Moldova - Emergency Drought Recovery Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 14899 IMPLEMENTATION COMPLETION REPORT MOLDOVA EMERGENCY DROUGHT RECOVERY PROJECT LOAN NO. 3569-MD JULY 21, 1995 Natural Resource Management Division Country Department IV Europe and Central Asia This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS ( December 1994) Currency Unit = Moldovan Leu US $ 1.00 = 4.38 Lei WEIGHTS AND MEASURES Metric System FISCAL YEAR OF BORROWER January I - December 31 ABBREVIATIONS AND ACRONYMS FSU Former Soviet Union MINFIN Ministry of Finance MFER Ministry of Foreign Economic Relations MAF Ministry of Agriculture and Food MOLDEXIM Importing Agent (Parastatal) FERTILITATEA Distributing Agent for Agrocliemicals (Parastatal) ARKA MOLDOVA Distributing Agent for Spare Parts (Parastatal) CEREALE Distributing Agent for Poultry Feed (Parastatal) q/ha Quintals (100 kg) per hectare a.i. Active Ingredient (Active Chemical in Pesticides) IS International Shopping LIB Limited International Bidding  FOR OFFICIAL USE ONLY CONTENTS Preface. Evaluation Summary . ...ii PART 1. Project Implementation Assessment . ...I Introduction.I Project Objectives ... 2 Implementation Experience and Results .. . 3 Agrochemicals .................................................. .4 Seeds and Drills. 6 Spare Parts ... 7 Poultry Feed ... 7 Project Sustainability ... 8 Bank Performance. 8 Borrower Performance. 9 Assessment of Outcome. 9 Future Operations... . 9 Key Lessons Learned ... 10 PART 11. Statistical Annexes . 11 Table 1: Summary of Assessments .. . 12 Table 2: Related Bank Loans/Credits .. . 13 Table 3: Project Timetable .. . 13 Table 4: Loan Disbursements: Cumulative Estimated and Actual .... 14 Table 5: Key Indicators for Project Implementation .. . 14 Table 6: Key Indicators for Project Operation .. . 14 Table 7: Studies Included in Project .. . 14 Table 8A: Project Costs .. . 15 Table 8B: Project Financing .. . 15 Table 9: Economic Costs and Benefits .. . 15 Table 10: Status of Legal Covenants .. . 15 Table I 1: Compliance with Operational Manual Statements .. . 16 Table 12: Bank Resources: Staff Inputs .. . 16 Table 13: Bank Resources: Missions .. . 17 Appendixes: A. Mission's Aide-memoire B. Map This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. |  I  IMPLEMENTATION COMPLETION REPORT MOLDOVA EMERGENCY DROUGHT RECOVERY PROJECT [Loan no. 3569 MD] Preface This is the Implementation Completion Report (ICR) for the Emergency Drought Recovery Project in Moldova, for which a loan in the amount of US$ 26.0 million was approved on March 11, 1993 and made effective on March 19, 1993. The loan was closed on March 31, 1994, the original closing date. Disbursements under the loan were completed on April 14, 1994 with the cancellation of US$ 176,865.96, representing the undisbursed amount of the loan. The ICR was prepared by Oskar Honisch, Natural Resources Management Division (EC4NR), Europe and Central Asia Region, and reviewed by Mr. Geoffrey Fox, Division Chief (EC4NR), and Ms. Judy O'Connor, Principal Operations Officer (EC4DR). Preparation of this ICR was begun during the Bank's final supervision mission in May 1994, and information was updated during a mission in December, 1994. It is based on material in the project file. The Borrower contributed to preparation of the ICR by providing comments on the project and statistical data.  I l ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~  IMPLEMENTATION COMPLETION REPORT MOLDOVA EMERGENCY DROUGHT RECOVERY PROJECT [Loan no. 3569 MD] Evaluation Summary Introduction 1. Agriculture and food processing make up more than half of Moldovan economic activity. Important products include fruits and berries for processing, tobacco, wine grapes, winter wheat, maize, and grain-intensive livestock. Around half a million ha (about 21% of agricultural land) are planted in fruits, vegetables, and vineyards. These are high value crops more prone to pest infestation than most annual field crops. The product mix reflects Moldova's labor -intensive resource base as well as its fertile soils. 2. The Republic of Moldova became independent on August 27, 1991 at a time of severe economic dislocation as a result of the disintegration of the USSR. This dislocation was exacerbated by a serious civil disturbance in the Trans-Dniester region in mid-1992 and a massive terms of trade shock as Russian energy prices rose toward world levels. In the summer of 1992, the situation was compounded by the worst drought since 1946. A lack of mid and late summer rains, coupled with much higher than average temperatures and an unusually high incidence of days with hot dry winds (sukhovei), inflicted heavy damage on annual crops, as well as fruits and vineyards. 3. In 1992 overall cereal production declined by 32%, of which maize by 58%. Serious decreases in yields and production also occurred in sugar beet, tobacco and soybeans; fruits yielded only some 30-40% of normal production, and grapes were half the usual yields. Valuation of the direct loss in output in the crop sector at domestic prices prevailing on average in 1992 (approximately third quarter prices) was about 40 billion Rubles, or some 16% of Moldovan GDP in 1992. 4. While in the medium-term there was need for further institutional and policy reforms in the agricultural sector, in the short term external assistance had to be targeted to arresting the productivity decline and restoring productive capacity, as it contributes about 40% of the country's net material product and it employs one third of the labor force. Agricultural chemicals, fuel, fertilizer, and spare parts are predominantly imported, traditionally from the FSU, though some western imports have been transshipped via Moscow. Neither the farms nor the Government had financial reserves with which to procure commercial imports, yet the country could not afford to risk the large losses likely if vines and orchards, already weakened by the 1992 drought, were left exposed to the 1993 season's diseases and insects. The Government requested emergency assistance from the Bank to help alleviate the serious impact of the drought. 5. Moldova joined the Bank on August 12, 1992. This loan was the first to the country. The appraisal mission enjoyed close collaboration with the Moldovan authorities and a fruitful policy dialogue on the agricultural sector developed, leading to very satisfactory economic and investment lending cooperation.  - Iii- Project Objectives 6. The main objective of the project was to provide fast disbursing funds to assist recovery from the catastrophic 1992 drought. The project aimed to increase the availability of food for the domestic economy and exports, and to reduce increasing poverty and hardship, by restoring production in the key sector of the economy. The loan provided inputs essential for the 1993 agricultural season. It assisted in raising production and exports, thus narrowing the balance of payments gap resulting from substantial incremental food imports. The objective was to be accomplished through fast imports, and well planned local distribution and sales of the critical inputs to the farming community. In-country technical assistance was to be provided for guidance in procurement and disbursement. Implementation Experience and Results 7. While project processing started only in mid-January 1993 with a first field visit, and implementation was substantially completed by the end of 1993, the project's main objective was achieved. The bulk of the imported inputs arrived in time to be utilized for the 1993 agricultural season. Early identification of critical procurement items and procurement packages during project preparation, coupled with technical assistance for procurement and disbursement during implementation had a major part in the project's success. The TA was particularly useful, given the Borrower's lack of experience with the Bank's procedures and with competitive procurement. Partly as a result of timely provision of project financed technical inputs, helped by more normal precipitation, production of major crops substantially increased in 1993, providing food, poverty reduction and increased agricultural export earnings. The institutional capability, in terms of financial management and discipline and procurement procedures in the enterprises involved in the project, was considerably strengthened through strict monitoring by MINFIN and inputs of the TA. 8. Agrochemicals represented some 60% of project costs and were the single most critical component for the implementation of the 1993 agricultural season. Seven agrochemicals, required according to the established Moldovan agricultural calendar by April 15, were procured and delivered on time through International Shopping (IS). The remaining ones with later target delivery dates were purchased on time using Limited International Bidding (LIB) procedures. Companies from seven countries participated in the bidding and price competition was satisfactory. The benefits of competitive purchasing were highlighted by substantial variations in bid prices and an overall saving of over $ 840,000 from the estimated cost of $ 15.7 million, thus providing a valuable example for the Borrower who had in the past consistently relied on direct contracting, and was initially unreceptive to international competition. 9. All agrochemicals had a highly positive impact on production. Overall, the impact of project- financed inputs, coupled with a more normal rainfall season in 1993, was best demonstrated in the most pest-prone crops, such as fruits, grapes, potatoes and sugar beet, where the modem pesticides, drills and hybrid seed were primarily used. The spare parts for harvesters, fertilizer, spraying and irrigation equipment, and diesel engines, imported under the project, contributed to timely performance of a number of important field operations. Fruit production in 1993 more than doubled compared with 1992 (1,038,000 t versus 511,000 t), while grape production increased by 7%, potato production by 36%, and sugar beet production rose by 14%. In comparison to 1991, fruit production was 49% higher, grape production 14%, potato production 45%, but sugar beet output declined by 11%. However, the sugar beet area cultivated with project-imported inputs gave outstanding results (para 13). In contrast to 1993, the agricultural season of 1994 was affected by yet another disastrous drought and other climatic calamities, with production of all crops, except potatoes and fruits, falling even below 1992 levels.  - iii - 10. In 1992/93, there was a great qualitative difference between pesticides produced in countries of the FSU, and those produced in western countries. The latter were considerably safer, more efficient, with a faster rate of biodegradability, requiring much lower quantities of active ingredient (a.i.) per unit area. Some of the best pesticides required only several hundred grams, or even less, of a.i. per ha, with 5-8 kg/ha, and in extreme cases even well over 30 kg/ha, needed for many of the FSU pesticides. Consequently, the modern pesticides imported under the project had a clearly positive environmental impact. 11. Some criticism has been raised that due to project interventions, production was so high in some farms in 1993 that it could not be harvested, resulting in substantial losses occurred due to inadequate infrastructure for harvesting. According to the highest sources in the Ministry of Agriculture and Food (MAF), these losses were no more serious than in some other years. They were reportedly caused primarily by a critical shortage of fuel which resulted in the inability to transport the produce from the field to markets and processing plants, and by the early onset of unusually strong and long lasting frosts. 12. The project helped to restore production in the agricultural sector by providing essential inputs rather than developing stronger capital assets. Medium- to long-term, sustainability in the agricultural sector depends on progress in macro-economic and agricultural sector policy, institutional reforms and economic restructuring. The project contributed to sustainability by reducing the risk that the restructuring process would be retarded or even reversed because of the potential for another unfavorable agricultural year. 13. Sustainability is not as critical in emergency projects financing immediate, urgently required inputs. Nonetheless, the project did generate some longer-term benefits which are worth mentioning. A successful technical cooperation emerged between the Moldovan firm that assembled precision drills and the western company which delivered the essential technical parts for assembly, in the form of engineering cooperation and training of Moldovan engineers and technicians in the design bureaus and workshops of the western company. The excellent sugar beet results achieved with western technology in 1993 encouraged the Government to import more seed and precision drills for the 1994 season. Continued application of this modern production technology is likely to become a permanent feature of Moldovan agriculture. The critical spare parts delivered under the project for some essential machines (drills, fertilizer spreaders, sprayers, forage harvesters) are likely to extend the economic life of these machines for a number of years. It is safe to assume that the well targeted crop protection applications of 1993, made possible through project financing, will keep some pest populations down for another few seasons. 14. In view of the urgency of the assistance to Moldovan agriculture, the Bank used an innovative and rapid approach to project processing. A competent seven member team spent three weeks in the field, during which, in a single mission, the project was fully identified, prepared, appraised, and negotiated. Thirty three days after the mission's return the project was approved by the Board, eight days later it became effective, and nine months later, by the end of 1993, it was essentially fully disbursed (98%). 15. The project was supervised three times. A short initial supervision was made in March 1993 in conjunction with an Agricultural Sector Review mission; the second (and first full) supervision occurred in September 1993 and the third (and final full) supervision was completed in May 1994. Some updated information for the ICR was collected in December 1994 in combination with other mission assignments. Supervision was carried out in a timely and competent fashion, as evidenced by project results. 16. The Borrower was committed and involved in the project throughout implementation. Both the Ministry of Finance (MINFIN), and the then Ministry of Foreign Economic Relations (MFER), (absorbed in spring 1994 into the Ministry of Economy) followed project implementation continuously and provided  - iv - good cooperation to visiting missions. In line with Article IV of the Loan Agreement stipulating maintenance of separate project records and accounts, the MINFIN created a special non-budget account for project fund recovery from the Distribution Agents, set rules for prices of goods to be sold under the project (essentially world market prices plus commission fees and handling costs), and monitored on a monthly basis all financial transactions of the Importing Agent and the Distribution Agents. 17. Presentation of the one and only audit of the project accounts required by the Loan Agreement was delayed by about four months. Despite the fact that it was the first audit prepared by Moldova for the Bank or any other multilateral donor, it was of acceptable quality. The delay was understandable; it was caused primarily by the spring 1993 parliamentary elections and changes in Government, by departures of competent personnel with whom Bank missions had earlier contact and agreements for assignments in the private sector, and by the general inexperience of the Borrower. The Borrower did not provide a written Implementation Completion Report, but observations and comments of the various agencies have been incorporated into this report. Government opinion of the project design and its implementation has been highly complimentary. 18. The Importing Agent, MOLDEXIM, performed commendable work, largely based on its previous commercial experience. It was very competently assisted by the project financed procurement and disbursement Consultants recruited by the then MFER. All the Distribution Agents had ample experience with supply and distribution, and an established country-wide network of warehouses and supply depots, which ensured a timely and equitable distribution of the inputs procured under the project. 19. Project implementation and results are rated as highly satisfactory. The well targeted project interventions contributed to substantial increases in agricultural production in 1993. The solid performance in Moldova's most important sector in 1993 also greatly contributed to macroeconomic stabilization. Summary of Findings, Future Operations, and Key Lessons Learned 20. The Drought Emergency Recovery Project was designed as a short term emergency operation and there are no provisions for a future operation. The Bank made a Rehabilitation loan of $ 60 million in October 1993, a Structural Adjustment loan of $ 60 million in December 1994, and a Pre-export Loan Guarantee Facility of $ 30 million in March 1995. An Agricultural Sector Review was completed in February 1995 and in line with its policy recommendations an Agricultural Restructuring Project is under preparation and an Agricultural Sector Adjustment loan and an Irrigation project are in the pipeline. These projects will be discussed with the Government as part of a three year agricultural investment program which will be the centerpiece of the Bank's Country Assistance Strategy for the same period. 21. The summary of main lessons learned: (a) Projects of this type work well if they have clear, well defined, and simple objectives; a committed Government; adequate infrastructure including, in this case, storage and transportation capacity; and, a farming community eager for assistance; (b) An essential pre-condition for successful preparation of this type of emergency project, mostly technical in character, is selection of competent professionals for Bank missions who are able to do the assignment expertly and quickly. Rapid understanding of the country's agro-ecological conditions and farming systems, quick analyses of operational constraints, and a clear and realistic identification of priority components to be financed under the project, is a key step to success;  - v - (c) First time projects in inexperienced Borrower countries require higher than average implementation support from the Bank through more frequent supervision missions and well targeted technical assistance. In-country assistance for several weeks or even months for procurement, and to a lesser degree disbursement, is unavoidable for fast implementation; (d) Importation of bulky commodities into inexperienced landlocked Borrower countries with little known customs and handling procedures in country of transit, as well as destination, might cause special problems to potential bidders. Careful preparation of bidding documents taking account of potential constraints for bid validity, delivery dates, and transportation arrangements are very important. Contract management after bid award has also been found to require heightened attention and support; (e) Contrary to some uninformed beliefs, it is not only possible but also economically well justified, to introduce modem technology into FSU countries in transition, provided the technology is well selected and adapted; and (f) Importations of machinery components and spare parts destined for full assembly in FSU Borrower countries can be successfully used to promote excellent west/east technical cooperation.   IPLEMENTATION COMPLETION REPORT MOLDOVA EMERGENCY DROUGHT RECOVERY PROJECT Loan no. 3569 MD PART I. PROJECT IMPLEMENTATION ASSESSMENT Introduction 1. Moldova is a densely settled rural country in which agriculture and food processing directly support more than half of the population. Agriculture contributes approximately 40% of GDP, more than half of the population of 4.4 million lives in rural areas, and food processing is a major employer within the industrial sector. Important products include fruits and berries for processing, tobacco, wine grapes, winter wheat, maize, and grain-intensive livestock. Around half a million ha (about 21 % of agricultural land) are under fruit, vegetable and vineyard cultivation. These high value crops are more prone to pest infestation than most annual field crops. The product mix reflects Moldova's labor-intensive resource base as well as its fertile soils. 2. The Republic of Moldova became independent on August 27, 1991, at a time of severe economic dislocation as a result of the disintegration of the USSR. This dislocation was exacerbated by serious civil disturbance in the Trans-Dniester region (where the Russian minority is strongly represented) from March to July 1992, and a massive terms of trade shock as Russian energy prices rose toward world levels. Moldova's membership in the Ruble area meant that these developments took place against the background of considerable macroeconomic instability. By the end of 1992, GDP was estimated to have declined by over 40 percent since 1990, and inflation had reached 1500 percent on an annual basis. 3. In the summer of 1992, this situation was compounded by the worst drought since 1946. Much lower than normal rains in mid and late summer, coupled with significantly higher than average temperatures, and an unusually high incidence of days with hot dry winds (sukhovei), inflicted heavy damage on annual crops, as well on as fruits and vineyards. In July and August, some of Moldova's districts received less than 20% of their normal monthly rainfall; hardest hit were the southern districts, but also many districts in the center and north were badly affected. As a result of this unfortunate combination of meteorological effects, overall cereal production declined by 32%, of which maize declined by 58%. Further serious decreases in yield and production occurred in sugar beet, tobacco, and soybeans. Fruits were 30-40% of normnal yields, and grapes only half their usual yields. Valuation of the direct loss in output in the crop sector at domestic prices prevailing on average in 1992 (about third quarter, 1992) amounted to some 40 billion Rubles (about US $100 million) or approximately 16% of Moldovan GDP in 1992. The large quantitative loss, coming at a time of profound political and economic change, had a further impact through slowing of the momentum of economic reforms. 4. Agricultural chemicals, fuel, fertilizers, and spare parts are predominantly imported, traditionally from the former Soviet Union, although there were some western imports transshipped through Moscow. Because of the massive downtum in earnings, neither the farms nor the Government had reserves to finance commercial imports, even though the country could ill afford to risk the large losses likely, if vines and orchards already weakened by the 1992 drought were exposed unprotected to the 1993 season's diseases and insects, and if essential spare parts and feed components were unavailable for the coming  production season. 5. Moldova joined the Bank on August 12, 1992. This loan was the first to the country. Bank missions worked in very close collaboration with the Moldovan authorities, and a fruitful policy dialogue developed. The missions have been consistently impressed by the professionalism of an overburdened administration, laboring with the enormous task of creating an independent state. Project Objectives 6. The general economic downturn, due in part to the drought, had channelled the attention of sectoral managers toward short-term crisis management. While in the medium-term there was need for further institutional and policy reforms, in the short-term external assistance had to be targeted to arresting the deterioration in the agricultural sector and restoring productive capacity. 7. The Bank's objective in funding this loan was to provide the Government of Moldova with urgently needed resources to assist recovery from the catastrophic 1992 drought. The project aimed to increase the availability of food for the domestic economy and exports, and to facilitate a reduction of poverty, through the restoration of production in the most important sector of the economy. It did so by providing inputs that were essential for the (then) coming agricultural season (beginniing in March 1993). At the same time the loan aimed to assist in narrowing the balance of payments gap resulting from substantial incremental food imports and the sharp decline in agricultural exports resulting from the drought. 8. The project's objectives were substantially achieved. Despite the late start for processing of the project (in the field in mid-January 1993), the bulk of the imported inputs arrived in time and could be utilized for the 1993 agricultural season. Competent technical assistance for procurement and disbursement played a major role in project implementation, given the Borrower's lack of experience with the Bank. The resulting increased production of major crops assisted in availability of food, poverty reduction, and export promotion. The process of project implementation resulted in substantial familiarization with Bank procedures. The institutional capability in terms of financial management and discipline, and procurement and disbursement procedures, in the enterprises involved in the project was considerably strengthened. The Proiect 9. The cooperation between Moldovan authorities and the Bank's preparation/appraisal mission was excellent. A detailed technical analysis of the most urgently required inputs for drought recovery was carried out in collaboration with several specialized supply agencies, based on thorough knowledge of the country's aero-ecology and agricultural systems by competent local technical professionals. The close interaction during project preparation ensured a clear and realistic estimation of the priority goods needed, including precise delivery schedules, and detailed modes of storage, distribution, and sales. The day-to- day collaboration with the Bank ensured the Borrower's intimate knowledge, ownership, and complete commitment to the project. 10. The project financed inputs for the 1993 agricultural season, targeted towards those sectors which appeared to have a long-term comparative advantage. A positive list of goods had been agreed to each of the four categories of inputs. The Bank loan of $ 26 million included retroactive financing amounting to US $5.2 million for seeds and agricultural machines and spare parts, and a Project Preparation Advance of $ 150,000 for technical assistance. The final beneficiaries, mostly former cooperative and state farms, were fully responsible for the local costs of the project, which consisted of the costs of storage and distribution, estimated at 20% of the value of the inputs financed by the project, or US $5.2 million.  -3- Implementation Experience and Results Project Management 11. The Ministry for Foreign Economic Relations (MFER) and the Ministry of Finance (MINFIN) were responsible for the implementation of the project and they supervised the functions of the Importing and Distribution Agents. A Vice-Minister was in charge of the operation. 12. MFER appointed MOLDEXIM, one of its agencies, as the Importing Agent responsible for the procurement and importation of all goods financed under the loan. Technical Assistance was procured directly by the MFER. 13. The Importing Agent transferred the imported goods to the Distribution Agents, who were responsible for their distribution and sales to the final users. The Government identified the following Distribution Agents, all of which were Govemment agencies: FERTILITATEA, for the agrochemicals; CEREALE, for the seeds, seed equipment and poultry feed; and ARKA MOLDOVA, for the agricultural spare parts. Technical Assistance 14. Since neither the importing agent nor the Government had any experience in procurement and disbursement for World Bank operations, it was agreed with the Government that technical assistance was essential to ensure speedy implementation of the project. A Procurement and a Disbursement consultant were identified and recruited under a PPF. Government decided that the consultants would report to the MFER and would assist MOLDEXIM. Delivery Schedule of Goods 15. MOLDEXIM carried out all procurement activities with the guidance and advice from the consultant team. A procurement plan was prepared on the basis of positive lists of imports furnished by the Distribution Agents to MOLDEXIM. These lists included quantities, technical specifications, target delivery dates, delivery points, packing information, and transportation modes. In accordance with the Procurement Schedule of the Loan Agreement, the following goods were to be procured competitively: (a) Over 1,300 tons of 15 different agrochemicals (estimated at $ 15.7 million), the bulk of which was to be delivered between April 1 and May 15, with the remaining about 70 tons required by August 1, 1993; (b) About 40,000 tons of poultry feed ($ 6 million), consisting of 26,000 tons of grain maize, 10,000 tons of fodder barley, and 4,000 tons of soybean seedcake, to be delivered by end May, 1993; (c) Twelve thousand units of sugar beet seed estimated to cost $ 800,000 and to be received by April 10, and 150 tons of soybean seed valued at 200,000 and to be delivered by April 15, 1993; and (d) Some 1,500 heavy duty batteries ($ 200,000) for tractors and loaders, to be delivered by May 31, and spare parts ($ 1.8 million) for forage harvesters, fertilizer distributors, pesticide sprayers, irrigation equipment, milking and refrigerating machines, and diesel engines, to be delivered between April and June, 1993.  -4 - Project Implementation Agrochemicals 16. Agrochemicals represented some 60% of project costs and were the single most critical component, in terms of availability and timeliness, for the implementation of the 1993 agricultural season. Seven agrochemicals, required in accordance with the established Moldovan agricultural calendar by April 15, were procured through IS, while the remaining ones with target delivery dates May I and later were purchased through LIB procedures. Companies from seven countries participated in the bidding and price competition was satisfactory. The benefits of competitive purchasing were highlighted by substantial variations in bid prices and an overall saving of over $ 840,000 from the estimated cost of $ 15.7 million, providing a valuable example for the Borrower who had in the past consistently resorted to direct contracting, and was initially unreceptive to international competition. 17. All agrochemicals arrived in Moldova in time for the growing season and had a highly visible and positive impact on production. According to Ministry of Agriculture estimates, without the project supplied agrochemicals less than half (30-40%) of the actual yields in treated orchards, vineyards and vegetables, and only about 70% of the actual yields in treated field crops would have been achieved. Although these estimates might look somewhat optimistic,.field confirmation of similar results was obtained in several enterprises. One example is the former kolkhoz "Nistru" in Dondusheni district, which received project supplied pesticides for fruit crops. The farm has 800 ha of orchards and the best production they ever had from this area before was 3,500 tons; in 1993 the harvested 6,000 tons, an increase of 70%. 18. Overall, the impact of the project financed inputs, coupled with a more normal rainfall season in 1993, has been probably best demonstrated in the most pest-prone crops, such as fruits, grapes, potatoes and sugar beet, where the modem pesticides, and in the case of beet the modem drills and hybrid seed were mostly used. Fruit production in 1993 more than doubled compared to 1992 (1,038,000 t versus 511,000 t, and it was 49% higher than in 1991). Grape production increased by 7%, potato production with 45,700 t was 36% higher than in 1992, and sugar beet production rose by 14%. These figures cannot, of course, strictly isolate the impact of project financed modem agrochemicals, because for no single crop group was the quantity of the chemical sufficient to treat adequately the whole nationally cultivated area. 19. In comparison to 1991, fruit production was 49% higher, grape production 14%, potato production 45%, but sugar beet declined by 11% in 1993. However, the sugar beet area cultivated with project- imported inputs gave outstanding results (para 27). The agricultural season of 1994 was affected by yet another disastrous drought and other climatic calamities, with production of all crops, except potatoes and fruits, falling even below 1992 levels. 20. Table I below gives an indication of the total areas of the more important crops which were treated with crop protection chemicals. These include, however, in addition to the project supplied pesticides, another up to 4,000 tons of pesticides (of which 88% sulphur and copper based fungicides), which Moldova secured from countries of the FSU. A treatment coefficient (TC) of I in the table would mean that the equivalent of the entire cultivated area was treated once with crop protection chemicals. 21. It is evident from Table I that fruits and grapes, followed by vegetables and sugar beet, received the most pest control attention in the 1993 season. It is further evident that fungus diseases posed the biggest threat to fruit and grape production.  Table 1 Areas Treated with Crop Protection Chemicals in 1993 Major Crop Areas Areas Treated in 1993 with Cultivated in 1993 (ha) Insecticides J Fungicides Herbicides J __ _ - _ _ _ ha TC ha TC ha TC Fruits 203,800 487,100 2.4 591,700 2.9 2,900 <0.1 Grapes 161,720 29,400 0.2 473,200 2.9 1,400 <0.1 Vegetables 74,160 42,300 0.6 65,000 0.9 8,300 0.1 | Sugar beet 80,000 l 78,100 1.0 400 <0.1 43,400 0 [Source: FERTILITATEA Environmental Effect 22. In 1992/93, there was a great qualitative difference between pesticides produced in countries of the FSU, and those produced in western countries. The latter are considerably safer, more efficient, have a faster rate of biodegradability, and require much lower quantities of active ingredient (a.i.) per unit area. Some of the best pesticides required only several hundred grams, or even less, of a.i. per ha, while for many of the FSU pesticides 5-8 kg/ha had to be applied, and in extreme cases well over 30 kg/ha of a.i.was needed, to achieve the desired pest control effect. 23. Moldovan crop protection specialists estimated, that if the country could procure the whole national requirement of pesticides in the state-of-the-art class, the total annual quantity needed would shrink to around 5,300 to 5,600 t of physical weight (ready made formulations), instead of the then required 25,000 t (already down from 53,000 tons used in 1984). From the above assessment it is clear that the modern pesticides imported under the project had a significantly positive environmental impact. Harvest and Post-harvest Losses 24. Some criticism was raised that due to project interventions production of selected crops in some localities was so high that farms were unable to handle the quantities produced and that inordinately high losses were incurred during harvesting and post-harvest handling. According to information from the Minister of Agriculture on this topic, losses were no heavier than in some other years. Enough labor was mobilized for harvesting, as people from factories came to assist the farms. Transport facilities were also adequate, but in many cases there was such a catastrophic shortage of fuel that some produce simply could not be evacuated from field to market. About 10,000 tons of apples in the north of the country, several thousand tons of cabbage, and about 1,000 ha of sugar beet remained unharvested. The situation was exacerbated by unusually early and heavy frosts (-15