Algeria - Second Rural Employment Project

Report No. PID10889 Project Name ALGERIA-Second Rural Employment Project (@) Region Middle East and North Africa Region Sector Crops (45%); Forestry (35%); Irrigation and drainage (10%); General agriculture; fishing and forestry sector (10%) Project ID P076784 Borrower(s) GOVERNMENT OF ALGERIA Implementing Agency Address MINISTRY OF AGRICULTURE AND RURAL DEVELOPMENT General Directorate of Forestry Address: Direction Generale des Forots, Parc Zoologique, Ben Aknoun, Alger, Algerie Contact Person: Monsieur Salah Bourahla, Directeur General Tel: 213 21 91 53 16 Fax: 213 21 91 53 17 Email: dgf@wissal.dz ; per2@wissal.dz ; per2bis@yahoo.fr Directorate of Investment Programming and Economic Studies Address: Direction de la Programmation des Investissements et des Etudes Economiques (DPIEE) MinistOre de l'Agriculture et de Developpement Rural Contact Person: Monsieur Idir Bais, Directeur Tel: 213 21 74 57 52 Fax: 213 21 74 57 52 Email: Idirbays@yahoo.fr Environment Category B Date PID Prepared March 20, 2003 Auth Appr/Negs Date September 20, 2002 Bank Approval Date April 29, 2003 1. Country and Sector Background The rural sector in Algeria bears a disproportionate burden in terms of poverty, unemployment and underemployment. The poverty assessment study carried out in 1996 indicates that 70 percent of the poor in Algeria are in rural areas and that there is a close relationship between poverty and unemployment. The rural areas are also affected by underemployment due to the seasonal nature of agricultural activities, hence agricultural labor productivity is considerably lower than that in the other sectors. Agriculture and agro-industry, dominated by private operators, have been a more dynamic element of the economy, exhibiting average growth rates above the economy-wide average. However, agriculture is also highly susceptible to climatic variability, and particularly drought, which has struck the  country persistently since the 90s, with some regions being particularly affected. This results in risk-averse technology choices by producers, with low levels of investment and technology and low average yields in critical (strategic) field crops, such as cereals. In order to stimulate the rural and agricultural sectors, the Government developed and implemented a National Agricultural Development Plan (Plan National de Developpement Agricole - PNDA) in 2000. Subsequently, in 2001, the Government initiated the five year PSRE (2001 - 2004) into which the PNDA was incorporated. After 2002, with the incorporation of the rural development perspective, PNDA became PNDAR. The objectives of the PNDAR are: (i) food security; (ii) exploitation of resources based on identified potential; and (iii) protection of the environment. However, the "identified potential" could have been overestimated and thus needs to based on research on both technical aspects as well as economic aspects (competitiveness) . The expectation that this potential is readily obtainable could have led to an emphasis on targeted development incentives through subsidies as the common policy instrument. The PNDAR is developed in the context of a market economy, and signals fundamentals such as "food security rather than self-sufficiency", "competitiveness", "comparative advantage", "optimal use of resources" (especially water), etc. These initiatives need to be supported by thorough policy analysis and have adequate impact monitoring. Staff capacity in the MADR needs to be reinforced in developing coherent programs around well assessed priorities, as well as for effective M&E. Participation. One important aspect of the PNDAR is that it is more reliant on decentralized processes and beneficiary participation than was the case historically. This is very important for the durability of the interventions and for reducing recurrent costs of O&M. The experience of the Rural Employment Project in this respect has been important. PNDAR is made up of four principal programs: (i) the adaptation of production systems to climatic conditions called reconversion; (ii) the modernization of farms, commonly called the FiliOre program; (iii) land development by concessions; and (iv) the national program of reforestation. The Reconversion Program aims to diversify agricultural production in the arid, semi-arid and sub-humid zones by reducing the fallow and by replacing low productivity cereals with other crops and activities that would: (i) manage the drought conditions better; (ii) arrest and reverse environmental degradation arising from cereal monoculture with fallow, especially soil erosion and the encroachment of the desert; and (iii) improve farmer incomes. The FiliOre Program targets products with large public consumption such as wheat and milk. These are development programs to encourage production and productivity increases through various incentives (financing inputs and wheat and milk producer price, interest rate and investment subsidies). They are also ambitious and entail large fiscal outlays which need to be adequately analyzed. The potential and actual impacts of this component need to be assessed. The Concession Program encourages specific development projects for diverse purposes (e.g., development of a small irrigation perimeter in a given location) . The projects need to be economically viable, socially acceptable and environmentally sustainable. There is an element of participation in financing in the costs of each project. If the project is -2 -  able to remain successful, after five years, all assets, including the land are supposed to be ceded to the beneficiaries. An assessment of the performance of the program is needed. In particular, given the current problematic state of land tenure rights, the cession of land to beneficiaries would have long term repercussions. The National Program of Reforestation targets the watersheds and mountain areas, using the model of the Rural Employment Project (Loan 4143-AL), namely both reforestation on public lands and expansion of fruit trees on private lands through labor-intensive methods. In addition, forestry related activities, such as plant production, are being introduced under concessions on public lands. The most serious environmental problem in rural areas is soil erosion. A major effort aims to focus defensive forestry and fruit tree establishment activities (reforestation, terracing, etc.) against soil erosion. These are efficient uses of public resources utilizing labor-intensive approaches. The Bank-supported ongoing Rural Employment Project is providing satisfactory results in this area. The Bank has already contributed to the National Program of Reforestation in the PNDAR and the PSRE by including a supplementary program for the wilayate (governorates) of Relizane and Mostaganem under the ongoing Rural Employment Project and by extending the closing date accordingly to allow for the realization of this supplementary program. New Initiatives for the Steppes. The challenging area of the management of the steppes as an ecological (diversity of flora and fauna) and economic asset (for grazing) will be tackled under a new initiative. These fragile areas are subject to severe pressure from grazing and illicit encroachment of cultivation, causing irreversible damage to the vast nappes alfatiOres which are critical to soil stabilization. Customary use rights based on tribal structures were at odds with development initiatives trying to establish control over the use of resources on these public lands. The new initiative now would recognize communities as the basic unit of development, in the spirit of decentralized and participatory approaches. Agricultural and Rural Development. The program of new Government appointed after the elections of May 2002 has reaffirmed the priority of agricultural and rural development and the continuation of the initiatives under PNDAR, focusing on employment, sustainable development and preservation of natural resources. One particular development was the establishment of State Minister (Ministre Delegue) post for Rural Development in the Ministry of Agriculture, which was renamed Ministry of Agriculture and Rural Development (MinistOre de l'Agriculture et du Developpement Rural - MADR). The ongoing Rural Employment Project has influenced policy perspectives on matters related to decentralized operations and participatory approaches for rural development. In this context, a new Agricultural and Rural Development Program (PADR) is being developed in the spirit of the Rural Employment Project with a "mise en valeur en proximite" perspective, implicating the decentralized administration of other ministries in the wilayate as well. In this respect, several inter-ministerial decisions have already been signed, in particular, one between the Ministry of the Interior and Municipalities (MICL) and the Ministry of Agriculture and Rural Development (MADR). The former is represented by the wali (governor), the chief administrator in each province. Hence, coordination for rural development is assured under the wali, implicating diverse ministries involved in rural development such as water resources, housing, health, education, etc. The proposed Second Rural Employment Rural Project will thus be the driving element of the PDAR and mise en valeur en - 3 -  proximite efforts in the targeted wilayate as well as the country as a whole. Financing of PNDAR. The PNDAR programs are financed through arrangements supported by different funds. The most important of these are the National Fund for the Regulation and Development of Agriculture (Fond National de la Regulation et de Developpement Agricole - FNRDA), which is now joined by the Fund for Rural Development and Land Development by Concessions (Fonds de Developpement Rural et de Mise en Valeur des Terres par Concessions - FDRMVTC). The FNRDA combines the two old funds for the Minimum Guaranteed Prices and the National Fund for Agricultural Development (Fond National de Developpement Agricole - FNDA). The National Agricultural Credit Union (Caisse National de Mutualite Agricole - CNMA), through its regional agencies of the Regional Agricultural Credit Union (Caisse National de Mutualite Agricole - CRMA), and the Agricultural and Rural Development Bank (Banque de l'Agriculture et du Developpement Rural - BADR) through its agencies, are the specialized financial institutions for the management of the funds mentioned above. The agricultural sector has been allocated a Program Authorization (Autorisation de Programme - AP) of 65 billion DA under the PSRE, which is equivalent to 12 percent of the total AP of 525 billion DA for a five year period (2001-2004). This total will be higher if the irrigation sector components, which are currently under the Hydraulique heading, and the rural infrastructure activities are included. The bulk of the AP for agriculture has been allocated to the reinforcement of programs supported by FNRDA (53.9 billion DA). There is a close dialogue and cooperation between the Government and the Bank in agriculture and rural development, which will be strengthened through the Institutional Development Component for MADR, focusing on training and studies on areas such as capacity development, M&E systems, rural poverty reduction, food security and competitiveness, agricultural credit mechanisms, etc. These activities will complement and provide inputs for the Rural Development Sector Strategy Note, planned for FY03. 2. Objectives The Project seeks to generate and stimulate rural employment in poor rural mountainous areas of northwest and north-central Algeria. In the first instance, the Project aims to respond in the short-term to the critical problem of unemployment in the target rural areas through direct employment creation, using labor-intensive civil works for natural resource management emphasizing soil erosion control. The longer-term perspective emphasizes the instrument of asset creation for stimulating employment, mainly through natural resource management, protection of the environment, water resource mobilization, and income-generating rural development activities aiming at the substitution of perennial tree crops in place of annual cereal production, with the purpose of increasing labor productivity in a sustainable manner. Asset creation is defined broadly as the enhanced availability of resources that can be used directly or indirectly in productive activities. Examples are infrastructure with important externalities; maintenance of the natural resource base by reducing soil erosion; perennial fruit tree orchards and vineyards adapted and appropriate for the agro-ecological environment instead of annual low productivity cereals; enhanced availability of water for irrigation and human - 4 -  consumption; etc. Unemployment is a structural problem in Algeria. Hence, longer term solutions are necessary to address the problem. Short term solutions such as direct transfers can alleviate shortfalls in income and consumption flows but need to be complemented by actions and measures with durable effects. In that context, it is necessary to focus on asset creation which will have longer term effects, particularly on labor productivity. 3. Rationale for Bank's Involvement The contributions of the Bank stem from the international experience gained in employment and social safety net type projects. This experience was influential in changing the policy perspectives in the MADR and DGF from relatively more capital-intensive towards small-scale, labor-intensive options. Again based on its international experience, the Bank has been able to cast the seeds of participatory approaches, limited and gradual as they may have been initially. This has been a major improvement over traditional top-down approaches. DGF has also found the technical, environmental, economic and social perspectives that the Bank has introduced to be effective, even if they were cumbersome to implement initially. This has now increased the rigor of the activities that DGF designs and implements. The Bank's emphasis on decentralized implementation and in the project design has encouraged and reinforced the decentralization of the DGF with activities that complement technical capacity with project management. Finally, the institutional development component targeting MADR will also benefit from Bank experience in policy analysis, M&E and participatory development. 4. Description Project design focuses on the basic objectives of direct and indirect employment creation. Direct employment creation aims to respond to the immediate problem of high unemployment in the project area, and indirect employment creation aims to enhance the options for medium to long term development for more sustainable employment through increased and more diversified production, both on-farm and off-farm through increased demand for upstream and downstream services. The project also aims to integrate rural women in project activities through direct access to project activities in general and through specific activities targeting rural women, difficult as this may prove to be given the existing socio-cultural conditions. As indicated in Annex 11 on Social Assessment, the project focuses on participatory approaches in order to enhance ownership of interventions and activities that are responsive to beneficiaries' needs. A preliminary survey, using project staff who received basic training in participatory approaches, assisted by trainers who had received training under the ongoing Rural Employment Project (PER1 - Loan 4143-AL) and coordinated by a team of consultants, used diverse techniques to assess the needs and constraints of men and women in the project zones (see Sondage Preliminaire in Documents in Project Files). This was a new experience for both the project staff and the beneficiaries in the project zones: the former for being able to work closely with the beneficiaries and respond to their needs, and the latter to find government agencies interested in their perspective on issues and priorities. As a consequence, project components were modified during project preparation to reflect the critical constraints in the project zone. These changes are mainly in the - 5-  increased emphasis on water resource mobilization and technical aspects of diversification. Ultimately, project implementation will also entail a degree of flexibility as is the case under PER1, to adapt to evolving conditions. The project will comprise the following components to be implemented by the centralized and decentralized administration of the Ministry of Agriculture and Rural Development (MADR) and the General Directorate of Forestry (DGF) through competitive market based procurement procedures, emphasizing small lots as the basis of contracts to encourage SME. Component 1: Soil Erosion Control (Total cost US$ 50.2 million; US$ 40.1 million Bank financing) This is the critical project component that will serve as the instrument for direct short-term employment creation, using labor-intensive techniques. The emphasis is on natural resource management targeting the critical problem of soil erosion. A critical aspect of this component is the employment of forest area riparians in a participatory manner to ensure the sustainability of interventions. Furthermore, where pertinent, forestry and forage species will be combined in planting activities to respond to the agro-pastoral characteristic of the project zone and pastoral management plans will be developed to promote the sustainable exploitation of the natural resource base for grazing. Specific activities comprise the following: reforestation; river bank management; terracing and biological control; flood control infrastructures; forestry rehabilitation; and silvicultural activities. Component 2: Agricultural Development (Total cost US$ 66.7 million; US$ 34.4 million Bank financing) This component aims to address employment within a medium to long term perspective through agricultural development activities in the mountainous project areas. These areas are currently characterized by a cereal-livestock system, mainly barley for feed and some wheat, and livestock, mainly ovines (sheep and goats). This component aims to diversify the production base by expanding the limited fruit tree production in the project area. Participation is a critical element of most agricultural development activities. In fruit tree planting activities beneficiaries will contribute to 50 percent of costs for digging the troughs and planting the trees. This participation will be either in the form of labor or actual financial contribution. No mechanical methods will be allowed except for the deep ploughing necessary for viticulture. In land clearing, beneficiaries will contribute 30 percent of costs through labor or finances. Women will benefit from agricultural development activities in an integral manner as well as through specific activities targeting rural women. Fruit tree, grapevine and small livestock activities will be closely associated with extension efforts through the Wilayate Agricultural Services Directorates (DSA - Directions des Services Agricoles) and the Wilayate Forestry Directorates (CDF - Conservations des Forots), with emphasis on the requirements for reaching female beneficiaries, choice of adapted species, cultural practices, including water-saving irrigation - 6 -  methods. Specific activities under this component are: rustic fruit tree plantations and irrigated fruit tree plantations; viticulture; plant material production; windbreaks; land clearing; rural roads (upgrading and rehabilitation); small livestock production; and artisanal activities. Component 3: Water Resource Mobilization (Total Cost US$ 15.5 million; US$12.4 million Bank financing) Water resource mobilization is critical to project activities. The project zone is characterized by low rainfall with significant intra- and inter-annual variation. While irrigation is practiced in the lower valleys through large irrigation schemes, in the mountainous and hilly areas the water potential is not adequately exploited for irrigation or potable water. In the project zone, capturing and managing existing water resources will be a critical factor in relieving some of the risks arising from variable agro-climatic conditions. This will also make clean potable water available to rural populations. As for irrigation, certain activities will require the prerequisite of water availability (e.g., irrigated fruit trees). Irrigation, in general, will allow more intensive and diversified agricultural production. Close coordination will be maintained with the Directions Hydraulique de Wilaya (DHW - Governorate Water Directorates) in water resource mobilization activities, particularly for the activities of hill dams and wells. The choice of the sites for the hill dams and deep wells will be authorized by the DHW, complemented by additional studies and exploratory drilling where necessary. In all cases, water has to be of adequate quantity and quality for the subsequent investment activity to be authorized. The specific activities under this component are as follows: hill dams (retenues collinaires) (where the height of the dam does not exceed 15 meters); water points; rehabilitation of springs; and shallow (30 - 50 m) and deep (50 - 100 m) wells. A hill dam will be subject to several conditions for the associated investments to be authorized by the Bank: Compliance with safeguards related to safety of dams (OP4.37) where necessary; Prior environmental impact studies; and Prior establishment and training of water users associations (WUA). Depending on the scale of the operation, WUA would also be required for deep wells. Complementary water saving irrigation equipment, such as drip irrigation systems, will be financed under the ongoing PNDAR/FNRDA activities. Component 4: Support for the Central Project Management Unit (Cellule Centrale de Gestion du Projet - CCGP) and Wilaya Coordination and Management Units (Cellules de Coordination et de Gestion de Wilaya - CCGW) (Total Cost US$ 4.6 million; US$ 3.2 million Bank financing) This component covers diverse activities such as training for DGF staff, -7 -  required studies, consultant services for M&E, and equipment and vehicles for the project management and implementation structure. The two important elements of this component are the training in participatory approaches for project staff and the independent M&E. These two activities are recent innovations for the DGF which are also having wider effect in other MADR projects. Specific activities will entail the following: (i) training activities such as participatory approaches, with a special perspective on gender-specific issues pertaining to women, targeting both male and female DGF staff; project management; information technology (IT), technical forestry subjects, etc.; (ii) studies such as the baseline survey, technical and environmental studies for water resource mobilization and rural road activities and marketing and socioeconomic impact; Monitoring and Evaluation (M&E) which will be carried out by independent consultants in a manner complementary to project implementation; and (iii) equipment comprising computers; office equipment, and vehicles. Component 5: Institutional Development for the Ministry of Agriculture and Rural Development (MADR) (Total Cost US$ 4.5 million; US$ 3.5 million Bank financing) During sectoral strategy discussions in the context of the new CAS and during project preparation, complementarities between some of the PNDAR and the two Rural Employment Projects objectives and instruments were noted in areas such as production diversification, protection of natural resources and water resource mobilization. Hence, a broader Institutional Development component for MADR was developed, targeting both the broader areas of policy design and implementation and M&E of development programs, and the specific context of the project area. For the project area, the focus would be on the complementarities between wilaya (governorate) level agencies, namely, the CDF, the DSA, and the Wilaya Water Directorates (Directions Hydrauliques de Wilaya - DHW), providing them with adequate training and/or equipment to ensure effective support to the collaborative project efforts in areas such as extension, facilitation of credit applications, etc. On the general focus of the Institutional Development component, a significant part of the resources would be allocated to training programs targeting the decentralized administration. This training would facilitate capacity development in implementing market-oriented rural development programs, giving authority and responsibility to regional and wilaya staff through diverse tools such as participatory approaches. The Institutional Development activities for MADR comprise the following: training for the central and decentralized administration on rural development strategies; impact assessment of development policies and policy analysis instruments; M&E instruments and methods, and pilot integrated rural development projects for training purposes. The Institutional Development activities will also incorporate gender-specific matters focusing on women and targeting both male and female staff. Erosion control measures Agricultural development Water resource mobilization Support for the CCGP and CCGW Institutional Development for MADR -8-  Unallocated 5. Financing Total ( US$m) BORROWER $24.22 IBRD $95.00 IDA LOCAL SOURCES OF BORROWING COUNTRY $23.67 Total Project Cost $142.89 6. Implementation Implementation period: Five and a half years (last six months for ex post assessment). Executing agency: General Directorate of Forestry (DGF) of the Ministry of Agriculture and Rural Development (MADR) for the first four components (Erosion Control; Agricultural Development; Water Resource Mobilization; and Support for the CCGP and CCGW) and the Directorate of Investment Programming and Economic Studies (DPIEE) of the MADR for the fifth component (Institutional Development for the MADR). The project will use the same implementation design as the ongoing Rural Employment Project (Loan 4143-AL), with minor modifications. The staff of the CDF in charge of implementing the ongoing project met with the staff of the CDF in the proposed project and discussed organizational issues, among others, in the context of lessons learnt. In addition, the Conservateurs of the proposed project have had a field visit to observe implementation of the ongoing project in September 2002. This implementation design maintains the basis of the decentralized DGF structure, which devolves responsibility for day-to-day management of project activities to local levels of the wilaya level organization: Central level. A central project management unit (CCGP) within the DGF would be responsible for overall project coordination and administration, including project accounting and disbursement; management of the project special account; and ensuring timely audits and M&E (see below). It would also be the principal interlocutor of the Bank on procurement matters, periodic progress reporting, etc., in accordance with procedures agreed upon at appraisal and integrated into the PIM, similar to those used in the ongoing Rural Employment Project. CCGP staff will entail a multidisciplinary team comprising a project manager (Chef de Projet), a forester/agronomist (to be nominated), an economist, a sociologist and an accountant responsible for procurement and financial management. There will be close coordination with the Project Management Unit (CGP) of the ongoing Rural Employment Project. Regional level. The DGF's Directorates (CDF) in each wilaya will be responsible for project implementation, which will be coordinated by a wilaya level project management unit (CCGW) under the responsibility of the Director (Conservateur) and headed by a unit chief (Chef de Cellule). The CCGW will have technical expertise, staff responsible for procurement and financial management, staff in charge of the integration of rural women in project activities and office staff. Specifically, CCGW will execute the annual programs and coordinate project actions in the respective wilayate at the level of the perimeter (see next point); manage -9-  the human, financial and material resources at the wilaya level, including procurement for works; and coordinate the M&E of project performance at the wilaya level, through supervising each perimeter. The CCGW will be responsible for liaison with the DGF hierarchy as well as public and private agencies or organizations (Chambers of Agriculture, NGO, cooperatives, Directorates of Agricultural Services - DSA, Directorates of Water Resources-DHW, extension agents, etc.). Communal level. Groups of 6-12 contiguous communes in the project area will be organized into Perimeters (PerimOtres) under a Chef de PerimOtre. The Perimeter will be the basic unit for project implementation and interface with the communities, with support from the CCGW staff. The Perimeter will be responsible for the physical monitoring of project activities as well as the linkages with the communities. The Perimeter staff will comprise the technical DGF staff at the circonscription (commune) level. For the Institutional Development component for MADR, the implementing agency will be the Directorate of Investment Programming and Economic Studies (DPIEE) of the MADR. However, to facilitate processes and take advantage of the experience of the DGF, procurement will be managed by the DGF, while DPIEE, through the services of a consultant, will be in charge of developing the TOR for the various institutional development activities under the component and supervise and coordinate the products. At the perimeter level, commune level DGF field staff will work directly with beneficiaries at the grass roots douar level, using participatory approaches in implementing the project. This process will enhance bottom-up flows that will affect project activities. In order to ensure that the project reaches out the intended beneficiaries, specific targeting criteria have been incorporated in the project design (See Annex 11 on Social Assessment). The use of a double approach to beneficiary targeting (self-targeting mechanisms and direct targeting by the DGF staff) will allow vulnerable groups to be the main beneficiaries of project interventions. All DGF field agents who will be involved in project implementation will receive training on participatory and gender-sensitive approaches that will help them build effective partnerships with the project beneficiaries. Within the above decentralized management framework, project activities would be executed mainly by local private and public enterprises through competitive processes. Force account will not be used. Maintenance of investments on private lands will be the responsibility of the beneficiaries themselves. For certain water resource mobilization activities, water users associations (WUA) will be established to manage and maintain the water infrastructures through a cahier de charges. The Project organization described above is in place, with all but a few staff remaining to be nominated. Some of these staff have already benefited from ongoing training in participatory approaches and project management. They have also been actively involved in project preparation activities. One area which needs to be improved upon is the identification, recruitment and maintaining of effective female staff who will be the main counterparts of women beneficiaries. The inherent difficulties reflect partly the social and cultural context and are expected to be resolved gradually during project implementation. - 10 -  Project organization will reinforced with diverse training activities for project management, M&E, gender issues, participatory approaches, technical training, IT training, etc., and be equipped with vehicles and office equipment. The responsibility for the financial management of the project for the first four components of PER2 will be with the DGF, and for the fifth component will be with the DPIEE. The financial management system at the implementing agencies is based on principles and procedures defined by the legal framework applicable to the public sector which follow strict enforcement procedures through formal stages of expenditure (commitment, service delivery, payment order, and payment). The financial management system, which is summarized in Annex 6b and detailed in the PIM, is adequate and meet the minimum accounting and reporting requirements of the Bank for accounting and reporting. Both the DGF and each of the six CDF will incur project expenditures, and approve payments following the budget execution processes that are in line with the prevailing laws and regulations in Algeria. The Banque Algerienne de Developpement (BAD) and its regional offices acting both as the financial controller (Contr