grant assistance report - farm roads to support poor ......japan fund for poverty reduction (jfpr)...

Project Number: 43279 June 2010

Proposed Grant Assistance

Kingdom of Bhutan: Farm Roads to Support Poor

Farmers’ Livelihoods (Financed by the Japan Fund for Poverty Reduction)

Grant Assistance Report

CURRENCY EQUIVALENTS (as of 2 June 2010)

Currency Unit – ngultrum (Nu) Nu1.00 = $0.0212 $1.00 = Nu47.16

ABBREVIATIONS

ADB – Asian Development Bank AMEPP – Agriculture, Marketing, and Enterprise Promotion Program BDFC – Bhutan Development Finance Corporation C&P – consultation and participation DADM – Department of Aid and Debt Management DBA – Department of Budget and Accounts DOA – Department of Agriculture EFRC – environment friendly road construction EMP – environment management plan FY – fiscal year GIU – grant implementation unit GNHC – Gross National Happiness Commission IEE – initial environmental examination IFAD – International Fund for Agricultural Development JFPR – Japan Fund for Poverty Reduction JICA – Japan International Cooperation Agency LCS – least-cost selection masl – meters above sea level MDG – Millennium Development Goal NEC – National Environment Commission NCB – national competitive bidding PAR – poverty analysis report RMA – Royal Monetary Authority RNP – Road Network Project RNR – renewable natural resources SNV – Netherlands Development Organization SSS – single-source selection

NOTE

(i) The fiscal year (FY) of the government and its agencies ends on 30 June. In this report, ―$‖ refers to US dollars.

Vice-President X. Zhao, Operations 1 Director General S.H. Rahman, South Asia Department (SARD) Director T. Matsuo, Director, Agriculture, Natural Resources, and Social Services Division, SARD Team leader S. Sahni, Principal Agricultural Economist, SARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

JAPAN FUND FOR POVERTY REDUCTION (JFPR)

JFPR GRANT PROPOSAL

I. Basic Data

Name of Proposed Activity Farm Roads to Support Poor Farmers’ Livelihoods

Country Bhutan

Grant Amount Requested $3,000,000

Project Duration 3 years

Regional Grant Yes / No

Grant Type Project / Capacity building

II. Grant Development Objective(s) and Expected Key Performance Indicators

Grant Development Objectives: The development objective of the proposed project is to provide improved and sustainable access to economic and social services in the project area, and so improve livelihoods and reduce poverty for at least 650 households, or about 4,000 people. This will be achieved by (i) developing selected priority farm roads; (ii) institutionalizing their community management and maintenance; (iii) providing small marketing infrastructure and equipment to the subsistence poor and vulnerable groups, including women; and (iv) improving the skills of beneficiary households to enable them to access financial and technical services to support agricultural marketing. The design and monitoring framework is in Appendix 1 and summary cost estimates in Appendix 2.

Expected Key Performance Indicators: In line with targets of the Government of Bhutan's Tenth Five-Year Plan and with project design, by project’s end (i) the poverty incidence in the project area will decline by 30%; (ii) the proportion of households suffering hunger will decline to less than 5%; (iii) the proportion of the population in the project area living more than 1 hour's walk from the nearest road will fall to 20%; (iv) at least 40 kilometers of farm roads will be constructed; (v) road-users’ groups will be established and trained in the project area, and road maintenance plans will be developed for each of the three farm roads.

III. Grant Categories of Expenditure, Amounts, and Percentage of Expenditures

Category Amount of Grant Allocated in $ Percentage of Expenditures

1. Civil works 2,440,680 81.4

2. Equipment 67,500 2.3

3. Local training and workshops 60,000 2.0

4. Consultant services 271,750 9.1

5. Grant management 33,000 1.1

6. Other inputs: seed capital 42,000 1.4

7. Contingencies 85,070 2.8

TOTAL 3,000,000 100.0

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JAPAN FUND FOR POVERTY REDUCTION

JFPR Grant Proposal Background Information

A. Other Data

Date of Submission of Application

23 November 2009

Project Officer Snimer K. Sahni, Principal Project Economist

Project Officer’s Division, E-mail, Phone

Agriculture, Natural Resources, and Social Services Division, SARD [email protected] 632-5079

Other Staff Who Will Need Access to Edit/Review the Report

Criselda Rufino [email protected]

Sector Agriculture and natural resources

Subsector(s) Agriculture and rural sector development, agricultural production and markets

Theme(s) Economic growth, effective gender mainstreaming, capacity development

Subtheme(s) Widening access to markets and economic opportunities, gender equity in economic opportunities, organizational development

Targeting Classification Geographic

Name of Associated ADB Financed Operation

Road Network Project

Executing Agency Department of Roads

Grant Implementing Agency

Chencho Norbu, Director, Department of Agriculture Ministry of Agriculture, Government of Bhutan PO Box 123, Thimphu, Bhutan Tel.: +975-2-322805 Fax: +975-2-323562 [email protected]

B. Details of the Proposed Grant

1. Description of the Components, Monitorable Deliverables/Outcomes, and Implementation Timetable

Component A

Component Name Develop Selected Farm Roads

Cost ($) $2,508,680

Component Description Farm roads are defined as roads that link farmland areas and villages to an existing road of equal or higher classification to enable the transportation of inputs to the farm and agricultural produce to the market. Selected farm roads have been identified through a participatory process at the geoga level and are part of the dzongkhag (district) rural access plan, which uses indicators from a number of sectors to take into account the holistic benefit of roads in line with the government’s key goal of

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reducing rural poverty. These roads are included as priorities in the government's Tenth Five-Year Plan, 2008–2013. This component will develop about 40 kilometers of selected farm roads in three of Bhutan’s poorest geogs (Bongo, Kangpara, and Trimshing) in two dzongkhags (Chukha and Trashigang). These farm roads will provide access for remote rural communities to the feeder roads being constructed under the Asian Development Bank-financed Road Network Project, directly benefiting 408 households and indirectly benefiting another 250 households. Appendix 4 provides brief descriptions of the project areas and maps to show the locations of the proposed roads. Farm roads will be developed using local contractors for civil works in accordance with the procedures in the Department of Agriculture (DOA) Guidelines for Farm Road Development and following environment friendly road construction (EFRC) techniques. These include (i) identifying alternative proposed alignments; (ii) marking out proposed alignments in the field; (iii) conducting pre-investment studies (including a geotechnical study, site survey, socioeconomic study, and environmental study) in-house, by geog and dzongkhag staff with technical backstopping by the DOA engineering division; (iv) community consultations to determine the preferred alignment in light of the effect on land belonging to socially vulnerable people; (v) recommending the best option, taking into account technical, social, and environmental factors; (vi) preparing detailed survey and design in-house or outsourced; (vii) producing detailed cost estimates, structures inventory, and construction drawings to current technical specifications; and (viii) construction supervision, usually by dzongkhag engineering staff. EFRC discourages impinging on environmentally sensitive areas and promotes improved survey and design, proper drainage to avoid storm damage, minimizing slope cutting, and revegetating cut slopes. Evidence suggests that using EFRC increases upfront investment costs but minimizes environmental damage and significantly reduces maintenance costs. This is reflected in the unit costs provided for constructing civil works. Given the limited number of local engineers, dzongkhags will contract out the survey, design, and construction of the roads to private service providers. This will ensure timely completion and consistent quality. Communities are expected to benefit as hired laborers for construction. To support engineering capacity development, the component will provide (i) one set of survey equipment for each of the two

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dzongkhags; (ii) training for dzongkhag engineers in survey and design techniques, to be conducted at the Royal College of Science and Technology in Phuentsholing; and (iii) training for DOA and dzongkhag engineers in EFRC. At present, few engineers have specialized knowledge or expertise in road construction in hilly areas. Training will enable them to contribute to better planning, design, implementation, and supervision of farm road development.

Monitorable Deliverables/Outputs

1. Survey equipment procured for each of two dzongkhags (months 1–2)

2. At least 16 DOA engineers trained in EFRC techniques (month 3)

3. At least 10 dzongkhag engineers trained in survey and design and in EFRC techniques (month 4)

4. At least 40 kilometers of farm roads constructed in 3 geogs (months 5–33)

Implementation of Major Activities: Number of months for grant activities

33 months

a A geog is a group of villages forming an administrative unit (block) within a dzongkhag (district) in Bhutan's

decentralized structure of government.

Component B

Component Name Institutionalize Community Management and Maintenance of Farm Roads

Cost ($) $21,000

Component Description Routine maintenance for farm roads refers to simple activities that need to be attended to frequently. The following are considered routine maintenance: (i) clearing obstructions, including minor slides of less than 5 cubic meters per 20 meters of road; (ii) clearing culverts and other cross-drainage structures; (iii) cleaning structures; (iv) clearing and maintaining side drains; (v) repairing scour checks and drain lining; (vi) collecting, transporting, and stocking material for road surface repair; (vii) road surface repair with collected materials; (viii) masonry works; (ix) maintaining carriageway cross-falls and cambers; (x) maintaining shoulder cross-falls; (xi) clearing vegetation; and (xii) bioengineering.b The work can be done by manual labor, using basic hand tools. No special skills are required, and all materials should be readily available. However, although it is simple, it does require proper organization and regular implementation according to a plan. Delayed routine maintenance can quickly require serious emergency maintenance. This component will, in accordance with the Farm Roads Maintenance Manual, assist in forming road-users’ groups from among the direct beneficiaries of the roads, prepare road-maintenance plans, and provide the training needed for routine maintenance. The DOA will, with the support of the

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rural road expert to be recruited under component E, provide trainers’ training to geog extension staff on farm road maintenance. Social mobilizers will (i) facilitate the formation of road-users’ groups in each of the three geogs; (ii) organize workshops, led by geog staff, to orient road-users’ groups on the basic tasks of routinely maintaining farm roads; (iii) assist in preparing road maintenance plans that will set out the responsibilities and schedules for maintenance; and (iv) help in identifying the cash and labor resources needed. The budget for the routine maintenance of farm roads and bridges is allocated to geogs based on DOA norms. As part of preparing maintenance plans, the groups will be assisted in mobilizing funds from the community as well as the geogs and prepare a roster of community-provided labor according to requirements. Where appropriate, communities may consider levying small tolls on road users.


1. At least 20 staff from each of the two dzongkhags trained in implementing farm road maintenance (months 12–13)

2. Road-user groups established and trained in 3 geogs (months 13–15)

3. Maintenance plans prepared with stakeholder participation (months 13–15)

4. Community and geog funds mobilized for implementing road maintenance plans (months 13–15)


4 months

b Government of Bhutan, Ministry of Works and Human Settlement. 2009.

Guidelines on Road Classification System

and Delineation of Construction and Maintenance Responsibilities. Thimphu.

Component C

Component Name Provide Small Marketing Infrastructure and Equipment for the Subsistence Poor

Cost ($) $80,500

Component Description This component will, with the support of social mobilizers, (i) organize users’ groups with a focus on the subsistence poor, including such vulnerable groups as households headed by women in the project area; (ii) help these groups to identify their needs for small marketing infrastructure and equipment; (iii) establish infrastructure locations and norms for group use of both infrastructure and equipment to be provided under the project; and (iv) build such small infrastructure as roadside platforms and sheds for marketing and provide equipment such as chili-drying machines, maize-flaking machines, and power tillers. To the extent possible, local labor will be employed for small infrastructure works. Training on operating

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and maintaining the equipment will be arranged. Power tillers will help groups to transport their produce, and the groups can earn additional income by hiring out equipment to other farmers in the area. This additional group income can go towards maintaining the equipment and infrastructure. There will be a focus on women’s needs, especially to ease their burdens and drudgery. The social development and gender specialist, to be recruited under component E, will provide guidance and support to the social mobilizers and facilitators, particularly on issues of gender equity. She or he will ensure that women are consulted equally with men in setting priorities and that they get equal opportunity in training and using equipment and small marketing infrastructure.


1. At least 20 groups of 10–12 members each formed, with at least 50% of members being women, in two dzongkhags, and infrastructure and equipment needs identified (months 17–19)

2. Identified equipment procured and installed (months 20–21)

3. At least three marketing sheds constructed (months 20–24)


8 months

Component D

Component Name Improve Skills of Poor Farmers to Access Financial and Technical Services

Cost ($) $67,500

Component Description A rapid impact assessment of rural development in Bhutan has noted a difference between access to a service and the use of it. Poorer households in particular lack the capacity to take advantage of opportunities offered by road access. This component will provide training and support to communities so that they are better able to use the new economic opportunities that will become available once road access is improved. Financial and technical services already exist, and the project will enable and empower communities to access them. The project will facilitate interactions with financial institutions such as the Bhutan Development Finance Corporation Ltd., government extension staff, and agricultural technology and extension experts, as well as linkage with traders and other private sector players who will be the main buyers of farmers’ marketable surpluses. Social mobilizers will work with geog extension staff and organize training workshops to support interaction between farmers and service providers. These workshops will also help link farmers’ groups to traders and

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processors, facilitate the marketing of cash crops, and enable group marketing for better prices. It will be ensured that there is no overlap with the activities of related projects, such as the World Bank’s Decentralized Rural Development Project in Chukha Dzongkhag or the Agriculture, Marketing, and Enterprise Promotion Program assisted by the International Fund for Agricultural Development, and that the activities are well coordinated with the geog and dzongkhag plans for supporting agriculture. A major program of the Ministry of Agriculture under the Tenth Plan is ―one geog, three products,‖ developed by extension agents at the geog level based on their understanding of the needs of the communities they support. Geog extension agents will continue to provide regular support to farmers in terms of technology, guidance, and agricultural inputs such as seeds, which will be facilitated by easier access. A higher level of support will be available from the regional centers when required. One of the main weaknesses of agricultural marketing by small farmers in Bhutan is that they take their produce to market individually. Even where groups are formed, they do not have the capital to initiate any substantive group activities. The experience of other development partners and the needs expressed by beneficiaries during stakeholder consultations indicated that some initial capital could jump-start group activities for marketing and processing. This component will provide seed capital for farmers’ groups and cooperatives in each geog to support the expansion of agricultural processing and marketing. It is envisaged that the seed capital will be provided as a grant. However, if baseline surveys and group mobilization show the groups have the capacity to repay the capital, a revolving fund could be considered and modalities (including an exit strategy) worked out accordingly. The social development and gender specialist, to be recruited under component E, will provide guidance and support to the social mobilizers and facilitators, particularly on issues of gender equity. She or he will ensure that women get equal opportunity in training and access to services, including seed capital.

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1. At least three workshops organized in each of three geogs to link farmers with financial and technical service providers, traders, and processors (months 18–20)

2. At least 50% of the beneficiaries of this output are women

3. Seed capital provided for two farmers’ groups in each of three geogs to enable the expansion of agricultural processing and marketing (months 28–29)


12 months

Component E

Component Name Grant Management, Monitoring, and Evaluation

Cost ($) $237,250

Component Description The DOA will nominate a project manager to lead grant management and monitoring and evaluation. In addition, a project accountant will be designated. This component will support technical backstopping for survey and design, and for construction supervision, to supplement the limited engineering capacity available in the dzongkhags and geogs. A rural roads expert will be recruited from the region to provide training and guidance to engineering staff. The expert will guide the preparation and implementation of environment management plans and monitor and guide construction supervision according to EFRC methods. A social development and gender specialist will guide the design of baseline surveys and ensure the implementation of the gender action plan. The baseline surveys will inform the detailed design and delivery of inputs for components B, C, and D. The baseline surveys will gather sex-disaggregated data and information on women’s access to such social services as maternal health services and such economic services as local markets and financial institutions. Gender equity indicators will be further developed based on the collected sex-disaggregated data and integrated into a more detailed gender action plan. Baseline and end line surveys will be undertaken to measure project benefits and impacts, as well as provide inputs for a project-end evaluation.


1. Project staff and consultants recruited and mobilized as scheduled (months 1–2 and 30)

2. Gender training provided to all project staff 3. Detailed schedules, implementation, and monitoring

guidelines developed (months 1–2) 4. Project activities completed as scheduled (months 1–

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36)


36 months

2. Financing Plan for Proposed Grant to be Supported by JFPR

Funding Source Amount ($)

JFPR 3,000,000

Government 256,314

Other sources (communities) 72,579

Total 3,328,893

3. Background

1. Bhutan is a mountainous and landlocked country where most people live in remote villages without roads and therefore have limited access to health and educational facilities, markets, financial institutions, and other development benefits. In some parts of the country, particularly in the eastern region, people walk several hours to reach the nearest road head or market. Farm produce has to be carried on horseback or as head loads. This is a disincentive for farmers to grow more food, as it is not possible to market farm produce. This reduces income-earning opportunities for the rural poor, exacerbating their poverty. The government recognizes that access to roads is key to poverty reduction. At present 60 geogs out of 200 have no road connectivity at all, and these are considered as highest priority areas. 2. The overall goal of the government’s Tenth Five-Year Plan, 2008-2013 is poverty reduction.1 Almost 80% of the population lives on subsistence farming in far-flung and isolated villages. Improving rural access, with a particular focus on farm roads, is therefore a priority of the Tenth Plan. It has the ambitious target of constructing about 3,000 kilometers (km) of roads, compared with about 900 km during the Ninth Plan, of which 600 km was farm road. Limited access to markets contributes to high marketing costs and deters the commercialization of agriculture. Half of farmers in Bhutan have agricultural landholdings of 1 hectare or less, and these households are characterized as low income and resource poor. In the absence of farm access roads, commercial crops such as potatoes, apples, and oranges have to be carried long distances on foot. In many remote areas, fruit is left to rot on the trees as there is no way to get it to markets. An access road allows farmers to use small vehicles to carry their fresh produce more efficiently and quickly to collection centers. 3. The Road Network Project (RNP), financed by the Asian Development Bank (ADB), was approved in 2005. Its objective is to improve transport efficiency on the trunk road network and expand accessibility in rural areas, which will contribute to expanding economic opportunities and reducing poverty. The government requested ADB for assistance for farm roads to support poor farmers’ livelihoods in the geogs in which these feeder roads are being constructed. The proposed Japan Fund for Poverty Reduction (JFPR) project will further improve access for remote rural communities by providing farm roads to connect to feeder roads being constructed under the RNP. Improved road access will allow poor rural households that depend upon agriculture to grow larger marketable surpluses and increase their incomes. Farm roads will also

1 Government of Bhutan, Gross National Happiness Commission. 2009. Tenth Five Year Plan, 2008–2013. Thimphu.

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enable better access to economic and social services, which usually do not reach these remote and sparsely populated areas. 4. There is now much greater understanding about the various dimensions of poverty in Bhutan. Poverty is not only about insufficient consumption but also the lack of opportunities and assets, isolation, poor health and nutrition, powerlessness, and insecurity. Recent studies reveal that poverty is a harsh reality in contemporary Bhutan. The Poverty Analysis Report 2007 (PAR 2007)2 and the Bhutan Living Standards Survey 2007 provide detailed data on poverty down to the dzongkhag level.3 According to the PAR 2007, 23.2% of the population of Bhutan lives below the poverty line, and 73.6% of the poor live in rural areas. Poverty in Bhutan is thus a predominantly rural phenomenon. While Bhutan is likely to nearly achieve the Millennium Development Goal target of halving poverty, from 36.3% in 2000 to 20% by 2015, it is less likely to achieve the target of halving the proportion of people living in hunger, as there has actually been an increase, from 3.8% in 2003 to 5.9% in 2007. Among the dzongkhags that experience food poverty (equated with subsistence poverty) rates well above the national average are Trashigang at 8.9% and Chukha at 8.1%.4 5. The geogs for which the roads are proposed are among the remotest and poorest in the country. Households that suffer food insecurity and extreme poverty are mainly in remote and isolated communities. Their living conditions are harsh, and they have little access to health facilities. They have to carry their produce long distances on their backs or on horseback, and it loses its market value through long journeys. Many farmers leave part of their land fallow as they have no way to get their surpluses to market. The lack of adequate road connectivity is one of the major challenges faced by the majority of the rural population. It often takes people several hours, or even days, to walk to the nearest road. This seriously constrains the ability of rural households to market their agricultural produce or to access health and education facilities. Mortality rates, particularly of maternal mortality, in these rural communities are high. Pregnant women and the sick have to be carried on people’s backs to the nearest health center. Farm roads directly contribute to poverty alleviation by enabling farmers to access markets for both inputs and outputs. Improved access will enable increased agricultural production and productivity, improved food security and increased incomes. While information on average incomes in the project area was not available, during stakeholder consultations people said that access to roads, improved agricultural practices, and facilitated transport to markets would reduce their poverty by half. Baseline studies will determine current agricultural incomes and potential for increasing production with improved access to markets. 4. Innovation

6. In addition to providing farm roads to connect some of the poorest areas in Bhutan, the proposed project will take an innovative approach to support poor farmers’ accessing the opportunities that will become available once the roads are completed, enabling them to increase their incomes from agriculture. Thus, the project will assist in group formation, identifying the specific needs of the groups for marketing infrastructure and equipment, providing the required infrastructure and equipment, and delivering basic training for operating and maintaining the infrastructure and equipment. The project will thereby help to enhance rural livelihood opportunities in an innovative manner through social mobilization. ADB already provides assistance to the Bhutan Development Finance Corporation to support medium, small,

2 Government of Bhutan, National Statistics Bureau. 2007. Poverty Analysis Report. Thimphu.

3 Government of Bhutan, National Statistics Bureau. 2007. Bhutan Living Standards Survey 2007. Thimphu.

4 In Bhutan, households that spend in real terms less than Nu689 per month are classified as subsistence poor, and

those which spend less than Nu1,097 per month are considered poor.

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and micro enterprises, and this project could establish local linkages to the ongoing sector development program. 7. The project design has tried to address the special needs of women farmers, particularly households headed by women, who are among the principal beneficiaries of the project. The agricultural and marketing activities planned for the project have been identified keeping in view women’s requirements. Funds have been allocated for providing women’s collectives with equipment and infrastructure support. Half of the training budget will be earmarked for training women farmers. 8. The project will provide innovative support to road maintenance by helping to mobilize road-users’ groups in beneficiary communities and make these activities sustainable (see para. 10). ADB's experience in Sri Lanka and other countries of the region has shown that the sustainable operation of rural roads depends critically on timely routine maintenance.

5. Sustainability

9. The project will support the training of Department of Agriculture and dzongkhag engineers in survey and design and EFRC techniques, as well as provide survey equipment and technical guidance for construction supervision and the implementation of environment management plans. This will build capacity to ensure that the further development of farm roads in these dzongkhags can be undertaken by the engineering staff in a sustainable way. 10. The project will assist in the formation of road-users’ groups to routinely maintain the farm roads constructed under the project. This will include training beneficiary communities and geog staff and formulating road-maintenance plans. Funding sources for routine maintenance will be identified, which may include affordable contributions from communities, budget allocation in the annual grant, and road tolls to be administered by road-users’ groups. This will ensure that the roads are properly maintained.

6. Participatory Approach 11. A participatory approach is an integral part of decentralized planning in Bhutan. Geog communities participate in identifying and prioritizing development requirements. Rural access plans are developed at the geog and dzongkhag level through consultation. 12. The Guidelines for Farm Road Development5 provide for community consultations in defining the preferred road alignment and obtaining agreement in principle for voluntary land contribution. Restrictions on alignment as imposed by the community members to minimize land contribution are noted, and possible mitigating solutions such as realignment and the provision of retaining walls are considered. Communities may decide to restrict the percentage of land lost by an individual household or the minimum acreage remaining to a single household. The Farm Road Maintenance Manual6 defines how communities participate in the management and routine maintenance of farm roads. 13. Project preparation involved consultations with affected communities at each of the proposed project sites. Stakeholder consultations confirmed that a participatory process had been followed in preparing the development needs of each geog. Consultations helped to define the ancillary needs that will be addressed through project components B, C, and D. These will

5 Government of Bhutan, Ministry of Agriculture. 2009. Guidelines for Farm Road Development. Thimphu.

6 Government of Bhutan, Ministry of Agriculture. 2009. Farm Road Maintenance Manual. Thimphu.

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be further defined through participatory workshops during project implementation. The summary poverty reduction and social strategy is in Appendix 4, and the gender action plan is in Appendix 5.

Primary Beneficiaries and Other Affected Groups and Relevant Description

Other Key Stakeholders and Brief Description

The primary beneficiaries of the project will be about 408 rural households in 10 villages that will be served by the proposed farm roads. People currently have to walk 3–6 hours to reach the nearest road head. The main source of income for these households is agriculture. The project will enable them to increase their incomes through improved access to markets for their products. Households headed by women and other vulnerable groups will benefit from group formation, training, and support for marketing. They will have improved access to health services. Children will benefit as farm roads will make it easier for them to go to school.

Another 250 households in 8 villages will be indirect beneficiaries as their walking time to the nearest road will be reduced. Local government officials will benefit by being able to provide better access to economic and social services for the target population. One of the dzongkhags is in an earthquake-prone area. Forest fires are also a hazard in the area. With farm roads, government departments will be better able to provide emergency relief to remote settlements in the event of a disaster. Engineering and extension staff will benefit from training to enhance their capacity for survey and design, preparing initial environmental examinations, implementing environment management plans, supervising construction, and maintaining roads.

7. Coordination 14. The appraisal mission met on 13 October 2009 with Tomoki Nitta, the resident representative of the Japan International Cooperation Agency (JICA) in Bhutan, to discuss the project concept, obtain information on JICA's ongoing and future activities in related sectors, and ensure coordination with the proposed JFPR project. The Government of Japan's support to agriculture and rural development through JICA is organized under three programs: agriculture research and expansion, agriculture mechanization, and farm road expansion. JICA considers agriculture and rural development as crucial areas in its assistance, along with basic infrastructure development to alleviate poverty. JICA recognizes that there is a high demand for farm roads to link the scattered and isolated farming settlements to the main road network to serve the growing socioeconomic needs of rural communities. The Government of Japan has extended grant assistance to procure a range of machinery and equipment for efficiently constructing rural roads under its farm roads expansion program. 7 JICA supports farm mechanization through year-to-year grant assistance to underprivileged farmers for equipment such as power tillers. This support includes Trashigang Dzongkhag, and the proposed project will ensure that there is no overlap in activities there. 15. The mission also met on 19 October 2009 with officials at the Japanese Embassy in New Delhi—Daiki Suemitsu, first secretary for finance, and Manabu Suzuki, first secretary and agricultural attaché—to brief them on the project design proposed for JFPR funding. They agreed that accessibility for farmers in Bhutan is very important and supported the project as outlined to them. The mission shared a copy of the aide memoire with the embassy.

7 The Government of Japan has recently approved phase 2 of the Rural Road Construction Equipment Maintenance

Program, and the proposed JFPR project will coordinate with this and other relevant JICA assistance.

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16. The World Bank has supported rural road development in western Bhutan through the Rural Access Project, completed in 2006, and the ongoing Decentralized Rural Development Project. However, there will be no overlap of activities with the proposed project in Bongo Geog of Chukha Dzongkhag. The International Fund for Agricultural Development (IFAD) provides support mainly in eastern Bhutan through the ongoing Agriculture Marketing and Enterprise Promotion Program (AMEPP). The mission’s discussions clarified that there will be no overlap in activities of the proposed project in Trashigang Dzongkhag. The mission also drew upon lessons from implementing the AMEPP in designing the activities to support farmers’ making the best use of the opportunities that will emerge with farm road development. 8. Detailed Cost Table 17. Please refer to Appendixes 2 and 3 for the summary and detailed cost estimates, and Appendix 7 for the fund flow arrangement. C. Linkage to ADB Strategy and ADB-Financed Operations

1. Linkage to ADB Strategy

18. ADB's country strategy and program for Bhutan, 2006–2010 recognizes that geographic isolation is a major cause of poverty and underdevelopment in Bhutan. Half the country's population lives more than a half-day's walk from the nearest motorable road. Because of the mountainous terrain, the area of land suitable for agriculture is very limited and the population is distributed in remote, scattered settlements. A well-connected national highway and road system interlinked with rural feeder and farm roads would greatly help reduce rural and regional isolation, expand rural access to social services and urban and export markets, and create conditions required to promote rural industrialization and off-farm enterprises.

19. The PAR 2007 (footnote 2) indicates that 73.6% of Bhutan’s poor live in rural areas and that the incidence of rural poverty is about 31%, as compared with less than 2% in urban areas. The Tenth Five-Year Plan, 2008-2013 therefore emphasizes the rural and agriculture sectors in its approach to poverty reduction. The Tenth Plan aims to extensively develop farm roads in rural areas, thus ensuring better access to markets and economic and social services, including facilitating the delivery of essential farm inputs. ADB's strategy includes assistance to the government in improving rural access, reducing the walking time to the nearest road, and integrating remote communities into the national transport network. The proposed JFPR project will support this strategy by expanding the network of farm roads and linking rural communities to the road network being expanded under the ADB-assisted RNP. The RNP includes the construction of four feeder roads, mainly in eastern Bhutan because of its higher poverty incidence but also to improve rural access in the western region. Proposed farm roads will link to these feeder roads.

Document Document Number

Date of Last Discussion

Objective(s)

Bhutan: Country Partnership Strategy Midterm Review, 2006-2010

IN.194-09 28 July 2009 (circulated for information)

Review progress in implementing the country strategy and program, 2006–2010 and its continuing relevance and responsiveness to Bhutan's development context and government priorities.

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2. Linkage to Specific ADB-Financed Operation

Project Name Road Network Project

Project Number 32373

Date of Board Approval August 2005

Loan Amount ($ million) 27.3

3. Development Objective of the Associated ADB-Financed Operation

20. The objective of the RNP is to improve transport efficiency on the trunk road network and expand accessibility in rural areas, which will contribute to expanding economic opportunity and reducing poverty. This objective will be achieved by (i) improving and shortening a major north–south road, (ii) constructing feeder roads, (iii) enhancing capacity in the Department of Roads for managing road assets, and (iv) facilitating private sector participation in the domestic contracting industry. The proposed JFPR project will further improve access for remote rural communities by providing farm roads to connect to these feeder roads. Improved road access will allow poor rural households, which depend on agriculture, to grow larger marketable surpluses and increase their incomes. Farm roads will enable better access to economic and social services, which usually do not reach these remote and sparsely populated areas.

4. Main components of the Associated ADB-Financed Operation

No. Component Name Brief Description

1. National Highway 1.1 Upgrade sections of the Gelephu–Trongsa national highway, about 140 km of the total 244 km.

1.2 Replace two temporary bridges with permanent structures.

2. Feeder Roads 2.1 Construct the 17.5 km Mirchim–Bongo feeder road in Chukha Dzongkhag.

2.2 Construct the 6.5 km Tekizam–Bjena feeder road in Chukha Dzongkhag.

2.3 Construct the 51 km Garbagtang–Autsho feeder road in Mongar Dzongkhag.

2.4 Construct the 28 km Khardungla–Kangpara feeder road in Trashigang Dzongkhag.

5. Rationale for Grant Funding versus ADB Lending

21. The government has identified reducing rural poverty as a key goal of the Tenth Five-Year Plan and the main causes of poverty as ―lack of access to physical infrastructure, especially motor roads; lack of access to social services; and low farm productivity‖ (footnote 1) In this context, direct economic return alone cannot be the criteria for planning Bhutan’s rural road network. Developing farm roads requires working in remote areas for the benefit of scattered rural communities—the poorest of the poor. The World Bank’s Implementation Completion and Results Report on the Rural Access Project noted a key lesson that developing the rural road network in Bhutan is an expensive but unavoidable undertaking to facilitate

15

economic development and poverty reduction. Because farm roads directly help the poorest of the poor, grant funding is necessary.8 D. Implementation of the Proposed Grant

1. Implementing Agency Government of Bhutan, Ministry of Agriculture, Department of Agriculture

22. The Department of Agriculture (DOA) will be, through its engineering division, the grant implementing agency. The DOA is the lead agency for farm roads and experienced in implementing externally aided projects in partnership with IFAD and the World Bank. It will provide a project manager, project accountant, office space and facilities, and engineering and extension staff resources. Construction and maintenance will follow the government’s Guidelines for Farm Road Development (footnote 5), and the EFRC method institutionalized by the Department of Roads. 9 Maintenance procedures will follow the DOA Farm Road Maintenance Manual (footnote 6). 23. Given limited in-house capacity, the project will provide for outsourcing construction to local contractors. Consulting services will support project implementation with technical and engineering guidance and help with preparing initial environmental examinations and environment management plans, conducting baseline surveys, social mobilization and facilitation, social development and gender equity, and project monitoring and evaluation. 24. All procurement under the JFPR grant will be conducted in accordance with ADB Procurement Guidelines (2007, as amended from time to time). Local organizations recruited to conduct baseline and end-line surveys and provide social mobilizers and facilitators will be contracted by the grant implementation unit (GIU) in accordance with ADB Guidelines on the Use of Consultants (2007, as amended from time to time), as will short-term national consultants. The long-term rural roads expert will be contracted by ADB to support project management and implementation. Further details are in Appendix 8. 2. Risks Affecting Grant Implementation

Type of Risk Brief Description Measure to Mitigate the Risk

Environmental Construction of farm roads in fragile ecosystems has the risk of causing environmental damage. One project site, Kangpara, is described as a broadleaf forest zone with potential for high diversity of faunal and floral species and as a habitat for a globally threatened bird species.

This risk is mitigated by the use of environment friendly road construction (EFRC) techniques and project support for preparing initial environmental evaluations (IEEs) and environment management plans (EMPs). Clearance of the National Environment Commission (NEC) will be obtained based on the IEE, and road alignments will be selected to ensure minimum damage.

8 World Bank, South Asia Sustainable Development Department, Bhutan Country Unit. 2006. Implementation Completion and Results Report (IDA-33090) on a Credit in the Amount of $11.6 million to Bhutan for Rural Access Project.

9 EFRC was introduced with technical assistance from the World Bank and Netherlands Development Organization

(SNV). Although the cost of EFRC is 25%–30% higher than traditional methods, it is more economical in the long term.

16

Type of Risk Brief Description Measure to Mitigate the Risk

There will be localized air pollution from rock crushing, cutting, and filling. There will be localized noise and vibrations.

The EMP will include measures to subdue dust. Protective gear for road workers is mandatory and will be highlighted in the EMP. Requirements for workers’ safety and protection are addressed in the NEC guidelines and will be incorporated in the EMP. EFRC techniques will minimize impacts from noise and vibrations from blasting.

Poor maintenance Lack of periodic or routine maintenance of farm roads carries the risk of roads not being sustainable.

The project provides support to organize and train road-users’ groups in line with the farm road maintenance manual. Stakeholder consultations confirmed that farmers are aware of their responsibilities to maintain the farm roads, but they need guidance to implement the procedures.

3. Incremental ADB Costs

Component Incremental Bank Cost

Amount requested nil

Justification

Type of work to be rendered by ADB

4. Monitoring and Evaluation

Key Performance Indicatora Reporting Mechanism Plan and Timetable for

Monitoring and Evaluation

Poverty incidence reduced by 40% in the project area

Baseline and end-line surveys Project-end evaluation

Proportion of households suffering hunger reduced to less than 3%


Proportion of population in the project area living more than 1 hour’s walk from the nearest road reduced to 20%


At least 40 kilometers of farm roads constructed by project end

Periodic monitoring reports

Project review missions

Every 6 months and at project end

Road-users’ groups established and trained in the project area, and road-maintenance plans developed for farm roads

Periodic monitoring reports

Project review missions

Every 6 months and at project end

a More details on performance indicators are provided in the design and monitoring framework in Appendix 1.

17

5. Estimated Disbursement Schedule

Fiscal Year (FY) Amount ($)

FY2011 1,787,570

FY2012 1,004,410

FY2013 122,950

Contingencies 85,070

Total Disbursements 3,000,000

----------------------------------------------------------------------------- Appendixes

1. Design and Monitoring Framework 2. Summary Cost Table 3. Detailed Cost Estimates 4. Summary Poverty Reduction and Social Strategy 5. Gender Action Plan 6. Project Area Description and Location Maps 7. Fund Flow Arrangement 8. Implementation Arrangements

Appendix 1

18

DESIGN AND MONITORING FRAMEWORK

Design Summary

Performance Targets/Indicators

Data Sources/Reporting

Mechanisms

Assumptions and Risks

Impact Increased incomes of rural population in project area

Poverty incidence in 2013 reduced by at least 40% from 2010 baseline

Proportion of households suffering hunger reduced to less than 3%

Population and housing census Project impact evaluation

Assumptions Farmers will produce greater marketable surplus. Market demand exists.

Outcome Improved and sustainable access to economic and social services in 3 geogs

Proportion of population in project area living more than 1 hour's walk from a road reduced to 20% or less Average time taken to reach nearest basic health unit reduced by 50% Average time taken to reach the nearest school reduced by 50% At least 50% of the female adult population in the 3 geogs are organized into women’s collectives to increase their access to economic and social services

Baseline and end-line survey reports

Risk Roads will not be well maintained.

Outputs 1. Selected farm

roads developed

At least 40 km of farm roads constructed in 3 geogs by end of year 3

At least 16 DOA engineers trained in EFRC techniques

Survey equipment procured, one set for each of 2 dzongkhags

Project monitoring reports Project review missions

Assumptions The supply of local construction contractors is sufficient. Engineering capacity is sufficient to undertake timely contracting for civil works.

Appendix 1

19

Design Summary



Mechanisms


At least 10 dzongkhag engineers trained in survey, design, and EFRC techniques

Risk Fragile ecosystems will be damaged.

2. Community management and maintenance of farm roads institutionalized

Road user groups established and trained in 3 geogs

At least 20 staff trained in implementing farm road maintenance procedures in each of 2 dzongkhags

Maintenance plans developed in each of 3 geogs, including sources of funding, and agreed between geogs and beneficiaries


Risk Sufficient funding cannot be mobilized.

3. Small marketing infrastructure and equipment provided for the subsistence-level poor

At least 20 groups of 10-12 members each formed in 2 dzongkhags, and their infrastructure and equipment needs identified

At least 50% of adult women in the project area included in these groups

At least 3 marketing sheds constructed

At least 3 power tillers and 12 items of processing equipment procured and provided to groups by end of year 2

At least 50% of beneficiaries of this output are women


Assumptions Government land is available at sites identified for marketing infrastructure. Groups are able to operate and maintain small marketing infrastructure and equipment.

4. Improved skills allow farmers in project area to access financial

At least 3 workshops organized in each geog in year 2 to link farmers with technical service

Project monitoring reports Project review

Appendix 1

20

Design Summary



Mechanisms


and technical services

providers, financial service providers, and processors and traders

At least 50% of beneficiaries of this output are women

Seed capital provided for 2 farmers’ groups in each geog in year 3 to enable expansion of agricultural processing and marketing

missions

5. Grant management, monitoring, and evaluation

Project staff and consultants recruited and mobilized in months 1–2 and 30 Gender training provided to all project staff Detailed schedules and implementation and monitoring guidelines developed in months 1–2

Project activities completed as scheduled


Assumptions Pre-project activities are completed in a timely way.

Consulting services are recruited in a timely way.

Appendix 1

21

Activities with Milestones 1.1 Recruit consultants for survey and detailed design, and for IEE and EMP

(month 1). 1.2 Complete survey and detailed design of selected farm roads (months 1–2). 1.3 Complete IEE and EMP and obtain clearances for road construction

(months 1–2). 1.4 Tender for and award construction contracts (months 3–5). 1.5 Procure survey equipment for dzongkhags (months 1–2). 1.6 Train DOA engineers in EFRC techniques (month 3). 1.7 Train dzongkhag and geog engineers in survey and design and EFRC

techniques (month 4). 1.8 Construct farm road from Jungley to Bongo and Ketokha (months 5–33). 1.9 Construct farm road from Thongchey to Thungker (months 5–33). 1.10 Construct farm road from Trimshing to Bedingphu (months 5–33). 2.1 Train dzongkhag and geog staff in implementing guidelines for farm road

maintenance (months 12–13). 2.2 Establish and orient road-users’ groups (months 13–15). 2.3 Prepare road maintenance plans with stakeholders (months 13–15). 2.4 Mobilize community and geog funds for road maintenance (months 13–15). 3.1 Identify community equipment and infrastructure needs and locations

(months 17–18). 3.2 Organize users’ groups and norms for community-based equipment and

infrastructure (months 17–18). 3.3 Build required marketing infrastructure (months 20–24). 3.4 Procure and install required equipment (months 20–21). 4.1 Conduct workshops and provide training on accessing financial services

(from BDFC) (month 18). 4.2 Conduct workshops and provide training on accessing technical services

(from DOA, RNR centers and dzongkhag and geog extension staff) (month 19).

4.3 Organize workshops for interaction of farmers with processors and traders (month 20).

4.4 Provide seed capital for 6 groups (months 28–29). 5.1 Establish grant implementation unit (month 1). 5.2 Recruit consultants (months 1–2). 5.3 Conduct baseline surveys (months 2–3). 5.4 Supervise construction according to EFRC guidelines (months 5–33). 5.5 Provide periodic accounts and progress and monitoring reports to ADB

(every 6 months). 5.6 Conduct end-line surveys (months 35-36).

Inputs ADB $3,000,000 Government $256,314 Beneficiaries $72,579

ADB = Asian Development Bank, BDFC = Bhutan Development Finance Corporation, DOA = Department of Agriculture, EFRC = environment friendly road construction, EMP = environment management plan, IEE = initial environmental examination, km = kilometer, RNR = renewable natural resource.

22

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SUMMARY COST TABLE ($)

ADB = Asian Development Bank, JFPR = Japan Fund for Poverty Reduction. Source: Asian Development Bank estimates.

Component A

Develop Selected Farm

Roads

Component B

Institutionalize Community

Management and

Maintenance of Farm

Roads

Component C

Provide Small Marketing

Infrastructure and Equipment

for Subsistence-level Poor

Component D

Improve Skills of

Farmers in Project Area

Component E

Grant Management,

Monitoring and

Evaluation

Total

(Input)Percent

1. Civil Works 2,410,680 30,000 2,440,680 81.4

2. Equipment and supplies 20,000 1,500 43,000 3,000 67,500 2.3

3. Training, workshops, seminars, public campaigns 30,000 12,000 18,000 60,000 2.0

4. Consulting services 48,000 7,500 7,500 7,500 201,250 271,750 9.1

5. Grant management 33,000 33,000 1.1

6. Other inputs: Seed Capital 42,000 42,000 1.4

Subtotal JFPR grant financed 2,508,680 21,000 80,500 67,500 237,250 2,914,930 97.2

7. Contingencies (0–10% of total estimated grant fund):

Use of Contingencies requires prior approval from ADB.73,214 613 2,349 1,970 6,924 85,070 2.8

Subtotal JFPR grant financed (including contingencies) 2,581,894 21,613 82,849 69,470 244,174 3,000,000 100.0

Government contribution (land for roads, salaries for government staff,

provision of project office, participation in workshops and meetings etc.)208,914 4,000 8,000 3,000 32,400 256,314

Community contributions (mostly in kind): land for roads, participation

in all training and community development; in kind labor contribution etc.)48,979 2,000 0 21,600 0 72,579

Total Estimated Costs 2,839,787 27,613 90,849 94,070 276,574 3,328,893

Inputs / Expenditure category

Grant Components

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DETAILED COST ESTIMATES ($)

Code Supplies and Services Rendered Unit Quantity Cost TOTAL

Units Per Unit US$

AmountMethod of

Procurement

Component A. Develop selected farm roads Subtotal: 2,766,573 2,508,680 208,914 48,979

1.1 Civil works NCB, 3 contracts

1.1.1 Preparatory work (installing labor camps, opening, running, and restoring quarries) kilometer 40 281 11,240 11,240

1.1.2 Site clearance (clearing of jungle and felling of trees) kilometer 40 871 34,840 34,840

1.1.3 Earthworks (collection of top soil, excavation of road formation, excavation of road

trenches, transport of loose soil, dressing of dump sites, plantation of vegetation after

dumping)

kilometer 40 22,633 905,320 905,320

1.1.4 Structures (masonry walls, hammer-packed dry stone, etc.) kilometer 40 3,065 122,600 122,600

1.1.5 Concrete (providing and laying plain cement concrete) kilometer 40 19 760 760

1.1.6 Water management structures (drains and causeways) kilometer 40 6,523 260,920 260,920

1.1.7 Barriers (log barriers, boulder barriers, trench barriers) kilometer 40 532 21,280 21,280

1.1.8 EMP implementation kilometer 40 2,000 80,000 80,000

1.1.9 Pavement (preparation of subgrade, laying hammer-dressed stone, sub-base,

stacking binding materials)

kilometer40 24,343 973,720 973,720

1.1.10 Land for roads hectare 23.46 10,440 244,893 0 195,914 48,979

1.2 Equipment and supplies

1.2.1 Survey equipment set 2 10,000 20,000 20,000

1.3 Training, workshops, seminars LCS

1.3.1 Training of DOA engineers in EFRC techniques (training costs, site visits, per diem),

duration 10 days

participant 16 1,500 24,000 20,000 4,000

1.3.2 Training of dzongkhag engineers in road survey and design, and EFRC techniques,

(training costs, site visits, per diem), duration 14 days

participant 10 1,250 12,500 10,000 2,500

1.4 Consulting services CQS

1.4.1 Survey and design kilometer 40 1,000 40,000 40,000

1.4.2 Preparing IEE and EMP kilometer 40 200 8,000 8,000

1.5 Management and coordination of this component

1.5.1 Supervision – staff time month 10 500 5,000 0 5,000

1.5.2 Travel and per diem month 10 150 1,500 0 1,500

COSTS CONTRIBUTIONS

CommunitiesGovernmentJFPR

24

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Units Per Unit US$

AmountMethod of

Procurement

Component B. Institutionalize community management and maintenance of farm roads Subtotal: 27,000 21,000 4,000 2,000

2.1 Training, workshops, seminars LCS/SSS

2.1.1 Workshops to establish and orient road users' groups (estimated 20 per group) group 3 1,000 3,000 1,000 1,000 1,000

2.1.2 Workshops to prepare road maintenance plans (estimated 20 per group) group 3 1,000 3,000 1,000 1,000 1,000

2.1.3 Training for dzongkhag staff in implementing Guidelines for Farm Road-Maintenance

(one program in each of 2 dzongkhags , 20 persons each)

person40 300 12,000 10,000 2,000

2.2 Equipment and supplies Shopping

2.2.1 Workshop materials number 6 250 1,500 1,500

2.3 Consulting services LCS

2.3.1 Social mobilizers/facilitators person-month 1.5 5,000 7,500 7,500

Component C. Provide small marketing infrastructure and equipment for subsistence-level poor Subtotal: 88,500 80,500 8,000 0

3.1 Civil works Shopping

3.1.1 Construction of marketing sheds number 3 12,000 36,000 30,000 6,000

3.2 Equipment and supplies Shopping

3.2.1 Processing equipment (may include chilli dryers, orange pulpers, maize flakers) number 12 2,000 24,000 24,000

3.2.2 Power tillers number 3 3,000 9,000 9,000

3.2.3 Other equipment and supplies (to be decided) lump sum 1 10,000 10,000 10,000


3.3.1 Social mobilizers/facilitators for group formation and needs assessment person-month 1.5 5,000 7,500 7,500


3.4.1 Construction supervision by dzongkhag staff person-month 2 500 1,000 0 1,000

3.4.2 Travel and per diem month 2 500 1,000 0 1,000

Component D. Improve skills of farmers in project area to access services Subtotal: 92,100 67,500 3,000 21,600

4.1 Training, workshops, seminars LCS/SSS

4.1.1 Workshops organized with financial institutions (BDFC) (estimated 50 persons per

geog )

geog 3 2,400 7,200 6,000 1,200

4.1.2 Workshops and meetings with extension staff and RNR experts (estimated 50

persons per geog )

geog 3 3,400 10,200 6,000 3,000 1,200

4.1.3 Workshops with traders and processors (private sector) (estimated 50 persons per

geog )

geog 3 2,400 7,200 6,000 1,200


4.2.1 Social mobilizers/facilitators person-month 1.5 5,000 7,500 7,500

4.3 Other inputs

4.3.1 Seed Capital for farmers' groups/cooperatives (2 per geog ) group 6 10,000 60,000 42,000 18,000

COSTS CONTRIBUTIONS


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5

BDFC = Bhutan Development Finance Corporation, COS = consultants' qualifications selection, DOA = Department of Agriculture, EFRC = environment friendly road construction, EMP = environment management plan, IEE = initial environmental examination, LCS = least-cost selection, RNR = renewable natural resource, SSS = single-source selection. Source: Asian Development Bank estimates.


Units Per Unit US$

AmountMethod of

Procurement

Component E. Grant management, monitoring, and evaluation Subtotal: 269,650 237,250 32,400 0

5.1 Equipment and supplies Direct purcharse

5.1.1 Training materials (reference materials, guides) geog 3 1,000 3,000 3,000

5.2 Consulting services

5.2.1 Social development and gender specialist (remuneration, travel, per diem) person-month 1.5 7,500 11,250 11,250 Individual

5.2.2 Baseline Survey month 1.5 10,000 15,000 15,000 CQS/LCS

5.2.3 End-line Survey month 1.5 10,000 15,000 15,000 CQS/LCS

5.2.4 Regional Technical Expert (technical training, supervision) person-month 20 8,000 160,000 160,000 Individual


5.3.1 Project Manager person-month 36 500 18,000 0 18,000

5.3.2 Travel and Per diem month 36 150 5,400 0 5,400

5.3.3 Office Space month 36 250 9,000 0 9,000

5.3.4 Operational Costs month 36 500 18,000 18,000 Shopping

5.3.5 Car rental, driver, fuel for Technical Expert month 15 1,000 15,000 15,000 Shopping

Components A to E = Subtotal Subtotal: 3,243,823 2,914,930 256,314 72,579

Contingency (Maximum 10% of total JFPR Contribution) 85,070 85,070

TOTAL Grant costs Total: 3,328,893 3,000,000 256,314 72,579

COSTS CONTRIBUTIONS


26 Appendix 4

SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY

Country/Project Title: Bhutan / Farm Roads to Support Poor Farmers' Livelihoods

Lending/Financing Modality:

Project Department/ Division:

SARD/SANS

I. POVERTY ANALYSIS AND STRATEGY

A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy

The country strategy and program, 2006–2010 has identified remoteness, isolation, lack of employment opportunities, and dependence on subsistence agriculture as the main causes of poverty in Bhutan. The Government of Bhutan has given road connectivity through the building of farm roads the highest priority in the Tenth Five-Year Plan, 2008–2013. The government recognizes that weak social and economic infrastructure, particularly road connectivity, has adversely affected the quality of life of its citizens in rural areas. It often takes people several hours, and sometimes days, to walk to the nearest road. Since agriculture provides the main source of income, employment, and food security for most Bhutanese people, providing access through farm roads is key to poverty reduction. Farmers in the proposed project area have articulated the need for farm roads through geog (block) and dzongkhag (district) development committees, and these needs are reflected in the geog and dzongkhag Tenth Five-Year Plans. The proposed project will directly contribute to poverty reduction because it will make it possible for villagers living in remote areas to have access to markets. In addition, farming households will be able to access health and educational facilities and technical and financial services, all of which will reduce poverty. The main beneficiaries of the project will be the villagers living in Trimshing and Kangpara geogs in Trashigang Dzongkhag and in Bongo Geog in Chukha Dzongkhag. About 408 households will directly benefit from the construction of about 40 kilometers of farm roads; another 250 households located in further villages will be indirect beneficiaries, as their walking time to the nearest motorable road will be reduced.

B. Poverty Analysis Targeting Classification: TI-G

1. Key Issues

There is now much greater understanding about the various dimensions of poverty in Bhutan. Poverty is not only about insufficient consumption, but also lack of opportunities and assets, isolation, poor health and nutrition, powerlessness, and insecurity. Recent studies reveal that poverty is a harsh reality in contemporary Bhutan. The Poverty Analysis Report 2007

a

and the Bhutan Living Standards Survey 2007b provide detailed data on poverty down to the dzongkhag. In Bhutan,

households that spend, in real terms, less than Nu689 per month are classified as subsistence poor, and those that spend less than Nu1,097 per month are considered poor. According to PAR 2007, 23.2% of the population of Bhutan lives below the poverty line, and 73.6% of the poor live in rural areas. Poverty in Bhutan is, thus, a predominantly rural phenomenon. While Bhutan is likely to nearly achieve the Millennium Development Goal (MDG) target of halving poverty from 36.3% in 2000 to 20% by 2015, it is less likely to achieve the target of halving the proportion of people living in hunger, as there has actually been an increase, from 3.8% in 2003 to 5.9% in 2007. In absolute terms, this accounts for 37,300 people who were food insecure in 2007. Among the dzongkhags that experience food poverty rates well above the national average are Trashigang at 8.9% and Chukha at 8.1%. The single most important factor that has worsened rural poverty and the relative underdevelopment of rural areas is the poor access of rural communities to roads, as a result of which they have very limited access to economic and essential social services. Households that suffer from food insecurity and extreme poverty are mainly in remote and isolated communities. The lack of adequate road connectivity is one of the major challenges faced by the majority of the rural population. It often takes people several hours, or even days, to walk to the nearest road. This seriously constrains the ability of rural households to market their agricultural produce or to access health and education facilities. Mortality rates, particularly maternal mortality rates, in these rural communities are high. Pregnant women and the sick have to be carried on people's backs to the nearest health center. There is no doubt that accessibility is the defining development issue in Bhutan. The overall goal of the government's Tenth Five-Year Plan, 2008-2013 is poverty reduction, and it emphasizes the rural and agriculture sectors in its approach to poverty reduction. The plan aims to promote accessibility through the extensive development of farm roads in rural areas, with priority given to about 60 geogs that have no road connectivity at all. The proposed project will directly support the government's poverty reduction strategy by supporting the development of farm roads in four priority geogs located in three of the poorest dzongkhags. The main beneficiaries of the project will be about 658 households that will be directly and indirectly benefited by the farm

Appendix 4 27

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roads. Of these, 408 households are in villages that will be directly connected by the farm roads, and 250 households are in further villages that will benefit from the reduction of their walking time to the nearest road. These will include poor and marginal farmers, landless people, and, in particular, households headed by women. At present, some farmers in these villages have to walk up to 6 hours to reach a road head. Their living conditions are harsh, and they have little access to health facilities. They have to carry their produce long distances on their backs or on horseback, and it loses its market value through long journeys. Many farmers leave part of their land fallow as they have no way to get their surpluses to market. The farm roads will directly contribute to poverty alleviation by enabling farmers to access markets for both inputs and outputs. This will enable increased agricultural production and productivity, improved food security, and increased incomes. The project will thus directly contribute to achieving target 2 of MDG 1 by enabling farmers to increase their agricultural production and incomes. It will also contribute toward target 6 of MDG 5, to improve maternal health, by making it easier for women to access health centers and hospitals in a timely way. 2. Design Features

The project area has poverty rates higher than average, and the project will therefore target the geographic dimensions of poverty. The development of farm roads will result in improved and sustainable access to economic and social services in the four selected geogs. To ensure sustainability, the project will also support the establishment of road-user groups among beneficiary communities, provide training in routine maintenance, and facilitate the formulation of road-maintenance plans. In addition, the project will provide training to farmers to help them use financial and technical services that will become more accessible with the development of the farm roads. Baseline surveys at the start of the project will help identify the poorest of the poor and other vulnerable groups such as households headed by women. Social mobilizers will help form groups for collective marketing and value addition. The groups will also be helped to identify small marketing infrastructure and equipment needs that can be supported by the project.

II. SOCIAL ANALYSIS AND STRATEGY

A. Findings of Social Analysis

The Bhutan Living Standard Survey 2007 (footnote b) estimated that (i) three-quarters of the total population of 630,000 lives in rural areas; (ii) literacy rates in rural areas are only around half, compared with nearly three-fourths in urban areas; (iii) about 25% of primary school children require more than an hour to reach school in rural areas; (iv) average per capita consumption expenditure in urban areas is 2.3 times that of rural areas; and (v) the proportion of households headed by

women is higher in rural areas (35%) than in urban areas (21%). The Rapid Impact Assessment of Rural Developmentc noted

that an estimated 35% of households reported food shortages, with half of them being food insufficient for more than 4 months, creating a cycle of indebtedness and poverty. It also found evidence that villages with a road nearby tend to have better access to other services as well. In addition to material support for the poor, social advocacy, such as providing guidance and support for the poor to take advantage of opportunities, was identified as an important need. Detailed focus group discussions and individual interviews with villagers at the selected sites and local government officials and people’s representatives revealed that villagers in these areas suffer acute poverty as they have no access to markets or services. Their villages are remote, and people in some areas have to walk 6 hours to reach the nearest road head. This has made them extremely vulnerable. While most people in the project villages have small landholdings of approximately 0.81 ha, there are a few families in almost every village where women are the effective heads of households because their husbands are either dead, old, or disabled. In some cases, women are divorced. These were also the households where women indicated that they had barely sufficient food to feed their children and, at certain times of the year, not even that much. In other cases, landholdings are very small. There were instances, even among those who had land, where they could not cultivate it as they had no adult men to help with cultivation. Thus, even among the poor, there are groups, such as households headed by females that are more vulnerable. Most villagers leave part of their land fallow because they are unable to market the produce. This significantly reduces their incomes, causing a spiral of underemployment and poverty. Households’ greatest need is farm roads that would give them access to markets and services. This need was unanimously expressed by the participants at stakeholder consultations. Farmers recognized that they needed to upgrade their skills and add value to their produce. However, as a result of their isolation, they were not in a position to articulate all their demands. This was a capacity issue, as they had no idea what they could access from government, financial, and technical institutions. They need capacity building and assistance to link up with institutions such as the Bhutan Development Finance Corporation. They need to be trained in preparing business plans so that financial institutions and government extension services can support them. They need to be organized into users’ groups.

28 Appendix 4

B. Consultation and Participation

1. Provide a summary of the consultation and participation process during the project preparation. Identification and prioritization of roads were done through the government’s participatory planning processes for preparing the Tenth Five-Year Plan. Stakeholder consultations confirmed the selection of the farm roads and informed the design of the project, taking into account stakeholder needs. Consultations included focus group discussions and individual interviews. Stakeholder consultations with the primary beneficiaries, local officials, and people’s representatives were held at all four proposed project sites (a total of 338 participants).

d In Trashigang Dzongkhag, two separate consultations were held at

Trimshing Geog center, which is 90 kilometers from Trashigang town, with villagers from two separate farm road sites, Thomchey–Thungkar and Trimshing–Bedingphu. Surprisingly, on a foggy and wet day, 128 people attended the consultations from the Thomchey–Thungkhar area. People walked 3 hours to attend stakeholder consultations from the five villages of Trimshing to the geog center. Eighteen villagers, including six women, walked 6 hours from Bedingphu. Almost 80 men and women came to the stakeholder consultation in pouring rain in Tsakling Geog in Mongar Dzongkhag. There were 54 women

and 25 men present at the meeting. In Chukha Dzongkhag, among 113 villager participants in the consultations were 57 women and 56 men. The farmers were informed about the meeting by the geog officials. In Trimshing, the meeting was held in the community hall near the geog office. In Mongar Dzongkhag, the meeting was held in Horong village under mango trees, as the only house nearby had been damaged by the recent earthquake. In Chukha Dzongkhag the meeting was held at the Meritshimo Community Primary School. An open-ended questionnaire was used to conduct focus group discussions. The main objectives of these discussions were to ascertain (i) the extent to which the beneficiaries were party to the decision to construct the farm roads, (ii) the extent to which they had participated in the preparation of geog plans, (iii) the extent to which primary stakeholders were aware of government guidelines regarding farm roads, (iv) whether people were aware that they may have to contribute their land, (v) whether people were aware that they would be responsible for road maintenance, and (vi) whether there were any communities living in the area who had a distinct social and cultural identity different from the majority community. Every attempt was made to ensure that the voices of the poorest, farmers with marginal land, and the landless were heard. Separate discussions were held with women, particularly females who head households. This was to ensure that vulnerable members of the community got a chance to express their views. This was also important in planning for development activities for the project and providing for interventions that would target the vulnerable and the marginalized. The farmers were very forthcoming about their needs and said that building farm roads would have a huge impact on their lives, reducing their drudgery and helping them to increase their incomes. Women farmers said that their lives were very hard because they had little access to markets, technology, infrastructure, or financial and health services. The farm road project would change their lives. The people confirmed that a consultative process had been followed and their plans had been incorporated in the geog Tenth Five-Year Plan. The people were fully aware that they may lose some small strips of land to the construction of the road. They were aware of the government’s farm road guidelines and willing to contribute this land for the road. The government officials present said that there would be another round of consultations when finalizing alignments as prescribed in the guidelines. Every effort would be made to ensure that no one lost a disproportionate amount of land or other assets to the alignment. On the issue of road maintenance, in some villages road-users’ groups had already been established and were collecting community contributions. In other places, villagers said they would be ready to maintain the farm roads but required technical assistance on how to do this. 2. What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring?

Information sharing Consultation Collaborative decision making Empowerment 3. Was a C&P plan prepared? Yes No If a C&P plan was prepared, describe key features and resources provided to implement the plan (including budget, consultant input, etc.). If no, explain why. Consultations with beneficiaries are an integral part of the decentralized planning process in Bhutan, as well as of the guidelines for the development and maintenance of farm roads. Therefore, no separate C&P plan is required.

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C. Gender and Development

1. Key Issues.

Bhutan has a high degree of gender equality, with no preference for sons. This is supported, for instance, by there being no gender disparity in malnutrition among boys and girls. Almost two-thirds of women are employed in agriculture, and about 70% of them own their land. Women’s participation in village meetings is very high. However, in rural areas, the burden of work on women is heavier than that on men because they not only look after livestock, cultivation, and marketing the produce, they also extend family care and have principal responsibility for household chores. Many women contribute to the household through cottage activities such as weaving and knitting in the off-season, and cheese-making in the busy season. Women are clearly and grossly overburdened.

2. Key Actions. Measures included in the design to promote gender equality and women’s empowerment—access to and

use of relevant services, resources, assets, or opportunities and participation in decision-making process: Gender plan Other actions/measures No action/measure

The project design has tried to address the special needs of women farmers, particularly women who head households, and they are among the principal beneficiaries of the project. The baseline survey will gather sex-disaggregated data, and monitoring indicators are gender-sensitive. The surveys will gather information on women’s access to maternal health services or such economic services as local markets and financial institutions. Gender equity indicators will be further developed based on the sex-disaggregated data collected, and integrated into a more detailed gender action plan. The agricultural and marketing activities planned in the project have been identified in keeping with women's requirements. Women will be given preference in selection for all positions, other things being equal. Funds have been allocated for providing women's associations with equipment and infrastructure support. Half of the training budget will be earmarked for training women farmers.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS

Issue Significant/Limited/ No Impact

Strategy to Address Issue

Plan or Other Measures Included in Design

Involuntary Resettlement

No impact

Full Plan Short Plan Resettlement Framework No Action

Indigenous Peoples

No impact. At all the project sites, the communities are homogenous. There are no ethnic minorities distinct from the main group.

Plan Other Action

Indigenous Peoples Framework

No Action Labor

Employment opportunities Labor retrenchment Core labor standards

There will be labor opportunities during the construction of the farm roads. With the introduction of a minimum daily wage, young women prefer to work on road construction rather than do housework. In addition, there will be improved employment opportunities with better road access.

Plan Other Action No Action

Affordability

At one project site where the alignment and survey have already been completed, villagers have formed a road-users’ group and drafted terms of reference. There is also agreement in principle to contribute funds

Action No Action

http://www.adb.org/Resettlement/category.asp

http://www.adb.org/Resettlement/category.asp

http://www.adb.org/IndigenousPeoples/IP-Screening-Categorization/default.asp

30 Appendix 4

and/or labor to support the routine maintenance of the farm road.

Other Risks and/or Vulnerabilities

HIV/AIDS Human trafficking Others(conflict, political

instability, etc), please specify

The potential risks of HIV/AIDS and trafficking that can be aggravated with increased road connectivity are being addressed through a government program supported by bilateral and multilateral assistance.

e

Plan Other Action No Action

IV. MONITORING AND EVALUATION

Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities

and/or social impacts during project implementation? Yes □ No

a Government of Bhutan, National Statistics Bureau. 2007. Poverty Analysis Report. Thimphu.

b Government of Bhutan, National Statistics Bureau. 2007. Bhutan Living Standards Survey 2007. Thimphu.

c Government of Bhutan, Planning Commission. 2007. Rapid Impact Assessment of Rural Development. Thimphu.

d Four project sites were proposed and consultations held. However, the number of sites had to be reduced to three to keep costs within the budget of $3 million.

e The government has a national program to control sexually transmitted diseases including AIDS that is assisted by

bilateral development agencies, United Nations agencies, and a World Bank grant. Through basic health units, the Ministry of Health runs clinics that include programs on HIV/AIDS awareness.

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GENDER ACTION PLAN

Activities Design features

Develop Farm Roads

Consultations on road alignment Ensure that women participate and are heard.

Employment opportunities Ensure that women in the project area are considered for employment on road construction.

Institutionalize Community Management and Maintenance of Farm Roads

Road-users’ groups Ensure that women participate and are heard.

Provide Small Marketing Infrastructure and Equipment for the Subsistence Poor

Group formation At least 50% of the adult female population will be organized into women’s collectives for the purposes of training and capacity building for income generation. Since the villages are widely dispersed, it is not possible at this stage to provide exact data on the number of groups that will be established. The size of the groups to be formed is also indicative.

Groups of 10–12 women will be formed into women’s collectives and trained on the norms of group activities and also on how to function as a cooperative. A gender needs assessment will be done by a social development and gender specialist to identify women who require specific inputs in terms of equipment, training, and seed capital.

At least 50% of organized women will be linked with financial institutions.

Provision of equipment and infrastructure

The equipment to be provided under the project will be identified based on the needs of women, particularly households headed by women. The infrastructure for storing and marketing produce will be largely for women farmers and other vulnerable groups.

Half of the small agricultural marketing infrastructure will be made available to women’s collectives.

Half of the drudgery-saving devices and equipment for value addition will be made available to women’s collectives.

Improve Skills of Poor Farmers to Access Financial and Technical Services

Workshops and meetings with technical and financial service providers

The project management office will support the specialist to ensure that at least 30% of women are linked to financial institutions and marketing facilities, and that at least 50% of participants at the face-to-face workshops with technical and financial service providers are women.

Grant Management, Monitoring, and Evaluation

Social mobilizers and facilitators Other things being equal, preference will be given to

32 Appendix 5

Activities Design features

women in recruitment.

Hiring of experts and consultants Other things being equal, preference will be given to women in recruitment.

Project management A social development and gender specialist will be recruited to ensure equal opportunity for men and women. She or he will (i) ensure that the equipment for value-addition is given to women on a priority basis and (ii) participate in all selection panels to ensure that at least 25% of social mobilizers and trainers are women.

Sex-disaggregated baseline surveys

The collected data will be sex-disaggregated. The baseline data will include information on women’s special needs and concerns, the amount of land they own, the crops they grow, and their specific responsibilities in supporting their families. Separate data will be collected for women who head households. Once the baseline surveys are completed, a more detailed gender action plan will be prepared, village by village, with details on the exact number of women who will be trained in each village.

Training The project management office will support the specialist to ensure that 100% of women in the project area, particularly women who head households, are given training in group formation and in new agricultural methods and technologies.

Gender training will be given to all project staff, social mobilizers, and trainers, and this will be included in the terms of reference of the specialist, who will be responsible for ensuring that all staff and volunteers understand what is meant by gender equality.

Project monitoring and reporting The project management team will ensure that sex- disaggregated data is provided in reporting on all project activities.

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PROJECT AREA DESCRIPTION AND LOCATION MAPS

A. Bongo Geog: Jungley–Bongo–Khetokha Farm Road

1. With a geographical area of 396.78 square kilometers (km2), Bongo Geog is the largest in Chukha Dzongkhag. It is located towards the southwest of the dzongkhag headquarters and has 27 villages with 584 households totaling 6,870 people, giving a population density of 17 people/km2. The settlements are scattered. The climate is hot in summer, with heavy rain and hailstones, and cold and dry in winter. Overall, the climate can be described as warm subtropical and temperate with high rainfall, averaging more than 2,000 millimeters per year. 2. The geog has 1,754.4 hectares of arable land, which is 4.42% of the geographical area. Of the arable land, 12.7% is categorized as wetland and 80.7% as dry land. The average landholding is 7.4 acres per household. The main crops grown are paddy, maize, mustard, millets, barley, and vegetables. A few cash crops such as citrus, cardamom, and ginger are also grown. 3. Phyllite, quartzite, limestone, and dolomite are the main rock types. Scattered outcrops of granite and gneisses with occasional bands of mica schist are exposed. The lithology of the area comprises biotite gneisses with bands of calc gneisses of the Thimphu group of rocks. The soil is mostly loamy, but at high altitudes it is clay loam. This is especially suited for growing potato. In the subtropical zone, between 150 and 1,500 meters above sea level (masl), primary broadleaf forests with patches of bamboo and banana forests are dominant. Vegetation in the area is characterized as dense mixed broadleaf forests with species like Alnus nepalensis, Castanopsis indica, Macaranga postulata, etc., and tree densities of 300–500/km2. 4. The area is drained by the Wang Chu and Chala Long Chu rivers in a dendritic pattern. Red residual soils derived from the weathering of ferruginous quartzite cover the slopes in some areas. The proposed road will run along slopes of 35º–50º in a narrow valley formed by the Wang Chu.

B. Trimshing Geog: Thungker–Thongmey Farm Road

5. Trimshing Geog, in Trashigang Dzongkhag in eastern Bhutan, has an area of 55 km2 and 17 major villages. The climate is cool subalpine in the Karthungla Pass area, warm and cool temperate on moist slopes, and subhumid at lower elevations. Overall, the climate in the area is cool temperate at higher elevations and warm temperate in the lower elevations along the Trashiyangphu–Pheggbari–Kangpara route. 6. The vegetation can be described as dense cool temperate and broadleaf forests. The soil is highly porous and mostly acidic. The area is generally undulating with steep slopes and deep gorges. Most agriculture is on slopes as steep as 80%.

7. The proposed route for this farm road runs through altitudes of 1,300 masl along slopes of 20°–50°. The route has several villages along its alignment, with low-density intermittent broadleaf forests. The area of the proposed road is drained by a number of rivers and streams, of which the Nyera Ama Chu is the biggest. There are a few rock outcrops of granite and gneisses on the slopes, riverbanks, and streams. The Trashiyangphu–Pheggbari–Kangpara stretch falls near the main crystalline fault, making the area vulnerable to landslides.

34 Appendix 6

C. Kangpara Geog: Trimshing–Bedingphu Farm Road

8. Kangpara is a remote geog under Trimshing Dungkhag (subdistrict) in Trashigang Dzongkhag, located at an elevation range of 1,200–2,300 masl. The geog is located in the broadleaf forest zone with potentially high diversity of faunal and floral species. The area is habitat for globally threatened bird species like Blyth’s tragopan (Tragopan Blythii Moleswotrhii) and rufous-necked hornbill (Aceros nipalensis). It is also famous for the special bamboo species, Neomicrocalamus andropogonifolius, locally known as ringsoo. A preliminary biodiversity study conducted in 2008 by the Royal Society for Protection of Nature recorded 225 plant species belonging to 104 families, as well as 50 bird species. 1

9. The dominant land types are forestland and forest at various stages of succession, including natural forest located in inaccessibly steep areas, degraded secondary forest, and shrub forest regenerated after stopping mainly slash-and-burn agriculture. Human settlements and agricultural land dot the mid-hill areas (footnote 1). Settlements and agricultural land are located either in small clusters of households or in the form of isolated individual farmhouses, depending on the availability of cultivable land area. The area has a dominant population of subsistence farmers who significantly rely on forest resources such as cane and bamboo for crafts.

10. The terrain of the road will be along altitudes of 2,300–1,300 masl and slopes of 20°–60°. There is a stretch of steep cliffs called Serpang Brag before the village of Bedingphu. Most if not all cultivated lands are on hill slopes. The soil can be characterized as sandy clay, which is rather loose and has a high percentage of gravel and cobblestones.

1 Royal Society for Protection of Nature. 2009. Pilot initiatives to reduce human–wildlife conflict in Kangpara,

Trashigang Dzongkhag, Bhutan.

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38 Appendix 7

Figure 1. Fund Flow Arrangements for JFPR Project

$2,508,680

$21,000 $237,250

$80,500

$67,500 $85,070

Department of Agriculture

(Grant Implementing

Agency)

Component A: Develop Selected

Farm Roads

Asian Development

Bank

Requests

Royal Monetary Authority of

Bhutan

Bank of Bhutan Budget Fund

Account of Department of Budget

and Accounts

Department of Aid and

Debt Management

$3,000,000

Component D: Improve Skills of

Farmers in Project AreaContingencies

Component E: Grant

Management, Monitoring and

Evaluation

Component B: Insitutionalize

Community Management and

Maintenance of Farm Roads

Component C: Provide Small

Marketing Infrastructure and

Equipment for Subsistence Poor

FUND FLOW ARRANGEMENT

1. The Asian Development Bank (ADB) will initially channel $100,000 to the imprest account as an advance for day-to-day project implementation during the inception period, and will replenish the imprest account every 3–6 months, based on the replenishment requests from the grant implementation unit through the executing agency and in accordance with ADB’s statement of expenditures procedure. The statement of expenditures procedure will apply for all payments and transactions under $20,000 to ensure speedy project implementation. Detailed implementation arrangements, such as flow, replenishment, and administrative procedures, will be provided in the grant implementation manual and established between ADB and the government through the Japan Fund for Poverty Reduction (JFPR) letter of agreement. Fund flow for the JFPR project is schematically shown in Figure A6.

Source: Asian Development Bank estimates.

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IMPLEMENTATION ARRANGEMENTS A. Grant Implementing Agency 1. The Department of Agriculture (DOA) in the Ministry of Agriculture will be the grant implementing agency, in collaboration with the dzongkhags and geogs concerned. The DOA mandate includes planning, coordinating, administering, supervising, and monitoring agricultural production, crop protection, post harvest, farm mechanization, and agricultural extension services. The engineering division of the DOA, headed by a chief engineer, is responsible for providing engineering services on infrastructure development in the renewable natural resource sector of the ministry. This includes improving rural access through farm roads, guided by the rural access master plan. This plan is based on dzongkhag rural access planning reports. Keeping in view limited in-house capacity and the already overstretched dzongkhag engineers, the DOA outsources some of the survey, design, and supervision for farm road construction, while backstopping to ensure acceptable standards. It uses environment friendly road construction (EFRC) techniques. The construction of farm roads follows the procedures set out in the Guidelines for Farm Road Development, 1 and farm road maintenance follows the procedures in the Farm Road Maintenance Manual.2 B. Grant Organization and Management 2. The DOA will identify a project manager from among its staff, who will coordinate all project activities, including implementation, monitoring, accounting, and reporting. The grant implementation unit (GIU) will be established in Thimphu under the DOA and headed by the project manager. The GIU will report on the project's progress to the government and the Asian Development Bank (ADB). The GIU will be supported by consultants and work closely with dzongkhags and geogs to implement the project. C. Implementation Schedule 3. The project is to be implemented over a period of 3 years, including end-line surveys that will enable evaluation of the project outputs and outcome. Preparatory activities include the preparation of the grant implementation manual, mobilization of the project management staff, and engagement of the regional technical expert. The DOA will, in coordination with the two dzongkhags, identify tentative road alignments for the proposed roads and finalize terms of reference for the detailed survey and design, as well as the environmental assessments and plans, so that tendering can be done at the start of the project. Project preparation has been initiated with the full cooperation of the participating communities. D. Procurement 4. All procurement under the Japan Fund for Poverty Reduction (JFPR) project will follow ADB Procurement Guidelines (2007, as amended from time to time). Procurement includes (i) civil works packages for road construction, which is planned as one package per road; (ii) civil works for small marketing infrastructure at the geog level; (iii) survey equipment for the dzongkhag engineering sections; (iv) small processing and marketing equipment for farmers’ groups; (v) vehicle hire for project management; and (vi) workshop materials and supplies.

1 Government of Bhutan, Ministry of Agriculture. 2009. Guidelines for Farm Road Development. Thimphu.

2 Government of Bhutan, Ministry of Agriculture. 2009. Farm Road Maintenance Manual. Thimphu.

40 Appendix 8

Procurement will be through national competitive bidding, direct purchase, and shopping procedures. Details are in Appendix 3. E. Consulting Services 5. An individual consultant from the region will be recruited to provide technical guidance on all activities related to developing and maintaining farm roads. ADB will engage the consultant for 20 person-months in accordance with ADB Guidelines on the Use of Consultants (2007, as amended from time to time). Consultants will be recruited by the GIU to provide support on social development and gender aspects of the project, project monitoring and evaluation, and social mobilization and facilitation, on the basis of qualifications for the assignment in accordance with ADB Guidelines on the Use of Consultants and other arrangements satisfactory to ADB for selecting and engaging domestic consultants. F. Flow of Funds 6. The DOA is currently implementing the World Bank-funded Decentralized Rural Development Project in western Bhutan and, in eastern Bhutan, the Agriculture, Marketing, and Enterprise Promotion Program funded by the International Fund for Agricultural Development. Both projects include developing farm roads, and the DOA has the capacity to manage such projects. Funds flow arrangements for this project will be similar to those for other externally assisted projects (Appendix 6). The Department of Aid and Debt Management (DADM) will request ADB to release funds and credit the requested amount in the Royal Government Budget Account Fund maintained by the Royal Monetary Authority (RMA) in Bhutan. When the RMA receives a request for the release of funds from the DADM, the RMA will write to the Bank of Bhutan to credit the said amount in the budget account fund of the Department of Budget and Accounts (DBA). The DADM will then write to the DBA to release the funds to the DOA3 or, with DOA authorization, directly to the dzongkhags and geogs. These steps will be followed for every release requested. The project accounts will be audited annually, as per government rules, by the Royal Audit Authority, which is (i) independent of the line agencies, (ii) has adequate knowledge and experience in international accounting practices, and (iii) is acceptable to ADB. G. Disbursement 7. To facilitate disbursements, the DADM will establish, immediately upon grant effectiveness, an imprest account at the RMA. The imprest account will be established, managed, replenished, and liquidated in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time) and detailed arrangements agreed upon by the government and ADB. The amount to be deposited into the imprest account will be based on 6 months’ estimated expenditures to be financed from the imprest account or 10% of the JFPR grant, whichever is less. The statement of expenditure procedure may be used for reimbursing eligible expenditures and liquidating advances provided into the imprest account, with each individual payment transaction not exceeding the equivalent of $20,000, in accordance with ADB’s Loan Disbursement Handbook. As confirmed by the Government of Japan, the use of interest earned on the JFPR imprest account requires ADB’s prior approval. Any unutilized interest earned on the JFPR imprest account should be returned to the JFPR account maintained at ADB upon completion of the JFPR project and before closing the JFPR account.

3 The DOA will open an imprest account exclusively for the project, which will receive funds from the DBA.

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8. The DOA shall (i) maintain or cause to be maintained separate accounts for the JFPR project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied by independent auditors acceptable to ADB; (iii) furnish to ADB as soon as available, but in any event not later than 6 months after the end of the fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto, including the auditor's opinion on the use of JFPR funds as well as on the use of the imprest account and statement of expenditures provided under the project, all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB may from time to time reasonably request. The DOA is experienced in implementing externally aided projects and has the financial management capacity to establish adequate accounting procedures and controls to efficiently administer the grant.

grant assistance report - farm roads to support poor ......japan fund for poverty reduction (jfpr)...

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