Colombia - Agricultural Technology Development Project

Document of The World Bank Report No. 12236-CO STAFF APPRAISAL REPORT COLOMBIA AGRICULTURAL TECHNOLOGY DEVELOPMENT PROJECT MARCH 24, 1995 Country Department II Latin America and the Caribbean Regional Office  FISCALI, YEAR Jani iary I t(l DIccencber 31 CUIRRLN( Vk ANI) ItKtIlV&IJt.N(UY UNITS l frllalty I11ltl - Peso (('o)S) -laCI1:Lnge Rirw (D)c,riinlhcr 31. 11494 IiS$l .1) &ol$ XM) WF:l(IIi'Ni ANI) MEll'ASLURE-S Mrlric Symeem (;II)S.SARV OF AEIRIR VIAiIONS AOP - Annual ()lOraling Plan (Illal AnFIal de Operaciones) AWP Annilall Work Plan (IlIan Anuial de Ttabajo) CENICAFI- Center lor ('olfee lwcslitiation (Centro de lIv-esligiAciies de Yal) CENICANA - Center tzir Sugar ('ane Investigation (Centro de Investigaci6n de la Cafua) CCTA - Colombian Corporation for Agricultural Investigation (CorixoracitIn Colombiana cle investigaci6r. Agropccuarla) CGIAR - Ctonsultative (roup on International Agricultural Research CIAT - Internatinnal C'eniter lor'lTropical Agriculture (Centro Intcracional de AgriculluraT ropical) CIIVMY F Internationial ('enter for the Improvement of Corn and Wheat (Ce"cnrn IntL-racitntal dle Mejoramiento de Maiz y Trigu) CIP Inteantal Ceittr br 1w(itatoLes (Centro Internacional der la l'.lia) flNP - National l)irarlioerit ol l'laniitig (D)epartamento Nacional de L'laneacitSit) D)RI Fund for Rural l)cvelopnicnit (londo de Cofinanciaci6n para la lnteroion Rural) FEDIjARROZ National 1E -deration of Rice (iravers (Eiceraci6n dc Arrriwei:esj HIlMATr - ('olon10t1hian Institu1te tlF Flydrology, Meteorology and I and Plreparation (Instituto Colombiano de Hidrologia. Miceorologfa y Adecuacidn de 'ITierras) IC, C'olombian Agricultural Iislitute (Instituto Colombiano Agropccia rio) MCU 'The Manageenicnit aaed Cooirdination tUnit (llnidad de Adjtinistraci6in y C(oordinaci6n) MCA - Ministrv of Agriculture (Ministerio de Agricultura) RDIP - Rural t)evelopment Investment Vrogram (Programa de Diksarrollo !nlegral Carnpesino) SINTAP - National SystCm for Agricultural Technology Transfer (Sistema Naciondl para Transferencia de lEcnologia Agrkcola) UMATA - Municipal tlnit fbr Agriciulttiral Assistance (ltinidad Municipal de Asistencia Agropecuaria) FENAILCO - National Association of Merchants (Fcderaci6n Nacionlal de Comerciantes) IDB - Inter-Amnerican Development Bank (Banco Interamericano de Dlesarrolo) PCR - Projcct Completion Report (Informe Final de Proyceto) NGO - Non Government Organizations (Organiraeiones no Gubernarnentales) ICB - International Competitive Bidding (Iicitaci6n Pub:ica lnternacional) LI B - Limited Iniernational B3idding (I icitaci6n Intornacional Limitada)  COLOMBIA AGRICULTURAL TECHNOLOGY DEVELOPMENT BRO3ECr Contents Page No. LQAN AND PROJECr SUMMARY ..................... Hi 1. THE AGRICULTURAL SECIR ...................... 1 Structure and Performance ....................... I PNtential for AgricultFiral Production Growth ............. 2 The Small Farmers-Contributions and Constraints .......... 2 2. AGRICULTURAL TECHNOLOGY DEVELOPMENT AND EXTENSION ............... 3 Backgxound ............ 3 National System for Agricultu-a ThchnOlogyi 4 Colombian Agricultu-a Research Institute (ICA) ........... 5 DR andExtension ............................. 6 Bank Strategy in the Agrcultual Sector and Support for Agricultural lbchnology ..................... 6 Lessons from Previous Bank Involvenent ............... 7 Rationale for Banklmt ...................... 7 3. THE PROJECT ................................. 9 Objectives and Desciption ........... ..... 9 Detled Features: Technology Development and ; paion ... 10 Detailed Featus: Instituiional Development ............ 11 Stas of Preparation: Project Year One (Including 1995 Investment Subprojects) ..................... 14 ProjectCosts ............................... 15 Project Financing ............................. 15 Procurement ................................ 16 Disbursements .........................8...... i AccountingandAuditing ........................ 19 4. PROJECTr MPLEMENTATION ......... ............. 21 Organization and Management ..................... 21 Operational Manual ............................ 21 The Executive Council .......................... 21 TheManagementCoordinationUnit ......2........... 22 TheNationalPanel ............................ 23 Regional Panels and Coordinati .......23............ 23 Pwcessing Subpnrects JLr2nanced Under the Project ....3.... 2 Prparing Annual Operating and Work ............P. 25 Environmental Inpact, Evaluation, Monitring, and Supervision ......... .................. 25 5. BENEr[ ANRIK .......................... .28  - ii - Bfsefits ................................... 28 Risks .................................... 28 Pro jectSustainabbiity .......................... .29 6. AGREEMENTS REACHED AND RECOMMENDATION ....... 30 ANNEXES: Page No. Annex 1. Loan and Project Summary Costs ............... 32 Annex 2. Project Summary Costs byYe .................Y. 33 Annex 3. Funds Flow Chart fo; National Agricultwal Ibcbnology lTansferPrgm .................. 34 Annex 4. Definitions ............................. 35 Annex 5. Subproject Application Form for Cofinancing ... ..... 36 Annex 6. Checist for Subproject Supervision and Evaluation Reports ....... ............... 41 Annex 7. Organization Chart for National Agricultural lbchnology Tlansftr Program .................. 43 Annex S. Key Indicators fbrtheProject .44 Annex 9. Audit Requirements .45 Annex 10. Criteria for Subproject Selection .47 Annex 11. Environmental Checklist and Key Screening and Monitoring Factors .52 Annex 12. Draft Terms of Refrrence for Technical Assistance ..... 54 Anmex 13. Schedule for Project Implementation and Supervsion .... 56 Annx 14. Selected Documents and Data Aalable in the Project File ........................... 59 Mvap IBRD No. 25401  - iii - COLOMBIA AGRICULTURAL TECHNOLOGY DEVELOIMPENT PROJECr LOAN AND PROJECT SUMIMRY Borrower: Republic of Colombia Implementing Agency: Management and Coordination Unit in the Ministry of Agriculture Beneficiaries: Farmers (majority small), growers associatons, universities, private sector, Departmental Agricultural Secretariats, and municipalities. Poverty: Program of targeted interventions. The project is expected to assist in raising incomes among s,mall farmers, whose productivity is below ave rage fir the sector, a group that includes the majority of Colombiis poor Amount: US$51.0 million equiwalent Tenrs: Tb be repaid in 17 years, including 4 years of grace, at the Banks standard variable interest rae. Commitment Fee: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver. Fiaancing Plan: See pta. 3.21. Net Present VaTie: Not calculated - the project finances research and institutional stngthening. Staff Appraisal Report: Report No. 12236-CO Map: IBRD No. 25401  COLOMBIA AGRICULTURE TECHNOLOGY DEVELOPMIENT PROJECT 1. THE AGRICULTURAL SECTOR Structure and Performance 1.1 In 1992, agriculture, fisheries, and forestry accounted for about 22 percent of GDP for Colombia, provided employment for 30 percent of the labor force (three million people) and contributed about two-thirds of merchandise exports. Coffee accounted for about 13 percent of agricultural GDP (and about 47 percent of total agricultural exports); other permanent crops for 33 percent, annual crops for 19 percent, and livestock for 35 percent. Coffee exports, as a proportion of total agricultural exports, have remained fairly constant over the last two decades, but some diversification has occurred within non-coffee exports, which now include flowers and bananas. Growth of agricultural GDP in Colombia averaged 4.8 percent a year during 19780, but slowed during 1980-92 to 3.2 percent a year reflecting both weakening demand for Colombia's agricultural exports and faliing international prices. 1.2 Colombia has a total land area of 114 million hecares (ha) of which some 33 million ha (29 percent) are considered suitable for agriculture (14 million ha for crops and 19 million ha for livestock). Of this area, about 27 million ha are presently under cultivation, yet crop production accounts for only about 4 million ha (29 percent of the total area potentially usable for cropping) and for about 23 million ha in livestk. Of the ten million ha suitable for rain-fed production, about seven million ha are in sloping areas in the Andean foothills and are primarily used for permaLnent crops to mhinimiz erosion problems. Another three million ha are in flatlands, primrily in the coastal areas. 1.3 In Colombia, three typical farming practices prevail. Modem agriculture, located primarily on flat and relatively more fertile lands. This type of frming, with its capita-intensive technology and higher productivity, accounts for about ten percent of the area of production. Tfaditional agricultue is typical of mountainous land in the Andean zones and of tropical lowlands on the coast. It is labor-intensive and achieves lower productivity. Finally, there is transition agriculture, which uses both modem and traditional technologies. 1.4 In 1992, the agricultural sector suffered one of its worst years in recent history, and output contracted 0.9 percent. The effects of a severe drought were exrbated by low international commodity prices, trade refms that increased import competition, lack of credit availability, areciation of the exchange rate, and rural violence. Facing declining rural incomes and growing pressure from agricultural interests, the Govemment recently adopted an Agricultural Recuperation Program of trade, credit, and other agricultural policy measures. The situation has improved and the sector grew about 2.7 percent in 1993 and 2.1 percent in 1994. There is, however, continuing political pressure to introduce protction in the sector that has partly, but not completely, been resisted by Govenment.  - 2 - NPtential for Agricultural Production Growth 1.5 Colombia has considerable potential for increasing agricultural production by bringing additional land under cultivation intensification and increasing productivity (improved yields). If local or external demand is to be satisfied by Colombian agricultural producers, however, production has to be competitive in a conterct of open borders. increased productivity would help t increase rural employment and incomes, alleviate poverty, and slow migration to cities. 1.6 There are presently large variations in crop productivity between commercial crops (prduced mostly by lare farmers as single crops on good .soils in the valley floors of the main rivers) and food crops (prduced primarily by small famers who plant a number of crops in small areas). Recent statisis show that small farmers' yields for basic food crops are about 66 percent, for cane about 50 percent, and for beans up to 90 percent of the national ave . Although large farmers tend to have higher quality land, the potential for increased prductivity for small farmers is substantial. The Smal FkI rners-Contributions and Constraints 1.7 Recent statistics show that about 10 million of Colombia's 31 milion inhabitants live in the rural sector, on about two million holdings. About 1.7 million farms (85 percent of the total) have less than 20 ha each, and 56 percent of these have less than the national average cultivated area of 3 ha. 1.8 In producing basic foodstuffs for the domestic market, small fanners play a vital role in Colombian agricultural self-sufficiency. Using the 1982 figures of the National Planning Department, it is estimated that small firmers produce about 60 percent of Colombia!s basic foodstuffs (maize, wheat, beans, potaoes, cass( a, plantain, pancla, fruits, and vegetables) and about 20 percent of indusal raw materials derived from agrculture. Farmers consume about 30 percent of their production and sell the remaining 70 percent. 1.9 About 60 percent of the rural labor force is employed in small- scale agriculture - small landholdings concentrated in the Andean regions and in topical lowlands. Most of the small fam crops are cultivated wilth traditional technology, and levels of productivity are low. On small holdings, access to land is a limiig factor Incsng smal frmer income, therefor, will mean increasing productivity, whethe by improved technology for production, processing, and marketing or by introducing higher value crops.  - 3 - 2. AGRICULTURAL T;ECNOLOGY DEVELOPM!ENT AND EXTENSION Background 2.1 In the last decade, public sector funding for agricultural research1 in Colombia has been equivalent to about 0.3 percent of the agricultural sector GDP (as compared with the 0.4 percent average recently noted for less developed, medium-large countries. In more developed, medium-large countries, the average is 2.2 percent). Private sector funding for agncultural research grew steadily during this period then flattened at nearly 0.2 percent of agricultural GDP. At 0.5 percent of agricultural GDP, total funding for agricultural research in 1991 was about US$35 million, with the Colombian Agiculturl Institute (ICA) -then the main govemment agency for agricultual research- investing about 60 percent of the total and the remaining 40 percent coming from such semipublic and private entities including universities and growers assocations. In the private sector, most research is commodity-specific and applied with a short gestation period. This tyut of research is likely to continue tD figuie prominently in privately funded projects as mechanisms to stimulate private funding become effective. 2.2 New technology in Colombia has been generated by ICA anstituto Colombiano Agmopecuario) in the public sector, and in the private sctor by producer organizations (such as Centro de Investigaciones de Cafd (CENICAFE), Federaci6n de Arroceros (FEDEARROZ), and the Centm de Ivnestigacidn de la Ca*a (CENICANA) and by commercial seed and agrochemical companies. In addition, Centro Inernwcional de Agricultura Dpical (CIaf, situated in Colombia, and with Centro Interacional de la Papa (CT), and CIMMYT (Centro Intenational de Meoramiento de Matz y 7iigo), supplies international support. 2.3 No single organizaion has beer responsible for extension activities. Larger farmers use the services of many private extension agencies, agents, and (in the case of rice, coffee, cane, and cotton) relevant producer organzations. While many have adopted modern technology, there are still considerable inefficiencies-particularly in the excessive use of chemical inputs. 2.4 A series of agencies have brought extension to small fiirmers in the past. Serving particular clients, these include Caja Agraria, a large agricultural bank (supported by Loan No. 2909-CO), DRI (Loan No. 3250- CO), The Colombian Institute for Hydrology, Meteorology and Land Preparation (HIMAT) (Loan No. 3113-CO), and the Coffee Growers' Association (Loan No. 2433-CQ closed). 1 Research include. stagc, applied esch, validatdon and adst (adaptive) inrventios, and techology ftnaki:r (Annex 4).  - 4 - 2.5 The basic shortcomings of research and extension in Colombia are as follows. a Lack of adequate advice to small farmers regarding sustainable production systems, which results in their profitability being far below the national average. * Excessively high commercial agriculture production costs largely from inefficient and excessive use of inputs (mainly chemicals). This puts Colombian producers at a disadvarntage in export markets, leads to severe environmental pollution, and lowers profits. * Irrigation technology that does not meet the needs of small firmers, causes major inefficiencies in water use, and leads to inadequate crop combinations and the use of low-value crops. * Lack of adequate post-harvest technology leading to excessive losses after harvesting, poor quality products, and the difficulty in improving standards of packaging and grading. * Lack of adequate technology for foTestry and fishery development. e A top down reah system that has not involved farmers in research development. 2.6 In 1989, as part of its decentalization initiative, Gover.ment began shifting responsibilities for planning and implementing agicultual development progams to municipalities and to departmental and regional authorities. In addition, Government took a series of steps to establish a new system for coordinating and funding agricultural reserch and extension, with a special emphasis on assisting small fbrmers. National System for Agricultural Technology Transfer 2.7 In early 1989, Govenment established (by Decree No. 1946) the National System for Agricultumal lTchnology Thansfr (SlTh .P)1 This policy statement sets out key sector objectives and institutional aranents for the coordination of research and extension to small frmers. WiLthin the SINT;F strucwre, MOA has a planning and coordinating role, cofinances research, and serves as an umbrella to DRI, for its cofinancing of agricultual axtnsion. 2.8 SITAP replaces ICAs lrely tp-down approah to applied research, technology transfer, and extension with a participator, demand- driven system in line with the ongoing process of decentralization. Farmers can now make their needs known through mumicipal development plans, from which local panels can identify research subprojects. Results of these  subprojects (if selected), and from ongoing research, are to be transtrred to the firmers through existing extension services. Public and private sector entities ard growers' associations will be able to obtain flinancial support for research through a competitive process designed to select subprojects that best meet local needs. 2.9 In 1991, Government established the National Agricultumal Thchnology bansfer Program (the Program) to put SINTAP into effect. The Program is the central instrument in the Government's plans to modernize and improve the competitiveness and incomes of Colombia's small agricultual producers. Addressing the major constraints faicing the sector, it aims to turn the present systm into a coherent, functioning system with clearly established criteria for planning, implementation, and supervision of reSearch and extension activities at the national, regional, and departmental leels. The Program will help make sure that the identification of research needs takes place at the local level so that research projects address local priorities. Finally, it will help ensure the quality of agriculhtual technology, both that generated by research at home and that which is transferred from abroad. The Program will focus on developing sustainable fanning systems; promoting reduced and more efficient use of bio-chemicals; promofing integrated pest management; and improving the management of irrigated agriculture, fisheries, forestry, and post-harvest technologies. 2.10 The MOA will coordinate the Program using research and extension activities that include the private sector, govemment departments, and municipaliies (for a Program organization chart, (see Annex 7). Colombin Agricultunal Research Institute (ICA) 2.11 In the past, ICA was the main govnment agency responsible for undertaking agricultural csearch and extension. By Decree No. 2141 of December 30, 1992, ICA was downsized and split in two (see Annex 14). 2.12 ICA. With a staff of 1,600 (down from 6,700), ICA is financed from the national budget. About 800 staff are part of a large joint project between ICA and the United SWes Departent of Agriculture for the control and eradication of hoof-and-mouth disease. ICA is also responsible for the control of animal and plant disas and pests (about 400 staff), for quality control of agricultual inputs (about 200 staff), and for administering speal programs (with about 200 stall). 2.13 The Colombian Corporation for Agricultural lnestigation (CCIA). A joint public-private sector rsearch corporation with a staff of about 3,500, CaRs mandate is to undertake agricultual research under contract from public and private sources. Although it is expected to be financially self-sustaining over the long term, dunng this transition stage it will be financed partly from xthe national budget. It will be eligible to solicit fimds from the Project in competition with producer associations, univeries, pnvate sector and CGIAR research centers. The Corporation  - 6 - has a largely private-sector Board chaired by ICNs General Manager, and has recently appointed its chief executive. CCIA has taken over ICA's 13 main research stations and 66 regional research centers and their staff. CCIA has more operational flexibility than a purely public sector entity. It can both give and receive contracts and its staff are not civil servants. It has some 106 associate members from both the public and private sectors, such as FENALCO, CENICAFE, FEDEARROZ and some of the 14 regional departments. Associates are invited to take equity positions, and their representatives have seats on CCIA's Board. It is expected that associates will submit research contracts they wish CCIA to undera}ke directly and it is expected that the CCIA to be a major participant in agricultural technology development and adaptation financed under this project. DRI and Extension 2.14 Recent legislation put the municipalities in charge of providing extension services bo farmers, either by establishing their own extension units Unidad Municipal de Asistencia Tdcnica Agropecuaria (UMATA), or by contracting an agricultural technology service firm. To date, 550 UMATAs have been established. Where these have been operational for one year or more, there is a marked improvement in the relevance and quality of cxtension services p.uvided to fanrmes. 2.15 DRI, which is supported by the Bank and IDB under the Rural Development Investment Program (RDIP), channels funds to municipalities to support a wide range of subprojects (including extension, rural roads, water supply, watrshed protection, marketing, and fisheries). Establishment of UMATAs; specific, joint extension subprojects conducted with the fimers (such as demonstration plots, field visits, and faer training); and the preparation of municipal agricultural development plans are all cofinanced by DRI. The RDIP is now in its third year of implementation and is proceeding well. Farmers are receiving more frequent and more systematic extension advice. What is now needed is advice. based on better research results The proposed Project is designed to fill this gap. Bank Strategy in the Agricultural Sector and Support for Agricutural Technology 2.16 Bank objectives in Colombia aTe to assist the Government in consolidatng and deeening its structural reforms and to support private- sector-led growth by improving labor's skills and infrastructure and utility seivices. The Bank gives pnority to imvestments for private sector development, government decentralization, and povert alleviation-with emphasis on ameliorating inefficiencies in key economic sectors. ln pmrsuit of these goals, Colombia's agricultual sector gives high priority to rural poverty alleviation and efficient growth. The Bank supports Colombia7s antipovrty strategy of ovUall macroeconomic policies designed to encourage sustained economic growth and expanding demand for labor. Bank srategy to promote growth in the agricultual sector includes generating and  - 7- promoting the adaptationi and transfer of new agriculturAl technology, assisting in the rationalization of the cxtension system, providing support for infrastructure (mainly irrigation and rural roads), and promoting natural resource management and protection. Its strategy is to focus on the needs of small farmers and thereby to help reduce poverty. Lessons from Previous Bank Involvement 2.17 The Colombia Agricultural Research and Extension Project (Loan 2303-CO) that closed on June 30, 1992 was designed to improve and expand lCANs research activities to help Colombia raise its agricultural output at competitive costs. The PCR noted that the project met its targets (such as building and equipping research facilities at experimental statimns and training research personnel), thereby expanding Colombia's capacity to develop useful agricultual technolkgy to improve and increase production. 2.18 The achievements of that project provide a strong foundation for the proposed Agricultural Technology Development Project, and lessons from it were incorporated in the Government's new research and ectension policy and in the proposed Bank Project. Because past projects have often been overly academic and have not fully met the research needs of small farmers, under the proposed Project, small farmers will participate in the selection and implementation of future research projects. lb increase the efficiency and effectiveness of agricultural research, efforts of the national institutre formerly responsible for such resarch will be augmented by a broad program of agncultural technology transfer that incorporates the talents of universities, NGOs, and private firms in the execution of research projects. Ib improve the relevance and quality of the technologies generated, research funded by the Project wiU be selected on the basis of predetermined criteria that prioritize activities by type and location and promote interinstitutional collaboration. Given increasing problems of sustainable agriculture and environmental issues, one of the selection criteria will be that proposed activities promote environmentally sound technologies, which will entail specific trainig and skills to develop a "grien" sensitivity thrughout all research subprnjects. Rationale for Bank Involvement 2.19 The most recent Country Assistance Strategy (Report R93-198, of November 19, 1993) for Colombia was presented to the Board on December 16, 1993. The proposed is fully consistent with the CAS. It is specifically mentioned the CAS and would support thre of the broad objectives for Colombia, private sector development, poverty reduction and institutional strengtheing. 2.20 There are several major reasons for the Bank to support the National Agricultual lTchnology kansfer Program of which the proposed Project is a part. The Program's objecives of making Colombia's agricultral sector more competitive is consistent with the Bank's continuous  - 8 - support of the Government's efforts to liberalize trade and modernize the agricultural sector. The Program also has a strong antipoverty focus, addressing the needs of small farmers. With the declining competitiveness of Colombian agriculture following apentura and the removal of taiffs and protections, it is imperative that measures be taken immediately to increase agricultural productivity. Finally, the Program supports an expanded role for the private sector and Government decentralization which the Bank has been assisting through a variety of programs that include the ongoing Rural Development Investnent Program of agricultural extension activities. 2.21 With its extensive experience in helping governments to decentralize and encouraging increased participation by the private sector (both in Latin America and elsewhere), the Bank is uniquely placed to assist in the financing of this proposed Project; which will be integrated into the exnsion system supported under Loan 3250-CQ The Project mould build on the Bank's experiences with the earlier Agricultural Research and Extension Project (Loan 2303-CO).  3. THE PROJECT 3.1 The Agricultural Technology Development Piroect (ATDP) was prepared by the Ministry of Agriculture and the National Planning Departmnt with support from the Bank. A preparation mission visited Colombia in February 1992, a preappraisal mission during April-May 1993, and an appraisal mission in July 1993. Negotiations were held in Washington from April 25-29, 1994. The Colombian Govenment team was led by Dra. Claudia Salcedo, Minstry of Finance and Public Credit. Objectives and Description 3.2 Objectives. A goal of the Project-and one consistent with the Government's apenura, decentraliztion, and privatization policies- is to bring about change in Colombia's agricultural research culture. laditionally, ithis has been public sector dominated, conservafive, elite and drven by supply rather than demand. As part of Government's National Agricultural lcbhnology 1kansfr Program, the Project aims to achieve the following objectives. - Introduciin a new approach, in support of the National System for Agricultural bchnology Development and Tlansfer, including with measures to build institutional capacity, which would promote the development and testing of technical packages especially appropriate for small fariners, and to divule new technology. * Promotig private sector participation in agricultural research. Imnproving the quality and efficiency of agriculual research by intoducing a demand-driven, competitie selection systm that would cofinance projects with universites and private and public sector entities. * Supportn decentralization of agricultural rach and exknsion activities by strengthening regional centrs, training agicultdual etnsionists, and disseminating infomation. * Revitalizing underused assets, both physical and human, that presently exist within Colombia7s research services stem. Research funded under the Project would ultimately help to reduce rural poverty, increase rural employment, and improve the competitiveness of Colombiis agricultural producers. 3.3 Description. The prposed Project would finance a four-year progrm with two main components:  - 10- * The technology development and adaptation component would include demand-dnven investments in strategic, applied, and adaptive research (including adjustment, validation, and promotional activities). * The institutional development component would include establishment of a small unit in the MOA to oversee Project coordination and promotion among the vanous participating oganizations, and the Departmental Secretariats of Agr-cultrues monitoring and quality control activities. This unit would also screen subprojects for technical quality and to contract out approved subprojects. The MOA would be supported by a National Panel (which would make the selection of subprojects for cofinancing and submit them to the Becutive Council), and, when installed, by regional panels (for subproject screening). Institutional development would also entail: the establishment of Program coordination staff at the regional level (which would carny out Program promotion); tchnical assistance to assist with implementation of a supesion system, a midterm review, and assessment of the Project's impact; taining in available technologies and subproject preparation for research staff, field technicians, and other professionals; establishment of a University Assistantship Program to link academic studies with practical research work; and establishment of a system to meet agricultural technology infrmation requixements at the departmental and municipal levels. Detiled Rbatures: Technology Development and Adaptation 3.4 This component would cover investnent in strategic, applied, and adaptive agricultural research throughout Colombia. The selection of investment subprojects would be made by applying criteria reflecting priorities for research (including those identified at the municipal and regional levels), limits on size and duration of subprojects, and amount of available funds in the Annual Operaing Plan. (The process by which msearch priorities are set, and research proposals are solicited and selected is described below). 3.5 All research subprjects would include socioeconomic sthdies and be limited to a maximum of tiree years and an average annual total cost of US$50,000. In order to ensure the active pardcipation of a variety of agmei in the Project, a Partcipang Entity's share of funded subprojects would be no more than 60 percent of the total value at any one point. The Bank and the Bomwer agreed on crtera and trgets for 1995, these have been included in the Project's Operational Manual. Assurances were obtained at negoiations that the MCU would implement the project as per the agreed Operational Manual and tat Government would send the Bank for appraoal any proposed changes to the Project's Operaonal Manual,  - 11 - including changes in the criteria and targets agreed upon during negotiations and a Participating Entity's limitation to a maximum of 60 percent of the total value of approved subprojects at any one time (para. 6.1 (c) (i)). 3.6 Eligible subprojects would fall into the following subcomponents: 0 Strategic and applied research iestent Stategic research would encompass subprojects directed toward medium-nm national priorities, and be expected to lead to applied, and later adaptive, research. Applied research fimding would support subprojects of potential immediate use to frmers (in such areas as sustainable production systems, integrated pest management, post-harvest technologies, fisheries, and environmental problems). It is expected that financial support provided under the Project, although limited, would encourage partcipating entities to use their existing resea.ch staff and facilities more efficiently and help to encourage greater private imnvstment in agriculturl research. EstimaWt4! cost of this subcomponent is US$26.8 million. Adaptive research inT chnology-transfer subprojects would include demonstration parcels, field days, and training. lbchnology generated at experimental stations, however, would be tested, adjusted, and approved under rpresentative ecological conditions before being transferred to extensionists. Research technology would hav-e to be validated by both farmers and local UMATA staff, who would identify fctors that might limit producion in each agroecological zone and develop strategies for overcoming these constraints. These subprojects would finance operational costs (such as gathering infomation, testing soil, providing inputs, transportation, visits with farmers, supervision, and evaluation). Estimated cost is US$26.8 million. Detaied 1Fatures: institutional Development 3.7 Establish and support the Management and Coordinating Unit MICU), the National hnel in the Manistry of Agriulture, and Rgional Paneis. The MCU, which has already been established, reports to the Council and is responsible for the overall coordination and supervion of the Program. The Project would finance start-up costs for office equipment, including computers, as well as salaries and operational costs and technical assistance necessary for this unit to coordinate the overall Program. It would also finance Project promotion and advertsing though publications. seminars, radio, and television advertising. MCU would manage the technical valuation and screening of subprojects. It would also prepare, sign, administer, and oversee +he technical and financial auditing of cofinancing contracts with the implementing entities either directly or through  - 12 - a fiduciary. With the help of contracted personnel, this unit would monitor and evaluate the overall Program at the national, regional, and municipal levels (see Project Implementation -Section 4). 3.8 The MCU would be supported by a National Panel (which has already been established) of up to seven leaders in agriculture and agricultural research drawn from universities, the private sector, and the Colombian government (para. 4.9). This panel would screen strategic and applied research subproject proposals against established criteria and recommend them for financial support. It would advise the Council when changes in the criteria and budget were desirable. 3.9 This suboomponent would also support the establishment and financing by MCU, of regional panels to screen subproject proposals first for such basic criteria as subproject size, cofinancing, regional quotas, and subproject priorities (para. 4.10). Prescreening would reduce the wnrk of the National Panel and help to begin the process of decentralization which the Program supports as an overall goal. 3.10 The total cost of this component, including office equipment, computrs, salaries and operating supplies as well as technical assistance in subproject preparation and evaluation, is US$7.1 million. 3.11 In order to make sure that the system was responsive to the needs of the region and the small famer, small coordination units would be established in each department (para. 4.10). These units would ensure that the municipal development plans were taken into account when maldng zonal development plans and that the annual investment program for research, adjustment, validation, extension, and training meet the needs of both smal fkrmers and the UMATAs in each area. Because this aspect is important to the success of the Project, professional assistance would be supported at the regional level. The MCU would be responsible for the appointment, contracting and financing of the regional coordmation umts and the financing of vehicles (including boats) for technical staff involved in the Program. Assurances were obtained during negotiations that no expenditures would be made for vehicles, including boats, until a plan has been prepared, acceptable to the Bank, for the acquisition of said vehicles and for making them available to the persons who would be using them for project purposes (PaM. 6.1 (b) (1)). The total cost of this subcomponent is US$9.6 million. 3.12 Iechnical Assistance. Technical assistance is required in the first semester of the Project to help MCU fine-tune and implement the supervision (including monitoring and evaluation) system for the cofinanced subpzojects. Assurances were obtained dunng negotiations that MCU hire consultants to undertake the following: not later than three months from the effectivEness date to assist with the refining and implementation of the system and within six months after effectiveness send a report to the Bank for comment (pam. 6.1 (c) (ii)); not later than two years after the effectiveness date prepare a project performance report to be used as a basis for a  - 13 - comprehensive midemn review (pam. 4.23). This performance report would assess the overall performance of the project, the functioning of the National Panel, the subproject selection process, the role of the regional panels, and what responsibilities for the Prgram could be transferred from MOA to the DePartmental Agricultural Secretariats or other approprate agencies of Tbrritorial Entities; toward the end of the Project, by January 1, 1999, consultants would be hired to conduct an independent evaluation of both the Proect and Program using sample case studies to assess the success to date, and to detneine whether or not the Government should prepare a fbllow-up project (pama. 6.1 (c) (iii)). Draft lbrns of Refirence for technical asistance to be undertakn in the first year of the project have bee a prepared and agreed upon during negotations (Annea 12). The estimated US$4.0 million cost of this technical assistance is included in the totals of the other subcomponentL 3.13 Tlainhn& The training activities under the Project fa into four categories. Tlaming in the management, formulation and implementation of the Program at the national, regional, and muimcipal (UMATA) leveL Allowances have been made for over 130 taining events over the four-year Project period. Estimated cost is US$1.7 million. e Professional training in preparation and management of subprojects financed under the project for employees of selected public and private institutions. An estimated 24 workshops are planned. Estimated cost is US$0.4 million. famiring of protssionals of public and private institutions (including universities) and UJMATAS in effective and relevant technologies. An estimated 240 training events are planned. Estimated cost is US$2.4 million. * Draining of technical staff in the 1,030 municiities in the methodologies of technical assistance (extension) to the farmer. Over 700 events are planned. Estimated cost is US$5.7 million. 3.14 Unidrsity Asistanisbp Program. This progm would help link academic studies with practical research work and help students at accredited filities of agronomy in Colombian universities complete their graduate work requirements in the M.A. degree, thereby helping to supply staff for departent which lack people with postgraduate agricultural qu lfcations. Actual research work would be done in conjunction with pecfic applied research subproects to be financed under the Project. An allowance has been made for 80 students, selected by participating universities, at an estmated base incremental cost of US$10,000 each. A detailed desciption of this program will be included in the Operational  - 14 - Manual (a draft proposal is contained in Annex 14). The estimated total incremental cost of this program is US$0.9 million. 3.15 lIaining programs have alrady been identified (Annea 14) and will be included in the Operational Manual. Estimated total incremental cost for training is US$11.1 million. 3.16 Establish a Technology Information System. MQO would put in place a Tbchnology Inornmation System for agricultural technological packages (including publications on the various packages available) which would serve the needs of the research system at the national, departmental, and municipal levels. During the fiLrst year of the Prject, a study would be undertaken to define the system's scope in terms of the needs of small rmeres/IUMATAs (taking into account available technology packages and publications), the needs of the regional research centers and the departments, ixedback information from the field, needs for equipment and materials, annual operating costs, and prospects for sustainability once cofinancing ceases. (Draft' rms of Reftrence for the study have beer. prepared and agreed at negotiations, see Annex 12). 3.17 Assurances were obtained during negotiations that MOA prepare a proposal for a detailed action plan for a technology infrmation system and submit it to the Bank for comment no later than six months after effectiveness (para. 6.1 (c) (iv)). Assurances were also obtained during negotiations that no expenditures, other than expenditures with respect to consultant services, be made on this system without an action plan acceptable to both Government and the Bank (pam. 6.1 (b) (ii)). Estimated cost of this subcomponent is US$2.6 million. Sittus of Preparation: Project Year One (Including 1995 Inestment Subprojects) 3.18 The 1995 Annual Operating Plan (AOP) for both semesters will cover about 200 research subprojects that meet agreed criteria and targets, as well as the first year's costs of other Project components. Government has approved the 1995 budget of US$11.3 million, for the project. The first tranche of proposals for cofinancing by the Project has already been prepared and initial screening completed. Demonstrating a strong private sector demand for research financing, some 450 out of 1,102 proposals (41 percent) came from institutions outside Government (growers associations, private companies, NGO's and universities2). About 370 proposals which met the agreed criteria were sent to the National Panel for review. Seventy subprojects, with a total investment value of US$5.7 million (first year investment of US$2.4 million) were selected by the Panel for sartwup in the first semester of 1995. Contractual arangements for these subprqects are presently underway. For the remaing 300 proposals sent to 2 Some Colombin unisities awe both public and pivatdely suppored.  - 15 - the Panel, about 130 more will be selected for startup in the second semester of 1995. 3.19 Analysis of the source of the proposals received indicated considerable scope for strengthening links between the public and private sectors since only 15 of 1,102 subprojects were collaborative efforis nolvng different agencies. If appropnately prontized and channelled, Project funding could play an important role in broadening the scope of private sector involvement and promoting joint public-private sector collaboration, thereby contributing to the ultimate goal of opening up the economy. Project Costs 3.20 Ibtal Project oDsts are estimated at US$84 million equivalent, with a foreign exchange component of US$29.6 million (as detailed in Annexes 1 and 2).3 The final allocation for technical assistance, research, validation, and adjustment subpjects would be determined by annual dmanad from potential beneficiaries and by the implementing agencies' capacity to implement subprojects. Costs were calculated using projected January 1995 pnces and include a physical contingency of 10 percent on all Priect management components. Expected pnce increases over the financing period were computed using Bank projections for international and local inflation dated May 1994. Physical and price contingencies total US$11.9 million for all components Project F ;nancg 3.21 The pmposed Bank loan of US$51 million wrould finance 61 pect of total Project costs equivaledt to 100 percent of the foreign excharnge costs and 39 percent of local costs. The balance of Project costs would be financed by the National Government (US$22.3 million, or 26 percent), and by participating unvesities and pnvate sector entities, (US$10.7 million, or 13 percent). See Funds Flow Chart (Annex 3). 3.22 The Republic of Colombia would be the Borrower. The Govenment would make the proceeds of the loan availab': on a grant basis tD MOA to finance Project components. MOA would finance the managent, administration, tainig, and institutional strengthening of MCU, the National Panel, the Regional Panels, and the regional Coordination Units; the trminng of exeonists; the Univsity Assistantship Progam; and the development of a technology infirmation system; and vhicls (mcluding boats) for regional technical staff. MOA would also cofinance-together with each of the participating entities-strategic and applied 3 Annua cost figures sw fr the imreseh isbnent com4mnu1 m Anncx 2 ame estimatcs provided for planning purpoes oly and wll depend on demad.  - 16 - research, adjustment, and validation subprojects. See Cofinancing Matrix (Annex 2). Procurement 3.23 Procurement of goods, works, and contracting of services financed by the Bank under the Project would follow procedures acceptable to the Bank. As applicable, standard bidding documents would be agreed upon and incorporated into the Operational Manual, to be used by implementing agencies as the basis for procurement under the Project. In executing its subprojects, CCIA is expected to procure like items under single annual contracts wherever possible, in order to achieve quantities-of- scale discounts. (Ihese requirements would be included in cofinancing contracts between MOA and the participating entities). 3.24 A procurement specialist on staff of the MCU would review procurement under the Project to ensure that these conditions described were met. In addition, MCU would hire an independent auditor satisfctory to the Bank to carry out a technical analysis of the procurement procedures under the Project every six months. Audit reports would be forwarded to the Bank. During supervision missions, the Bank would sample contracts for review of how procurement was being implemented. 3.25 Goods, other than vehicles, laboratory and specialized agricultural equipment, would be procured under Iternational Competitive Bidding (ICB) procedures for all contracts in excess of US$250,000. Whicles, laboratory and specialized agricultural equipment, and other equipment, as may be agreed to with the Bank, would be procured under Limited Interational Bidding (LIB) on contracts above US$50,000. Vhicles, equipment, and materials valued at less than US$50,000 equivalent per order, would be purchased on the basis of price quotations from at least three eligible suppliers. Computers, equipment, machinery, vehicles, etc. will need to be procured and maintained for at least the first year of operaton. Civil works financed under the Research Investments component would also require contracts of less than US$50,000 to be awarded on the basis of three price quotations from at least three qualified local contractors. The selection and appointment of consultants for studies and technical assistance financed under the Project would be consistent with the August 1981 Bank Guidelines for the Use of Consultants by Bank Borrowers and by the Bank as Executing Agency. 3.26 Prior Review. In addition to the exceptions listed in the Loan Agreement (Part E, Section 2), all consultant contracts over US$100,000 for firms and US$50,000 for individuals would be subject to prior riew by the Bank For cofinanced imvestment subprojects, in view of the small size of the subprojects and the large number of participating entities, prior rnview by the Bank, other than for ICB and LB, would not be practical. Therefore, in accordance with the Operational Manual, the MCU's staff procurement specialist would rwiew prcurement other than ICB and LIB, after the fact,  - 17 - on a sampling basis of at least one in ten of the subprojects financed under the project. As for ICB and LIB procurement, there would be no prior registration of bidders, no requirement for local agents, and no provision regarding a minimum number of bidders. In order to address unacceptable discrepances between Colombian procurement legislation and the Bank guidelines, the Project Agreement includes the follownmg special provisions: bids for goods would be evaluated on an as quoted c.i.f. basis for foreign bids and an ex-ifctory basis for local bids, and awards shall be made to the lowest evaluated responsive bidders. Foreign bidders and consultants would not be xequired to ratify accreditation documents (power of attorney, company registration) with Colombian consulates, except for the purpose of signing a contract. Bidders would bear the responsibility for the accuracy of translations of any such documents into the Spanish language with no need for certification by Colombian official agencies. Finally, all ICB and LIB procurement would be done using Bank issued standard bidding documents, amended as necessary for the purposes of the project. 3.27 Assurances were obtained during negotiations that MCU, and the participating entities would follow procurement procedures satisfactory to the Bank, as outlined above (para. 6.1 (c) (v)).  - 18- lible 3: Procurement of Goods and Services (US$ millions, including contingencies) 1'''-'~~~~~~~ ~~~~ ....... . .. >'. :t-.. ....:.'. Research Inestments 53.6' 53.6 (26.8) (26.8) Vieicles and Equipment 1.8 6.6' 8.4 (1.8) (4.9) (6.7) Op Costs Matri & Supplies 1.7b 1.7 (1.3) (1.3) Salaries and Labor and Travel Expeses 6.3 6.3 (4.3) (4.3) Ibchnical Assistancerinin 14. 14.0 (11.9) (11.9) Ibtal 1.8 82.2 84.0 Finaced by Loan Amowut (1.8) (49.2) (S5.0) prcentage Share (60.7) Note: Figures m pare_ess awe the espective dollar amounts financed under the I lInludes Limited tmatiLonal Biddig adG Shopping b No single item of prement w11 exceed US$25,000 and Local Shopping will apply. 0 Not subject to proment I lundes conwlig services Disbursements 3.28 Based on the standard disbursement profile fnr 1994 for Colombia-Agriculture-when adjusted for retoctive financing and the use of a Special Account (para. 3.32)-the proposed Bank loan of US$51 million would be disbursed over seven years. 3.29 The Bank would reimburse MOA for expenses related tD institutional strengthening of coordinating unit and regional centes, and for the panel of experts, training, and technical assistance at a rate of 100 percent for foregn expenditumes for equipment and vehicles (including boats), foreign consultants, and taig; and 85 percent for locally procured vehicles (icluding boats) and equipmrent, panel honorarums, consultants, and tAining. Estimated loan disbursement for these items is US$18.6 miTlion. 3.30 Salaries and inczemental opeating supplies would be reimbursed from the loan at a rate of 85 percent of costs in years one and  - 19 - two, 70 percent in year three, and 60 percent thereafter (estimated loan disbursenents of US$5.6 million). All subprojects would be cofinanced with participating public and private sector entities and subproject investment costs would be reimbursed at a rate of 100 percent of MCU's portion, up to a maximum of 50 percent of the total investmeni cost (with an estimated loan disbursement of US$26.8 million). 3.31 All disbursements from the loan, except for equipment and materials, are ecpected to be made against statements of expenditures (SOEs). ICB and LAB contracts greater than US$50,000 or more equivalent (where prior Bank rwiew will be required) would not be eligible for SOEs. The participating entities responsible for the procurement of goods and contracting of services would maintain the SOE documentation. Based on SOEs, the minimum value for each disbursement request from the loan to the Special Account would be US$600,000. Retroactive financing of up to US$5.1 million for eligible expenditures (made after July 31, 1994, but no more than 12 months before signing) would be provided for under the loan. Eligible expenditues would have to follow procurement procedures acceptable to the Bank. It was agreed at negotiations that MOA may seek the assistance of one or more fiduciaries, acceptable to the Bank, to provide services related to the management of funds for the contracted payments on rsearch subprojects (pan. 6.1. (c) (vi)). The Project is expected to be completed by June 30, 2001, with a closing date of December 31, 2001. 3.32 The Borrower would establish a Special Account in US dollars with the Banco de la Repdblica, acceptable to the Bank to cover eligible Bank expenditures under the loan. The Bank would iniitially deposit up to US$1 million upon receipt of an initial withdrawal application. This could laer be increased to US$2 million (representing the avenage xpcted Loan disbursement for a four-month period) once cumulative disbursements from the loan reached US$6 million. Subsequent replenishment by the Bank into the Special Account would foUow the procedures by which Bank fimds are disbursed against actual expenditures. Accountig and Audiing 3.33 To account for Project costs and financing, the MCU would establish consolidated Project accounts and maintain other records as needed, including separate accounts and records of the total cost of financed subprojects and the cost of individual Project activities. Cofinancing contracts with participating entities would use accounting and auditing procedures provided in the Operational Manual, which would be coordinated with the MCU's accounting system. These accounts are required to be adequate for the financial monitoring of such transactions as local and Bank financin& 3.34 Project accounts, the Special Account, and related financial information (induding supporting documentation for SOEs) would be audited annually by an independent auditor acceptable to the Bank, in accordance  - 20 - with Bank auditing guidelines (Annex 9). Assurances were obtained during negotiations Ohat certified copies of the. audited consolidated Project accounts and audited Special Account in the Central Bank (including a separate opinion on the use of SOEs) be submitted annuaUy to the Bank not later than six months after the close of the financial year, starting with the audit reports for the fiscal year ending December 31, 1995. Assurances were also obtained at negotiations that, if the financial audits identify significant irregularities in any participating entity, MOA would immediatly suspend disbursements to that party and require it to arrange fbr special audits to ensure that any irregularities were resolved before disbursements are resumed (pam. 6.1 (c) (vii)).  - 21 - 4. PROJECT 1MPLEMENTATION Organition and Management 4.1 'lb implement the Colombian Government's National Agricultural Ibchnology Program and this Agricultural Ibehnology Development Project, a new structure was established in the MOA, and DRI (see Organization Chart, Annex 7). Within the MOA, there would be an Executive Council supported by a Management Coordination Unit and a National Panel. With the help of Project support, this new structure is expected to be adequate for Project implementation. The existing Agricultumal Division in DRI would be strengthened as part of the Government's ongoing Rural Development Investment Program and as an important complement to the overall Program, but it is not a part of this project. 4.2 As a condition of effectiveness, the MCU would have to have minimum staff in place (in numbers and composition acceptable to the Bank) to initiate the Project (para. 6.1 (a) (i)). Assurances were obtained at negotiations that Government would, at all times, retain in the MCU and the National Panel, staff in numbers and composition satisfactory tD the Bank for efficient implementation of the Project, and that conditions for the replacement of the coordinator of the MCU, and of National Panel members, would also be satisfactory to the Bank (paa. 6.1 (c) (viii)). Operational Manual 4.3 The Operational Manual describes how to plan, identify, prepare, select, contract, finance, supervise, evaluate, and account for the subprojects cofinanced with participating entities under the Project. The Bank and the Borrower have agreed on the final draft of the Operational Manual, which would be the worlkng document describing the Project, including access to financial assistance by participatng entilties and the geneal administration of the Project. The Operational Manual could not, therefor, be changed without prior review by the Bank (para. 3.5). As a condition of disbursement, an Operational Manual acceptable to the Bank would have to be issued by the EC and adopted by the MCU (para. 6.1 (a) O ))- The Executive Council 4.4 The Executive Council has already been established. It is led by the Vice Minister of Agnculture (Fblicy Coordnation) and mcludes the Diector of Devopment (MOA) and the heads of Colciencias and DRI and the Agricultal Unit in the DNP. The fonction of the Council is to oversee the implementalion of the Project, to approve changes proposed by the National Panel to Project cnteia or strategic tagets, to confirm the portfoio of subprojects selected after each semi-annual review by the National Panel (see para 4.16), tD approve Annual Operating Plans and Annual 'Wrk Plans,  - 22- and to ensure that the MCU and DRI comply with the obligations stated in their Annual Work Plans. The Mtnagement Coordination Unit 4.5 The Management Coordination Unit (MCU), which is already established, is responsible for administering, supervising, promoting and providing related training for the Project; for preparing financial and progress reports; and for monitoring and evaluating the Project overall. As it is presently defined, the MCU is the administrative arm of the Council and would assist with the development of Project criteria, coordinat research and extension activities, promote wide participation, and ensure that the Project continues on a path consistent with national goals. The MCU will also be the main contact for the Bank for Project implementation. 4.6 The MCU has been given full authority and xesponsibility for cofinancing subprojects with participating entities in strategic, applied, and adaptive research. The MCU would send out semiannual imnitations for subprojects; conduct a preliminary technical and financial review of proposals; contract with implementing entities; supervise and monitor subproject implementation; and ensure that procurement procedures used by the participating entities were satisfactory to the Bank. Thc contracted payments for the investment subprojects may be contracted to a fiduciary. 4.7 The MCUi would also coordinate and finance the mining program including the University Assistantship Progra. Short-term trining courses would be prepared by the MCU, by regional centers, or by participating entities, who would identify course subjects, potential instructors, and an appropriate organizational setup for teaching. Some of the trining would be contracted out to specialists. The MCU would also be responsible for the design and implementation of a technology intbrmation system. The MCU would prepare Annual Operating Plans and Annual Work Plans for all work under its supervision, along with annual financial statements. This Office would be responsible for the use of the Bank funds, including the processing of requests for reimbursement to replenish the Special Account. 4.8 The MCU is led by a Coordinator, who reports to the Vice Minister of Agriculture (Policy Coordination) in order to expedite decision- maling. This gives the MCU the authonty necessary for dealing with all the other entities in the sector and overseeing the implementation of the Project. In all, some 23 incremental staff would be required. Details of the MCU's organization structure and its tasks, authority, and responsibilities are available in the Project file (Annex 14).  - 23 - The National Panel 4.9 The National Panel (para. 3.8) has been appointed by the Council to review, select, validate, and adjust all research and training subproject proposals to be implemented under the Project. The Panel would present the portfolio of selected subprojects to the Council for approval. Panel members would be contacted at a standard daily rate for an estimated 15 days each per year. Contacts would be for two years with the possibility of one extenion (in order to provide continuity). The National Panel would include at least four members from universities and the private sector and one person with environmental experience who could review research subprojects for their emironmental impact Regulations for the National Panel would be part of the Operational hianual and would stipulate specifically that only subproject proposals that were enmirnmentally neutral or were aimed at remedying environmental damages would be considered. Regional Panels and Coordination Unit 4.10 As part of the national decentrizaton objective, the Project would establish, after the first year of operation, regional panels to screen proposals and ensure that those selected are designed to meet regonal priorities and the needs of the small farmer (pam. 3.9). Regional panels would also set assessment critea and targets for their respective departments compatible with the corresponding critria provided in the Operational Manual. Each regional panel would contain up to five professionals who would be appointed by the Council on recommendations from the Departmental Agricultmral Secretaa. The Project would also finance prfessional coordination units at the field level to ensure that the project was meeting the needs of the small farmer (pam 3.11). Assurances were obtained at negotiations that the MOA would, no later than within 6 months after the date of effectveness, establish at least 3 regional panels and appoint their members and at least 3 regional coordination units, and hire appropriate personnel and no later than twelve months after the date of effectiveness prepare a plan, acceptable to the Bank, for the establishment of additional units (para. 6.1 (c) (ix)). Processn Subprojects Fianced Under the Project 4.11 The system for the identification, processing and approval of subprojects for cofinancing is based on open competition for available fumds- based on established portfolio selection critria-among such sector enties as universities and growers associations and the CCIA. Criteria would include smal farmer and regional needs, pivat sector and joint venture partcipation, and relevance to stategic research goals, and would be speled out in the Operational Manual. 4.12 lb ensure frmer participation, agricultu development plans woud be prepared by the UMAMAs following meetings between the farmers, UMATA tcnical staff, and the mayor of each mumicipality. Such meetngs  - 24 - would provide a forum for farmers to express their research and ectension needs. Development plans would also identify those areas and crops liklly to yield increased production and income with research adaptation or technology transfer. 4.13 Plans would be consolidated at the departmental level into overall zonal plans. Identified needs (including training) would then be addressed by means of discrete subprojects, to be financed under the Project. With the assistance of the coordination staff, it is envisaged that, once decentralized, Departmental Agricultural Secretariats would invite proposals from research entities to undertake these subprojects, and implementing entities would submit cofinancing proposals to the appropriate Departmental Agricultural Secretariat using a standard fonn, see Annex 5. Pmposals would then be screened by regional panels to ensure that they conformed with crieria stated in the invitation letter and oginated at the municipal level. Accepted proposals would be forwarded to the MCU. 4.14 Under the project, the MCU would also send letters, each year, m August and m February to participating and prospective entities inviting proposals for strtegic and applied research, adjustment, validation, technology transfer, and training subprojects for possible cofinancing. This invitation letter would state basic criteria for subprojects, in accordance with the Operational Manual, as well as the Project's investment priorities for the coming semester. 4.15 The MCU would enter proposals recved into a database and eliminate: duplicates, technically unacceptable proposals, those whose duration would be more an three years or whose average annual cost eeeded US$50,000; those that requested financing greater than the maximum percentage allowed, and those that did not address the basic Project objective of helping the small farmer. The MCU would then apply a score to the remaining proposals for quality and reect those that fill below the established minimum. It would summarize the remaining proposals by department, compare the total value and financing required to detemine if more screening was required to reduce the value of requests to no greater an three times the level of funds available If needed, further screning would be done by scoring and by distributing selections to ensure a rational departmental mix. Finally, a list of recommended proposals would be sent on to the National Panel. 4.16 The National Panel would review the portfolio received frm the MCU to screen it for departmental mix, ovaall assessment criteia, degree of participation by the pnvate sector, and relevance to small farmers The National Panel would send a final portfolio of subprojects to the Executive Council for approval. The Council would apprcve the overall portfolio for the semester and advise the MCU regarding which subproects had been selected. Once Government budgetary contibution was secured, MOA would sign contuacts with the participating entities and make payments according to the schedule set forth in the contact. If acual Project resources  - 25 - differ from approved budget allocations, the National Panel would be responsible for making changes in the approved portfolio of subprojects. 4.17 For the final portfolio of approved proposal, MCU would send out Letters of Intent confirming the level of cofinancing and amount of financial support that would be supplied to implementing entities. Reply letters would be sent out indicating which subprojects were not selected. For each subproject, the MCU would prepare cofinancing contracts between MOA and the participating entity. 4.18 As part of the decentrlization process, certain subproject selection, approval, and cofinancing procedures would be handled at the deparmental level. Regional Panels, Coordination Staff, and Departmental Agricultural Secretariats would set the assessment criteria and annual imvestment trgets for their respective departments. Durng the midtErm reviw an assessment would be made on what Project responsibilities could be transfrred to the Departmental Agricultural Secretariats (para. 4.23). Preparing Annual Operating and Work Plans 4.19 The MCU would prepare an annual operating plan for the Project in accordance with normal Government timing and procedures. Based on available funds and on demand, amounts would be included for global investment in research, validation, adjustment, and training subprojects. Assurances were obtained during negotiations that the MCU would send to the Bank for review (by October 31 of each year) the proposed Annual Operating and Work Plans to be undertakn by the MCU under the Project far the coming year and a report on the adequacy of theportfolio management criteria (para. 6.1 (c) (x)). 4.20 In order to ensure maximum cooperation between interational and Colombian research centers, prionty would be given to joint research of mutual interest.' Management links among these organizations exist, in that the General Manager of CCIA is a member of the Board of Ikustees of CIAT, and CIAT is a member of CCIA and has the same rights as any other national member. While promoting maximum cooperation between research centers and corporations, subproject proposal submissions will be screened to make sure they do not duplicate work being done internationally or elsewhere in Colombia. Emvironmenl Impact, Evaluation, Monitoring, and Supervision 4.21 The Project would promote research that would increase agriculturl productivity and also improe the environment. Yet almost any 4 FEDEARROZ already has links to the new Cwpomucidn Colombiana Invsigacidn Agmpecuaria (CCIJA) (panL 2.13) and to CLAI. CCIA and CIAT are conducting joirit researeb on cassava poducton.. Joint research is also being conducted by CCIA and tvwo other Latin American centers, CIP and CIMMYT  - 26 - development activity distubs the land surface. While the area involved may be small, the cumulative effect of many small disturbances can be substantial. The MCU and Panel would screen proposals for environmental impact (Annex 11). The MCU would maintain a monitoring system to evaluate those impacts in thie field and to monitor the promotion of sustainable agricultural practices. The MCU would prepare short reports on each subproject under implementation (Annex 6). The implementing entity would prepare a report upon completion of each subproject which would be evaluated by the MCU. This subproject evaluation would compare actual results with the subproject's objectivs using the baseline data in the original proposal (Annea 5). In order to ensure adequate monitoring and supervision, assurances were obtained at negotiations that the MCU would appoint consultants, not later than tee months from the date of effectiveness (under terms of reErence satisfactory to the Bank) to refine and implement the monitoring and evaluation system for the Project. Not later than six months after effectiveness, the MCU would pvide the Bank with a report on that system for comments (paa. 3.12). 4.22 The MCU would also submit an annual progress rport to the Bank (due February 28) and two--three page progress reports (due August 31 and February 28 of each year) identifying the major issues, problems, and actions taken in the planning and implementation of the Project. These reports 'wold indlude the status of each component and discuss any problems that might arise (m such areas as provsion of counterpart funds, pace of technology adaptation, the Annual Wbrk Plan's effectiveness of research and extension services, reasonableness o performance, and monitoring criteria), which could impede Implementation. This information would also help the Bank and the MCU to plan the timing and composition of supervisory missions. 4.23 Tb evaluate the Project, the MCU would hire consultants (under tms of reference satisfactory to the Bank) to prepare a midterm performance report (pama. 3.12). No later than 30 months after the effeceveness date, and using the afementioned report as a basis, the Bomwer wuld undertae jointly with the Bank, a Midterm review and evaluation of the activities caried out under the project and the results achieved. This review would include, but not limited to: (a) the ftmctioning of the Coordinating Unit, the Executive Council, the Panel, the Regional Panels and the Coordination Units; (b) all aspects of the carrying out of approved Subprojects, particulady the selection process and the response of the privait Sector; (c) the efficacy of the provisions of the Operational Manual and the application theeof; and (d) the determination of which of the responsibilites of the Borrwe under the Pram could be transfirced to the Dqartmental A u l Secretariats or other appropriate agencies of Teritorial Entities. Assurances wer obtained during negotiations that the above midterm review would take place no later than 30 months after the date of effectiveness and once the renew has been completed all required adjustments, as well as changes to the Opeational Manual agreeable to the Bank would be introduced (pama. 6.1 (c) (xi)).  - 27 - 4.24 lbwards the end of the Project, by January 1, 1999, consultants would be hired to assess the overall success of the Project and to determine whether and when a second phase was needed. Reviewers would use case studies to assess the Project's success in developing and integrating links between strategic and applied research, adjustment and validation, and technology transfer and extension and in promoting jomt research and transkr activities between the puolic sector, growers associations, universities, and other private sector entities (para. 3.12). 4.25 Assurances were obtained from the Borrower that MOA would prepare and furnish to the Bank, no later than six months after close of the project, a plan for the future operation of the system of financing agricultural research to be put in place by this project, including the institutional development undertaken. The Borrower has also agreed to give the Bank a reasonable opportunity to exchange views with the Borrower on such a plan and thereafter to carry out the plan, taking into account the Bank's comments (6.1 (c) (xii)).  - 28 - S. BENEFITS AND RISKS Benefits 5.1 The research system developed under the Project would be more responsive to the needs of small producers. Although specific benefits from this first phase of the Project cannot yet be quantified, it is estimated that it could help some 350,000 farmers by improving yields, helping to introduce higher value crops, and promoting enviromnmentally sound practices. The introduction of a competitive research system, should also increase the efficiency of research. The financing of operating costs would help Colombian agricultural researchers make better use of existing physical and human capital and, aver the long term, the use of improved technology will increase incomes and employment for firmers, laborers, and the rural population at large. Risks 5.2 The Project's main nsks derive from its magitude to establish an integrated, nationwide agricultural research and technology tansfer pr-gram, involving up to 1,000 municipalities, 31 Departmental Agricultural Secretariats, and a variety of universities, NGOs and private grwers associations. 5.3 The risk that research results may not be effecive is a risk inherent to any research program. In this case, the Project could fail to meet the needs of small firmers. The overall Program, therefore, has been designed to link research and extension services and to screen proposals to ensure they will benefit the small farmers. Specific seminual targets will also be set for financing subprojects that originate from the municipalities Another mitigating factor is that in Colombia, the Project will be building on an existing DRI extension systm that works very well. It is important, therefore, that DRI continue to cofinance ectension services under its ongoiqg project. 5.4 Government has established a special high-level Execudve Council chaired by the Vice Minister of Agricuture (Pblicy Coordination) to resolve any implementation problems that might arise and to apprve the Project's annual opeating plans. Tb reduce the nsk of stat-up delay, the inve nt program for the first semester of the Project's first year (1995) includes some 70 actual subprojects proposed by potential Participating Entiies and accepted by the Panel, cofinancing contracts for these subprojects are presently being prepared.  - 29 - Project Sustainability 5.5 The Government's continued commitment to the development of a new system for coordinating and funding agricultural research and extension, with the ultimate aim of modernizing and increasing the competitiveness of the sector, bodes well for the future of the Project. By financing incremental operating costs within the existing infrastructure and research community, the Project should generate an increase in research activities. The Project will also increase the efficiency of investments in agricultural research in Colombia, and private sector involvement (para. 3.2). 5.6 lb further enhance the sustainability of the Project, the following mechanisms were included in the design. * Professional assistance would be provided to the departments to coordinate research and extension activities, and training would be provided for field technicians and other professionals at the UMATA level (paras. 3.11 and 3.13). * The Executive Council, MCU, and DRI's Agricultural Division will maintain administrative links to support Project and Program activities (para. 4. 1). * The Borrower, jointly with the Bank would conduct a mid-term review to examine results and propose adjustments to Project objectives wherever necessary (pama. 4.23). * External consultants would begin a study in the fifth year of the Project to evaluate the Project's success and assess the need for and best timing of a second phase (para. 3.12). * The Borrower would prepare, within six months after the close of the project, a plan for the future operation of the project, discuss the plan with the Bank and, thereafter, implement it (para. 4.25).  - 30 - 6. AGREEMENIS REACHED AND RECOMMENDATION 6.1 During negotiations of the proposed Loan, agreement from the Government of Colombia was reached on the following main actions. (a) Condition of Effectiveness: (i) Initial key staff of the MCU, with qualifications and experience satisfactory to the Bank, had been appointed (para. 4.2); and (ii) an Operational Manual had been deemed acceptable to the Bank and issued by the EC and adopted by the MCU (pam. 4.3) (b) Conditions of Disbursements: the Bank would not disburse against expenditures for: (i) vehicles, including boats, until an acceptable plan has been prepared and submitted to the Bank (para. 3.11); and (ii) the technology information system, other than expenditures with respect to consultant services, until a mutually agreeable, detailed action plan had been accepted by both Government and the Bank (par 3.17). (c) Other Agreements and Assurances: (i) MCU would implement the project as per the OM and Government would approve, and submit for Bank approval, any proposed changes to the OM (para. 3.5). (ii) Consultants would be contracted by MCU not later than: three months from the effectiveness date, to assist the MCU with the implementation of the supervision system for the Project and send a report on their findings and recommendations to the Bank for comment within six months from the effectiveness date (para. 3.12). (iii) Tw years from the effectiveness date, to prepare a performance report; and by January 1, 1999, and to assess the Project's success to date and to determine whether or not Government should follow-up with a second phase of the Project (para. 3.12). (iv) MCU would prepare a proposal for a detailed action plan for a technology information system and submit it to the Bank for comment no later than six months from the effectiveness date (para. 3.17). (v) Govemment and the participating entities would follow procurement procedures satisfactory to the Bank (para. 3.27). (vi) MOA may seek the assistance of one or more fiduciaries, acceptable to the Bank (pam. 3.31). (vii) The accounting and audit requirements described in para. 3.33 and 3.34 would be followed. (viii) Government would retain in the MCU, and the National Panel, persons in numbers and composition satisfactory to the Bank for the efficient implementation of the Project and would not change the Coordinator of the MCU, or appointed National Panel members, without prior Bank approval (para. 4.2). (ix) within 6 months from the effectiveness date, MOA would establish at least 3 regional panels and at least 3 regional coordination units and appoint personnel and, no later than 12 months after the effectiveness date, prepare a plan, acceptable to the Bank, for the establishment of additional units (para. 4.10). (x) The MCU  - 31 - would submit Annual Operating and Work Plans for Project activities to the Bank for review by October 31 of each year (para. 4.19). (xi) No later than 30 months from the effectiveness date, the Borrower, jointly with the Bank, would carry out a comprehensive midterm review and thereafter introduce all necessary changes to the Project (para. 4.23). (xii) MOA would prepare a plan, within six months after project closing, fir the future operation of the project and discuss this plan with the Bank, and, thereafter, implement it (para. 4.25). Recommendation 6.2 Using the terms and conditions set forth in Sections 1 to 6 of this report, the Agricultural TIbchnology Development Project, as proposed, constitutes a suitable basis for a World Bank loan of US$51.0 million to the Republic of Colombia.  -32- Arex 1 COLOMBIA AGRICULTURAL TECHNOLOGY DEVELOPMENT PROJECT LOAN AND PROJECT SUtNARY COSTS -----USS Millons--- Local Foreign Totat X of Totat 1/ Research Investments - Research Projects 18.75 8.03 26.75 31.88 - Technology Transfer 18.75 8.03 26.78 31.88 Management and Coordination - MIIAG - Mgmt.5 AdafnA& Panel 3.24 1.39 4.63 5.51 - Program Promotion 0.78 0.33 1.11 1.32 -Supervision 0.97 0.41 1.38 1.65 -Sub-TotaL - MCU 4.99 2.14 7.13 8.48 - Strengthening Regions 2.89 6.74 9.63 11.46 - Training 7.17 3.07 10.24 12.19 - Research Retated Trn'g 0463 0.27 0.90 1.07 -Information System 1.28 1.28 2.55 3.04 Total Project Cost 54.44 29.56 84.00 100.00 I/ Estimted direct and Indirect foreign exchange costs of the progrm. Financing Plan National Govermment Inc. CCIA 22.29 22.29 26.54 Universities and Private Sector 10.71 10.71 12.75 IBRD Loan 21.44 29.56 51.00 60.71 Bank FY 1995 1996 1997 1998 1999 2000 2001 DISBURSEMENTS X 12.00 24.00 40.00 52.00 68.00 88.00 100.00 - Anual Mn 6.12 6.12 8.16 6.12 8.16 10.20 6.12 - Cumzulative Mn 6.12 12.24 20.40 26.52 34.68 44.8 51.00 C:XA1PSARfANNEX U.IK  -33- Amis 2 ASI!WLTUAL TECIOL DEVELOPUT PROJECT PROJECT SUIMP Ws BY VW ----USS NhlLIcs-- Tar I YTr 2 Yer 3 Tor 4 Total 2 Remrch Inveatments - Re.ea.rc Projects 3.01 6.13 7.83 9.31 26.78 31.16 - Tachnology Truefer 3.01 6.13 7.83 9.1 26.78 31.16 ng_t md Coordinstion - Nwt. Adin.& Pwl 1.17 1.15 1.16 1.13 4.63 5.51 - Prgrm Promothmn 0.54 0.22 0.18 0.17 1.11 1.32 - tiwrveiin 0.40 0.J 0.42 0.30 1.38 1.15 - St-Ttal, - NM 2.12 1.63 1.78 1.10 7.13 8.48 - Stru'utheninr tlwo 3.66 3.91 0.90 0.94 9.3 11.46 - Training 2.69 2.57 2.78 2.20 10.24 12.19 - REaorech Rlated Trn'g 0.20 0.20 0.21 0.21 0.90 1.07 - lnfomt1on stog 0.31 0.71 0.77 0.77 2.55 3.04 Total Projoect bast 15.29 21.29 22.09 5.34 84.00 100.00 COFINANCING MATRIX IqAtm. Nai Agencise NME Lom _ _.._ __._ ............._______. _____............... _------------------ Managemet mi Coordinatfin - Nt.& AdmIn.& Pael 100 85 Il - Training 100 05 I/ - Proorm Promotion 100 65 11 - Srvision 100 85 1/ - infoatlon Systa 100 85 11 - Reserch Projects 21 50 - Tadinlogy Transftr 2/ 50 - Rteserch Rotsted Trn'g 100 a5 11 - Strengthening eogions 100 as5 I 1/ The Denk an wmoutd finance 100 of the foreign costs mid 65 of the Local costa of goods3 technal assistance and training in the coordinating uit. It would also fin *6 2 -n the incrmenta operating costs of the uaft in years I and 2, 701 In yesr 3, wd 602 in year 4. V/ The llr loan would finane 1OO of NA's tare of the totat Investmnt costs of ech rearch usprojects. NRM mId negotiate Iv of contribution on each Aiproject with the participating entities ip to a mximum of 50 2.  Il I - -- -- - - - -- - - - -- - -- - -- -- - -- - -- - - - - - - -- - -- --- - I xamNv -I--~~~~~~~~