Cambodia : Tonle Sap Poverty Reduction and Smallholder Development Project - Additional Financing (TSSD- AF)

Agriculture, natural resources and rural development / Agricultural policy, institutional and capacity development - Agricultural production - Rural market infrastructure

Finance / Inclusive finance

The Tonle Sap Poverty Reduction and Smallholder Development Project will foster community-driven development through investments in productivity improvement, rural infrastructure, and capacity development in 196 communes in the provinces of Banteay Meanchey, Kampong Cham, Kampong Thom, and Siem Reap. The Project will assist the Government in creating (i) community driven development through a commune block grant with the following three subcomponents: (a) improving rural infrastructure supporting agricultural productivity; (b) improving capacity of smallholder farmers; (c) strengthened commune project management capacity; (ii) enabling Environment for Agriculture Productivity and Diversification with the following subcomponents: (a) improving agricultural policy environment; (b) increasing availability of and access to quality seeds; and (c) increasing access to agricultural information and market data; and (iii) Effective Project Management.

Cambodia has achieved gross domestic product growth of 8%-10% a year since 2001, driven largely by an expansion of the construction, garment, and tourism sectors. Agricultural growth has fluctuated because of variations in the performance of the crop sector, especially rice. However, the Government of Cambodia and its development partners are deeply concerned about (i) the narrow base of economic growth, currently threatened by the global economic crisis; and (ii) the persistence of high levels of rural poverty, coupled with the growing income disparity between rural and urban areas.

The headcount poverty index of 52.40% for Kampong Thom, 51.84% for Siem Reap, 37.15% for Banteay Meanchey, and 37.04% for Kampong Cham can be compared with the national rural poverty level of 39.7%. A recent Asian Development Bank (ADB) study of 20 communes, in six representative agro-ecological regions in four provinces, found that 15 communes had poverty levels exceeding 60%, two were between 50% and 60%, and two were between 30% and 50%. Only one had poverty a level below 30%.

Opportunities for sustainable rural economic growth based on increasing the productivity of resource-poor smallholders were examined. These studies confirmed the need for investment in agricultural productivity improvement, rural infrastructure, and capacity building. The focus should be on commune-led activities to support smallholder production, and key institutional reforms to enable faster agricultural growth. The proposed investments would be in line with ADB's Strategy 2020, the country strategy and program for Cambodia, and the road map for agriculture and natural resources for Cambodia. The investments would also support the International Fund for Agriculture and Development (IFAD) country strategy for Cambodia, and the Government's Rectangular Strategy II.

ADB's assistance to Cambodia, especially for agricultural policy development and finance sector reform, has established the base for faster economic growth. Rural roads have strengthened market links and improved mobility; irrigation schemes have created access to water sources to increase agricultural production; and water supply and sanitation works have contributed to better health. With three ongoing projects and supporting technical assistance (TA), the Tonle Sap Initiative is creating assets, infrastructure, and institutional capacity locally, while protecting the environment and natural resources of the Tonle Sap basin. The recently completed commune council buildings are centers for local authorities to better organize and implement service deliveries to communities.

To accelerate development and deepen the impact of the past investment and TA projects, additional support to strengthen community-driven development and to enhance household production, income, and access to technology, markets, and credit will be essential. The provision of rural finance will be essential to remove barriers that restrict supply and constrain access to credit by poor households. The segmented nature of the rural credit market, and the absence of properly functioning markets in the segments where the targeted beneficiaries are expected to operate, justifies improving access to rural finance.

Original project: Livelihoods in target communes in five provinces in Tonle Sap Basin improved by 2020

Overall project: Livelihoods and climate resilience in target communes in seven provinces in the Tonle Sap Basin improved.

Original project: Agricultural productivity increased and improved access to markets created in 196 communes in five provinces in Tonle Sap basin

Overall project: Agricultural productivity increased, climate and disaster resilience strengthened, and access to markets improved in 270 communes in seven provinces in the Tonle Sap Basin.

Original project: Community Driven Development through a commune block grant (a. Improving Rural Infrastructure, b. Improved capacity of smallholder farmers, c. Improved Commune Capacity for project management) / Overall project: Rural productive infrastructure and livelihood improved with capacity in disaster risk management enhanced

Original project: Enabling Environment for Increased Agricultural Productivity and Diversification (a. Improved agricultural policy environment, b. Improved agricultural policy environment, c. Increased access to agricultural information and market data) / Overall project: Enabling environment for increased agricultural productivity, diversification and climate resilience created.

Original project: Effective Project Management / Overall project: Project management strengthened.

Overall physical progress is satisfactory with 85% physical progress against the elapsed grant period of 80%. As of 30 June 2016, cumulative contracts awarded and disbursements were $41.35 million (83%) and $41.54 million (83.4%), respectively. Significant progress has been made towards achieving, and in some cases, exceeding the Project targets.

Under output 1 community driven development through a commune block grant, a total of 403 km of laterite/earth roads have been rehabilitated and irrigation systems have been improved to service 53,211 hectares of rice farmland against the targets of 90 km and 2,500 hectares, respectively. A number of 1,241 livelihood improvement groups (LIGs) have been established against the target of 1,200. Under output 2 enabling environment for increased agriculture productivity and diversification, The production of quality rice seeds to address a critical gap in rice production has exceeded the Project target.

Summary of progress per output

Output 1. Commune Development through a Block Grant

Currently 685 rural infrastructure sub-projects have been completed, comprising the construction of 403 km of rural roads and construction/rehabilitation of irrigation structures servicing 53,211 hectares. There are an additional 99 sub-projects identified for 2016 with 53 contract awards, of which 24 have commenced construction and 22 have completed construction.

1,241 livelihood improvement groups (LIGs) have been formed with a total membership of 30,050 households of which 82 percent are categorized as ID Poor 1 or 2 and 22 percent are Female Headed Households. Over 50,000 loans from the GRFs have been made so far to LIG members. The loans have focused on livestock raising (67 percent), rice production (18 percent) and cash crop production (7 percent). Although last year's drought adversely impacted rice production of many LIG members resulting in food shortage, good progress on livestock activities supported under the project has enabled farmers to receive additional income to buy enough rice and food for their families.

Output 2: Enabling Environment for Increased Agricultural Productivity and Diversification

For the introduction of Good Agricultural Practices (GAP) for fruit/vegetable production, training of trainer courses have been conducted in all provinces to develop the capacity of the project staff to implement the Farmer Field Schools for the GAP producer groups. There are 33 GAP producer groups established with a total of 756 (383 females) members. In addition, the development of a Master Plan for Crop production by 2030 in Cambodia is almost completed. In addition, contract farming agreements between farmers and groups and seed traders (including rice millers), with a total of 47 tons of rice seeds produced and sold.

Support for capacity development and production and storage facilities have been provided to the two Agriculture Stations which have produced 119 tons of certified rice seeds with sales of 109 tons, most of which were made to the 35 rice Seed producer Groups (RSPGs) that are being supported. Sixteen (16) storage warehouses have been constructed for the RSPGs and 31 small water pumps provided together with other small equipment and these groups have produced 1,660 tons of commercial rice seed to date.

A total of 1,075 on-farm demonstrations have been completed which includes 672 for crops, 383 for livestock and 20 for aquaculture. Field days have been conducted at every site either during the production cycle or at harvest with invitations extended to all LIGs in that commune to participate.

The project website (www.tssdcambodia.org) has been developed and regularly updated. The training videos have been gradually shared on Facebook and will be posted for wider sharing.

Output 3: Effective Project Management

Provincial and district monthly coordination meetings have been conducted on a regular basis. Good coordination of the agricultural activities is also maintained through the conduct of regular meetings and sharing of information. Full awareness of the content and scope of the annual work plan (AWPB) has been achieved through the conduct of planning workshops at the end of each year and provincial based launching workshops for the AWPB at the start of each year.

Goods and works financed partly or wholly by ADB will be procured in accordance with ADB's Procurement Guidelines. Equipment to be procured under the Project will consist primarily of office and training equipment, bicycles, motorbikes, utility vehicles, and minor construction equipment and tools. No contract package is expected to exceed $500,000 and international competitive bidding is not envisaged under the Project. Each contract costing between $100,000 and $500,000 will be awarded through national competitive bidding. Minor equipment and materials costing less than $100,000 will be procured through shopping.

Individual works contracts under Community driven development (block grant) will not exceed $20,000 and may be awarded to contractors selected according to the PIM. Work contracts under the CDF may also be awarded to community groups following procedures for community participation in procurement in accordance with ADB's Procurement Guidelines.

Civil works for Component 1, such as small water schemes, roads, markets, storage, fish pond, water supply and sanitation, and small village works, that cost less than $500,000 will be procured through local competitive bidding procedures acceptable to ADB. Individual works contracts not exceeding $20,000 may be awarded to contractors selected through local shopping or direct contracting. Work contracts may also be awarded to community groups following procedures for community participation in procurement in accordance with ADB's Procurement Guidelines.