t has extensive experience with other partner’s procedures; (ii) SAED has a division responsible for procurement; however, there i s no procurement specialist per se.

-

The corrective measures which have been agreed upon are: - -

Prepare a Manual o f Procedures satisfactory to the Association by Effectiveness; U s e new SBD and RFP based on 2004 Guidelines;

57

- Prepare a procurement plan (PP) and a general procurement notice (GPN) before negotiations (completed); PCU: need to recruit a highly qualified Procurement Officer, due to complexity o f the project and train hidher as soon as he/she gets on board; ANCAR: (i) assess need for salary update in light o f new tasks for the PO due to management o f this additional project; (ii) train the PO in the new procedures established with the 2004 Guidelines; (iii) after the f i rs t year o f implementation, assess the need to reinforce Procurement Department; SAED: should (i) appoint one or two Operations Officers (00 - Chuvge‘s d ’Ope‘vutions) to be specifically dedicated to the implementation o f AgMARKETS activities; (ii) train those 00 and staff from the D M C on 2004 Guidelines and related procedures.

-

-

-

The overall project risk for procurement i s “Average”.

C. Procurement Plan The borrower, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan, which has been agreed upon between the borrower and the Project Team on November 18,2005 and updated on December 16 following technical discussions and before negotiations, i s available in the World Bank project f i les and at the project preparation coordination unit. It will also be available in the Project’s database and in the Bank’s external website. The Procurement Plan wil l be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvement in institutional capacity.

D. Frequency of Procurement Supervision In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended supervision missions at least every six (6) month to visit the f ield to carry out post review o f procurement actions.

58

Annex 8. Attachment 1. Details of the Procurement Arrangement involving international competition

1. Goods and Works and non-consulting services.

(a) L i s t o f contract Packages which wil l be procured fol lowing ICB and Direct contracting:

8 Expected

Bid- 0 pen i n g

Date

Sept. 4/06

- 1

Ref No.

- 9 Comments 7 Contract Estimated

red meat supply chains- works Development o f support infrastructures for exports

works

Development

infrastructures for exports

Equipment Realization o f irrigation infrastructures in tthe Delta - works

(PLAZA)-

o f support

(PLAZA) -

4

4,403,846

3,213,462

10,153,846

6 Domestic

Preference (yesho)

7 Review

by Bank (Prior /Post) Prior

5 Prequalification

(yedno) Procurement

Method

NCB

NCB

ICB

ICB

ICB

NCB

NCB

no Development o f infrastructure models for rural markets (PALMM) -

611,538

1

works Modernization 1 964,615 no March

20107 Prior

Prior

Prior

2

no

3

no

4

-

5

no Prior

Prior

Prior

no the micro- irrigation in Niayes and the Groundnut Basin -works

6

Sept. 23106 i no Promotion o f the micro- irrigation in Niayes and the Groundnut Basin - Equipment

711,538

7

59

(b) I C B Contracts estimated to cost above US$500,000 (Works) and US$250,000 Goods) per contract and al l direct contracting wil l be subject to prior review by the Bank.

2. Consulting Services.

(a) List o f Consulting Assignments with a short-list o f international f i rmshdiv idual consultants:

152,885

1

Ref. No.

-

Date SBQC Prior March 2,

2006

13

61,154 14 Indiv. Pr ior i April 30, 2006

Description of Assignment

Construction o f PALMM-technica l feasibility study and design-2006 and 2007 Communication and marketing Strategy for export markets. Construction o f a container handling/freight faci l i ty at the Port o f Dakar-Design in 2007 Development FOS services in 2006 Detailed study and preparation o f bidding documents for irrigation infrastructure in the Del ta Agro-pastoral Development Plan o f the Lac de Guiers in 2006 Development models for private irrigation around the Lac de Guiers in 2007 Recruitment o f the Market Integrator to assist the P C U (assistance firm) Setting up o f an accounting management system in the PCU) Tests o f innovation for domestic markets Small producers scheme- design and monitoring international expert, Specialized expert for 2006107 and 2007108 Tests o f innovation for domestic markets (DM): Design and fo l low up - S M E Scheme - International specialized expert Diagnosis and analysis o f supply chains (due diligence review) - international Expert Assessment o f Potential o f production for selected supply chains- Design - International Expert Production test and marketing - Small producers scheme- specialized expert

Expected

60

1

Ref. No.

-

- 15

- 16

17 -

- 18

29 -

Estimated

20

- 21

22 -

- 23

24 -

- 25

- 26

27

28

-

-

- 29

I Selection M e t h o d I cost

Descr ip t ion o f Assignment

Review by B a n k

(Prior/Post)

Update o f Supply Chain diagnostic study and analysis - International

183,462

Expert Trainings in 2007

Technical support to Livestock Professional Associations - training p lan in 2006 Technical Assistance for Subcomponent A4- in 2007

Audit (PPF f i rs t year o f the project)

91,731

76,154

Support t o national plants control services with the European accreditation - training Technical feasibility study and design o f P L A Z A in 2006 and 2007. Reconversionladaptation o f M p a l Agropole - technical feasibility study and design in 2006. Construction o f a container handlinglfreight facil i ty in the Port o f Dakar - technical Feasibil i ty and design in 2006. I-FLEX bullet in and market intelligence system. Update o f the cartography o f the private irrigated perimeters in the project areas. P A L M M - management p lan for 2006and2007 Domestic markets information management and communication

50,962

38,462

61,154

101,923

50,962

10 1,923

122 308

96,154

91,731

81 538

SBQC

SBQC

S M C

Indiv.

Post

Post

Post

Post

Indiv. Prior

Indiv. Prior

Indiv. Prior

Indiv. Prior

Innovation tests for export markets: small producers scheme - Design and monitoring - International Expert for marketing years 2006107 and 2007108 Innovation tests for export exports: closer monitoring - S M E scheme - International Expert for marketing year 2007108

3 1,846

20,385

Expected Proposals

Submission Date

4pri l 30, lo07

Comments

4pri l30,

1006

4pril 30, 2006

May 30,

July 30, 2006 January 18, 2006

February 17, 2006 March 3, 2006

November 1, 2006

July 22, 2006 October 1, 2006 January 13, 2006

12,2006

61

1

Ref. No.

-

- 30

- 3 1

7 April 30,

32

- - 33

iq- May 15,

34

- 35

- 36

- 37

- 38

- 39

Description of Assignment

Modernization of red meat supply chains -institutional and organizational Audit o f the PO members in 2006.

Construction and management of livestock demonstration infrastructures -modem Slaughtericutting houses - Feasibility study and preparation o f bidding documents. Construction and management of demonstration infrastructures - Slaughter-house of Mbour - Feasibility study and preparation o f bidding documents in 2006.

Modernization of supply chains poultry farming- institutional and organizational Audit o f PO members in 2006. Economic Analysis and identification o f incentives for poultry farming in 2006. Study "Plan o f development and modernization o f livestock the infrastructures" in 2006. Production tests and marketing - small producersifarmers Scheme - Design and monitoring. Production tests and marketing - SME and agribusiness scheme- Design and monitoring in 2007. Production tests and marketing - Tree crops scheme - design and monitoring in 2006 and 2007. Elaboration o f the livestock communicatiodmarketing plan in 2006.

3

Estimated

cost

32,308

16,154

34,615

~~

32.308

34,615

69,23 1

20,385

10,192

40,769

50,962

4

Selection Method

SBQ

Indiv.

Indiv .

SBQ

SBQ

Indiv.

Indiv.

Indiv.

SBQ

Review by Bank

(PriodPost)

Post

Post

Post

Post

Post

Post

Post

Post

Post

Post

Expected

Submission

April 27,

October 3,

L,- October 3,

January c 2,2007

May 29, 2006

October 18, 2006

April 30, 2006

January 11, 2007

(b) Consultancy services estimated to cost more than US$lOO,OOO (f i rms) and US$50,000 (Individuals) per contract and Single Source selection o f consultants wil l be subject to prior review by the Bank.

62

(c) Short l is ts composed entirely o f national consultants: Short l is ts o f consultants for services estimated to cost less than US$lOO,OOO equivalent per contract may be composed entirely o f national consultants in accordance w i t h the provisions o f Paragraph 2.7 o f the Consultant Guidelines.

63

Annex 9. Economic and Financial Analysis

Senegal: Agricultural Markets and Agribusiness Development Project

An illustrative Cost Benefit Analysis (CBA) was carried out for private agricultural enterprise models in the project’s primary intervention areas: the Niayes zone, Senegal River Delta and Groundnut Basin. Using the policy analysis matrix (PAM) methodology, another analysis was conducted to assess the importance o f horticultural production on wages and employment (by gender). A prospective analysis was also carried out to assess the results o f the project’s positive impact on the livestock sector. As the direct benefits o f the project’s investments in capacity building and safeguards are inherently difficult to measure, no attempt was made to measure them.

Private horticultural enterprise models by region

The analysis considers three private enterprise models (smallholders, collector/exporter, and producer/exporter) investing in frui ts and vegetables in the Niayes zone and Senegal River Delta, and two enterprise models (smallholders and medium producers) in the Groundnut Basin. The Niayes zone, the focus o f the predecessor Agricultural Export Promotion Project (AEPP), is Senegal’s traditional horticultural production region for export. The Senegal River Valley, however, has the largest potential-in land and water resources-for horticultural development. The proposed project wil l promote the development o f the Senegal River Valley as a complement and, possibly, a long-term alternative to the Niayes, which i s under increasing pressure f rom urban development and declining agricultural water resources. The Groundnut Basin, the traditional production area o f groundnuts for o i l processing and low-yielding cereals, i s suffering from the country’s non performing groundnut o i l sector. The proposed project wil l attempt to revitalize the Groundnut Basin by promoting the production o f fmits, vegetables and higher value confectionary peanuts. The project wil l also cover the Casamance and Senegal Oriental regions, but not to the extent that i t wil l for the other three regions.

Assumptions

The analysis considers that horticultural production for export (green beans, cherry tomatoes, mangoes, melons, and herbs) i s concentrated in the Niayes zone and the Senegal River Delta. However, these two regions also produce for the domestic market. The Senegal Delta, in particular, has developed a thriving tomato processing industry that relies on local production. The analysis assumes that the Groundnut Basin wil l be mostly concerned with production for the domestic market: onions, sweet potatoes, bananas, confectionary peanuts. Smallholders produce for the domestic market and engage in contract-farming with collectors/exporters and producers/exporters to produce horticultural products for export. Collectors/exporters do not engage directly in production, but each commands certain acreage through contract-farming with smallholders. As for large producers/exporters, they rely primarily on their own production for export, and eventually on smallholders to make up the volume demanded by importers. The model farm budgets include a combination o f horticultural products and, as a result, the sensitivity analysis (discussed later) also uses aggregated variables. The analysis i s based on farm sizes given below. The results are given on a model basis and not for the total number o f target production units also given below.

64

Table 14:Economic and Financial Analvsis: Regional models (NPV in US$)

Models

Economic Financial

IRR N-PV ERR NPV

Economic Analysis

The results per enterprise model (table above) are strong in al l models across the three regions and indicative o f the economic profitability o f private investment in fruits, vegetables and nut production for the domestic and export markets. The Niayes zone and the Senegal River Valley lead the way, with an economic rate o f return (ERR) between 40 and 70 percent and 25 to 75 percent, respectively. Smallholders in the Delta (ERR o f 75 percent) are much better that those in the Niayes zone (ERR o f 40 percent), notably because o f the well-organized tomato processing industry in the Senegal River Delta. The collector/exporter i s a more viable alternative in the Niayes zone (ERR o f 55 percent) than in the Delta (ERR o f 25 percent), where such entrepreneurs must deal with higher labor cost than in the Niayes zone. This business model must deal with a patchwork o f low-ski l l smallholders, and consequently faces a daunting challenge from the unyielding requirement to implement traceability through the whole supply chain to comply with food quality standards. The Groundnut Basin-an area in need o f revitalization-shows what must be considered very encouraging results, even if at a lower level compared to the Niayes zone and Senegal River Delta. One must note that the magnitude o f the net present value (NPV) i s much more reflective o f the assumed size and not the profitability o f the farm model.

65

Financial Analysis

The financial results are also strong across all regions and are similarly indicative o f the profitability o f private investment in horticultural production. The financial results are generally lower than the economic results (except for smallholders in the Groundnut Basin ), because o f taxes (value-added taxes, duties, tax on revenue and in transportation) and nominal wages, and despite the one-time investment subsidy (targeting mostly these smallholders). Taxes, however, have a lower impact on smallholders who are also less capital intensive. This, combined with the low labor cost in the Groundnut Basin, explains why smallholders in the region are the only ones with financial results higher than economic results. As with the economic analysis, the results show that collectors/exporters fare the poorest (with internal rate o f return o f 20 percent) in the Senegal River Delta, and that the Groundnut Basin does quite well (IRR o f 34 to 41 percent).

Economic

Gross revenue Production cost Models

Sensitivity Analysis

Financial

Gross revenue Production cost

The sensitivity analysis asks how much would critical factors adversely change for the economic and financial internal returns to fall to the level o f the assumed opportunity cost o f capital (12 percent). A large percentage change or switching value (positive or negative, depending on the key factor) indicates a sound investment; a smaller percentage change, a more risky investment. Here, the critical factors are aggregate variables (gross revenue, combining production and prices, and annual production costs) reflecting the aggregate nature o f the model farm budgets.

Niayes zone Smallholders CollectoriExporter ProducerlExporter

-19 +47 -14 +28 -17 +24 -14 +18 -19 +28 -16 +23

The levels o f the switching values (above) suggest that al l three models in the Niayes zone are sound investments, both economically and financially. In the Senegal River Delta, smallholders and large producer/exporters have sound investment models. However, the collector/exporter business model i s risky, as i t i s particularly susceptible to a single digit change in revenues (-9%). The results in the Groundnut Basin provide even more cause for concern because they are susceptible to relatively small changes in revenues and production costs, particularly the medium producer models (with al l switching values below the 10 percent threshold). This i s a warning s i g n for the project to pay particular attention to investments in the Groundnut Basin. The project should only consider outstanding business proposals coming from this area, and carry out a thorough risk analysis before approval. The project should also

66

Category Number Total wages received Wages Average annual

employed (US$) received wages received (US$)

67

Rural men Rural women Staff

Spillover employment Total

Support personnel

2,833 1,103,448 32 3 89 3,856 1,013,793 29 263 102 150,000 4 1,471 834 327,586 9 393

1,433 90 1,724 26 629 9,058 3,496,552 100 386

The sensitivity analysis (Annex 9) suggests that the investments in the Niayes zone and Senegal River Delta are sound, except for the collector/exporter business model. The results, however, also suggest that the investments in the Groundnut Basin are more risky. This i s a warning s i g n for the project to only consider outstanding business proposals coming from this area. I t also suggests that the project conduct a thorough risk analysis before approval, and closely monitor and evaluate the implementation o f the business plans being supported.

The results o f analysis of the impact o f horticultural production on the economy adds credibility to the notion that this sector plays an important role in providing large employment and wages for rural men and women-arguably one o f the most important yardsticks o f shared growth. A prospective analysis of the livestock sector suggests that the project-induced improvement wi l l lead to local products (red meat and poultry) gaining market shares in domestic markets at the expense o f imported products.

68

Annex 10. Safeguard Policy Issues

Senegal: Agricultural Markets and Agribusiness Development Project

The safeguard screening category i s S2 and the environmental screening i s Category B.

The key issues raised by the project during preparation were the potential impacts on the Senegal River Delta f rom the project-supported irrigation infrastructure on waterways, floodplains and wetlands, particularly on protected areas such as the Rksewe Spkciale de Faune du Ndiael -which is an international wetland RAMSAR site- and The Rksewe Sylvo- Pastorale du Ferlo. Current water management in natural depressions (cuvettes) i s less than optimal for recession agriculture, for irrigating pastures and for inundating fish reproduction zones. Excess water diverted away from the cuvettes increases the risk o f flooding in irrigation fields, villages and towns. The recent, non-project-related, breach o f the Langue de Barbarie has some negative effects on agricultural production in the Delta and the Lac de Guiers.

I t i s unlikely that the development of irrigation within the project scope in the Senegal River Delta wil l have any adverse impact on such protected areas given that: (i) the targeted areas in the first phase wil l be limited to the upland lower Delta between Ross-Bethio and Ndiol; and (ii) new irrigation technologies such as drip irrigation that wil l be promoted with the project are environmentally friendly. Moreover, the project wil l assist producers in this area in converting their current damaging irrigation systems and complying with the Guidelines for environmental Norms elaborated along the ESMF.

In any case, the project wi l l comply with triggered safeguards policies and specific environmental assessment wil l be done for each infrastructure once known following indications in the Environmental and Social Management Framework (ESMF) prepared by the Government. In addition, the project wil l assist in building capacity within SAED to better address irrigation development and related environmental and natural resources management issues in the Senegal River Valley, in compliance with international conventions. To that aim, the Project, through SAED, wil l collaborate with other Bank-supported projects in the area such as the Senegal Multipurpose Water Management Project (MPWM), the Integrated Marine and Coastal Resources Management Project (GIRMAC) and the Long Term Water Supply Proj ect (LT WS).

The environmental impact assessment report documented other safeguards issues identified at the pre-appraisal mission:

69

Safety o f Dams. The project wi l l not finance any new dams or rehabilitate existing ones. However, irrigated areas in the Senegal River Delta wil l use water provided from the Manantali and the Diama dams. The AgMARKETS project wil l collaborate with the Senegal River Basin Multipurpose Water Development Project to ensure that appropriate dam safety measures are being applied by OMVS (Organisation pour l a Mise en Valeur du fleuve Senegal). (Safety o f Dams (OPIBP 4.37).

Other infrastructures that the project will develop include post harvest warehousedstorage, rural markets facilities, and slaughter-houses. I t i s likely that environmental impact o f the project wil l be limited given that: (i) the targeted areas in the f i r s t phase are limited to the Niayes zone, the upland lower Delta, and part o f the Groundnut Basin; and (ii) technologies that wil l be used for irrigation and markets facilities are environmentally friendly. However, as these infrastructures are defined, the Government wil l address potential impacts following the Environmental and Social Management Framework (ESMF). The pol icy has been prepared by the government and disclosed widely in Senegal and in the Bank information system through Infoshop. A specific EA will be done for each infrastructure investment once known.

Pest Management and pesticides. The project wil l not finance directly or indirectly the purchase o f limited quantity o f fertilizers, pesticides or other inputs for demonstration activities. However, the development o f intensive agriculture through the project activities may lead to an increase in the use o f such inputs. A Pest Management Plan has been prepared and disclosed along the ESMF.

Involuntary resettlement: The project wil l avoid, when possible, adverse impacts on people, land and other economic resources and on livelihood. And, as it stands i t i s not known whether people wil l be affected or not. In case they are, the Government has prepared a Resettlement Policy Framework (RPF), and if needed, a resettlement action plan wil l be drawn up during project implementation.

In light o f this project, the Government has conducted an Environmental Impact Assessment and has prepared an Environmental and Social Management Framework (ESMF) including an Environmental and Social Management Plan (ESMP), a Pest and Pesticides Management Plan (PMP), a Resettlement Policy Framework (RPF) and Guidelines for Environmental Norms to be considered for irrigation infrastructures. In addition, the Referential Quality prepared under the pi lot Agricultural Export Promotion project provides a comprehensive approach for dealing wi th international standards such as EurepGAP for horticultural exports.

Furthemore, in l ine with i t s mandate, the National Environment Commission under the Ministry o f Environment has cleared al l safeguards documents as o f June 17, 2005, and documents have been widely disclosed within country and in the Bank information system in timely fashion.

The Government o f Senegal i s familiar with the Bank Safeguard Policies, based on experience with other bank-funded projects, where i t successfully met the requirements o f these policies. Examples o f recent projects in different sectors are: The Agricultural Services and Producer Organizations Project, The National Rural Infrastructure Project, The Energy Sector Investment Project and the Agricultural Export Promotion Project, etc. The ESMF made recommendations on capacity building for the P C U and the project implementing agencies and additional resources needed for monitoring and implementing safeguards. Relevant recommendations are considered in the final design o f the project and reflected in the project

70

manuals. An Environmental and Social Evaluation Specialist wil l be recruited as a core staff member o f the Project Coordination Unit, and safeguards focal points wil l be designated and trained for in each implementing agency.

The key stakeholders are the direct beneficiaries (producers and exporters and their associations), the CommunautLs Rurales (Rural Communes) in project areas, agribusiness enterprises and service providers, NGOs and the project implementing agencies (SAED, ANCAR) and technical partners, (Ministry o f Livestock, Ministry o f Commerce, Direction du Genie Rural, APE). The ESMF, the RPF, and Pest Management Plan have been sent to the project partner-institutions and stakeholders, strategic information centers including universities, and the NGO confederation (CONGAD). They also have been disclosed in daily news media and on the project website www. pdmas.org, and sent to InfoShop for disclosure.

71

Annex 11. Project Preparation and Supervision

Senegal: Agricultural Markets and Agribusiness Development Project

P 1 ann e d Actual P C N review February 9,2004 February 9,2004 Init ial P I D to P I C February 13,2004 March 17, 2004 Init ial ISDS to PIC February 13,2004 March 16,2004 Pre-appraisal October 2004 Appraisal June 25,2005 June 27,2005 Negotiations December 12,2005 December 19,2005 BoardRVP approval February 28,2006 Planned date o f effectiveness M a y 3 1,2006 Planned date o f mid-term review March 15,2008 Planned closing date December 20 10

Key institutions responsible for preparation o f the project:

National Preparation Committee o f the AgMARKETS Program, led by the Ministry o f Agriculture and Hydraulics, including representatives from Ministries o f Finance, Trade, Infrastructure, APIX, Exporter Organizations (ONAPES, SEPAS), Producer Organizations (ASPRODEB, Fe'diration des Marafchers des Niayes, Federation des Pe'rimBtres Autoge'ris du Delta), Association des Conseillers Ruraux, and the former director o f the pi lot project (Agricultural Export Promotion Project-AEPP).

Bank staff and consultants who worked on the project include: ~~

Name Title Unit El Hadj Adama Toure Sr. Ag. Economist, TTL AFTS4 Ismael Ouedraogo Sr. Ag . Economist AFTS4 Ronald Kop ick i Lead PSD Specialist AFTPS Nyaneba Nkrumah NRM Specialist AFTS4 Robert Robelus Sr. EA Specialist AFTS 1 Yvette Djadiechi Social Development Specialist AFTS 1 Amadou Oumar BA Sr. Ag. Services Specialist AFTS4 Lucie Tran Operations Off icer AFTS4 Ibou D i o u f Transport Specialist AFTTR Sidi Boubacar Lead Counsel, Operations LEGAF RenCe Desclaux Finance Off icer L O A G 2 Demba Balde Social Development Specialist AFTS4 Laurent M e h d i B r i t o Procurement Specialist AFTPC Bourama Diaite Sr. Procurement Specialist AFTPC Osval Rocha Romao Financial Management Specialist AFTFM Fily Sissoko Sr. Financial Management Specialist AFTFM Marie-Jeanne Ndiaye Language Program Assistant AFTS4 Anta Ta l l D ia l lo Team Assistant AFC14 Amadou Soumaila Irr igation Specialist FAOiTCIW Marc Moens Livestock Specialist F A O i T C I W Vincent Akue Consultant Private Sector Development ConsultantiIFC Christophe Ravry Commodity Markets ConsultanVAFTS4 Nicolas Kotshoubey Consultantioperations ConsultanVAFTS4 Rene Cipriani ConsultanVManual o f procedures Consultant/FAO/CP

72

Bank funds expended to date on project preparation: I. Bank resources:US$349,423.47 2. PHRD:US$O.OO

1. Remaining costs to approval: US$5,000 2. Estimated annual supervision cost: US$120,000

Estimated Approval and Supervision costs: US$250,000 + US$600,000

73

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15. 16. 17.

Annex 12, Documents in the Project Fi le

Senegal: Agricultural Markets and Agribusiness Development Project

Amadou Abdoulaye Fall. Evaluation Economique du PDMAS. Ministere de 1'Agriculture et de l'Hydraulique/PDMAS, Rapport Provisoire Juillet 2005. Mbaye Mbengue Faye. Evaluation d 'impact environnemental et cadre de gestion environnementale et sociale. Ministere de 1'Agriculture et de 1'Hydraulique /PDMAS, Juin 2005. Mouhamadou Lamine Bocoum. Cadre de politique de re'installations des de'place's involontaires du PDMAS. Ministere de 1'Agriculture et de 1'Hydraulique /PDMAS, Juin 2005. Mouhamadou Lamine Bocoum. Evaluation de 1 'impact social du PDMAS. Ministere de 1'Agriculture et de 1'Hydraulique /PDMAS, Juillet 2005. Nicolas Dupuy. Manuel d 'exe'cution du PDMAS. Ministere de 1'Agriculture et de l'Hydraulique/ PDMAS, Novembre 2005. Projet de Promotion des Exportations Agricoles (PPEA). Etude de Faisabilite' pour la constitution de la Fondation Origine Se'ne'gal Fruits et Le'gumes. Ministere de 1' Agriculture, de 1'Elevage et de 1'Hydraulique /PPEA, Juin 2004. GEOMAR International. Horticulture du Se'ne'gal - cadre strate'gique, horizon 201 0. Rapport Final et Annexe. Ministere de 1'Agriculture et de 1'Hydrauliquel PDMASI ACDI, Avril2005. PHYLUM. Appui a la De'finition d'un plan d'actions pour la se'curite' sanitaire des aliments d 'origine animale au Se'ne'gal. Ministere de 1'Agriculture et de 1'Hydraulique /Ministere de l'Elevage/ PDMAS Mai 2005 GEOMAR International. Plan national de de'veloppement des infrastructures logistiques de soutien 2 la commercialisation des produits de 1 'horticulture. Ministere de 1'Agriculture et de 1'Hydraulique /PDMAS /ACDI, Avril2005 GEOMAR International. Diagnostic et programme de mise a niveau des capacite's senegalaises en mat ihe d 'assurance qualite' et de sarete' alimentaire. Ministere de 1'Agriculture et de 1'Hydraulique /PDMAS /ACDI, Avril2005 GEOMAR International. Diagnostic en e'galite' entre les sexes et strate'gie d 'inte'gration des capacite's fe'minines au de'veloppement desfili8res horticoles d'exportation. Ministere de 1'Agriculture et de 1'Hydraulique /PDMAS /ACDI, Avril2005 Marc Moens. Contribution 6 la Mission d'Evaluation du PDMAS. Volet Elevage. FAO/TCIW. Juillet 2005. Amadou Soumaila. Contribution Ci la mission d 'Evaluation du PDMAS. Composante C- De'veloppement de 1 'Irrigation Prive'e. Juillet 2005. FAO/TCIW Vincent AkuC. Contribution 2 la mission d'e'valuation du PDMAS. Composante A- Ame'lioration des conditions de mise en Marche's. FAO/TCIW. Juillet 2005. Laurent Mehdi Brito. Procurement capacity Assessment. Final, November 2005 Osval Rocha Romao. Financial Management Assessment. Final, November 2005. Gerard Gagnon. Programme d 'appui a 1 'ame'lioration de la se'curite' sanitaire des aliments au Se'ne'gal. Diagnostic, esquisse d 'un plan d'actions et e'le'ments de coats. Banque Mondiale et FAO. Juin 2004.

74

Annex 13. Statement of Loans and Credits

Senegal: Agricultural Markets and Agribusiness Development Project ~ ~~

Original Amount in US$ Millions

Difference between expected and actual

disbursements

Project F Y Purpose IBRD I D A SF GEF Cancel. Undisb. Orig. Frm. Rev’d ID

SN-GIRMAC S IL (FY05) 0.00 10.00 0.00 0.00 0.00 10.60 0.25 0.00 PO86480 2005

PO85708 2005

PO69207 2005

PO80013 2004

PO51609 2003

PO74059 2002

PO70541 2002

PO41566 2001

PO41528 2001

PO47319 2000

PO55472 2000

PO57996 2000

PO02366 1999

PO02367 1999

PO02369 1998

SN-Rural Electric Service Prj (FY05)

SN Casamance Emergency Reconstruction su

Private Sector Adjustment Credit

Private Investment Promotion Project

HIV/AIDS Prevent. & Control

Nut. Enhancement Prog.

Social Dev. Fund

L O N G TERM WATER SECTOR PROJECT Quality Educ. for All

U R B A N M O B I L I T Y IMPROVEMENT PROGRAM SN N A T I O N A L RURAL INFRAS

SN-Transport S IL 2 (FY99)

Senegal:AGR.SRCVES&PROD.ORGS

SN-Integr Health Sect Dev Prj (FY98)

Total:

0.00 0.00

0.00 0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

29.90

20.00

45.00

46.00

30.00

14.70

30.00

125.00

50.00

70.00

28.50

90.00

27.40

50.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 30.01 0.00

0.00 19.73 -0.52

0.00 37.13 16.41

0.00 45.85 -5.69

0.00 22.38 4.21

0.00 6.39 1.10

0.00 14.30 9.76

0.00 92.01 22.23

0.00 3.40 1.81

0.00 69.03 59.97

0.00 8.75 7.37

0.00 42.80 35.47

0.00 3.54 2.24

0.00 8.90 8.47

0.00

0.00

0.00

0.00

0.00

0.00 0.81

0.00

-48.19

0.00

-0.70

12.67

0.54

8.66

0.00 666.50 0.00 0.00 0.00 414.82 163.08 - 26.21

STATEMENT OF IFC’s Held and Disbursed Portfolio

In Mil l ions o f U S Dollars Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

1996197 AEF SERT 0.00 0.04 0.00 0.00 0.00 0.04 0.00 0.00 1980 BHS 0.00 0.46 0.00 0.00 0.00 0.46 0.00 0.00 1999 Ciments du Sahel 14.36 2.26 3.20 0.00 14.36 2.26 3.20 0.00 1997198 G T I Dakar 2.15 0.00 0.00 0.00 2.12 0.00 0.00 0.00 2001 SEF Royal Saly 1.46 0.00 0.00 0.00 1.46 0.00 0.00 0.00

Total portfolio: 17.97 2.76 3.20 0.00 17.94 2.76 3.20 0.00

Approvals Pending Commitment

F Y Approval Company Loan Equity Quasi Partic.

~

Total pending commitment: 0.00 0.00 0.00 0.00

75

Annex 14. Country at a Glance

Senegal: Agricultural Markets and Agribusiness Development Project

POVERTY and SOCIAL

2003

GNI per capita (Atlas method, US$j 550 GNI (Atlasmefhod, US$ billionsj 5.6

Average annual growth, 1997-03

Population (%j 2.3 Laborforcephj 2.4

M o s t recent es t imate ( la tes t year available, 1997-03)

57 Urban population (%oftotalpopulation) 50 Life expectancyat birth (years) 52 Infant mortality (per 1000 live births) 79 Chiid malnutrition (%of children under5) 23 Access to an improvedwatersource (%ofpopulationj 78 illiteracy (%ofpopulation age 15+) 61 Gross primaryenrollment (%ofschool-age population) 75

Male 79 Female 72

Senegal

Population, mid-year (millions) 0.0

Poverty (%of population belo wnationalpo verfyline)

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1983 1993

GDP (US$ billions) 2.5 5.4 Gross domestic investment/GDP P.8 0.7 Exports of goods and seNices/GDP 31.7 22.2 Gross domestic savings/GDP -1.9 7.7 Gross national savings/GDP -6.3 4.4

Current account baiance/GDP -18.8 -0.6 Interest paymentsIGDP 1.7 0.4 Total debtiGDP 83.8 69.2 Total debt service/exports 11.3 9.1 Present value of debt/GDP Present value of debtiexports

1983-93 1993-03 2002 (average annualgrovdhj GDP 2.1 4.9 11 GDP per capita -0.7 2.3 -13

Sub- Saharan Low-

A f r i c a income

703 490 347

2.3 2.4

36 46 0 3

58 35 87 94 80

2002

5.0 18.5 30.1 8.8 P.6

-5.9 13

77.5 114

47.9 Q5.4

2,30 450

1,038

1.9 2.3

30 58 82 44 75 39 92 99 85

2003

8.5 20.1 28.4 8.0 0.8

-6.3 1.0

64.1 9.9

2003 2003-07

6.5 5.9 6.0 3.7

j Deve lopment diamond*

~

Life expectancy

~ T Gross

primary GNI per t----*\ *,:tij capita Y enrollment

I

I 1 1 Access to improvedwatersource

Senegal

Low-incomegroup

STRUCTURE o f the E C O N O M Y

(%of GDPj Agriculture Industry

Services

Private consumption General government consumption imports of goods and services

Manufacturing

(average annual gro vdhj Agriculture industry

Services

Private consumption General government consumption Gross domestic investment Imports of goods and services

Manufacturing

1983

21.5 15.5 a.6

63.0

83.9 18.0

46.4

1993

8.0 19.1 0.0 6 19

77.5 14.8 28.2

2002

25.0 2 16 0.8 63.4

76.7 14.5 39.8

1983-93 1993-03 2002

1.2 2.4 -8.9 3.3 6.7 9.5 3.3 5.9 0.1 2.1 5.1 4.8

1.6 12 -0.2 1.7 7.3 12

4.7 0.0 5.4 1.0 18 -2.6

2003

18.8 21.2 P.8

62.0

77.4 14.6

40.5

2003

8 .2 4.6 0.3 4.1

2.7 8.3 E .4 -1.6

E c o n o m i c rat ios '

Trade

T

indebtedness

- I ~ Senegal

__ Low-income group

Growth o f inves tment and GDP (%)

40 T

I-- --GDI -GDP

Growth o f expor ts and impor ts (%)

76

Senegal

I n f l a t i o n (Oh) 5

0

-5

.lo -15

-20

---- GDPdeflator -CPI - -

P R I C E S a n d G O V E R N M E N T F I N A N C E

D o m e s t i c p r i c e s (%changej Consumer prices 11.4 Implicit GDP deflator 8.9

1993

G o v e r n m e n t f i nance (%of GDP, includes current grants) Current revenue Current budget balance Overall surpius/deficit

T R A D E

(US$ millions) Total exports (fob)

Groundnut products Phosphates Manufactures

Total imports (cif) Food Fuel and energy Capital goods

Export price index (SSS=WOj Import price index(895=WO) Terms o f trade (895-WO)

B A L A N C E o f P A Y M E N T S

(US$ millionsj Exports o f goods and services Imports o f goods and services Resource balance

Net income Net current transfers

B .8 -4.0 -8.1

1983

606 7 0 48 60

1,042 265 239 6 4

62 53 1l7

1983

955 1,3 t? -358

-m3 -6

Current account balance -467

Financing items (net) Changes in net reserves

414 53

M e m o : Reserves including gold (US$ millions) 23 Conversion rate (DEC, local/US$j 3811

E X T E R N A L D E B T a n d R E S O U R C E FLOWS

(US$ millio ns) Total debt outstanding and disbursed

1983

2,078 IBRD 86 IDA 183

Total debt service IBRD IDA

Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment Portfolio equity

World Bank program Commitments Disbursements Principal repayments

1 7 1) 3

a 8 274

58 -35

0

59 32

6

1993

-10 -14

6 .8 0.2

-4.0

1993

7 8 47 43

134 1,235 348 a 4 5 9

56 61 90

1993

1,272 1,674 -401

- 8 1 5

-578

466 lt?

15 283.2

1993

3,760 52

9%

t?7 6 0

299 m l -6 -1 6

40 46 15

2 0 0 2

2.3 2.1

8 .0 5.4

-3.0

2 0 0 2

1,066 69

7 4 250

1,775 335 284 3 7

87 83

1)4

2 0 0 2

15% 2,004 -486

-184 373

-298

368 -70

579 697.0

2 0 0 2

3,904 0

1,578

220 0 6

8 0 93

1 93

0

45 114

6

2 0 0 3

0.0 0.8

8 .6 5.5

-3.0

2 0 0 3

1,332 61

6 8 304

2,247 41) 387 325

87 83 0 5

2 0 0 3

1,847 2,628 -780

-92 464

-408

342 67

689 580.1

2 0 0 3

4,137 0

2806

237 0

24

8 0 83

1

0

46 0 7 a

E x p o r t a n d i m p o r t l e v e l s (US$ mill.)

2,500 T

12.000 c

97 98 99 00 01 02 03

exports ~ l r r p o r t s

C u r r e n t a c c o u n t b a l a n c e t o G D P (Oh)

- 4

~~~

~ C o m p o s i t i o n o f 2 0 0 3 deb t (US$ mill.)

I I

E 1,208 B 1,806

I C 2 4 0

A - IBRD E - Bilateral 8- IDA D-Othermitilateral F-Private C - I M F G-Short-term

77

iMAP SECTIOK

Mbour

Saint-Louis

Louga

Thiès

Diourbel

Kaolack

Fatick

DAKAR

Tambacounda

Kolda

Ziguinchor

BANJUL

Senegal R.

Valley

Ferlo

Salou

m

Gambia R.

Casamance

Gambia R.

Valley

Ferlo

Senegal R.

160015

00 1400

1300

1100

900 800

700

600

500

400

1000

Atla

ntic

O

cean

1200

AtlanticOcean

MAURITANIA

GUINEA - BISSAU

GUINEA

MALI

THEGAMBIA

FormerSpanishSahara

ALGERIA

MAURITANIA

MALI

NIGER

GUINEA

Dakar

NIG

ERIA

BENINTOG

O

GHANACÔTE D'IVOIRE

GUINEA-BISSAU

THEGAMBIA BURKINA

FASO

T A M B A C O U N D A

C A S A M A N C E

G R O U N D N U TB A S I N

NIAYESZONE

SENEGAL RIVER DELTA

SENEGAL RIVER VALLEY

F E R L O

SENEGAL

GuiersLake

RIVER DELTA (ST. LOUIS)Potential Products: - off-season vegetables, melon, potato, tomato, sweet corn, mango

TAMBACOUNDA/KOLDAPotential Products: - Banana, Papays, Mango, Cashew Nut, Various Legumes

GROUNDNUT BASINPotential Products: - Mango, Peanuts, Watemelon, Maize, Sesame, Cashew, Beans

CASAMANCEPotential Products: - Mango, Citrus Fruits, Papaya, Peanuts, Maize, Avocado, Banana, Coconut, Various Legumes/Vegetables

GROUNDNUT BASINPotential Products: - Peanuts, Beans, Watermelon, Maize, Hibiscus Flower Tea

NIAYES NORTHPotential Products: - Off-season legume, Tree Fruits, Onions

NIAYES Potential Products: - Off-season legume, Ornamental Plants and Flowers, Melon, Grapes, Mangoes, Citrus Fruits, Lime, Papaya

LOWER VALLEY OF THE RIVER(INCLUDED GUIERS LAKE)Potential Products: - Rice, Onion, Potato, Grapes, Garlic, Citrus Fruit, Melon and other off-season legumes (Lake Guiers)

MBOURPotential Products: - Mango, Papaya, Melon, Citrus Fruit, Legumes

17° 16° 14°15° 13° 12°

16°

15°

14°

13°

12°

15°

14°

13°

12°

17° 16° 15° 14° 12°13°

16°

18°

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 50 100

KILOMETERS

SENEGALZONES OF THE PROGRAM AND

THEIR POTENTIIAL PRODUCTS

MAJOR RIVERS

ISOHYETS

REGION CAPITALS

NATIONAL CAPITAL

INTERNATIONAL BOUNDARIES

ECO-GEOGRAPHIC ZONE LIMITS

POTENTIAL PRODUCTS

Sources:1) National survey conducted by the Parasitological Department of the Medical and Pharmacological University of Dakar (UCAD) in 19962) ESPOIR Program

Ministry of Public Health and Social Action

IBRD 34487

FEBRUARY 2006