Cambodia - Northeast Village Development Project

Document of The World Bank Report No: 18998-KH PROJECT APPRAISAL DOCUMENT ONA PROPOSED LEARNING AND INNOVATION CREDIT IN THE AMOUNT OF SDR 3.6 MILLION EQUIVALENT TO THE KINGDOM OF CAMBODIA FORA NORTHEAST VILLAGE DEVELOPMENT PROJECT APRIL 30, 1999 Rural Development and Natural Resources Sector Unit East Asia and Pacific Region  CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 1998) Currency Unit = Riel Riel = US$ 0.00027 US$ 1 = 3700 Riel FISCAL YEAR January-December ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank AFD Agence francaise de developpement APIP Agricultural Productivity Improvement Project (World Bank/IFAD) CAAEP Cambodia-Australia Agricultural Extension Project (Ausaid) CASD Community Action for Social Development (UNICEF) CARERE2 Cambodia Area Rehabilitation & Regeneration Programme (UNDP) CDC Commune Development Committee CMAC Cambodia Mine Action Centre IAPSO Inter-Agency Procurement Services Office LDP Local Development Process MAFF Ministry of Agriculture, Forestry and Fisheries MEF Ministry of Economy and Finance MRD Ministry of Rural Development MWA Ministry of Women's Affairs NPM National Project Manager PDP Provincial Development Programme (GTZ) PDRD Provincial Department of Rural Development PFD Partners for Development (NGO) PHRD Policy and Human Resources Development Fund (Japan) PIU Project Implementation Unit PPIU Provincial Project Implementation Unit PRASAC Programme d'appui au secteur agricole au cambodge (EU) PRDC Provincial Rural Development Committee PSC Project Steering Committee RRIP Rural Roads & Infrastructure Proj ect (ADB) STF Seila Task Force UNCDF United Nations Capital Development Fund UNDP United Nations Development Programme UNICEF United Nations Children's Fund UXO unexploded ordnance VDC Village Development Committee WFP World Food Programme Vice President . Jean-Michel Severino, EAP Country Manager : Ngozi N. Okonjo-Iweala, EACSM Sector Manager : Geoffrey B. Fox, EASRD Task Team Leader : Christopher Redfem, EASRD  Kingdom of Cambodia Northeast Village Development Project CONTENTS Page No. A. Project Development Objective ...............................................................2 1. Project development objective and key performance indicator .....................................2 B. Strategic Context ...............................................................2 1. Sector-related CAS goals supported by the project .......................................................3 2. Main sector issues and the Government's strategy ........................................................3 3. Sector issues addressed by the project and strategic choices .........................................3 C. Project Description Summary ...............................................................4 1. Project components ............................................................4 2. Key policy and institutional reforms supported by the project ......................................6 3. Benefits and target population ............................................................6 4. Characteristics of the Population in the Project Area ....................................................7 5. Development Constraints in the Project Area ............................................................ 8 6. NVDP Poverty Strategy ............................................................8 7. Institutional and implementation arrangements ............................................................9 8. Monitoring and Evaluation ........................................................... 10 9. Bank Supervision Strategy ........................................................... 11 D. Project Rationale .............................................................. 11 1. Project alternatives considered and reasons for rejection ............................................ 11 2. Major related projects financed by the Bank and/or other development agencies ...... 12 3. Lessons learned and reflected in proposed project design ........................................... 12 4. Indications of borrower commitment and ownership .................................................. 13 5. Value added of Bank support in this project ........................................................... 14 E. Summary Project Analyses .............................................................. 14 1. Economic ........................................................... 14 2. Fiscal Impact ........................................................... 14 3. Technical ........................................................... 14 4. Institutional ........................................................... 14 5. Social ........................................................... 14 6. Environmental assessment ...................... 15 7. Participatory approach ...................... 15 F. Sustainability and Risks ......................... 16 1. Sustainability ...................... 16 2. Critical risks ...................... 16 3. Possible controversial aspects ...................... 17  G. Main Loan Conditions ........................ 17 2. Effectiveness Conditions ..................... 17 3.- Financial covenant ..................... 17 4. Disbursement condition ..................... 17 H. Readiness for Implementation ........................ 17 I. Compliance with Bank Policies ........................ 17 Annexes Annex 1. Design Summary Annex 2. Detailed Project Description Annex 3. Estimated Project Costs Annex 4. Procurement and Disbursement Arrangements Table A. Project Costs by Procurement Arrangements Table Al. Consultant Selection Arrangements Table B. Thresholds for Procurement Methods and Prior Review Table C. Allocation of Loan Proceeds Table D. Government Counterpart Budget Contribution by Calendar Year Annex 5. Project Processing Budget and Schedule Annex 6. Documents in Project File Annex 7. Statement of Loans and Credits Annex 8. Country at a Glance Annex 9. Rural Development and Decentralization in Cambodia Map IBRD 27955  Kingdom of Cambodia Northeast Village Development Project Project Appraisal Document East Asia and Pacific Region Date: April 27, 1999 Task Team Leader/Task Manager: Christopher Redfem Country Manager/Director: Ngozi Okonjo-Iweala Sector Manager/Director: Geoffrey B. Fox Project ID: KH-PE-58841 Sector: BD, TR, Al Program Objective Category: Poverty Lending Instrument: LIL Program of Targeted Intervention: [x] Yes [ No Project Financing Data [] Loan [x] Credit [] Guarantee [ Other [Specify] For Loans/Credits/Others: Amount (SDR): 3.6 million equivalent Proposed terms: [] Multicurrency [ Single currency, specify Grace period (years): 10 [] Standard Variable [ Fixed [ LIBOR-based Years to maturity: 40 Commitment fee: 0.5% Service charge: 0.75% Financing plan (US$m): Source Local Foreign Total Government 0.3 - 0.3 Cofinancier: Japan (PHRD Grant) - 0.7 0.7 IDA 3.0 2.0 5.0 Beneficiaries 0.3 - 0.3 Total 3.6 2.7 6.3 Borrower: Kingdom of Cambodia Responsible agency: Ministry of Rural Development (MRD) Estimated disbursements (Bank FY/US$M): 1999 2000 2001 2002 Annual 0.5 1.5 2.0 1.0 Cumulative 0.5 2.0 4.0 5.0 Project implementation period: 30 months Expected effectiveness date: July 1, 1999 Expected closing date: April 30, 2002  Page 2 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1).- The NVDP's development objective is to introduce decentralized, participatory, poverty-oriented rural development approaches in some of the poorest areas of Cambodia and to gain the experience in managing such programs needed by the Government for formulating and carrying out a cohesive national strategy for rural development in the post-2001 period. Critical performance indicators would be: (a) as a result of the project, the Government would adopt more decentralized, participatory and sustainable rural development strategies for its public investment and administrative reform programs; (b) Government capacity to implement such strategies would improve; and (c) the rural economy in the project target areas would improve. By the end of the project (LIL) in October 2001, the capacity of the Provincial Departments of Rural Development (PDRD) in the four provinces concerned would have been built up to the point where they could help local communities to plan and manage small rural development sub-projects. They would have developed effective working links with existing Provincial Rural Development Committees (PRDC) and with Commune Development Committees (CDC), expected to take on an increased local government role after communal elections planned for late- 1999. Working systems and trained personnel for participatory rural appraisal (PRA) would have been put in place. The project would have made a start in providing people in the area with community investments needed to improve their incomes; and, through their participation in village development committees (VDC), the poorest households would have an opportunity to make their needs known. Opportunities would be created for local NGO and contractors to develop activities in the area. The project would help project staff to gain management experience and to prepare a plan for a follow-up project in the Northeast. B: Strategic Context Project Rationale Cambodia has had a number of rural development projects during the post-conflict reconciliation and reconstruction period beginning in 1992, which have had a positive but still limited impact; and a top priority of the national development strategy is to spread the benefits of development more widely to rural areas, where 90% of Cambodia's poor households live. To date, virtually all rural development projects in Cambodia have been designed, financed and implemented by donors, international agencies or non-governmental organizations:l the Government of Cambodia and its responsible line agencies has so far had very little on-the-ground experience of planning, managing and coordinating a rural development project. Preparation of the NVDP has drawn extensively on the experience of these other projects and in the process has helped the MRD to get a better knowledge of them and of Bank procedures;2 implementing the NVDP will permit MRD and Government staff in the provinces to acquire and internalize experience of project management and evaluation. The project would include the hiring of international consultants to advise and train in key areas where experience is lacking but Cambodian staff would throughout be responsible for managing the project. Pre-project staff selection and training has commenced. I Section D lists some larger programs funded by donors and international agencies. 2 Especially through managing PHRD grant funds for project preparation.  Page 3 1. Sector-related Country Assistance Strategy (CAS) goals supported by the project (see Annex 1): CAS document number: 16255-KH Date of latest CAS discussion: February 20, 1997 The central objective of the CAS for Cambodia is poverty reduction. The specific goals of the CAS supported by the project are: * Enhancing Rural Development and Natural Resource Management; * Improving Human Resources and Reducing Poverty; and * Strengthening Institutional Capacity. 2. Main sector issues and Government strategy. Reflecting the country's still-ongoing emergence from prolonged civil war and destruction of social capital, the main challenge for Cambodia's economic and social reconstruction is poverty reduction - the Government has not yet found the means to achieve a significant improvement of economic and social well-being for the majority of the rural population, which has suffered great deprivation and remains severely impoverished. The Government's strategy for eliminating poverty is becoming more clearly formulated but suffers from severe implementation constraints and human resource limitations. Approaches to rural development have tended to be centralized and top-down, partly reflecting a persistence of attitudes from earlier periods. Local government has been largely neglected in the reconstruction process and efforts to establish a centralized public finance system have created an added constraint. In order to achieve better results, the Government aims to decentralize responsibilities for rural development closer to the villages, in order to secure their commitment and active involvement. Local government presently lacks the resources to do much without assistance from NGOs and other development organizations. After assuring basic security, the next major tasks are to improve communications, provide basic needs of access to food, water and health services, and to demonstrate to villagers ways in which they can improve their own livelihoods and connect them with potential sources of technical and financial assistance. The IDA/IFAD Agriculture Productivity Improvement Project (APIP) and others such as the Ausaid-funded agricultural extension project provide assistance for improvement of technical services for smallholder farmers. Another important step is to prepare a realistic plan for the development of rural financial services, which is being done with assistance from the Asian Development Bank (ADB) and Agence francaise de developpement (AFD). Sectoral issues are discussed in the Bank's 1996 Cambodia country report and Agriculture Sector Memorandum (May 1997), as well as in studies done by other agencies, some of which are referred to in section D.3. 3. Sector issues to be addressed by the project and strategic choices: The project addresses the following sector issues: (a) institutional: the project will help to demonstrate the feasibility of a significantly decentralized approach to the management of rural development in some of the poorest and most isolated parts of Cambodia; in so doing, it will also help to clarify and develop the role of the Ministry of Rifral Development (MRD), more as a strategist and facilitator rather than a direct deliverer of rural  Page 4 development services. In the longer term, MRD could take on a larger responsibility for promoting the development of local government in rural Cambodia; (b) social: for a country which has undergone immeasurable damage to its social institutions from three decades of civil conflict, there is a surprising dearth of recent sociological analysis of rural Cambodia. The project would provide an important test of whether rural Cambodian communities are willing and able to reorganize themselves to undertake development activities for communal purposes; (c) economic: since most of the target villages and communes involved are geographically isolated and very poor, and have received little or no development assistance for 30 years, there is a lack of systematic knowledge of development constraints in the area. By supporting and monitoring a range of demand- driven subprojects the project will obtain information needed to determine clearer priorities for future investment in the economy of the area. C: Project Description Summary 1. Project components (see Annex 2for a detailed discussion and Annex 3for a detailed cost breakdown): Component Category Cost incl. % of Bank- % of Contingencies Total financing Bank- (US$m) (US$m) financing Participatory Planning and 4.3 68 % 3.3 66 % Investment Institutional Strengthening and 2.0 32 % 1.7 34 % Project Management I I _ I Total 6.3 100 % 5.0 100 % The NVDP's development objective is to introduce decentralized, participatory, poverty-oriented rural development approaches in some of the poorest areas of Cambodia and to gain the experience in managing such programs needed by the Government for formulating and carrying out a cohesive national strategy for rural development in the post-2001 period. Project Outputs. In line with the project's development objective, and learning and innovation format, the project aims at producing two main outputs: A. Developing and testing a participatory system for identifying, financing, constructing and maintaining investment subprojects aimed at raising the livelihoods of poor rural households, with the Government role mainly as "strategist", and partner agencies (NGO, private contractors, local associations) as principal direct service providers; and B. Improving the capacities of local institutions, from VDC in the target villages, to PRDC at the provincial and MRD at the national levels, to play their parts in supporting participatory, decentralized rural development programs. Project Components. The proposed project has two main components, corresponding to the Project Outputs described above: * Participatory Planning and Investment (US$4.3 million); and * Institutional Strengthening and Project Management (US$2.0 million).  Page 5 (a) Participatory Planning and Investment. Project investment activities would be based on and support development of a participatory planning system, starting at the village level with the formation ofVillage Development Committees (VDC) and intended to reach progressively upward to correspond with different levels of local government, referred to as the Local Development Process (LDP). To start the LDP in the project area, the project would finance the costs of preparing and carrying out participatory rural appraisals (PRA) in about 120 villages in 27 target communes, selected on the basis of criteria set out in the PRA Implementation Guide (PRAIG) reviewed during appraisal. The LDP would inter alia assist VDC to determine a community's development priorities and identify suitable subprojects for financing under the project. The project would provide financing on a grant basis to VDC in target communes in the project area for the construction of investment subprojects (total cost US$3.0 million) aimed at generally raising the livelihoods and well-being of the concerned communities and approved by the respective Provincial Rural Development Committee (PRDC), on the basis of proposals screened and forwarded by the Provincial Project Imp,lementation Unit (PPIU). Investment subprojects would mostly be for rehabilitation or improvement of the physical infrastructure directly supporting the economic activities of a community, such as a dike for irrigation and water control, a bridge or track for easing farm-village-market transport constraints ', or digging of ponds and wells for village water supply. Beneficiary communities would normally be expected to contribute about 20% 4 of estimated construction cost of subprojects, either in the form of labor, materials or financing, and would sign an agreement providing for subproject operation and maintenance. The subproject menu would deliberately be kept flexible in order to gain maximum valid information about local development constraints and capacities to overcome them. Community asset subprojects, such as village training and literacy centers, cultural heritage conservation and eco-tourism projects, could be considered. However, social sector projects (health, education) would not normally be financed as these are provided through other sources such as UNICEF and the Social Fund. Details of the types of subproject eligible for financing will be included in a Project Operations Manualto be submitted to IDA for approv before disbursement of funds for subprojects can begin. To assist the PIU in setting up the project's Local Development Process, training staff, establishing systems for financing and monitoring of subprojects, and evaluating project results, the proposed Credit would finance about 5 staff-years of TA (Institutional Development Advisor, Financial Advisor, and short-term consultants, see Annex 4, Table Al), estimated cost US$0.7 million. The Institutional Development Advisor would be the chief technical advisor for the Project, with the prime responsibility of helping the Government to draw the appropriate institutional and other lessons from implementation of this and other rural development projects for its future investment programs and national strategy for rural development in the post-project period. Detailed terms of reference for all project advisory positions are contained in the Borrower's PIP. 3The Project does not envisage the financing of tertiary road improvements, since the technical and financial resources needed to address these needs in the area would greatly exceed those available under this project. MRD is currently implementing a national program for Rural Roads and Infrastructure Improvement (RRIP) with financial assistance from the ADB in conjunction with ILO. 4There will be flexibility to vary this percentage according to the type of project and specific circumstances; the 20% figure is an agreed overall guideline.  Page 6 To help set up and operate the four PPIU, a bilateral Grant from Japan of US$0.7 million would finance approximately 8 staff-years of TA in the fields of: participatory rural appraisal (PRA) and community development methods suitable for post-conflict situations; subproject preparation, appraisal, financing and contracting; and small rural works design and construction, estimated cost US$0.7 million. The terms of reference and contracts for individual consultant services would be approved by IDA. (b) Institutional Strengthening and Project Management The Project would provide resources to help strengthen the Borrower's institutions at national, provincial and lower (district/commune/village) levels, sufficient to carry out the activities described above and more generally to achieve the Project's development objective. Specifically, the Project would provide for: (i) fixed-price contracts with consulting firms (estimated cost US$0.8 million, see Annex 4, Table Al) to assist MRD in: * establishing a management information system (MIS) for the project; * conducting participatory evaluation studies of project performance and impact; * preparing feasibility studies for a follow-on project; * providing review where necessary of subproject design and supervision of construction; * carrying out independent annual financial audits; and * provision of training courses. The terms of reference and contracts for consulting firm services would be approved by IDA. (ii) rehabilitation of Government offices needed for implementing the Project (US$0.2 million); (iii) purchase of vehicles, a diesel-powered boat and office/communications equipment needed for the operation of the Project (US$0.7 million); and (iv) incremental project operating expenditures (US$0.2 million) and salaries for local project staff hired on contract (US$0.2 million). IDA funds would not be used for paying government staff salaries, which are not included in the cost of the project. Implementation Period. The project would be implemented starting in mid-1999 and completed by October 31, 2001. Final disbursements would be made by April 30, 2002. 2. Key policy and institutional reforms supported by the project: The project is designed to introduce decentralized and participatory approaches to the management of rural development in the Northeast of Cambodia, to monitor and evaluate that experience, and thus to assist in developing the roles and capacities of MRD, local government and civil society to promote equitable and sustainable development in the project area. The project implementation plan is built up in phases and provides for flexibility and mid-course adjustment, in the light of experience gained and the findings of independent evaluations. 3. Benefits and target population: The 12 selected districts currently have no major rural development program. The project would make grant funds available to a sample of local communities for improving the social, economic and physical  Page 7 infrastructure needed to support an improvement in incomes. Most importantly, the project will help to acquire local knowledge and institutional experience that could lead to a well-prepared follow-up project having the following results: Economic Benefits: Improved economic conditions for poor rural households as a result of improved market access and upgraded infrastructure for agricultural production (e.g. rehabilitation of village tracks, rural roads, bridges and small scale irrigation works); Social Benefits: Through exposure to participatory approaches to rural development, people living in the project area will gain confidence in the prospects for an improvement of their livelihoods; Other Benefits: Institution building and the promotion of public administration decentralization; the private sector and NGOs may find increasing opportunities to develop activities in the area; and 4. Characteristics of the Population in the Project Area The social assessment carried out during project preparation studied the provinces of Kompong Cham (population 919,000), Kompong Thom (population 305,000), Kratie (population 198,000), and Stung Treng (64,000). The total project area has a population of about 1.5 million people. The average household is 5.6 persons, and the average number of households per village is 132, or about 740 persons. The sex ratio of the population is 91.7, indicating that there are only 91.7 males per 100 females. These indicators are generally consistent with national level. Female-headed households are as common as elsewhere in Cambodia. About 20% of household heads in the project area are women. The project area and population is characterized by diversity rather than homogeneity, by variation rather than uniformity, both in livelihoods and in other ways of life. The SA classified the project area into five ecozones: (i) Mekong Riverside, (ii) Other Riverside, (iii) Lowland Plains, (iv) Lowland-Upland interface, and (v) Uplands. Patterns of livelihood were analyzed in the context of each ecozone. Livelihood for households was operationally defined in terms of the resources from which they were derived, viz: (i) farming, (ii) utilization of common property resources, (iii) wage labor, (iv) micro- enterprise, and (v) loans from others. Variation by ecozone is significant: * Seasonal wage labor contributes significantly for between one-fourth to one-third of households in most ecozones, except for the Mekong riverside, where wage labor is insignificant; * One fourth to one third of households in most ecozones are indebted to an amount representing more that three months expenditures; and * Significant health variation exists between communes in all ecozones, for reasons not identified. Over the four provinces, two-thirds of households are classified as 'poor' (10%) or 'very poor' (54%), on the basis of nutrition, migration and indebtedness indicators. In Kratie, more than 40% of households are 'very poor', representing half of all very poor villages in the project area. In Kampong Cham, 57% of households are 'poor' and landlessness was reported as a factor.  Page 8 5. Development Constraints in the Project Area Some of the main economic development constraints of the area are considered to be: a) lack of access to markets, information and public services: the area includes some 3000 km of rural roads and tracks, and over 1000 bridges, most of which are not suitable for motor vehicles as they have been destroyed in the war or simply not maintained for the past 30 years. About 80 percent of the population in the area live close to the Mekong and other rivers, which assure passage through much of the year for transport into and within the region; b) lack of water in the dry season for human and livestock needs, irrigation of vegetable plots and for fishing, and also frequent flooding in the wet season; c) lack of know-how, inputs and credit for increasing agricultural production, including rice and other annual crops, animal production and low-intensity fish rearing; d) landmines/UXO: in certain localities in the area (e.g. Snoul) land cannot safely be accessed or developed because of danger of landmines or unexploded ordnance, since the Northeast has not generally been a top priority area for the Cambodia Mine Action Centre (CMAC) and other demining agencies; e) lack of know-how, inputs and credit for starting rural enterprises (e.g., building and construction, transport, motorcycle repair shops, ox-cart manufacture, small sawmills and wood-based industry, fishing gear manufacture/repair, battery charging, food preparation and retailing, other retail services); and f) weakness of institutions from provincial down to village levels to relate rural development initiatives to local needs and opportunities and to secure local participation in the undertaking of community- level investments. 6. NVDP Poverty Strategy NVDP comprises a targeted poverty reduction strategy based upon multi-level prior screening, data collection and consultation processes, viz: * Selection of four provinces in the Northeast as the project area, one of the poorest regions of the country as a result of resource-endowment and historical factors; * Selection of 12 target Districts within the area, based upon consultations with locally-knowledgeable persons and data reviews by the preparation team in order to obtain a cross-section of socio-economic characteristics within an overall objective of favoring inclusion of poorer and unassisted districts; for this reason, * Establishment of baseline data on socio-economic and demographic characteristics of all known villages in the project area, permitting their classification into broad poverty bands and resource- based (agro-ecological) livelihood categories; * Carrying out of commune-level profiles to permit selection of about 30 target communes and about 120 villages to serve as the primary focus of activity under the project through the LDP. These  Page 9 comprise villages categorized as well-off, poor and very poor; and within these villages there is always a variation of household situations but generally not very wide. NVDP will aim to target and monitor its poverty reduction impact at the level of the community, but not to the individual household level. Few if any of the larger rural development programs in Cambodia have announced more explicit poverty reduction strategies than this. Some smaller NGOs have had some success in raising incomes of the very poorest households but this is difficult to replicate and scale up. In general, experience in Cambodia shows that it is difficult to help the very poorest of the poor except through food for work, emergency health and other direct relief measures. NVDP will probably be the first larger scale rural development program in Cambodia to have developed a baseline data set and a monitoring and evaluation system before disbursing funds for subprojects. This will significantly improve the poverty impact of the project and enrich the knowledge base on effective rural poverty reduction strategies. 7. Institutional and implementation arrangements Project Management. Overall management of the Project will be under the responsibility of a five-person Project Steering Committee (PSC), chaired by the MRD State Secretary and supported by an Executive Secretary. Staffing, policy matters, coordination with other Ministries and donors, receiving progress reports and, above all, ensuring that the Project remains on course toward its overall objectives, will be the main tasks of the PSC. For this reason, it will need to be a proactive not passive body. Preparation, pretesting and coordination of the Local Development Process, monitoring of subprojects, will be the responsibility of the Project Implementation Unit (PIU) to be established by MRD, headed by aNational Project Manager (NPM) and situated in the project area's main town, Kompong Cham, about two hours by road from Phnom Penh with adequate housing, banking and communication facilities. Forming and training the LDP core team of facilitators and project promoters will be the first and main task of the PIU; later, it will be the management and monitoring of the PPIUs and the growing portfolio of subprojects. All PIll positions other than support staff will be filled on the basis of competitive selection and contractual employment. Small Provincial Project Implementation Units (PPIUs), situated physically within the PDRD but including staff drawn from outside the PDRD, will be established in each project province, starting in PY2, under the authority of the existing Provincial Rural Development Committee, chaired by the provincial Governor. The PPIUs would eventually take over the functions initially assumed by the PIU: but it would be determined later on how soon this decentralization could and should take place. The PIU will be responsible for (i) project planning and coordination the central level and coordination of activities being carried out by participating provinces; (ii) the production and updating of the project operational manual and technical guidelines; (iii) all project-wide aspects of procurement and disbursement, and the implementation of monitoring and evaluation activities; (iv) preparation of implementation reports and annual/semi-annual workplans; and (v) design of training programs for MRD and provincial staff. The PPIUs will be responsible for the day to day implementation and oversight of the establishment of Village and Commune Development Committees (VDC/CDC), PRA planning activities, subproject development, and provincial training and monitoring activities. Sub-projects will mainly be implemented by VDC/CDC with assistance from local government staff and project partners. The role to be played by grassroots village leaders (formal and informal) in implementation will be important, and the support of existing social organizations in the area, such as local NGOs and pagoda committees, will be enlistedby the project  Page 10 Accounting, financial reporting and auditing arrangements. Financial records would be kept for all project-related expenditures using generally accepted accounting principles. A Special Account would be established under the project at the National Bank of Cambodia (NBC) and would be managed by MRD. The project accounts established and maintained by MRD with assistance of a financial advisor would be audited annually by independent auditors acceptable to IDA and audit reports would be forwarded to IDA within six months of the end of the financial year. The Project Steering Committee would be responsible for ensuring that financial management, reporting and auditing were properly carried out by PIU and the PPITUs. The project's flow of funds system would be elaborated progressively, reflecting the types of activities that the project will be undertaking and the capacities of the implementing agency as well as of the local government authorities in the four provinces. * Under Phase 1 of NVDP (April-December 1999) where activities primarily involve the formation and training of the LDP core team, the normal financial flow of funds would be adopted, with a Special Account managed by the implementing entity (MRD). By the end of Phase 1, the financial system would be reviewed with the help of the Financial Advisor and refined as necessary to permit implementation of the next phase; * In Phase 2, which involves formation of project implementation units (PPIU) in the provinces and initiation of subprojects, the financial system will be elaborated so as to permit a prudent delegation of financial responsibilities to local government levels as part of the Local Development Process, and to develop capacity of the PPIUs to provide necessary technical and financial support to the PRDC, CDC and VDC. * In Phase 3, implementation of subprojects would continue with further refinement of the financial system and LDP process, in light of the evaluation carried out at end of Phase 2. 8. Monitoring and Evaluation. Critical indicators of success would be: (a) as a result of the project, the Government would adopt more decentralized, participatory and sustainable rural development strategies for its public investment and administrative reform programs; (b Government capacity to implement such strategies would improve; and (c) the rural economy in the project area would improve. In line with its objectives, the outputs of the project essentially relate to strengthened institutions and processes. The LIL aims to find out what kind of community development approaches and local planning and investment processes will work well under the difficult initial conditions encountered in the northeast of Cambodia. So, most of the relevant key indicators will be about how well these local institutions and processes are working, from the point of view particularly of the participants. For example, how long it takes from the time a VDC applies for a subproject to when it gets approved (or rejected); and indicators of the performance and rectitude of the financial management system. However, any outcome indicators  Page 11 available during the implementation period about the quality of the project's physical outputs (subprojects) and of their likely sustainability would also be used. The project's monitoring system would established within the PIU, with the help of a short-term consultant, during the project's start-up phase in 1999, before subprojects are approved for funding. Some of its inputs would come from the financial management system also to be developed during Phase 1. The M&E consultant would be expected to return for short-term missions throughout the remainder of the project to ensure that the monitoring system functioned satisfactorily and to assist in the analysis and reporting of its results. These would be included in the project's quarterly progress reports. Because of its piloting and learning objectives, the project would invest substantially in at least two independent evaluations of its progress and results, toward the end of each of its first two implementation phases, as described in the PIP, and a completion report toward the end of the third phase. These evaluations would be carried out on contract by an independent organization but include MRD staff on the team for learning and familiarization purposes. The evaluations would feed in turn into the project completion report and the feasibility study for a follow-on project. Including the cost of independent audits and consultant services for subproject design and contract supervision, the project would devote about 10% of its total resources to monitoring and evaluation. 9. Bank Supervision Strategy The learning, capacity-building and institutional objectives of the Project are important for developing Cambodia's post-2001 rural development framework, and the Government will count on continuing support for this from the Bank through its regular supervision missions and non-lending assistance. In addition, the implementing agency lacks experience with Bank projects. Above-average intensity of supervision is therefore recommended, particularly during the start-up period and at the time of mid-term evaluation. The budget implications for the Bank's operational Units concerned should be taken into account accordingly. D: Project Rationale 1. Project alternatives considered and reasons for rejection: Consideration was given to adopting the CARERE/Seila Local Planning Process and extending it to the Northeast but it was felt to be too demanding for the initial conditions of this area (where, unlike the Northwest of Cambodia, there are very few IOs and NGOs operating) and too management-intensive for MRD and the provincial services to handle immediately (a fuller analysis of this strategic choice is given in Annex 9: Rural Development and Decentralization in Cambodia). The project was originally envisaged as a much larger rural development program covering five northeast provinces over a period of six years. Because of a lack of implementation capacity in the area and of institutional experience in MRD in managing rural development programs, it was agreed with Government in early 1998 that a LIL, which could prepare for a larger-scale rural development program in the future, was a much better approach.  Page 12 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Sector issue Project Latest Supervision (Form 590) Ratings (Bank-financed projects only) Implementation Development Progress (IP) Objective (DO) Bank-financed Emergency Rehabilitation Project S MS Agriculture Productivity S S Improvement (APIP) Social Fund (SFKC) HS S Other development agencies Cambodia Area Rehabilitation and Regeneration Program 2 (CARERE2) (UNDP) PRASAC (EU); CAAEP Agricultural Extension Project (Ausaid) Rural Roads & Infrastructure Project (ADB) Kompong Thom PDP (GTZ); Northeast Community Development (Partners for Development NGO); Community and Social Development Program =_________________________ (UNICEF). IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), MS (Marginally Satisfactory) 3. Lessons learned and reflected in the project design: Significant lessons have been learned from in-country experience in project design and implementation. Among the most salient are: * delay in initial implementation reflecting unfamiliarity with project management and external financing agency procedures is a risk but can be overcome by providing experienced short-term TA to assist in project start-up; * without clear communication and up-front agreements for local participation in operation and maintenance, subprojects may not be sustainable; * without explicit poverty, gender and participation strategies, rural development projects may lose sight of initial goals for reaching the poor, women and other vulnerable groups; * since rural credit schemes have mainly benefited relatively richer communities and households, and it is difficult to find ways to make the very poorest creditworthy, poverty-oriented projects generally need to offer grant assistance, while helping stronger communities to become viable customers for rural credit financing (MRD/CDRI studies);  Page 13 however, even in the poorest areas of Cambodia it has been found that a substantial beneficiary contribution to construction and maintenance costs is feasible, so long as there is a sense of ownership of the project. Some poverty-oriented NGOs find that as much as 50% beneficiary contribution to cost of community infrastructure projects may be provided in some circumstances; project preparation and review has benefited from close collaboration with the Bank's Post-Conflict Unit, and with agencies such as CARERE2 working in Cambodia's post-conflict reconciliation areas, with which operational partnerships have been developed, leading to recent approval of a PCF Grant to CARERE for rural reconciliation activities in the Northwest of Cambodia. Design lessons from LILs in other post-conflict countries such as Angola and Rwanda, such as the importance of empowering local-level institutions in the planning and implementation of investment sub-projects, have been taken account of and incorporated to the extent considered applicable to the Cambodian situation. 4. Indications of borrower commitment and ownership: * Both at central level (Ministry of Economy & Finance (MEF) and MRD) and in the provinces concerned, the Government has shown strong support for the project, because development activities in the area are so far very limited and because this would be the first participatory rural development project that the Government has directly managed itself; - a NGO project for village water, sanitation and hygiene improvement in the Northeast has demonstrated the commitment on the part of local communities to a participatory approach, including willingness to contribute to the cost of subproject construction and operation; * the Government established in late 1997 an inter-Ministerial body known as the Seila Task Force (STF), chaired by the MEF and comprising representatives of the Ministries of Interior, Planning, Agriculture, Rural Development and Women's Affairs, to oversee the rural development decentralization initiative in five provinces piloted by the Seila/CARERE2 program; e the Government decided in January 1999 to simplify the Rural Development Structure first introduced in 1995, dropping the District Development Committee layer of the structure and making the PDRD the principal executive body serving the PDRC (as envisaged under the NVDP); * by decision of the Minister of Rural Development in January 1999, an Advisory Board for Rural Development was created, to provide a regular forum for exchanges of experience between different programs and approaches for rural development (as earlier recommended during NVDP preparation); * legislation approved in 1998 permits the establishment of provincial budgets and retention by provinces of certain tax revenues for approved development and maintenance purposes; the national budget for 1999 includes provision for notional block grants to support approved provincial budgets; * a Decree issued in January 1999 legally establishes a Rural Road Maintenance Fund; * the Government paper presented to the February 1999 Consultative Group gives renewed priority to reducing rural poverty and improving food security for the poor; and * preparations are underway to hold, for the first time, commune authority elections in late-1999. Elected government at this level should greatly facilitate local participation in development activities, as well as more generally promote responsiveness and accountability in local government.  Page 14 5. Value added of Bank support in this project: * The Bank brings wide experience in the design and financing of decentralized rural investment fund- type projects, especially from Latin America and Africa, which has been used in the design of this project; * Government values the Bank's support for implementation and financial monitoring provided through its regular supervision missions; * Cambodia expects to require greatly increased multilateral loan financing for its rural development programs in the future, once the current generation of grant-funded projects like CARERE2 (UNDP, bilateral donors) and PRASAC (European Union) are completed: the NVDP is a logical way to prepare for this expected growth in the program. E: Summary Project Analyses 1. Economic: Given the learning and evaluation objectives of the project, ex-ante economic analysis is not feasible but the project MIS would acquire cost and benefit data from the implementation and evaluation of first round investment subprojects, and use simplified methods of costibenefit or cost/effectiveness analysis to evaluate subprojects expost. 2. Fiscal impact: The incremental amount to be financed by Government is very small (US$0.3 million) during the implementation period, and only about $0.2 million/year thereafter in recurrent costs. As a requirement of project financing, each subproject proposal would include a plan for post-construction operation and maintenance by the beneficiary community. 3. Technical: Technical studies providing implementation guidelines for various types of potential subprojects have been initiated and would be included in the Operations Manual, including: * village water supply and sanitation; * village tracks and small bridges; * small-scale irrigation and water control; * village literacy centers; etc. 4. Institutional: A study has been carried out by EU on the institutional strengthening and training needs of MRD generally, based partly on which a training plan has been prepared and some training assisted with financing under the PHRD preparation grant. 5. Social: During project preparation a Social Assessment (SA) was carried out using secondary data. The SA provides a baseline against which to measure progress of the project in project villages. On the basis of a variety of data sources, some of which5 used innovative approaches to data collection, the SA classifies all 2,000 villages within the project area according to livelihood patterns and poverty levels and ranking. 5Such as the poverty mapping exercise carried out by the World Food Programme (WFP).  Page 15 These findings form the basis for the project strategy for poverty targeting and developing approaches for improvement in the various livelihood patterns. In many ways rural Cambodia has few village institutions of hereditary and traditional character, due to the last decades of uprooting and turmoil. The traditional livelihood pattern along the Mekong River is also characterized by a relative independence of individual households from one another, based as it is on individual garden (chamcar) cultivation, rather than irrigation systems which require inter-household cooperation. But there is nevertheless still generally a strong sense of belonging to a particular village, so that VDC can be a viable instrument for deciding on investments and activities of a communal nature. 6. Environmental assessment: Environmental Category [ ] A [ ] B [x] C The proposed project presents no environmental or resettlement issues falling under the Bank's policies and is expected to contribute to improved environmental planning at local levels. Through its PRA and community development approach the project will test methods for including environmental, natural resource and simple land use planning at the community level. Village investments will involve small scale subprojects aimed at improving the livelihoods of participating resource-poor communities. Participatory village planning will take into account environmental aspects during the formulation of community plans and proposals for subprojects. The subproject menu would deliberately be kept flexible but would include rehabilitation of farm access tracks, small bridges, wells for village water supply, and small scale irrigation and drainage works. Construction of village infrastructure will so far as possible observe practices to minimize construction impacts. This will be reviewed periodically by the proposed subproject monitoring system. In the event that any subproject involved involuntary resettlement, a satisfactory resettlement action plan would need to be prepared and submitted for IDA's prior review. The Project Operations Manual would need to include a statement of the Government's policy for the compensation and rehabilitation of such affected persons. 7. Participatory approach a. Primary beneficiaries and other affected groups: all villages participating in the project would first identify their livelihood constraints and development priorities through a PRA, a critical step not carried out under some rural development projects in Cambodia; b. Other key stakeholders: the support and active participation of central government, provincial governors, provincial line agencies, local government and local NGO leaders, women's associations, staff of other development projects, and village bodies such as abbots, monks and members of pagoda committees has already been solicited through pre-project meetings and workshops held in the project area.  Page 16 F: Sustainability and Risks 1. Sustainability: The sustainability of the approaches to be tried under the LIL cannot be assured ex ante, but the LIL format itself encourages sustainability by building in incentives for maximizing local involvement and for learning from the results. The prospects for sustainability are greatly enhanced by agreed approaches to: * up-front participation of communities through the LDP; * required contribution of beneficiaries to sub-project construction cost; * beneficiaries' agreement to take care of sub-project operation and maintenance; and * intensive built-in monitoring and independent evaluations. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): Risk Risk Rating Risk Minimization Measure Annex 1, cell "from Outputs to Objective" 1. Government does not demonstrate firm enough M Government policy statements and commitment to participatory approach. actions indicate an increased understanding and commitment. 2. Subprojects suffer excessively from deficient Agreements required for all subprojects operation and maintenance attention. S that VDC/CDC assumes full responsibility for operation and maintenance. Annex 1, cell "from Components to Outputs" 1. PRA process is considered too complex and M Relevant PRA guidelines are prepared project staff revert to top-down modes of and an intensive PRA training and dealing with the local communities. pretesting program for LDP core team is planned. 2. VDCs do not understand rationale for their M Project will develop a clear expected contributions toward cost of communications and promotion subprojects; so uptake of sub-projects is slower strategy to inform, involve and advise than expected. VDCs through the LDP. 3. Subprojects not selected in accordance with M Project Operations Manual includes sound technical and economic criteria. technical guidelines for selection of subprojects and their implementation. 4. Subprojects designed or realized inefficiently. M Provision made for hiring professional services if needed to strengthen subproject design and supervise contracts (especially of larger subprojects). Overall Risk Rating M I Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)  Page 17 3. Possible Controversial Aspects: No controversial aspects have surfaced to date but it is possible that once the project gets underway there may be resistance from entrenched stakeholders (e.g. local government office-holders) to the idea of giving up power of resource allocation to elected bodies such as commune authorities, after elections planned for late-1999. G: Main Loan Conditions 1. Effectiveness Conditions: establishment of PSC and PIU; appointment of National Project Manager with qualifications satisfactory to IDA; establishment of an adequate financial management and accounting system; selection of auditors; and recruitment of a qualified Project Accounts Officer. 2. Financial covenant: to carry out an agreed, time-bound action plan for financial management of the project; 3. Disbursement condition: prior to disbursement of the Credit against grants for investment subprojects IDA would receive for comments and approve a draft Project Operations Manual which would include a satisfactory financial management plan for disbursement of grants; establishment of PPIUJ and appointrnent of PPM. H. Readiness for Implementation [x] The revised Project Implementation Plan prepared by MRD has been appraised and found to be realistic and of satisfactory quality. Copies are available on request. I. Compliance with Bank Policies [x] This project complies with all applicable Bank policies. Task Team Leader/Task Manager: Christophe idfere Sector Manager: Geoffrey B. Fox Countg :Noziweala  Page 18 Annex 1 Cambodia Northeast Village Development Project Project Design Summary Narrative Sunmmary Key Performance Indicators Monitoring and Critical Assumptions and Supervision Risks CAS Objective (CAS Objective to Bank Mission) Promote rural development and Rural economy begins to improve, 1. Govemment national Government commitment to poverty reduction, as key elements of rural household incomes increase income estimates participatory rural a national development strategy, and and numbers living in absolute (GDP/industrial development programs clarify the role of the Ministry of poverty fall. origin) results in significant Rural Development. 2. National Socio- reduction in poverty and Economic Survey. improvement in the national economy. Prepare a larger follow-on project Government internalizes lessons extending the lessons leamed under learned from the LIL and prepares a the LIL more widely in the Northeast follow-on rural development project and elsewhere. or program. Project Development Objective (Dev. Objectives to CAS Objective) Introduce decentralized, participatory, 1. Govemment transfers some 1. National budget for Successful implementation poverty-oriented rural development decision making and resource provinces and of project reinforces support approaches in some of the poorest allocation responsibilities to communes for participatory rural areas of Cambodia and gain the local govemments. 2. Donor assistance for development programs. experience in managing such 2. NVDP target communes and decentralized activities programs needed by the Govemment villages selected according to in provinces and for formulating and carrying out a agreed poverty criteria. communes cohesive national strategy for rural 3. NVDP baseline social development in the post-2001 period. assessment Locally knowledgeable persons (monks, teachers, officials) Project Outputs (Outputs to Development Objectives) 1. Develop and test a participatory 1. PIU develops and pretests LDP 1. PIU quarterly reports. 1. Government maintains system for identifying, in selected villages and 2. MRD evaluation its commitment to financing, constructing and communes. reports. participatory approach. maintaining productive rural 2. PIU introduces decentralized 3. Feedback reports on 2. Government will investment subprojects, with procurement and financing LDP process. allocate sufficient Government as strategist and procedures for subprojects. 4. Operations Manual on budget resources for partner agencies (NGOs, private 3. Villages and communes in procurement and project maintenance. contractors) as direct service target districts use LDP for financial procedures. providers. planning and implementing subprojects. 4. Women participate in VDC/CDC.  Page 19 Narrative Summary Key Performance Indicators Monitoring and Critical Assumptions and Supervision Risks ....................................................................... ..EF ~ i f i................... ..................... . .................................... 2. Develop the capacities of local 1. Program for LDP training 1. PIU training plan. institutions, from VDC up to workshops scheduled and 2. PIU/PPIU quarterly national MRD, to play their part organized. reports. in planning and managing rural 2. VDC/CDC elected and 3. Mid-term evaluation development programs. recognized by PRDC.. (external evaluation) 3. VDC/CDC in target communes reports. meet for matters other than 4. Maintenance plans and NVDP subprojects. contracts for all 4. PRDC formed and functioning subprojects. in all four target provinces. 5. PPIU formed and managing the LDP process in all four target provinces.. 6. MRD coordinating and evaluating the project. Project Components (Components to Outputs) I. Participatory Planning and 1. PRA process completed in 80% 1. PIU/PPIU quarterly I . PRA guidelines are Subproject Investments of project villages reports relevant to the situation 2. Approved subprojects under 2. Mid-term evaluation and accepted by the implementation in 80% of reports project staff and target villages. villagers. 3. Maintenance plans/contracts 2. VDCs willing and for all approved subprojects capable of proposing 4. Workshops with local suitable subprojects. development partners 3. Subprojects selected in completed, participation of accordance with local stakeholders improved. technical, social and 5. Beneficiary villages and economic criteria, and communes contribute to realized efficiently. subproject costs. 2. Project Management and 6. PIU prepares Operations Operations Manual. Institutional Strengthening Manual and financial plan for Ph.2. 7. M & E system in place and M & E reports. producing reliable information. 8. Training program carried out Staff performance and some results seen. evaluation reports.  Page 20 Annex 2 Cambodia Northeast Village Development Project Project Description Development Goal of the NVDP Programme The NVDP program aims to alleviate poverty by reducing the number of impoverished villages and the number of people living in poverty. For this purpose, concerted efforts will be made to increase the economic status of communities which combines capital accumulation and human resource development with creation of vital infrastructures and will be achieved by strengthening the PDRD in the four provinces, who are able to assist poor households in becoming more productive and self-reliant. Immediate Objectives In order to achieve the above development goal, activities under the NVDP (January 1999 to October 2001) will undertake the following: Immediate Objective # I Improve income generation opportunities and general productivity in the rural areas through support to agricultural and rural enterprise development. outputs 1.A Improved rural economy and enhanced living standards of the people through increased agriculture production, better live stocks, and dissemination of technical knowledge. 1.B. Increased people's access to credit for farm and non-farm activities by providing appropriate technical advice and information about potential sources of credit from specialized credit providers such as NGOs and other projects. Immediate Objective # 2 Improve the basic rural and community infrastructure necessary for economic growth. Outputs 2.A. Rehabilitate village tracks and small bridges to increase access to markets and ease delivery of social services at the village level. 2.B. Rehabilitate and improve potable drinking water supplies, small-scale irrigation systems, and flood control measures. Immediate Objective # 3 Reinforce and back up the capacity of local institutions to identify, plan, implement, monitor and manage rural development activities in the target districts of four provinces. Outputs 3.A. Trained Provincial Project Implementation Units (PPIUs) in each of the four provinces. 3.B. Documented guidelines for NVDP sub-project design, appraisal, approval, implementation, monitoring, evaluation, and financial management (including procurement of goods and services, recourse to private sector, contracting out, and payments).  Page 21 3.C. Installed and operationalized data-base in the four PPIUs/PIU covering socio-economic information, sub-project details, priorities, resources etc. 3.D. Facilitated decentralization of demand-driven planning, financing and implementation of rural development. 3.E. Developed co-ordination and co-operation among line departments and other national, international and non-governmental agencies engaged in rural development, as well as the private sector. Immediate Objective # 4 Complete documentation of the NVDP activities as learning experiences that will serve to develop the long-term 5-year phase of the project. Outputs 4.A. Documented information and data gained through Participatory Rural Appraisal (PRA) exercises, socio-economic and sector surveys, case studies, and monitoring reports in each of the four provinces which assess development constraints and opportunities. 4.B. Completed preparation of the 5-year long-term phase of the NVDP programme. Project Activities Corresponding to the objectives set forth above, activities of the NVDP will take the form of sub-projects which will be divided into the following four activity-components. Directly Productive Activities * Agricultural development: Within this category are included programs for irrigation systems rehabilitation and development, livestock improvement, and technical advice to smallholder farmers for developing rice and other annual crops, tree crops, livestock and fish raising. * Rural Credit/Micro-enterprise development: This includes technical advice and credit to small-scale farmers/entrepreneurs in support of farm-based activities, as well as for developing non-farm enterprises such as small-scale nurseries, fish processing, silk-making and handicrafts, mechanical repair shops, tailoring, etc. Indirectly Productive Activities * Rural infrastructure improvement: Examples include tertiary road rehabilitation, bridge repair, and port improvement. * Community asset improvement: Examples include village water supply and sanitation, community ponds, rice banks, flood control measures, marketplace improvement, etc. Institutional Strengthening and Development * National and provincial planning and management strengthening: This will largely take the form of technical assistance to the PIU and PPIUs, support to Provincial Rural Development Committees, and the production of basic data regarding levels of income, and land use. * Community-level planning and management strengthening: A key area to the NVDP, this includes support to village development committees (VDCs) and other appropriate local organizational structures.  Page 22 * Private sector development: This includes some management training and practical experience gained through work on NVDP sub-projects contracted-out to private entrepreneurs. Documentation of the Experiences * Establish a monitoring focal point within the PPIU in the four provinces and in PIU to gather information and analyze the findings. * Defne criteria and identifv sample villages/sub-projects for time-series case studies and fully document the process. * Regularly prepare and disseminate reports to the various ministries of the government, concerned local government officials, community leaders, donors, NGOs and other key personnel. * Organize provincial and inter-provincial level workshops to review the lessons being learned, and formulate recommendations for developing the long-term phase of the NVDP program and project strategy as needed to improve effectiveness. Activities Outside the Scope of the NVDP In reviewing what the NVDP will support, it is equally important to note what the NVDP will not support and activities outside the scope. For example, the following types of subproject will not be eligible for financing under the NVDP: * Purchase or leasing of land * Renovation or construction on private land * Any project which reflects political partisanship * Any project of potential detriment to the environment * Any project which may adversely affect the social and cultural identity of ethnic minority populations * Recurrent expenses * The preparation of sub-project proposals, beyond limited technical assistance which may be available TARGET GROUPS The NVDP's target groups are poor people who live in a village which has been categorized as being less-developed. They are community groups whose incomes are low and who have limited access to infrastructure and services, and to capital for meeting basic or emergency needs. For the NVDP prograrn, the basic unit of work is the Village Development Committee (VDC). The VDC is elected by the village population and is recognized by the Royal Government as an autonomous, non- governmental body belonging to the village. The VDC is mandated to represent the village to government, to other civil associations and local agencies, as well as to international agencies, in planning and managing their own process of village development. Based upon agreement with government, and guidance and training provided through the NVDP, the VDC is responsible for facilitating the planning and management of village development with the broad participation of the community, other village associations and activity groups. In putting the principle of mutual interests into practice, all members take part in shouldering responsibility, trust each other, and help each other. With such camaraderie, opportunities will arise which will enable the collection of funds from members, joint management of the funds and utilization of the funds in the interest of all members. This camaraderie is an indication of the co-operative spirit which lays the groundwork for self-reliant and sustaining VDCs. The existence of several other development groups within a village such as Pagoda Committees do not affect the VDC but complement its work.  Page 23 PROMOTERS The staff of the PPIU, serving as facilitators and communicators of the process, are responsible for the setting up and operation of the VDCs/local organizations. They are called "Promoters", full-time staff of the PPIU, who receive training in communication and development, attend VDC meetings, and organize training programs at the grassroots level. The responsibilities of promoters include efforts to raise the capabilities for managing and operating the sub-projects, and to promote the economic and entrepreneurial capabilities of the members. For this purpose, it is imperative that a promoter knows his or her group and communicates intensively with it. The fostering of activities can be done by the promoter alone, but they can also be realized by inviting local people or NGO representatives as appropriate. The main task of the promoter is to assist in the process of managing VDCs/local activities, starting with the preparation in forming the VDCs/local organizations right through to the completion of a development sub-project. In order to be effective, each promoter will cover no more than three villages. In addition, technical facilitators working at the PPIUs/PIU will provide technical support. Development of VDCs, Local Organizations and Civil Society The development of civil society is a key objective of the NVDP program in the north-east provinces. Within the framework of the NVDP, specific programs will be undertaken to work with civil society to raise awareness, increase the income of the people, and generate the values of democracy and people's participation. Awareness and openness will be engendered by the members being introduced to accept new ideas and organizations. Income will be increased when capital and savings begin to accumulate and members continue to be able to make productive undertakings. Democracy and participation will be illustrated by the fact that management of the sub-projects is conducted through a group process, and that decision-making is undertaken through deliberation and consensus. Subsequently, members, led by the committee, will hold periodic meetings, the purpose of which is to agree upon what further steps need taking and what activities will be pursued, as well as to evaluate results attained so far. Each and every member is encouraged to take part in such meetings to discuss problems and attempt to solve those encountered by the group or individual members. In order to ensure the smooth and effective running of programs towards the alleviation of poverty, target group people living in the four provinces are expected to organize themselves into VDCs so that the services can be rendered in an effective manner, interaction among group members can be promoted, and camaraderie and mutual co-operation can be developed and nurtured. The existence of the VDC will make it possible for the communities to supervise the execution of the NVDP program by themselves. The setting up of the VDCs will involve all parties knowledgeable of the people in each province. Within the framework of forming VDCs, data on poor people will be collected and analyzed. Where possible, exploratory socioeconomic research tools will be used to strengthen the work. Capacity Building through NVDP The capacity building dimensions of the program involve the following:- * Promoting and strengthening the Provincial Departments of Rural Development, and organizations of civil society; * Strengthening sectoral and cross-sectoral collaboration; * Facilitating social inclusion; and * Providing professional training. These capacity building dimensions will be applied in the program in the following skills areas:- Governance: Through training, provincial officials, civil servants and members of PPIU at all levels will improve their skills in governance, basic administration and management in order to fulfil their responsibilities and implement the NVDP at the provincial level. Participation: Through capacity building in facilitation skills, the active participation of men and women within govermment and civil society, in all aspects of the development process and according to clarified roles, will be encouraged and developed.  Page 24 Gender Awareness: Through gender awareness training, and training on how to use planning tools in a gender sensitive way, the development of gender responsive local sub-projects will be encouraged. Planning and Implementation: Through technical assistance and training of trainers and promoters, village sub-projects will be developed and implemented in accordance with the expressed priorities of the people while integrating local plans with the vision, policies and programs of the NVDP. Through such experiences, and through the increasing responsibilities provided to them through the proposed trial program in which community organizations which demonstrate the ability to carry out procurement tasks alone or with a minimum of assistance from Project personnel, the local institutions will gain confidence to plan and implement investment programs. Financial Management: Witlh technical assistance, transparent provincial financial systems will be jointly designed by the various agencies of the Royal Government and the Ministry of Rural Development, and which are in accordance with evolving financial regulations. They will meet the requirements of the donors to the NVDP and will enable development activities emerging from the local and provincial plans to be financially supported. Through capacity building in financial management and auditing, from national to village level, transparency and accountability will be strengthened. Technical Fields: The technical assistance will be provided in the areas of agriculture production, live stock, construction of small-scale infrastructure skills and other sub-projects that are prioritized by the villagers. The thrust of the project will be to transfer the skills and knowledge in these sectoral areas to both the people and institutions. Local Economic Management: Through awareness raising activities, including study tours to neighboring countries, fornal training in economic management and contract administration, market analysis and research, and increased dialogue with local entrepreneurs, local government officials will be assisted in establishing an enabling environment, necessary for accelerating the growth of enterprise. Planning ofActivities and Funding Procedures In drawing up a plan of activities and for the use of NVDP funds, there are several main guiding principles. These are: (a) the principle of integration; (b) the principle of trust; (c) the principle of mutual cooperation; (d) the principle of self-reliance; (e) the principle of economies of scale; and (f) the principle of sustainability. The VDCs, as target groups, will be entrusted to identify the problems being encountered and the needs to be satisfied by the communities to promote the rural economy and to select and determine the kind of activity to be undertaken, in accordance with the potential of the village. Emphasis will be placed on the productive features of the sub-projects proposed and their capability to sustain themselves. Following this exercise, an indicative planning figure (IPF) will be established for each community taking into account the annual work plan and resources of the Project. As mentioned above, communities considered capable of taking a greater role in the procurement of works and services will, on a trial basis, be provided funds by the Project under a contract which requires that community to contract for, manage and account for those funds in the implementation of their agreed action plans. The kind of activities eligible for NVDP sub-project funding will have to meet one or more of the following requirements: o that it yield results within a reasonable time so that the incidence of expenses and the receipt of benefits is not too long * that it utilizes the potential which already exist within the village * that it yield products which are marketable and able to meet market demands so that value added can be secured * that it is capable of satisfying urgent basic needs and involve as many poor people as possible * that it yields results which benefit all households living in the village * that it can be done by using methods which are known and mastered by the community, by using existing and original know-how which, technically, can be easily put into practice.  _ _ _ _ _ _ _ - - Page 25 * that it is attuned to the local potentials and ecological conditiqns and is not detrimental to the physical environment * that it includes women and disabled people and vulnerable groups - that it is mutually supportive, and does not compete with other activities being pursued through sectoral and regional programs * that it is socio-culturally acceptable to the community Proposals are prepared by the VDCs and submitted to the respective PPIU (for more details refer to the Operations Manual). In order for the proposed activity to reach the objective of alleviating poverty, it is imperative that the VDCs, in collaboration with the PPRJ staff persons, identify the problems encountered by each household in relation to efforts to raise his or her welfare. In identifying the problems, and also in drawing up the activity plan, the group is guided by a facilitator. Participatory Rural Appraisal (PRA) techniques will be extensively used. END-OF-PROJECT SITUATION By the end of the 30-month LIL, in late-2001, the project will have developed the capacity of the Departments of Rural Development in the four provinces to independently plan, and manage rural development sub-projects. It will have developed better links with the PRDC. Working systems and trained personnel for participatory rural development projects, and for carrying out basic land use planning and registration, will have been put in place. The NVDP will have provided all the people with an opportunity to contribute meaningfully to meeting the needs of the farily, community and society. Through the active participation of the VDCs, the poor will be in a stronger position. This start-up phase will have helped the NVDP to gain experience and enable those involved to prepare the long-term plan for the following 5-year phase. In sun, the start-phase of the NVDP program will have supported four capacity building areas of the government and civil society: (a) by improving the human resource quality, (b) developing rural infrastructure, (c) increasing employment and small-scale business opportunities, and (d) reinforcing institutional arrangements for poor people. Further, at the completion of this start-up phase, the rural economy of the four provinces as a whole will have improved. It is expected that NVDP sub-projects will have directly benefited about 10,000 rural households to raise their incomes through financing of agricultural and non-farmiing productive activities. The NVDP will have further developed the private sector in the area. The longer term 5- year development program for the area will have been prepared.  Page 26 Annex 3 Cambodia Northeast Village Development Project Estimated Project Costs Project Component Local Foreign Total -----------------------US $ million-------------------- Participatory Planning and Investment 2.6 1.4 4.0 Institutional Strengthening and Project Management 0.7 1.1 1.8 Total Baseline Cost 3.4 2.4 5.8 Physical Contingencies 0.2 0.1 0.3 Price Contingencies 0.1 0.1 0.2 Total Project Cost 3.6 2.7 6.3  Cambodia Northeast Village Development Project Table 1. Participatory Planning and Investment Detailed Costs (USS) Quantities Unit Base Cost Unit 1999 2000 2001 Total Cost 1999 2000 2001 Total I. Investment Costs A. Consulting Services 1. Credit Financed TA 1. Institutional Development Advisor month 8 12 10 30 8,000 64,000 96,000 80,000 240,000 2. Financial Advisor month 4 8 4 16 12,000 48,000 96,000 48,000 192,000 3. Short-term consultants month 5 5 5 15 12,000 60,000 60,000 60,000 180,000 Subtotal Credit Financed TA 172,000 252,000 188,000 612,000 2. Grant Financed TA 1. Community DevelopmentVLD-A (3) month 18 36 18 72 6,500 117,000 -234,000 117,000 468,000 2. Training Specialist month 4 4 4 12 8,000 32,000 32,000 32,000 96,000 3. Rural Engineer month 6 6 12 8,000 - 48,000 48,000 96,000 4. Short-term consultants LS 14,000 14,000 14,000 42,000 Subtotal Grant Financed TA 163,000 328,000 211,000 702,000 Subtotal Consulting Services 335,000 580,000 399,000 1,314,000 B. Subprojects 1. Province/District infrastructure subprojects LS 4 10 14 50,000 - 200,000 500,000 700,000 2. CommuneNillage infrastructure subprojects LS 25 45 70 20,000 - 500,000 900,000 1,400,000 3. Income-generating subprojects LS 10 30 40 10,000 - 100,000 300,000 400,000 4. Community facilities subprojects LS 10 30 40 5,000 - 50,000 150,000 200,000 Subtotal Subprojects - 850,000 1.850,000 2,700,000 Total 335,000 1,430,000 2,249,000 4,014,000  Cambodia Northeast Village Development Project Table 2. Institutional Strengthening and Project Management Detailed Costs (US$) Quantities Base Cost Unit 1999 2000 2001 Total Unit Cost 1999 2000 2001 Total I. Investment Costs A. Renovation of Office Buildings Ministry (Phnom Penh) 1 90,000 90,000 90,000 PIU (Kompong Cham) building 1 1 35,000 20,000 15,000 35,000 PPIU (3 Provinces) building 3 3 15.000 45.000 45,000 District (B outside Provincial HQs) building 8 8 5000 40.000 40,000 Subtotal Renovation of Office Buildings 110,000o 100,000 210,000 B. Staff Training Courses LS 15,000 20,000 10,000 45.000 C. Office and Communications Equipment /a LS 42,000 98,000 14,000 154,000 D. Vehicles 1. 4WD Vehicle unit 1 1 40,000 40,000 40,000 2. 4WD Pickups/b unit 6 6 12 30.000 180,000 180,000 360,000 2 3. Motorcydes/c unit 34 34 1,500 51,000 51 .000 w 4. Diesel Boat unit 1 1 35.000 35.000 35,000 G Subtotal Vehicles 220,000 266,000 486,000 E. Independent audits LS 15,000 15,000 15,000 45,000 F. Financial management system/MIS LS 25,000 25,000 25,000 75,000 G. Subproject design/contract supervision LS 40,000 40,000 80,000 H. Impact evaluation studies LS 50.000 50.000 100.000 1. Follow-on project feasibility study LS 200,000 200,000 Total Investment Costs 427,000 614,000 354,000 1,395,000 II. Recurrent Costs A. Incremental Operating Costs /d LS 30,000 60.000 90,000 180,000 B. Incremental Staff Salaries staff-year 12 24 28 64 3600 43,200 86,400 100,800 230,400 Total Recurrent Costs 73.200 146.400 190,800 410,400 Total 500,200 760,400 544,800 1,805,400 \a including field communications network (approx $40,000) \b 1 for PIU. 1 per PPIU (4), 1 per TA (7) xc 2 for PIU, 4 for each PPIU. 2 for each District \d includes operating costs for PIU, PPIUs, District offices and vehicles  Cambodia Northeast Village Development Proect Table 3. Project Cost and FRnandng Summary (USS$'00) (%) Costs: 1. Partidpatory Planning & Investment 4,014 69 2. Institutional Strengthening & Project Management 1,805 31 Total BASELINE COSTS 5,819 100 Physical Contingencies 276 5 Price ConUingendes 233 4 Total PROJECT COSTS 6,329 109 Financing: Beneficiaries (12% of subprojects cost) 330 5 Govemment budget (5% of total costs) 316 5 Japanese Grant 702 11 IDA Credit 4,980 79 Total FINANCING 6,329 100  Page 30 Annex 4 Northeast Village Development Project Cambodia Procurement and Disbursement Arrangements Procurement Procurement methods (Table A) Procurement of all works and goods would follow the "Guidelines for Procurement under IBRD Loans and IDA Credits" published in January 1995 and revised in January and August 1996, September 1997 and January 1999 (the Guidelines). Contracts for consulting services would be procured in accordance with provisions of the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers", published in January 1997 and revised in September 1997 and January 1999 (the Consultant Guidelines). Civil works (US$0.2 million) would mostly consist of small contracts for the rehabilitation of existing office buildings in Phnom Penh and in the project area and would not therefore be suitable for procurement through competitive bidding procedures. All works! of which none are expected to cost more than US$50,000 equivalent per contract, would be procured through simplified procedures under lump-sum, fixed price contracts awarded on the basis of quotations obtained from at least three contractors in response to a written invitation. The invitation would include a detailed description of the works including basic specifications, the required completion date, a form of agreement acceptable to the Association and relevant drawings, where applicable. The award would be made to the contractor who offers the lowest price quotation for the work and who has the experience and resources to complete the contract successfully. Goods (US$0.7 million) required for the project would comprise equipment and vehicles. The required items of office and communications equipment are readily available through competitive suppliers in Cambodia. Equipment and a diesel-powered boat (US$0.2 million) would be procured under contracts awarded through National Shopping procedures based on a comparison of price quotations obtained from at least three suppliers in response to a written invitation including a detailed description of quantities and specifications of the goods. Procurement of vehicles required for the project (US$0.5 million) would for reasons of efficiency and economy be procured at standard advertised prices through the UN's Inter-Agency Procurement Services Office (IAPSO), since the quantities involved would not justify ICB procurement. Services (US$2.2 million) required for the project would comprise consultant services (including provision of independent audits and training courses). Contracts with firms (US$0.6 million) would be lumpsum contracts procured using quality-based selection arrangements, following the Bank's standard Request for Proposals dated July 1997, revised April 1998, while contracts for individual consultants' services (US$1.6 million), including short-term consultants (procurement, finance, M&E, rural engineering), would be procured through procedures covered under Section V of the Consultants Guidelines. The payment of contractual staff salaries (US$0.2 million) and incremental operating expenditures (US$0.2 million) would follow Government procedures acceptable to IDA. Personnel selected to fill key project positions would be recruited on contract following a competitive selection procedure, based on advertised job descriptions, and remunerated in line with local market conditions, since Government pay-scales are generally inadequate to retain qualified and motivated staff.  Page 31 Other activities to be financed under the credit include Investment Subprojects (US$3.0 million) and Incremental Operating Costs (US$0.2 million). Investment Subprojects, mostly expected to cost less than $25,000 equivalent each, would be procured through shopping procedures, based on the solicitation of three price quotations from qualified contractors as noted above. In order to permit beneficiaries to make their contribution to the costs of subproject construction in the form of labor or materials, these procedures could be adapted to allow for community participation in the case of subprojects expected to cost less than US$25,000 each. The payment of incremental operating expenditures (US$0.2 million) would follow Government procedures acceptable to IDA. Prior review thresholds (Table B) Prior review would be required for (a) the first three works contracts and all works contracts in excess of US$25,000; (b) the first three contracts for goods and all contracts for goods in excess of US$25,000; (c) all contracts for services in excess of US$50,000 equivalent for firms and US$25,000 equivalent for individuals; and (d) the first contract in each province for investment subprojects, regardless of value, and all such contracts estimated to cost the equivalent of US25,000 or more. These arrangements would ensure prior review by IDA of contracts worth an estimated US$2.65 million, or about 40 percent of the value of all goods, works and services to be procured under the project. Ex-post review would be carried out on a sample basis of one out of four contracts for those contracts not subject to prior review. Disbursement Allocation of loan proceeds (Table C) The allocation of proceeds is shown in Table C of this Annex. Use of statements of expenses (SOEs): Disbursements would be made against Statements of Expenditures (SOEs) for project operating costs, and for expenditures under contracts for: (a) goods, works and consultants' services (individuals) under contracts not exceeding US$25,000 equivalent each; (b) contracts with consulting firms not exceeding U$50,000 equivalent each; and (c) investment subprojects costing less than US$25,000 each. Documentation for these expenditures would be retained by the PIU and made available to the Bank on request. All other disbursements from the Credit would be fully documented. Special account: In order to facilitate Credit disbursement and reduce the number of withdrawal applications, the Borrower would establish a Special Account, to be maintained in US dollars, at the National Bank of Cambodia (NBC). The authorized ceiling for the account would be US$500,000, equivalent to about four months' average disbursement of the Credit.  Page 32 Annex 4, Table A: Project Costs by Procurement Arrangements (in US$ million equivalent) Expenditure Category Procurement Method Total Cost (including contingencies) ICB NS Other NBF 1. Works Civil Works - 0.2 - - 0.2 (0.2) - (0.2) 2. Goods Vehicles and Equipment 0.3 0.4 - 0.7 (0.3) (0.4) (0.7) 3. Services Consultant Services a/ - - 1.5 0.7 2.2 (1.5) (1.5) 4. Other Investment Subprojects - 0.7 2.3 - 3.0 (0.5) (1.9) (2.4) 5. Recurrent Costs Incremental Operating Costs - - 0.2 - 0.2 (0.2) (0.2) Total - 1.2 4.4 0.7 6.3 - (1.0) (4.0) - (5.0) Note: NBF. = Not Bank-financed. Procurement arrangements for items listed under "NS" and "Other" include national shopping, community participation in subproject implementation and direct contracting (IAPSO). Figures in parenthesis are amounts to be fnanced by IDA. a/ including contractual staff salaries.  Page 33 Annex 4, Table Al: Consultant Selection Arrangements (in US$ million equivalent) Selection Method Total Cost Consultant Services Expenditure (including Category, contingencies) QBS Other NBF A. Firmns Financial Systems/MIS 0.1 0.1 Post-Evaluation Studies 0.1 0.1 Project Feasibility Studies 0.2 0.2 Subproject design/supervision, Independent audits 0.1 0.1 Training services 0.1 0.1 B. Individuals Institutional Development Advisor 0.2 0.2 Financial Advisor 0.2 0.2 Short term consultants 0.2 0.2 LDA, Training and Rural 0.7 0.7 Engineering Advisors Contractual staff 0.2 0.2 Total 0.6 0.9 0.7 2.2 (0.6) (0.9) - (1.5) Note: totals may not add because of rounding. QBS = Quality-based Selection Other = Selection of individual consultants per Section V of Consultants Guidelines. NBF. = Not Bank-financed. Figures in parenthesis are amounts to be financed by IDA. N.B. Any contract expected to cost over US$200,000 must be advertised in 'Development Business'.  Page 34 Annex 4, Table B: Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Procurement Contracts Subject to Category (Threshold) Method Prior Review / Estimated Total Value Subject to Prior Review US $ US $ millions 1. Works Civil Works NS 1I' three contracts $ 0.05 m above 25,000 NS all contracts $ 0.15 m 2. Goods Vehicles and Equipment NS I" three contracts $ 0.05 m above 25,000 NS, UN All contracts $ 0.55 m 3. Services Consultant Services Firms > $50,000 Consulting $1.35 m Individuals > Services $25,000 4. Miscellaneous Investment Subprojects Regardless of Community VSt contract per province $ 0.05 m value participation Above NS all contracts $ 0.45 m 25,000 Incremental Operating - Costs Total value of contracts subject to prior review: $ 2.65 m  Page 35 Annex 4, Table C: Allocation of Credit Proceeds Expenditure Category Amount in US$ Financing Percentage 1. Works $200,000 90% 2. Vehicles and Equipment $650,000 100 % foreign expenditures, 100 % of local expenditures (ex- factory cost) and 85% of local expenditures for other items procured locally 3. Consultant Services $1,450,000 100 % 4. Grants (Investment Subprojects) $2,300,000 90% 5. Incremental Operating Costs $200,000 90% 6. Unallocated $200,000 Total $5,000,000  Page 36 Annex 5 Northeast Village Development Project Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual (At final PMGD stage) $98,500 $98,500 B. Project Schedule Planned Actual (At final PMGD stage) Time taken to prepare the project (months) 6 9 First Bank mission (identification) 3/10/1998 3/10/1998 Appraisal mission departure 9/15/1998 11/30/1998 Negotiations started 10/06/1998 3/17/1999 Planned Date of Effectiveness 2/01/1999 7/01/1999 Prepared by: Ministry of Rural Development Preparation assistance: Japanese PHRD Trust Funds (29737, 27026) total $122,000 approx. Bank staff who worked on the project included: Name Specialty Christopher Redfern Task Team Leader/Economist Lars Lund Social Assessment Glenn Morgan Environmental Jean-Claude Sallier Rural Infrastructure/Operations Manual Christopher Naab/David Sislen TA/Procurement Mostafa El-Erian/Raj Soopramanien Legal Gaye Lindsey/Omowunmi Ladipo Disbursement/Financial Management Amanda Days/Kathryn Cherrie Team Assistants  Page 37 Annex 6 Northeast Village Development Project Documents in the Project File* A. Project Implementation Plan Revised PIP (January 1999) B. Bank Staff Assessments Various mission reports C. Other Project Document (November 1998) Social Assessment (May 1998) *Including electronic files.  MOP Schedule D Generated: 04/30/99 Status of Bank Group Operations in Cambodia Operations Portfolio As of 26-Apr-99 Difference Between expected Original Amount in US$ Millions and actual Fiscal disbursements a/ Project ID Year Borrower Purpose IBRD IDA Cancellations Undisbursed Orig Frm Rev'd Number of Closed Projects: 2 Active Projects KH-PE-4030 1999 GOVT OF CAMBODIA Kii-RD REBABIT. 0.00 45.31 0.00 43.82 0.00 0.00 KH-PE-50601 1999 KH-SOCIAL FUND II 0.00 25.00 0.00 24.29 0.00 0.00 KH-PE-45629 1998 CAMBODIA URBAN WATER SUPPLY 0.00 30.96 0.00 29.39 4.42 0.00 KH-PE-4033 1997 GOVT OF CAMBODIA AGRI.PRODUCT IMP. 0.00 27.00 0.00 25.11 12.69 .44 KH-PE-4034 1997 KINGDOM OF CAMBODIA DISEASE CONTROL&HEAL 0.00 30.40 0.00 22.74 9,51 0.00 KH-PE-4032 1996 KINGDOM OF CAMBODIA PHNOM PEHN POWER REH 0.00 40.00 0.00 7.46 9.79 0.00 KH-PE-34755 1995 GOVT. OF CAMBODIA TECHNICAL ASSISTANCE 0.00 17.00 0.00 3.34 2.97 0.00 KH-PE-37088 1995 KINGDOM OF CAMBODIA SOCIAL FUND 0.00 20.00 0.00 .28 1.74 0.00 Total 0.00 235.67 0.00 156.43 41.12 ,44 Active Projects Closed Projects Total Total Disburse