Climate-Friendly Agribusiness Value Chains Sector Project (RRP CAM 48409-002)

Feasibility Study Report for Agricultural Cassava Drying, Processing, and Storage Facility Subproject Project Number: 48409-002 May 2018

Cambodia: Climate-friendly Agribusiness Value Chains Sector Project

ABBREVIATIONS

WEIGHTS AND MEASURES

NOTE

In this report, “$” refers to United States dollars.

ADB – Asian Development Bank CEDAC – Centre d’Etude et de Développement Agricole Cambodgien CSA – climate smart agriculture DACP – Department of Agricultural Cooperative Promotion EIA – environmental impact assessment EMP – environmental management plan IEE – initial environmental examination M&E – monitoring and evaluation MAFF – Ministry of Agriculture, Forestry and Fisheries MOC – Ministry of Commerce NCB – national competitive bidding O&M – operation and maintenance PAM – project administration manual PDA – Provincial Department of Agriculture PDRD – Provincial Department of Rural Development PIC – project implementation consultants PMU – project management unit PRC – (the) People's Republic of China PSC – project steering committee PV – photovoltaic SPS – Safeguard Policy Statement TOR – terms of reference

ha – hectare kg – kilogram km – kilometer kWh – kilowatt-hour m – meter m2 – square meter

I. SUBPROJECT SUMMARY

A. Subproject Context and Rationale

1. Since the promulgation of the Royal Decree on the Establishment and Functioning of Agricultural Cooperative (2001) and followed by the Law on Agricultural Cooperatives (2013), the Ministry of Agriculture, Forestry and Fisheries (MAFF) through the Department of Agricultural Cooperative Promotion (DACP) has registered 158 agricultural cooperatives in Kampong Cham, Kampot, Takeo, and Tboung Khmum, with Takeo having 88 cooperatives, Kampot 43, Kampong Cham 15 and Tboung Khmum 12 cooperatives. The DACP has promoted agricultural cooperatives as a mechanism to encourage farmers to work together to solve their farming challenges and improve incomes to improve livelihoods in the rural areas, by consolidating finances, enhancing the agricultural cooperatives’ purchasing power and implementing trading initiatives through product consolidation. Article 15 provides for "Agricultural Cooperatives to be encouraged and to enjoy preferential treatment from the government as defined by a sub-decree". As yet no sub-decree has been drafted. The Law on Agricultural Cooperatives stipulates the primary business type for an agricultural cooperative can be production, agroindustry, agribusiness or services related to agriculture.

2. The majority of agricultural cooperatives start with developing savings and loan schemes, which in general are competitive with microfinance institutions and interest rates of 2.5% to 4% per month. Other businesses include input supply, retail shops, and agricultural commodity trading. A number have already or are planning to purchase land to develop agribusiness enterprises to market crop commodities primarily rice, maize, and cassava.

3. At present the drying of the grain crops and cassava is undertaken mainly on the ground, over tarpaulin. The storage structures, if they exist, are rudimentary. Post-harvest losses impact on the efficiencies of the value chain and both from a quality and safety viewpoint the cleanliness of the product is also an issue. For cassava chips, a stable product is attained when the moisture content is below 14%, the product needs to be stored at 13%, above 14% leads to Cassava chip degrading black spot and molds, as well as the starch percentage in cassava being affected by lack of or poor storage. Gravel and dirt in the sample can be problematic for the traders and processors. Fresh cassava needs to be professed within 4 days otherwise the roots will deteriorate.

4. There are issues with respect to climate change, infrequent and unexpected rainfall exposing harvested crops to the elements, higher humidity and inadequate drying of the crop with the presence of aflatoxins leading them to be rejected at the transaction points throughout the value chains. Aflatoxins are poisonous and are among the most carcinogenic substances known that are produced by certain molds (Aspergillus flavus and Aspergillus parasiticus) which grow in soil and grains that are undergoing microbiological deterioration. They are regularly found in improperly stored staple commodities which include cassava. When contaminated food is processed, aflatoxins enter the general food supply chain where they have been found in both animal feed and human food. Animals fed contaminated food can pass aflatoxin transformation products into eggs, milk products, and meat. Children are particularly affected by aflatoxin exposure, which leads to stunted growth, delayed development, liver damage, and liver cancer.

B. Subproject Design

5. The subproject provides post-harvest unit of a 200 ton cassava drying and storage facility to an agricultural cooperative which has satisfied the eligibility criteria, in relation to land

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availability, agribusiness trading activities or planning and has sufficient financial resources with a strong management structure. With the post-harvest unit the agricultural cooperative can consolidate the product of sufficient quantities to be able to form close linkages with processors and or traders. The processing unit will produce a quality and uniform sample through the introduction of sound selection, processing, drying and storage techniques. The unit can act as a focal point for not only the agricultural cooperative but also the village. The unit’s electrical systems will be powered by photovoltaic (PV) energy and will not use grid electricity.

6. The subproject objective is to support the establishment of a drying and storage unit within the agricultural cooperative and in parallel, capacity development to undertake agribusiness activities, develop management and operation expertise. This is to enhance rural household incomes and agricultural competitiveness by (i) providing improved critical post-harvest infrastructure; (ii) increasing and securing the supply chain through linkages to the trader or processor; (iii) reducing energy costs by promoting bioenergy; and (iv) improving market connectivity. The overriding goal is the inclusion of poorer smaller farmers in the value chain by transforming traditional production and supply practices into commercial demand driven processes that the buyers and processors require within the value chains, this includes promoting on and off-farm businesses to improve rural incomes and product specialization. The major agribusinesses will not work closely and form relationships with individual small farmers because the administration of such a business relationship is not efficient in time and resources. However, if there is sufficient incentive to procure quality, uniform product in reasonable quantities then value chain linkages will be formed between the agricultural cooperative and the processor and or trader.

7. The agricultural cooperative chosen as the representative subproject is Seda Senchey, Sedasean Chey Village, Seda Commune, Dambae District, Tboung Khmum which had initially 50 members and the membership has increased to 98 members representing 51 families. The agricultural cooperative was formed on 17 February 2012 with savings and credit as its business; it was subsequently registered with the Provincial Department of Agriculture (PDA) in 2015. The cooperative reserve fund stood at $17,875 at the end of 2015.

C. Subproject Cost and Financing Plan

8. The total financial cost is $147,822 and in economic prices is $139,700 including training and project management costs, a provision of 5% of civil works costs for construction supervision and related costs and a declining subsidy for the storage unit manager for 4 years. Cooperative members involved with the operation and management of the storage facility will also benefit from business training provided by the project through the provincial agricultural training centers.

9. ADB will finance 90.2% of the subproject while the government will fund the remaining 9.8%.

10. A conservative approach has been taken in the analysis based on the time it will take the facility management to develop the skills and contacts for managing high volumes through the facility. It is assumed that the annual volume handled will reach 700 tons per year only in year 5. However, if it is assumed that the volume handled in year 5 reaches 800 tons (4 cycles equivalent) then the economic internal rate of return (EIRR) would be 19.8%. It is possible that by the end of the fifth year, higher volumes than this might be handled, in which case the viability of the subproject would be even more secure.

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D. Implementation Arrangements

11. The project management unit (PMU) is ultimately responsible for the decision to proceed with the investment, and will take guidance from the MAFF, Department of Agricultural Cooperatives Promotion, the Tboung Khmum PDA and the project implementation consultants (PIC). The PIC will provide the technical assistance, to further assess the agricultural cooperative and the location proposed by the design consultants and to reevaluate the proposal during the project design phase and make changes where necessary, in consultation with the agricultural cooperative board and its members. At this stage it is crucial to assess the authenticity of the land title of the parcel of land where the unit will be constructed, which should not be less than 1,000 square meter (m2); the actual footprint for the store design proposed is 943 cubic meter.

12. The oversight of the construction and operation of the drying and storage unit will be under the auspices of the PDA. At construction the contractors will be responsible to the provincial agency and private sector consultant engaged for the construction process which should take between 4 – 5 months to complete. The contractor during construction will maintain a construction diary that can be referred to during o nsite inspection by the PIC, PMU, and PDA.

13. During construction and prior to handover, the project will engage trainers and seek agribusiness cooperation from agricultural cooperative members that are already trading, who will take the lead role in demonstrating the operation and management of the storage unit and establishing the agribusiness/trading operation. Following handover, trainings and demonstrations will be held. A unit operations manager will be recruited whose salary will be supported at a declining rate by the project.

14. Reporting is essential; the implementation progress reports will be used for feedback on the progress and to determine if coordination is effective and confirmation that the subproject investment is consistent with provincial development plans. The PMU will (i) approve annual work plans and budgets to implement the storage unit; (ii) the selection and recruitment of the contractor; (iii) approve detailed designs for subprojects based on recommendations from the technical line agency, but more importantly the contractor; (iv) monitor and request release of payments (if required) for not only construction but also for the management support of the storage unit; and (v) provide guidance to relevant provincial departments in the implementation of the subprojects in the province.

15. The subproject implementation is presented in the project administration manual (PAM). All activities will be monitored and progress reports submitted to the PMU with technical line agencies having the responsibility to ensure the technical and operational aspects of the subproject are addressed adequately.

E. Subproject Impact

16. It is estimated that the majority of subproject beneficiaries will be women given the levels of out-migration of males from the area and the fact that this project is gender mainstreaming. The proposed subproject has the following potential impacts (see Annex 1):

(i) The storage unit will offer a marketing outlet for 600 tons of dried chips equivalent to approximately 1,100 tons of fresh produce, which is a conservative estimate.

(ii) Off season prices 10%–20% higher than in season.

(iii) Increase household income for not only those households that are members of the agricultural cooperative but other household that market their fresh cassava to the

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Seda Senchey agricultural cooperative and hence a reduction in poverty; a 10% increase in rural household income (from a base of KR 1.16 million/$290) of farmers including women, and those employed in agribusiness operations and service providers over the lifetime of the project.

(iv) The subproject will generate additional demand for hired labor due to the increase in the need to manually cut cassava (as buyers prefer hand cut chips over machine cut chips) and there will be opportunities for direct and indirect employment.

(v) The agricultural cooperative trading business will offer continuity of supply, storage infrastructure, and through quality management and an improved quality and uniform product, the value chain linkages between producer, processor, and trader/exporter will be stronger and in a glut market that product will sell before other lower quality or substandard products. There will be increased trust amongst the value chain players.

(vi) With expanded cassava production opportunities, the subproject may lead to some reduction in out-migration levels as cassava processing becomes more profitable.

(vii) Services and technical information will be improved, with men and women through training in improved processing and production techniques, as well as accounting, agribusiness development, and mechanization.

(viii) Post-harvest losses are likely to be reduced by 10% (from baseline of 15% - 25% loss on average). Cassava yields are expected to increase by 15% (from a base of 20 tons/ha, drought in 2015 lower the yield further to 18 tons/ha).

(ix) With increased household revenues, school drop-out levels may decrease as families are better able to pay for their children's education and women's access to extension. Increased household incomes will lead to a reduction in household debt levels, and a subsequent decrease in the incidence of domestic violence in farming households.

(x) Increased awareness of gender equality may lead to improved sharing of household chores and tasks.

(xi) The storage unit will bring together the agricultural cooperative members more closely and the agribusiness will encourage more frequent management meetings and when the storage space is empty can double up for gatherings and local functions for the six surrounding villages. Thus, increased solidarity among agricultural cooperative members.

17. The direct, quantified benefits of the subproject come from the trading margins from the management and operation of the storage facility. This is a benefit that accrues from the service of buying and storing cassava chips until they are needed by traders and processors further down the value chain. Only these benefits are included in the economic analysis. 18. Indirectly, the subproject will benefit cooperative members who grow cassava, and perhaps other cassava growers in their immediate area, who are provided with an incentive to improve cassava growing methods to increase yields and to undertake the cutting and drying of some of their own production to take advantage of the significantly greater returns on the sale of

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chips compared with fresh cassava. This would be a change for cooperative members and others as at present most growers in the area choose to sell only fresh cassava.

19. The common constraint for selling fresh cassava rather storing it as chips is that cash is required by most farmers immediately after harvest to repay debts and satisfy creditors. However, the ability to store increases the returns for the crop as the prices received out of season typically improve by 10% – 20% depending on demand. Also, the quality in both losses of starch content and chip deterioration does not occur for up to 6 months provided the correct insect proofing and storage conditions are provided.

F. Critical Risk

20. Risk: The common constraint for not storing is that the produce has to be sold off immediately to repay debts and satisfy creditors, with product storage affecting cash flow. To counter this risk, there are examples of storage being economically viable with the following advantages (i) the prices received out of season improve by 10% – 20% depending on demand; (ii) the quality in both loss of starch content and chip deterioration does not occur and the product can be stored for up to 6 months, if the correct insect proofing and storage conditions occur; and (iii) once good relationships are established between supplier and buyer the buyers will offer storage credit (20% of stock) in order to secure off season supplies.

21. Risk: Concerning financing, the Law on Agricultural Cooperatives (2013) stipulates that 20% of gross profit is deducted and placed in a reserve fund, 3% deducted for training members, external auditing is not required for agricultural cooperatives that have funds of KR 100,000,000 ($25,000). The problem is the remainder of the profit is paid to members without further reinvestment into the agricultural cooperative business; to build up the business further, this has to change. The culture of reinvesting in the business will be promoted through the agribusiness training.

22. Risk: Insufficient allocation of operation and maintenance (O&M) costs within the business, this is again addressed in the agribusiness capacity building activities within the project to encourage sufficient reinvestment in the business and not looking at a business for maximum profit taking.

23. Small numbers of workers will be present at the start of the subproject during civil works; however, the risk of increasing the local population's exposure to communicable diseases is rated as very low.

II. SUBPROJECT CONTEXT AND RATIONALE

A. Need for Investment

1. Provincial and District Development Policies

24. Tboung Khmum province was formed when Kampong Cham province was split in two by a royal decree signed on 31 December 2013 and was officially launched on 2 June 2014. Tboung Khmum province consists of six districts and one city with a total area of 4,928 square kilometer. The six districts are: Dambae, Krouch Chhmar, Memot, Ou Reang Ov, Ponhea Kraek, and Tboung Khmum and the capital as it stands at the moment is Suong Town.

25. The province is located between two main national roads no.7 and no.73. A water reservoir capable of holding 3 million cubic meters of water is being developed to supply water to the new

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capital city and also to provide tourist facilities. The priority for the province is to construct the provincial government infrastructure. The site of the new provincial capital covers 2,000 hectares (ha) and is expected to expand further as land is available.

26. Tboung Khmum province has number of development plans and the priorities are:

(i) The provincial infrastructure development plan is the main priority, starting with the construction and development of the government secretariat and the public services within a new town.

(ii) The planning of the commercial area will include retail and shopping outlets.

(iii) The agricultural and industrial area sector development plans, will aim to increase trade between Cambodia-Viet Nam and the other regions in the country and the province will create a special economic zone.

(iv) The province is planning to create an ecotourism for provincial job creation with the administration planning nation parks or green belts and has highlighted the conservation of ten existing ancient temples again for tourism.

(v) Building knowledge centers and higher education facilities is included in the develop plan to promote provincial research activities.

27. Tboung Khmum province is one of the eight provinces along the Cambodia-Viet Nam border and both governments plan to build 13 new border gates to help boost trade that has already been growing between the two countries. For the border gate connectivity plans are being developed to connect the central highlands of Cambodia with the Mekong Delta region of Viet Nam. The new border gates plan will improve provincial trade with Viet Nam. Cambodia's total exports to Viet Nam rose 4% to $504 million in 2013, while during the same period Viet Nam's exports to Cambodia reached to $2.93 billion. Trade between Viet Nam and Cambodia has been rising fast in recent years, reaching $3.3 billion in 2012, up from $2.8 billion in 2011 and $1.8 billion in 2010. The two countries plan to increase trade volume to $5 billion by 2015-2016.

2. Natural Features

28. Tboung Khmum province is located in the central lowlands of the Mekong River. It borders the provinces of Kampong Cham to the west, Kratié to the north, Prey Veng to the south, and shares an international border with Viet Nam to the east. Its capital and largest city is Suong City.

3. Social and Cultural Environment

29. There are six villages in the targeted commune - Seda Senchey, Krasang, Andong Lagneang, Beung Thmey, Chung Tasao and Sampor. The total number of households is 975 households. The total population is 4,254 of which 2,028 are female and 298 persons have outmigrated of whom 156 to urban areas in Cambodia and 142 to other countries. Approximately 90% of total households are involved in agriculture the average farm size is 1.5 ha. The total available area for farming is 2,106.7 ha including 1,948 ha for rice production and 158.7 ha for crop production. In Seda commune, nearly 100% of farmer households have land titles from the government. There are 94 ID-Poor 1 households and 138 ID-Poor 2 households in the commune. The community is characterized by substantial numbers of older women who are taking care of their grandchildren, and receiving remittances from their adult children working in urban areas. Those households that only have 1 - 3 ha or less are considered to be the most vulnerable.

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Farming households have debts brought on mainly because of the recent droughts causing them to lose crops. The area is suffered from drought in June 2016; the local ponds have dried out this year and households had to purchase bottled drinking water.

30. Approximately 20% of the community is illiterate and of these 90% are women. The access to information, knowledge and education is limited and inadequate for both men and women although more so for women who have rarely attended formal agricultural training.

31. Between husband and wife there is joint access to and control over productive resources such as land, as the land title they possess is in both their names. There is joint access to and control over capital, i.e. revenue from agricultural production, although the household budget is always controlled by women. There is joint access to markets although in practice it is farm women who negotiate with the cassava collector about the price.

32. The main division of labor between men and women in cassava cultivation is that women are responsible for the actual planting cassava cuttings and men are tasked with digging holes for cassava planting and for harvesting. Men are also responsible for cassava transportation. Wage rates for women are lower than men's. Wage rates are different for male and female day laborers causing a great deal of dissatisfaction. Women who plant cassava receive KR20,000 ($5) per day and men who dig the holes receive KR25,000 ($6.25) per day (see Annex 2).

4. Subproject Rationale

33. Since the promulgation of the Royal Decree on the Establishment and Functioning of Agricultural Cooperative (2001) and followed by the Law on Agricultural Cooperatives (2013) MAFF through the DACP has registered 158 agricultural cooperatives in Kampong Cham, Tboung Khmum, Takeo, and Kampot. Support to the cooperatives has been minimal and restricted to some seed money to fund registration and with support from the JICA Project for Establishing Business-Oriented Agricultural Cooperative Models which provided technical assistance in Takeo and Kampong Cham Provinces for agricultural cooperative accounting and developing business model capacity building.

34. The inclusion of small farmers in the value chain is difficult. Market-driven development of value chains thus tends to favor larger, geographically concentrated producers in consolidated land holdings or within a cluster development. The downstream private sector agribusinesses prefer working with those value chain raw material suppliers as it lowers its management and administration costs. This is a challenge for the inclusion of small farmers and women in particular, who are usually the target for development projects. Traditional production and supply practices are changing into commercial demand driven processes for a consolidated product with good quality and uniformity. Any small farmer inclusion will be based on them working together to consolidate products to achieve economies of scale and product uniformity in conformity with buyer standards or requirements.

35. Previously the ADB had supported the extension service through the Loan 2023-CAM: Agriculture Sector Development Project. The project closed on 30 June 2010; the relevant activity was strengthening institutional capacity for competitive agricultural commercialization through extension support to farmer groups in 20 districts of the four project provinces: Kampong Cham, Kampong Speu, Kampot, and Takeo to receive extension training under the project. ADB projects in agriculture have worked with small farmer grouping within value chains in the past, but primarily in capacity building and the management and operation of irrigation schemes within the investment projects. Lately, the projects have looked at rice seed production for farmers to group together to produce quality seed and the promotion of forward contracting. There have been no

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agribusiness initiatives concerning post-harvest infrastructure provision with its corresponding capacity building initiatives.

36. The justification for climate resilient infrastructure during project design was to improve post-harvest practices to counter excessive humidity or extreme temperatures through maintaining the optimum environment within the storage unit. At the same time within the design there is further climate change option by the use of renewable energy (PV energy) initiatives for the reduction of greenhouse gases.

B. Subproject Objectives

37. The overall objective of the subproject is to achieve increased household net incomes for both agricultural cooperative members and farmer suppliers and ensure market outlets for fresh and dried cassava within the district and beyond.

38. The other subproject objectives for the agricultural cooperative post-harvest activities are to support the establishment of drying and storage units within agricultural cooperative and in parallel, assist in the capacity development to undertake agribusiness activities, develop management and operation expertise (i) providing improved critical post-harvest infrastructure; (ii) increase and secure the supply chain through linkages to the trader or processor; (iii) reducing energy costs by promoting renewable energy (PV energy); and (iv) improving market connectivity.

39. The overriding objective is to ensure the inclusion of poorer smaller farmers in the value chain by transforming traditional production and supply practices into commercial demand driven processes that the buyers and processors require within the value chains. This includes promoting on and off-farm businesses to improve rural incomes and product specialization with sufficient incentive to procure quality, uniform product in reasonable quantities so that value chain linkages will be formed between the agricultural cooperative and the processor and or trader.

40. Following implementation and the agricultural cooperative agribusiness establishment, this particular agribusiness enterprise will serve as an example/demonstration/case study for other agricultural cooperatives that would like to establish a trading activity.

C. Related Development Initiatives

41. Seda Senchey agricultural cooperative was established on 17 February 2012 as a cooperative with the support of Centre d’Etude et de Développement Agricole Cambodgien (CEDAC) primarily to develop a savings scheme. The initial work was mobilizing the local authority and conducting general meetings to introduce the concept of group savings. CEDAC provided training on capital management and overall management such as saving and credit management and follow up training on (i) assisting in solving challenges, problems, and conflicts; (ii) legal framework and responsibilities; and (iii) basic computer literacy and account programing. The nongovernment organization also worked with farmers to provide agricultural technical training on eco-friendly agricultural practices in rice production, animal production, and soil fertility improvement, as well as training on collective community business and investment.

42. Caritas Cambodia has worked with six villages within the Seda Commune of Dambae district since 2006. The support activities have included training on (i) improved rice seed production; (ii) group saving; and (iii) small agricultural inputs supply business within the community. Caritas provided an interest free loan of KR2 million ($500) to start the rice seed improvement scheme. Within the Seda commune, Caritas selected the Seda Senchey Cooperative for additional support to further the agricultural cooperative business activities. The

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reason for selecting the agricultural cooperative was (i) the cooperative was the most active amongst all the village groups within the commune; and (ii) Caritas believed the work with the agricultural cooperative would be sustainable. The capacity building and training activities provided by Caritas were (i) business plan development and business management; (ii) record keeping; and (iii) chicken raising training on how to produce chicken feed by using the local materials and chicken disease control. After the training was completed, Caritas provided an additional seed loan of $1,900 to strengthen the agricultural cooperatives agribusiness activities; the loan has a 5-year, interest free term. Caritas Cambodia has completed its activities with the Seda Senchey agricultural cooperative on 30 June 2016.

1. Related Projects

43. JICA Project for Establishing Business-Oriented Agricultural Cooperative Models. The project goal is for agricultural cooperatives that plan to undertake agribusiness initiatives under the Law on Agricultural Cooperatives are supported with training and capacity building in the provinces of Takeo, Kampong Cham, Svay Rieng, and Kampong Speu provinces. The project consists of four outputs: output 1: support DACP and PDA to provide technical assistance for agricultural cooperatives; output 2: organizational and business operation systems of agricultural cooperatives are strengthened in the target areas; output 3: pilot businesses are introduced and operated in model agricultural cooperatives; and output 4: agricultural cooperative business networking with other agricultural cooperatives are improved together with linkages to rice mills, wholesalers, buyers, and retailers. The project duration is for 5 years from August 2013.

44. USAID HARVEST (Helping Address Rural Vulnerabilities and Ecosystem Stability). Cambodia HARVEST is a five-year integrated food security and climate change program completed end of 2015. The program worked in Battambang, Kampong Thom, Pursat, and Siem Reap provinces to improve food security; strengthen natural resource management and resilience to climate change. One initiative was to provide agricultural cooperatives with basic 40 ton rice seed stores primarily to secure farmers supply of quality rice seed.

45. Cambodia – Australia Agricultural Extension Project. Phase II (2001–2007) developed technological implementation procedures which were used in the ADB Loan 2023-CAM: Agriculture Sector Development Project. These included production technologies for rice (including integrated pest management, strategic rice improvement, and soil management), upland and fruit crops including watermelon, taro, and coconut, involving group demonstrations and farm visits.

46. Cambodia Agriculture Value Chain Program of the Australia Department of Foreign Affairs and Trade. During Phase I which was completed in 2015 the project supported the establishment of 53 cooperatives and demonstrated laser levelling. In Phase II which is due to start mid-2016, the recommendation is not to support more cooperatives but instead build on the capacity of existing cooperatives. Phase II will also focus on increasing gender equality outcomes relating to female representation and decision making within cooperatives.

47. Previously, ADB has supported the extension service through Loan 2023-CAM: Agriculture Sector Development Project, which closed on 30 June 2010. The relevant activity is (i) to strengthen institutional capacity for competitive agricultural commercialization which included support services for agro-enterprises by providing technology and business training; (ii) assistance to agricultural commercialization by improving local access to effective research and extension of services; and (iii) the improvement of public institutions to promote marketing and export of agro-based products to remedy these issues. The activity aimed to provide training

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programs, seminars, equipment, and office facilities to agricultural institutions within MAFF. The Ministry of Water Resources and Meteorology developed farmer water user communities under this project with 29,300 farmers in 13 pilot areas of 11 provinces.

D. Subproject Justification

48. Referring to the Agriculture Sector Strategic Development Plan (2014-2018); uthe subproject is relevant under Program 1: Enhancement of Agricultural Productivity, Diversification and Commercialization, (i) Subprogram 1.9: Promote Agricultural Communities Development, to develop cooperatives to become rural enterprises and to develop their business activities and linking with business partners; and (ii) Subprogram 17: Promotion and Enhancement of Agro-industrial Development to promote value addition and engagement of climate change adaptation and mitigation using appropriate post-harvest, drying and storage technology.

49. Article 15 of the Law on Agricultural Cooperatives states that "Agricultural Cooperatives to be encouraged and to enjoy preferential treatment from the government as defined by a sub-decree." As yet no sub-decree has been drafted. The Law on Agricultural Cooperatives stipulates the primary business type for a cooperative which can be on production, agro-industry, agribusiness or services related to agriculture. The agricultural cooperative needs to comply with the statutes, internal regulations, and proceedings as detailed in the articles.

50. Climate change justification: The cleaning, drying, and storage of cassava will counteract the effects of climate change with cooperatives having more control on maintaining the temperature and humidity in the unit and the quality of the product sample. Furthermore, the use of renewable energy (PV energy) will conform to the reduction of greenhouse gases which is one of the outcome targets, as detailed in the designing and monitoring framework. Climate smart agriculture (CSA) compliance is supported by reducing post-harvest losses and improving the cassava chip sample and its moisture content particularly in the rainy season.

51. Value chain justification: The storage units encourage value chain processors and buyers to form closer linkages with such cooperatives as it will stabilize supply and demand and therefore pricing issues relating to the availability and oversupply of the product, as well as offer continuity of supply. The fit will be even stronger if the product stored and traded suite the buyer’s specifications (moisture content, maximum percentage of extraneous matter, free from pests etc.).

III. SUBPROJECT DESIGN

A. Subproject Description

52. The agricultural cooperative chosen as the representative subproject is Seda Senchey, in Sedasean Chey Village, Seda Commune, Dambae District, Tboung Khmum. It had initially 50 members and the membership has increased to 98 members representing 51 families. The cooperative was formed by CEDAC on 17 February 2012 with savings and credit as its business, it was subsequently registered with the PDA in 2015. The cooperative’s reserve fund stood at $17,875 at the end of 2015.

53. The agricultural cooperative will be provided with a 200 ton cassava chip drying and storage unit, powered by renewable energy (PV energy) and with a locally recruited storage unit manager funded with a decreasing project payment subsidy. The unit will be constructed on agricultural cooperative land. The Board has already committed to buying that land with their own resources. The manager and agricultural cooperative members will be provided with training

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under the project’s capacity building program, which will be related to agribusiness and trading, bookkeeping and accounting and marketing. The cassava farmers will be incorporated in the CSA training. Some training materials have already been elaborated by the JICA Establishing Business-Oriented Agricultural Cooperative Models Project.

54. One female agricultural cooperative member has two storage units for fresh and chipped cassava storage estimated to have 500 ton capacity with existing market linkages with Vietnamese buyers and processors and has negotiated to warehouse/stock credit from the buyers (20% deposit advance). With such potential linkages and local expertise the agricultural cooperative members have also plans to move cassava storage and trading.

55. This subproject context is the enhancement of rural household incomes and agricultural competitiveness by (i) providing improved critical post-harvest infrastructure; (ii) increasing and securing the supply chain through linkages to the trader or processor; (iii) reducing energy costs by promoting bio-energy and renewable energy; and (iv) improving market connectivity. The overriding goal is the inclusion of poorer smaller farmers in the value chain by transforming traditional post-harvest and supply practices into commercial demand driven processes that the buyers and processors require within the value chains, this includes product specialization and achieving economies of scale. For this to occur, the farmers need to trust each other and consolidate long term relationships among themselves and above all, strengthening producer associations and organizations for consolidated supply of raw materials. Tthis can be achieved through the cooperative system of which the government is promoting. If there is sufficient incentive to procure quality, uniform product in reasonable quantities then value chain linkages will be formed between the processor and trader and the cooperatives.

56. The Seda commune is a relatively new development and has recently been settled the development includes the road infrastructure. In other sites to be developed, cooperative storage unit connectivity can also be an issue from the production site to the proposed storage unit and from the storage unit to feeder roads. The work on the roads or tracks will support climate resilient modernization and renovation and the investment will focus on improving the flood resilience of farm roads and existing laterite and gravel roads along underserviced link roads to the cooperative storage units. Depending on specific site needs, the infrastructure improvements can include (i) widening embankment slopes; (ii) bio engineering to strengthen embankment slopes, using rip rap protection on critical areas; (iii) structural engineering in critical slopes (gabions, retaining walls, etc.); (iv) increasing cross and side drainage capacity (bridges, culverts, spillways, ditches, drains, scour checks, etc.); (v) using more resilient pavement materials (concrete); and (vi) raising road elevation in low land flooded areas.

1. Engineering Requirements

57. The storage unit is a relatively low cost investment but can be considered innovative, using designs that emphasize forced air circulation in the main store with the use of a combination of PV entrance fans on the gable walls and passive roof ventilation of exhaust air to avoid excessive humidity and temperature build up to minimize post-harvest losses. The intake fans will be ducted from the fan inlet to the storage unit floor. The ducts will be perforated in order that ventilation is at all levels of the store. Insect proofing is also included in the design with mosquito netting covering all air vents.

58. All materials used in the construction of the store are readily available in Cambodia and most are manufactured in the country. The designs are well within the capabilities of small local contractors.

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59. In comparison to the grain stores to be provided by the project, this unit will not have a bio-mass fueled improved flat-bed drier. Instead, as cassava chips are sun dried, there is a concrete chip drying area in the design, protected from animal intrusion and a shade structure where wet cassava can be manually cut/chipped before being spread on the drying surface in the sun. The drying area has gentle slopes from the center to promote rainwater drainage and encourage water away from the store.

60. The design will include the use of renewable energy, in this case PV energy, to power lights, fans, and office equipment. The total amount of power required for the cooperative storage unit is estimated to be 9 kWh in the season where the demand is the highest (when the storage room is ventilated with the power fans). Most of the electricity demand will be during the day and will be directly supplied by the PV panels. The batteries will only be used for night time power demand (i.e., the fans and security lights outside the building) and as back up power. With a daily depth of discharge level of 33%, a range of 12 kWh deep cycle lead acid batteries are required.

61. The store contains an office with side windows on both internal walls. There are two doors leading into the store; one from the drying area and one to the adjacent road. For security purposes, both doors can be monitored from the office (see Annex 3).

2. Cropping Pattern

62. Cassava is the main crop in Seda commune of Dambae district and is the principal income source of the agricultural cooperative members. According to Tboung Khmum PDA data, in 2015 there was 17,600 ha of cassava grown in Dambae district. Most of the product was sold to buyers representing Vietnamese processors. The product is sold both as fresh root or dried chips. There is one cassava flour processor (Song Heng Processing) in Tboung Khmum province located just outside Suon City but is a long distance from the cooperative; approximately 50 km and is not considered a market outlet, as farmers are obliged to deliver their fresh cassava.

63. On average each of the agricultural cooperative member has about 1-3 ha of land under cassava production but some of the farmers have land up to between 5-10 ha for cassava, there are six villages around the Seda Senchey agricultural cooperative with estimated 1,948 ha cassava production but the Seda Senchey agricultural cooperative member have only about 250 ha with 98 members. In Seda commune, nearly 100% of farmer households have land titles from the government.

64. Cassava is the main crop and income source for agricultural cooperative members, however, the members have limited technical capacity and poor or lack of soil improvement activities has led to low productivity. The recent drought has affected yields, with the average yield as low as 18 tons/ha. Some farmers can achieve 28-30 tons per ha, however the potential yield can be as high as 40 tons per ha. According to MAFF (2016) data, the national yield average for cassava is 24 tons/ha. The majority of farmers are mono cropping cassava. Planting in April and harvesting in the dry season from November through to January, but if prices are poor the crop is stored in the ground until April. The crop can be harvested after 10 months but farmers can keep it in the ground for up to 16 months.

65. Cassava is vegetatively propagated through the use of cuttings and the overriding issues are (i) varietal uniformity; (ii) viability of cuttings (storing from harvesting to the next planting season); and (iii) the cleanliness of the stock affecting yields. Most of planting material imported from Thailand and Viet Nam is not totally uniform after 3 to 5 years. While farmers have continued to keep their own material and an estimated about 95% do that and only about 5% of farmers have to buy the seed from other farmers. The main varieties grown are KU50 from Thailand,

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KM94 from Viet Nam, however, many farmers are not aware of the varieties that they grow and refer to them as red leaf or white leaf; the local variety is commonly termed Malay. All varieties that are grown for processing have high yield and high starch content as the major required characteristics. Access to good cassava stem seed that has pest and disease resistance is also an issue. There are plant pathology problems concerning mycoplasma (Witches Broom) and more recently identified mosaic virus in cassava crops. Both diseases have not been identified in the production zone but farmers need to be aware of the problem.

3. Marketing

66. Cambodian cassava market price fluctuates and is very much influenced by the demand from neighboring countries. Approximately 90% of the cassava is exported to Viet Nam and Thailand with the remaining 10% sold for domestic starch processing and exports to the People’s Republic of China (PRC) as dry chips. During 2015, Cambodia exported 150,000 tons of the dry cassava chips and 27,034 tons of starch to PRC and Cambodia is expected to ship 200,000 tons of dry cassava chips to PRC in 2016. The official data from MAFF in 2016 shows that Cambodia exported 1.79 million tons cassava dry chips to Thailand with 106,500 tons of fresh roots and to Viet Nam with 330,874 tons cassava dry chips and 464,020 tons of fresh roots (see Tables 1 and 2).

67. Cambodia and PRC have signed the Safeguard Policy Statement (SPS) Protocol on cassava exports in 2010, but Cambodia only started to export the product to PRC in 2013.

Table 1: Official Data of Cambodia Cassava Exports Destination in 2015 (tons)

No. Countries Fresh root Dry chip Starch Pulp

1 Thailand 106,500 1,785,975 0 0

2 Viet Nam 464,020 330,874 2,115 0

3 PRC 0 149,412 27,034 36,166

4 Republic of Korea 0 0 153 0

5 Malaysia 0 0 153 0

6 Poland 0 0 34 0

7 Italy 0 0 1.2 0

8 USA 0 0 102 0 Source: Ministry of Commerce (MOC) and MAFF 2016.

Table 2: Exports Cassava Dry Chips to PRC 2013-2015 (tons)

No. Country 2013 2014 2015

1 Thailand 5,754,597 6,778,401 N/A

2 Viet Nam 552,178 1,662,516 N/A

3 Cambodia 71,250 101,273 149,412 Source: MOC and MAFF 2016.

68. The average onfarm price for dry cassava chips in 2015 was KR765 per kilogram (kg) ($189/ton) for fresh cassava was KR270 per kg ($67/ton) with 1 kg of fresh cassava yielding 60% by weight of dry chips. Towards the end of the 2015-2016 season the prices decreased further to KR120–KR280 for the fresh product. The price increased slightly, if compared to 2014, when fresh cassava was KR270 per kg ($66/ton) and KR730 per kg for dry chip. Usually, the trader undertakes a quality assessment by touching and visual inspection and the price variance can be between KR50-100 per kg. Figure 1 provides the differences between dry (cassava chips) and fresh crop prices in KR per ton over the period 2011–2015.

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69. In Tboung Khmum all cassava is cut manually and then sun dried on tarpaulin or plastic. Vietnamese buyers prefer hand cut cassava chips to maintain starch percentages and will pay KR33,000 ($8.25) for farmers to cut their product. Thai processors do not demand hand cut cassava chips. Table 3 below provides the cost of cutting 1 ton of fresh cassava. The optimum moisture content for cassava chips is 14%.

Table 3: Cassava Chip Cutting Costs ($/ton) Location Manual Cutting Machine Cutting

Tboung Khmum $8.25 (KR33,000) No machine cutting, as product is for Vietnamese market

Pailin & Battambang $7.50 (KR30,000) $3.75 (KR15,000) Source: Cassava traders 2016.

70. The quality of cassava is important in determining the price, which is based on the percentage of starch or flour output, the optimum starch content is 30%-35% of dry matter. For every 100 tons of fresh cassava roots there will be 30–35 tons of starch flour and 10 tons of dry solid waste with the remainder being water; this has to be estimated by traders. If the cassava is harvested in the rainy season then the starch content will only be as high as 25%. The traders have indicated that the period of December to April is the optimum time to purchase cassava as the crop provides higher percentage flour yields as it is the dry season and there is limited spoilage.

71. There is no data available for cross border trade of Cambodia cassava to Viet Nam and Thailand but it is expected that the Thai and Vietnamese markets will continue to be the most important markets for Cambodian cassava through cross border trade. However, the Chinese market is also increasingly becoming important. There will be demand from those countries in the next 5 years. Local processing is still relatively small but it is expected that with the right economic environment, that national processing will increase to 15-20% because of high domestic demand for the product. It is estimated that in the next 5 years Cambodia cassava production will increase by about 20% with production reaching about 15,000,000 tons due to improving soil nutrition, improved germplasm and increased productivity. By 2020 domestic demand is estimated to be 800,000 tons in fresh roots and exports in dried chips to PRC will increase to 350,000 tons, with the remainder still being exported to Thailand and Viet Nam (see Table 4).

0

100

200

300

400

500

600

700

800

900

2011 2012 2013 2014 2015

Figure 1: Farmgate Cassava Prices 2011-2015

Dry Fresh

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Table 4: Cassava Production, Domestic Demand, Exports (2012-2015) and Estimated 2020 Volumes (tons)

Description 2012 2013 2014 2015 2020

Production (fresh) 7,613,697 7,933,381 11,943,204 13,298,108 15,000,000

Domestic demand (fresh)

150,000 200,000 250,000 600,000 800,000

Cross Border trade (fresh & dry chips)

7,000,000 7,200,000 9,000,000 11,767,231 13,000,000

Official exports (dry chips)

N/A 71,250 101,273 200,000 350,000

Source: MAFF, Traders 2016.

4. Animal Feed Processors

72. Dried cassava which includes its leaves in a ratio of 4 to 1 can replace maize in poultry feed and it reduces feed costs without a loss in weight gain or egg production, and cassava flour can be complemented with a large number of ingredients that provide the nutrients needed to obtain balanced food rations for poultry. Several trials using dry cassava chips and dry residue

as an animal feed on cattle, sheep, goat, and pigs have been successfully reported.1

73. The waste materials from the three remaining cassava starch factories are used as a feedstock ingredient for local animal feed factories such as CP and Green Feed. It is estimated that those three cassava starch factories are processing between 200,000 to 250,000 tons of fresh cassava roots per year, which can provide 140,000 to 175,000 tons (residue about 70%) of cassava wet waste and dry cassava residue being 21,000 to 26,250 tons all of which is available for animal feed. The dry cassava waste product price varies from KR400 to KR500/kg ($0.1-$0.125 depending on quality and wet residue price is KR80/kg ($0.2)

74. The national demand for feed is about 100,000 tons a month and it continues to grow by around 10% per annum over the last 3 years with Thailand's CP Cambodia supplying almost half the market. Thailand's Betagro, imports about 3,500 tons a month and plans to invest $500 million on a new mill with a capacity of 12,000 tons a month. Among other companies, Green Feed supplies 6,000 tons a month from Kampong Cham and has a capacity of 8,000–10,000 tons per month, while PRC’s New Hope Agribusiness and Korea’s SCF each supply about 2,000 tons. Cambodia’s Master Feed supplies about 4,000 tons a month, BVB 3,000 tons, and M’s Pig 900 tons.

5. Scale and Capacity

75. The scale, dimensions, and capacities of the drying unit are based on a maximum storage capacity of 200 tons of dried cassava chips at any one time, with a combined gross footprint of 1,000 m2 (a usable net area of 214 m2 within the store and a net drying surface of 573 m2). The unit will provide space for cutting fresh cassava and drying under hygienic conditions ensuring the prevention of entry of foreign bodies. Once dried, the storage will be at 20C–30C below ambient temperature and the design is such that adequate ventilation is provided to reduce the buildup of humidity. This is to prevent the rehydration of the product and therefore its deterioration.

76. The warehouse storage unit will be of dimensions of 12x20 meters (m) within which there will be a 4x4 m office to conduct day to day business and agricultural cooperative management

1 The research result of Annals of the Brazilian Academy of Sciences in 2015 and Malaysian Society of Animal

Production in 2013, included CeAgrid Cambodia NGOs research center in 2008.

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affairs and have sufficient space to store the solar batteries. The storage unit perimeter will have a 1 m wide pavement that runs around the whole building, this makes cleaning easier.

77. The store is divided into nominal 4 m wide bays to allow stock to be easily rotated and avoid the dangers associated with the collapse of high stacks of sacks. Dried cassava will be stacked within the bays on slatted timbers to promote ventilation. Each 4 m bay, stacked to a height of 5 m will hold approximately 27 tons of dried cassava chips based on a unit weight of 350

kg/m3.2 The drying area will be 22.3x28 m with a roofed area of 5x10 m to provide shade for the

cassava cutters.

6. Associated Investments

78. Associated initiatives will include a sub-output dedicated to capacity building in accounting, agribusiness, cooperative management, and O&M of storage units, with technical assistance being provided in cooperative management and agribusiness and business development support. Government officials will be identified as resource persons to enhance their capacity and eventually lead the sub-output activities. The capacity building work will be formal in the case of cooperatives in association with the GDA DACP relating to the Law on Agricultural Cooperatives, cooperative management (bookkeeping, accounts and business plans), agribusiness development with particular reference to post-harvest management and trading, management and operation of storage units. In each province a model agricultural cooperative that is trading or on the cusp of a successful trading enterprise will be used for training purposes, to convene workshops and become a pilot.

79. The project will prepare training materials, if such materials do not exist, there is a JICA project in Takeo, Kampong Cham, Svay Rieng and Kampong Speu provinces, which started in August 2013, to develop business-orientated agricultural cooperatives and this can be built upon in the provinces of Kampong Cham and Takeo. The JICA elaborated training manuals and guidebooks on agricultural cooperative management, business planning, auditing, monitoring and facilitation will be used and develop further training materials particularly with emphasis on storage unit management and operation and crop marketing.

80. The project will also support the development of tissue culture as a method of cleaning up cassava planting material stocks, in order to improve varietal characteristics, achieve virus elimination and the in-vitro production of pathogen free plants and the rapid multiplication of plants that have good climate resilient characteristics. The tissue culture unit in the National Agriculture Laboratory is at present working on banana propagation but needs to develop uniform variety stocks in cassava and to clean up the varieties from virus (mosaic virus) and mycoplasma (witches broom).

81. There will be a CSA training and capacity building program to help agriculture production undergo significant transformation to meet the climate change challenges. CSA includes (i) soil and nutrient management which includes increasing the use of organic fertilizers; (ii) improved water harvesting and retention; (iii) understanding the changing distribution and pest control management; (iv) encouraging resilient ecosystems which includes variety climatic adaptation; and (v) improving efficiencies in post-harvest management practices to reduce losses. There is

2 Rupert Best et al. Centro Internacional de Agricultura Tropical (CIAT). 1989. Natural Drying of Cassava Roots on

Concrete Floors

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potential for CSA practices primarily to improve soils, the use of clean germplasm and more rationale use of inputs, which can achieve cassava yields above 40t/ha (see Annex 4).

B. Location and Site

1. District and Provincial Plans

82. Tboung Khmum province was formed when Kampong Cham province was split in two by a royal decree signed on 31 December 2013 and was officially launched on 2 June 2014. Tboung Khmum Province consists of six districts and one city with a total area of 4,928 square km. The six districts are: Dambae, Krouch Chhmar, Memot, Ou Reang Ov, Ponhea Kraek, Tboung Khmum, as well as Suong Town, the existing provincial capital.

83. The province is located between two main national roads no.7 and no.73. A water reservoir capable of holding 3 million cubic meters of water is being developed to supply water to the new capital city and also to provide tourist facilities. The priority for the province is to construct the provincial government infrastructure. The provincial city covers 2,000 ha and is expected to expand further as land is available.

84. Tboung Khmum province has number of development plans and the priorities are:

(i) The provincial infrastructure development plan is the main priority, starting with the construction and development of the government secretariat and the public services within a new town.

(ii) The planning of the commercial area will include retail and shopping outlets.

(iii) The agricultural and industrial area sectors development plans, will aim to increase trade between Cambodia-Viet Nam and the other regions inside the country and the province will create the economic zone.

(iv) The province is planning to create ecotourism for provincial job creation with the administration planning nation parks or green belts and has highlighted the conservation of 10 existing ancient temples again for tourism.

(v) Building knowledge centers and higher education facilities is included in the develop plan to promote provincial research activities.

85. Tboung Khmum province is one of the eight provinces along the Cambodia-Viet Nam border and both governments plan to build 13 new border gates to help boost trade that has already been growing between the two countries. For the border gate connectivity plans are being developed to connect the central highlands of Cambodia with the Mekong Delta region of Vietnam. The new border gates plan will improve provincial trade with Viet Nam. Cambodia's total exports to Viet Nam rose to 4% ($504 million) in 2013, while during the same period Viet Nam's exports to Cambodia reached to $2.93 billion. Trade between Viet Nam and Cambodia has been rising fast in recent years, reaching $3.3 billion in 2012, up from $2.8 billion in 2011 and $1.8 billion in 2010. The two countries plan to increase trade volume to $5.0 billion by 2015-2016.

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2. Socioeconomic Conditions

86. Tboung Khmum province is located in the central lowlands of the Mekong River. It borders the provinces of Kampong Cham to the west, Kratié to the north, Prey Veng to the south, and shares an international border with Viet Nam to the east. Its capital and largest city is Suong City.

87. The total population of Tboung Khmum province in 2014 was 850,304 and women represented approximately 50.28% of the total population. The total number of males under 18 years was 172,560 and the total number of females under 18 years was 170,100. The total number of males over 18 years was 250,170 and the number of females over 18 years was 257,474 (see Table 5 below). The total number of households was 183,703 of which 13.75% were female headed households.

88. The number of people in Tboung Khmum that have work associated with agriculture is 40,226 or 82.2% of the population. The complement of the PDA is 15 staff members.

Table 5: Size of Population in Tboung Khmum Province Province Male

>18 years Female

<18 years Male

over 18 years

Female over 18 years

Total male

Total female

Total

Tboung Khmum 172,560 170,100 250,170 257,474 422,730 427,574 850,304

Source: Ministry of Planning, Cambodia Socio-Economic Survey 2014.

89. There are six villages in the commune - Andong Lagneang, Beung Thmey, Chung Tasao, Krasang, Sampor, and Seda Senchey. The total number of households is 975. The total population is 4,254 of which 2,028 are female. 298 persons have out-migrated of whom 156 to urban areas in Cambodia and 142 to other countries. Approximately 90% of total households are involved in agriculture and the average farm size is 1.5 ha. The total available area for farming is 2,106.7 ha including 1,948 ha for rice production and 158.7 ha for crop production. In Seda commune, nearly 100% of farmer households have land titles from the government. There are 94 ID-Poor 1 households and 138 ID-Poor 2 households in the commune. The community is characterized by substantial numbers of older women who are taking care of their grandchildren, and receiving remittances from their adult children working in urban areas. Those households that only have 1–3 ha or less are considered to be the most vulnerable. Farming households have debts brought on mainly because of the recent droughts causing them to lose crops. The area is again currently suffered in June 2016; the local pond has dried out this year and households had to purchase bottled drinking water.

90. Farmers grow rubber, cassava, mango, pepper, and rice. They also work as day laborers in cassava production doing tasks such as planting and harvesting. Cassava produced in the area is bought to be transported to a buyer in Viet Nam. Women raise pigs and poultry. As an alternative to hiring day laborers, farmers are increasingly hiring tractors for land preparation.

91. Poverty in subproject area: Those households that only have 1–3 ha or less are considered to be the most vulnerable. The incidence of poverty in the community is indicated by the number of households which are designated as ID-poor. Households designated ID-Poor 1 are usually landless. The poverty profile in Sedasean village is as follows: approximately 10% of households are ID-Poor 1 and approximately 30% of households are designated ID-Poor 2. For the commune of Dambae approximately 15% of households are classified as ID-Poor 1, and 10% are ID-Poor 2. These households do not have enough rice for the whole year.

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92. One of the significant characteristics of the local population is that farming households have debts brought on mainly because of the recent droughts causing them to lose crops. The area is again currently suffering from drought (June 2016). The local pond has dried out this year and households must purchase bottled drinking water. (See Annex 8)

3. Identification Process

93. A formal process was followed for the identification of potential agricultural cooperatives that satisfy the eligibility criteria to receive a drying and storage investment subproject. The selection process required the participation of the PDA, the Commune Councils and latterly village heads and subsequently the agricultural cooperative members themselves. At the interim project planning stage, the PDAs nominated the following agricultural cooperatives:

(i) Within Takeo there are over 88 farmer cooperatives established by the PDA and the PDA has recommended 19 cooperatives for support.

(ii) Within Kampot there are over 43 farmer cooperatives established by the PDA and the PDA has recommended 13 cooperatives for support.

(iii) Kampong Cham PDA has recommended 15 farmers cooperatives for support in six districts.

(iv) 12 farmer cooperatives in seven districts were established by the Tboung Khmum PDA of which the PDA has recommended nine farmer cooperatives in six districts for support.

94. The screening process was undertaken by the design consultants during the preparation study with the following selection criteria was the following: (i) the agricultural cooperative has to

be registered to be able to gain access to loans;3 (ii) if the cooperative stores seed and/or is

trading or has a business plan to develop a trading agribusiness with potential downstream value chain linkages; (iii) land available (for the cassava store a footprint of at least 1,000 m2 is required) or the agricultural cooperative is planning to buy land; (iv) have an adequate reserve fund with preference to those reinvesting more than 20% gross profit (the minimum stipulated in the Law on Agricultural Cooperatives) into the reserve fund; (v) strong commitment of cooperative management team and approved by at least two-thirds of the majority of members as detailed in

Article 43 on the Law of Agricultural Cooperatives,4 however, the two-thirds majority will be for all

members and not just those attending general meetings; (vi) the cooperative grows rice, maize

and/or cassava; and (vii) there is full social and gender inclusion within its membership.5

3

Agricultural cooperatives can be registered with MAFF and those that are have access to formal financing. The Rural Development Bank will support those cooperatives with good management and business plans with loans, this is a recent move (June 2016) and is backed by an AFD guarantee which commits to cover 65% of any losses; average loan size $5,000.

4 Article 43: decisions relating to statute, internal regulations, division, amalgamation or dismissal of members shall be

made by two-thirds majority of votes of members present in the general meeting. Other decisions of the general meeting shall be made by a majority of votes of members present.

5 A study on Women’s Empowerment in Agriculture Index surveyed 13 countries, including Cambodia which was

undertaken late 2012 and included 2,100 households in 84 villages across 17 districts. Cambodia achieved the highest score for Women’s Empowerment in Agriculture of the 13 countries. The study noted that 92.6% of women achieved adequate empowerment and that 94.7% of the women had achieved gender parity. But the indicator which contributed most to disempowerment for women was group membership: USAID. 2014. Measuring Progress Toward Empowerment: Women’s Empowerment in Agriculture Index: Baseline Report.

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95. The Seda Senchey agricultural cooperative was chosen owing to the capacity of its board, some members are already cassava chip trading and higher than average reserve funds with members undertaking other business initiatives to spread risk.

96. All the eligible subprojects shall conform with the development objectives of the project, the government and of ADB. They are expected to contribute to the achievement of the ADB Country Partnership Strategy (2014-2018) the MAFF Agriculture Sector Strategic Development Plan (2014-2018), Industrial Development Policy (2015-2025), Policy on the Promotion of Paddy Production and Rice Export (2010) and Cambodia Climate Change Strategic Plan (2014-2023) The eligible subprojects are unlikely to have any significant social or environmental safeguard issues with their implementation. This subproject was adopted as the representative subproject as it demonstrated a greater emphasis on small farmer development and will improve rural livelihoods.

C. Technology and Equipment

97. Cassava drying and storage: Usually, the fresh cassava roots can be kept for only 3 days once it is lifted, but sometimes the farmer can keep the roots a little longer (4 days), when the weather is dry, otherwise it will be degraded with such pathological problems as black spot, rots and molds, rendering the crop poor with a resultant low price for animal feed.

98. The farmer dries the cassava under direct sunlight for about 5 to 7 days until 14% of moisture content is attained. The dry chips of cassava can be stored up to 6 months if they have proper storage and good maintenance. A Seda Senchey agricultural cooperative member (women trader) has stored the dry chips of cassava between 3 to 6 months in response to achieve good returns for the out of season product.

99. Any storage unit will need insect proofing as after 3 months the product begins to become susceptible to insect attack.

1. Technological Options

100. The main technology option was whether to use grid electricity or PV energy; the latter was chosen as it was more climate-friendly.

101. As mentioned previously, farmers dry cassava in direct sunlight to reach moisture levels of 14%. Artificial drying using biomass fueled driers (rice husk, coconut shells, corn cobs, etc.) were considered as an option but were discounted as not a viable alternative.

102. The storage unit is a relatively low cost investment but can be considered innovative, using designs that emphasize air circulation in the main store with the use of a combination of fans and roof ventilation to avoid excessive humidity and temperature build up to minimize post-harvest losses. The ventilation fan arrangement consists of two pairs of intake fans on each gable wall. The intake fans will be ducted from the fan inlet to the storage unit floor and perforated in order that ventilation is at all levels of the store. Exhaust air will exit through the vents in the roof.

D. Land Acquisition and Resettlement

103. No land acquisition or resettlement issues will arise. One of the criteria for an agricultural cooperative to receive a drying and storage unit is that the agricultural cooperative must have a land of the size needed to build the unit. The area required is estimated at approximately 1,000 m2, and the agricultural cooperative must provide evidence of security of tenure. The agricultural

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cooperative will purchase land that is available in the area under a private commercial transaction which is outside of the scope of ADB SPS (2009). There will be no encroachment on any private land.

104. Any rural road improvements will be on the existing rural road footprints and no new land will be required. There will be some temporary use of land during the road improvement to park machinery and store materials but this will be on non productive land which the community is willing to provide on a short term basis. There is no involuntary land acquisition, economic loss or dislocation, no loss of houses or structures. The temporary use of small areas is deemed insignificant with no impact. Safeguard screening has been guided by the ADB SPS (2009) and has been categorized as Category C with no involuntary resettlement or land acquisition. As such there is no further action required relating to safeguard 2 (see Annex 6).

E. Indigenous People

105. The beneficiary community is ethnic Khmer and there are no members of ethnic minority or indigenous groups impacted by the subproject. According to the ADB’s SPS (2009), the subproject is rated as Category C for indigenous people and as such no further action is required under Safeguard 3.

F. Environment

1. Environmental Criteria and Standards

106. Screening Criteria and Categorization: At an early stage of the project, ADB screens and categorizes proposed projects based on the significance of potential project impacts and risks. Screening and categorization is undertaken to (i) reflect the significance of potential impacts or risks that a project might present; (ii) identify the level of assessment and institutional resources required for the safeguard measures; and (iii) determine disclosure requirements. A project's category is determined by the category of its most environmentally sensitive activity, including direct, indirect, cumulative, and induced impacts in the project's area of influence. The nature of the environmental assessment required for a project depends on the significance of its environmental impacts, which are related to the type and location of the project; the sensitivity, scale, nature, and magnitude of its potential impacts; and the availability of cost-effective mitigation measures. Projects are screened for their expected environmental impacts, and are assigned to one of the following four categories:

(i) Category A. Projects could have significant adverse environmental impacts. An environmental impact assessment (EIA) is required to address significant impacts.

(ii) Category B. Projects could have some adverse environmental impacts, but of lesser degree or significance than those in category A. An initial environmental examination (IEE) is required to determine whether significant environmental impacts warranting an EIA are likely. If an EIA is not needed, the IEE is regarded as the final environmental assessment report.

(iii) Category C. Projects are unlikely to have adverse environmental impacts. No EIA or IEE is required, although environmental implications are reviewed.

(iv) Category FI. Projects involve a credit line through a financial intermediary or an equity investment in a financial intermediary. The financial intermediary must apply

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an environmental management system, unless all projects will result in insignificant impacts.

107. Standards: Subprojects are obliged to conform to environmental standards of both the ADB and the government. Based on ADB's Rapid Environment Assessment Checklist, the project is classified as Category B, requiring the preparation of an IEE.

108. Legal framework. Based on the Law on Environmental Protection and Natural Resource Management, the subproject has to be compliant with the Law which was enacted by the National Assembly and launched by the Preah Reach Kram/NS-RKM-1296/36 on 24 December 1996. This law has the following objectives:

(i) To protect and promote environment quality and public health through prevention, reduction, and control of pollution;

(ii) To assess the environmental impacts of all proposed projects prior to the issuance of a decision by the government;

(iii) To ensure the rational and sustainable conservation, development, management, and use of the natural resources of the Kingdom of Cambodia;

(iv) To encourage and provide possibilities for the public to participate in the protection of environment and the management of the natural resources; and

(v) To suppress any acts that cause harm to the environment.

109. In addition, there are agricultural standards that have control criteria that relate to site selection and environment safeguards, which include full record keeping and traceability requirements. The two standards that the project will promote are the (i) Sustainable Rice Platform; and (ii) Cambodian Good Agricultural Practice. CSA practices and procedures also have environmental safeguards, primarily the rational use of agricultural inputs and agronomical practices to reduce greenhouse gas emissions:

110. At the national level there are additional relevant regulation and evaluation standards supported by a range of legal instruments, as follows (see Annex 7):

(i) Law on the Management of Pesticides and Fertilizers;

(ii) Law on Water Resources Management;

(iii) Water Pollution Control Sub-decree;

(iv) Solid Waste Management Sub-decree;

(v) Air Pollution Control Sub-decree;

(vi) Silt/Sediment Quality (from Japan and PRC standards);

(vii) National Integrated Pest Management Program; and

(viii) Environmental, Health and Safety Guidelines.

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2. Management Solutions for Environmental Protection

111. The analysis of the environmental impacts has focused on the civil works associated with the Seda Senchey cooperative cassava chip drying and storage unit feasibility study. The significant environmental and social enhancement measure has been identified. The storage of cassava with the improvement of post-harvest technology offers the agricultural cooperative a business opportunity for trading the product when higher prices and value chain linkages can be achieved. Improved cooperative management as a result of subproject investment and the parallel capacity building activities will enable the agricultural cooperative to develop an agribusiness enterprise.

112. During the project design, there are anticipated environmental impacts from the building the structure: Four environmental issues are expected to be taken into consideration from the construction (i) meeting requirement of building construction guidelines of the government; (ii) the provision of good quality storage standards; (iii) avoiding the impact on private properties to meet the resettlement policies of ADB and the government; and (iv) the design of sanitation facilities must be at least 29 m away from a water.

113. Local Ecological Features. The Seda Senchey agricultural cooperative location is located outside all of the protected areas. The surrounding land use is non irrigated cassava field, grasslands, and shrub. Thus, the potential impact on local ecological features is not envisaged. A number of environmental management measures will be implemented in the pre-construction phase to ensure that appropriate design, plans and documentation to determine environmental performance of construction and operation of subprojects are in place. These include:

(i) Mitigation measures defined in the agricultural cooperative storage unit environmental management plan (EMP) will be updated and incorporated into the detailed design to minimize adverse environmental impacts. This will be the responsibility of the PMU and the relevant PICs.

(ii) Final designs of site layout, foundations, siting of control structures and renewable energy incorporation will be completed after taking into account the provisions of the EMP.

(iii) Engineering design will consider avoiding impacts on environment and social impacts and also consider long term use and sustainability, particularly the impacts of climate change.

(iv) Environmental clauses will need to be included in the construction contract documents, including an EMP and monitoring plan in the terms of reference (TOR).

(v) Establishment of the Grievance Redress Mechanism during the subproject design which will be updated during project activities to meet the actual situation in real time and will follow guidelines of ADB and the government.

(vi) Effective capacity building on implementation and supervision of the EMP. The project officers and local Ministry of Environment officers will be involved in the training. This will be the responsibility of the PMU safeguards officer through the PMU.

114. Impacts and mitigation measures during the construction phase. The EMP will be implemented by a contractor to avoid or minimize negative impacts following the IEE documents.

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To ensure that construction contractors are able to implement the mitigation measures effectively, the PMUs will put in place the following arrangements: (i) environmental specifications will be included in the bidding documents to contractors; (ii) an appropriate environment section describing standards and responsibilities will be included in the TOR for bidders; and (iii) clauses referencing the EMP mitigation provisions and monitoring plans will be written into the construction contracts. Following the award of construction contracts, the successful contractor will prepare a site environmental management and supervision manual, including an emergency preparedness and response plan for construction emergencies and site environmental health and safety plan, for approval by the PMUs. The contractor will prepare quarterly reports on environmental management to PMUs. The PMU's safeguards officer, along with the PDA will be active in site supervision, management, and appraisal, particularly during construction, so as to identify problems and solve them in a timely manner.

115. Protected Areas. No protected areas exist in the subproject location. The subproject area has recently been opened up to farming with a new settlement developed as approved by the government. No significant natural terrestrial or aquatic habitats exist and natural biodiversity comprises of only common wildlife living among humans in agricultural regions, domesticated animals and feral pests and rodents. There is no evidence of protected or endangered species and there will be no significant loss of native flora and fauna as a result of the project as the site is 1,000 m2 in size.

116. Cultural Heritage. During construction, the contractor will ensure that any local cultural sites (including shrines, graves, and other beliefs) will be kept clear of construction material and protected from other disturbance. Access to these sites will not be impeded, and after construction is finished any disturbed surroundings will be restored to pre-construction standards. If there is any issue, it must be reported to the PMU through the PDA immediately.

117. Construction camps. The construction contractors will establish offices and work camps (for 4-5 months) at the site works which will generate wastewater and solid waste which can cause environmental pollution and unsanitary conditions. Proper disposal of these wastes will be essential. It will be the responsibility of the construction contractors to provide toilets with pump out and disposal facilities and sufficient waste bins at strategic locations to ensure that they are (i) protected from birds and vermin; (ii) emptied regularly (using the nearest landfill or site which is approved by the authority); and (iii) ensure there is no waste overflow. The contractors will clean the camps area after completion of works.

118. Hazardous and polluting materials. Construction material handling and disposal guidelines and directions that include spill responses will be prepared and implemented as part of the site environmental management and supervision manual. The following measures will be taken to prevent pollution of soil and surface water/groundwater: (i) storage facilities for fuels, oil, cement, and chemicals will be within secured areas on impermeable surfaces, provided with bunds and clean-up installations; (ii) vehicles and equipment will be properly staged in designated areas to prevent contamination of soil and surface water; (iii) vehicle, machinery, and equipment maintenance and re-fueling will be carried out in such a way that spilled materials do not seep into the soil; (iv) oil traps will be provided for service areas and parking areas; and (v) fuel storage and refilling areas will be located at least 50 m from canals and channels and will be protected by temporary drainage bunds to contain spills.

119. Air pollution. During construction, heavy and light machinery will be used that will generate gases including carbon dioxide, nitrogen oxide, etc. This will be minimized by good

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equipment checking and maintenance to meet a high standard to ensure efficient fuel burning and quality. Vehicle emissions will be in compliance with relevant Cambodian emission standards.

120. Dust. An adverse environmental impact could occur during the construction phase in case of improper construction management but is not likely significant. Water shall be sprayed during construction if the construction zone will be located close 50 m to urban areas such as village, hospital, school and so on to ensure that dust is minimized throughout the construction zone.

121. Soil Erosion. Limited soil erosion may occur when digging the building foundations, if work is carried out in the rainy season. This could cause deterioration in water quality and impact on some aquatic resources. Hence, good construction practices shall help to mitigate soil erosion and siltation. Additionally re-planting of vegetation (post construction) will also help to mitigate erosion.

122. Noise. Noise can be expected during construction due to construction machinery operation and transport activities. Construction activities will involve haulage vehicles, bulldozers, excavators, concrete-mixing plants, rollers, and other heavy machinery. Noise intensity from these large machines operating is typically in the range of 80-90 decibels at the site (5 m from operating machinery). The transport of material, aggregate, concrete and waste material to and from sites will also cause noise impacts along the haulage routes. Activities with intensive noise levels will not only have an impact on the residents, but may also cause injury to construction workers operating the equipment.

123. Environmental impact and mitigation measures during operation. Poor and inadequate O&M of the agricultural cooperative storage unit could cause unintended adverse environmental impacts. Establishment and operation of the agricultural cooperative will be through the recruitment of a storage unit manager and capacity building by private sector service providers and PDA staff. The training will include a number of technical aspects including post-harvest best practices, maintenance of the structure and renewable energy systems, operations management and conflict resolution. The project/PMU will support the PDA and the agricultural cooperative through a technical assistance program to strengthen overall management and agribusiness capacity.

124. Water pollution and excessive agricultural input. The benefits resulting from the project's supported agricultural cooperative cassava unit will be to develop best practices in cassava drying, storage, and trading activities. There will be no washing of the product and there will be no chemicals used. Water pollution and excessive agricultural input use is not expected. However, there will be storage pest control using agrichemicals and those products that are used will be registered and approved by the government and will be according to the label recommendations.

125. Worker Health and Safety of both workers and agricultural cooperative members may be threatened by construction activities. Numerous workers will gather within the construction site, with potentially relatively low living conditions, such as unclean water, poor food, and increased risk of diseases infection and transmission. Surrounding residents may also be affected by noise and dust. Workers will confront construction safety risks as well. In addition, some workers will include non skilled workers, operators, and drivers as well as surveyors and construction supervisors.

126. The measures to protect the community will include planning construction activities (including demolition work) so as to minimize disturbances to residents, utilities, and services.

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Temporary land occupation will be planned well ahead of construction to minimize its impact. Land will be reinstated to its original condition after construction and implementing safety measures around the construction sites to protect the public, including warning signs to alert the public to potential safety hazards, and barriers to prevent public access to construction sites and unsafe areas.

127. Measures to ensure occupational health and safety will include (i) contractors shall be required by the PMU to ensure that their workers and other staff engaged in the proposed construction are in a safe environment; (ii) following the award of construction contracts, the contractors will prepare site environmental health and safety plan, for approval by the PMU; and (iii) contractors shall ensure that: (a) all reasonable steps are taken to protect any person on the site from health and safety risks; (b) the construction site is a safe workplace; (c) machinery and equipment are safe and in good working order; (d) adequate training and instruction for occupational health and safety is provided; (e) adequate supervision of safe work systems is implemented; (f) means of access to and egress from the site are without risks to an individual's health and safety; and (g) protective equipment such as gloves, face mask, etc., are provided by contractors to ensure that all workers are safe.

128. If any unanticipated impacts during construction and operation become apparent during project implementation, the PMU will (i) inform and seek ADB's advice; (ii) assess the significance of such unanticipated impacts; (iii) evaluate the options available to address them; and (iv) prepare or update the EIA including EMP. ADB will assist the PMU to mobilize the resources required to mitigate any adverse unanticipated impacts or damage.

IV. TOTAL INVESTMENT, FUNDING ARRANGEMENTS, AND FINANCING PLAN

A. Infrastructure Cost

129. The cost of the building works is summarized as follows

Table 6: Building Cost Estimates ($)

Description Amount

Foundation 14,168.64

Structure 39,444.17

Masonry works 7,848.13

Finishing works 856.96

Doors and windows 1,591.10

Miscellaneous 14,681.00

Total 78,590.00

130. These prices include contractor’s overhead and profit but make no provision for contingencies (see Annex 5).

1. Estimation Methods

131. In line with the normal practice, the survey and design cost is estimated at 12% of the total civil works costs.

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132. The building cost estimates were prepared using data and quantities taken off the drawings and a description of the works was elaborated for every item based on the type of construction. For building materials, concrete, steel bars etc., all estimates were based on local rates that were collected during field work, from local suppliers and contractors. The unit price used for the estimates is based on an average of current unit rates used in similar constructions recently contracted by the provinces.

133. However, the PV energy systems are based on local solar energy equipment suppliers, Star Cambodia with input of the international bio energy consultant as part of the design consultants input and is included in the costs.

2. Unit Prices and Ratios

134. All rates include all import duties and local taxes and the unit rate analysis is based on a number of factors:

(i) The experience of international and national procurement specialist and the national cost engineer on previous projects both in Cambodia and internationally.

(ii) Inputs of all other international and national specialists.

(iii) General location of material suppliers in the area of the subproject to obtain the transportation costs.

(iv) General location of quarries in the area of the subprojects to obtain the transportation costs.

(v) Using updated values for material, equipment, and labor from previous projects.

(vi) The designs and bill of quantities where completed on end of July 2016 and the exchange rate used was at a currency conversion of $1=KR4,094. The exchange rate was obtained from the National Bank of Cambodia on 27 July 2016.

(vii) A sensitivity analysis has been carried out on the key items within the bill of quantities to ensure the accuracy of their prices.

135. There are five major activities of calculating the unit rates, all of which are estimates, they are:

(i) materials;

(ii) transportation;

(iii) equipment;

(iv) labor; and

(v) overheads and profit are estimated at 20% which is standard practice in Cambodia.

B. Total Cost and Financing

136. In addition to infrastructure costs, a provision of 5% of infrastructure costs is made for construction supervision and related costs. The project will also subsidize the facility manager

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employed by the cooperative at the rate of 100% (up to $200 per month) for the first two years, 60% for the third year and 30% for the fourth year.

137. The total base cost for the subproject is estimated at $92,479 and including physical and price contingencies, the cost will be $99,845. ADB will finance 90.2% of subproject costs, with the remainder being funded by the government. Government’s contribution will be in the form of waived taxes.

V. IMPLEMENTATION AND OPERATING ARRANGEMENTS

A. Execution and Implementation Agencies

138. As the project activities will cover a number of government ministries at central government and provincial level it is important that the management, operations and monitoring of the project run smoothly and delays in implementation are kept to a minimum.

139. MAFF will be the executing agency and will be responsible for overall project management, coordination, and reporting. MAFF will establish a PMU; it is proposed that the PMU can be the existing SPS GMS Trade Facilitation Project PMU, using some of the existing management personnel and resources but with additional recruitment in key positions, such as those officials that will have monitoring and evaluation, procurement, safeguards, and accounting responsibilities.

140. The PMU will have the responsibility for the day-to-day management, coordination, and supervision of the project, as well as consultant recruitment, financing, fund flow, and the oversight of safeguard issues and measures. The Ministry of Economy and Finance will channel funds to the PMU advance account and the PMU will disperse on to the provincial implementing designate accounts. The parent ministries of their respective provincial implementing agencies will be notified of the release of funds and payments.

141. The national level coordination will also be assisted by a Project Steering Committee (PSC) which will be co-chaired by a representative of MAFF and one representative from the Ministry of Economy and Finance; Ministry of Water Resources and Meteorology, Ministry of Industry and Handicraft, Ministry of Rural Development, Council for the Development of Cambodia and Ministry of Commerce will also be represented. In order that decisions are made quickly it is recommended that the various Steering Committee members will be at least the rank of Director General. The Steering Committee may invite persons and agencies to discuss specific agenda items, when required. For effective decision making no more than 20 persons shall attend at any one meeting.

1. Detailed Design Phase

142. Although this subproject has been designed and costed by the design consultants, the PMU may request a revision or verification of some details. The PMU will be responsible for the recruitment of consulting engineers to review the detailed designs, bid document preparation and if approved will supervise the construction, along with the PIC detailed designs will be reviewed by PMU and the engineer from the PIC to ensure internationally acceptable design standards have been incorporated and that engineering designs address the potential impact from climate change. Comments will be referred to the detailed design consultants for amendment and subsequent preparation of bidding documents. Detailed designs must be approved by MAFF/PMU with input from the Provincial Director of the PDA and submitted to the PSC (along with other documents) for funding approval. Once funding approval has been provided, the

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recruitment of contractors can proceed. The detailed design consultants can also proceed with the preparation of bidding documents. There will be no resettlement plan required prior to the commencement of works.

143. As the cost is likely to require only national competitive bidding (NCB), the PMU will invite bids for construction in accordance with ADB’s and the government’s requirements as set out in the procurement plan. The consultant prepared bidding documents will be used to invite bids for the works program and a bid evaluation committee will be established with the mandate to review all bids prior to recommending the selection of one of the national construction companies and recommendations passed on to the PMU.

2. Construction Phase

144. Construction supervision will be provided by PDA with the assistance of the PIC and in collaboration with the construction company. The build will take 4–5 months and there will be monthly visits by the construction supervisor which coincide with request for payments and additional visits as necessary as work progresses. The contractor will maintain a construction diary or log and the consultant will assess the log and physical progress and look at the schedule in the contract against actual progress to authorize payment release or not. If issues arise then the PMU will be advised accordingly with possible onward submission to the PSC. Strict adherence to quality standards will be enforced with the consultants providing continual supervision and progress payments made on the recommendation of the consultant to PDA and subsequently to the PMU. The safeguards officer which has an environmental remit, appointed to the PMU will monitor implementation of the EMP. After the construction and warranty period has lapsed, the facility will be handed to the Tboung Khmum PDA who will hand it over to the Seda Senchey agricultural cooperative.

3. Operational Phase

145. The key to ensuring this subproject’s sustainability to provide the maximum capacity building and advisory input in the first two years of operation. The PDA through its official that has the mandate to support agricultural cooperatives will be responsible for close contact with the agricultural cooperative storage unit. The project will support the agricultural cooperative agribusiness directly or indirectly through the PDA to undertake the following activities: (i) in association with project training advisers assist in the development of a suite of capacity building programs related to cassava post-harvest management, storage operation, and agribusiness development; (ii) ensure that there is coordination with the JICA agricultural cooperative business orientation work to either use JICA’s training manual or make sure the manuals are compatible with the aims of the Law on Agricultural Cooperatives; (iii) the use of Seda Senchey site to demonstrate the work undertaken; and (iv) assist in the recruitment, training and part payment of a drying and storage unit operations manager.

146. The PMU monitoring and evaluation (M&E) consultant will monitor the impact of the subproject investment by carrying out annual impact monitoring surveys relating to storage unit management and operation, trading progress, and make recommendations for improvement.

B. Subproject Implementation Management

147. The Seda Senchey agricultural cooperative cassava chip drying, storage, and trading subproject is primary to introduce the improvement of cassava chip post-harvest procedures and to establish an agribusiness amongst agricultural cooperative members, show its benefits in relation to climate change, using renewable energy and achieve agricultural cooperative revenue

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generation. The oversight of the operation of the storage will be under the auspices of the PDA with support from the PIC. At construction the contractors will be responsible to the provincial agency and private sector consultant engaged to review and revise if required, the detailed design, bid document preparation, and supervision of construction.

148. Following construction and handover, the project will engage trainers and seek agribusiness cooperation from agricultural cooperative members that are already trading who will take the lead role in demonstrating the operation and management of the storage unit and establishing the agribusiness/trading operation.

149. The subproject implementation is presented in the PAM; the following outlines responsibilities of the provincial agencies and departments involved in subproject implementation. All activities will be monitored and progress reports submitted to the PMU with technical line agencies having the responsibility to ensure that technical and operational aspects of the subproject are addressed adequately.

1. Subproject Organization and Implementation

150. The PMU is ultimately responsible for deciding to proceed with the investment in the location proposed by the design consultants. The PDA will report to the PMU on a half yearly basis which is a means through which coordination is effected and confirmation that the subproject investment is consistent with provincial development plans. The PMU will (i) approve annual work plans and budgets to implement the storage unit; (ii) the selection and recruitment of the contractor; (iii) approve detailed designs for subprojects based on recommendations from the technical line agency, but more importantly the contractor; (iv) monitor and request release of payments (if required) for not only construction but also for the management support of the storage unit; and (v) provide guidance to relevant provincial departments in the implementation of the subprojects in the province.

2. Role of the PDA

151. The following tasks will be completed by the PDA under the management of the PMU:

(i) In association with project training advisers assist in the development of a suite of capacity building programs related to cassava post-harvest management storage operation and agribusiness development.

(ii) Coordinate with JICA agricultural cooperative business orientation work to ensure the training is compatible with the existing training manuals.

(iii) The PDA will organize and arrange open days to the Seda Senchey site to demonstrate the work undertaken.

(iv) The PDA will have an oversight on the technical and infrastructure aspects of the storage unit construction.

(v) The PDA will seek guidance from the Department of Agricultural Cooperative Development on developing accountancy procedures line with the Law on Agricultural Cooperatives.

(vi) Assist the PMU M&E consultants in monitoring the impact from the subproject investment by carrying out annual impact monitoring surveys relating to storage

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unit management and operation, trading progress, and make recommendations for improvement.

3. Role of the Provincial Department of Rural Development

152. The Provincial Department of Rural Development (PDRD) will work under the management of the PMU with the guidance of the Ministry of Rural Development technical focal point. The PDRD may or may not have a role at the Seda Senchey site as the feeder road system is new and connectivity is sufficient i.e., from the production area to the storage unit and from the storage unit to the feeder roads.

153. The PDRD in the targeted provinces in conjunction of the PIC will determine the need for feeder rural road improvement at each of the proposed 50 storage units to be constructed during the project period of 6 years. The PDRD and PIC will determine the type of infrastructure required to make the rural roads climate resilient, elaborate tender documents, select contactors, and oversee the work to ensure quality and on-time completion.

4. Role of Contractors

154. The contractor will be responsible for following the detailed design, the construction process, and the quality of work to be established under the contract and will prepare and submit construction diaries in order that PDA and PMU can monitor progress. The contractor will be responsible for on-time handover of the infrastructure as per the contract.

5. Role of Program Implementation Consultants

155. During the preparation of the detailed design, the PIC will support the preparation of the detailed engineering design as required. A specialist rural infrastructure engineer will be part of the PIC and there will be an assessment that adequate provision has been made to accommodate the potential impact from climate change relating to extreme weather events. The PIC will also review bid documentation to ensure that they conform to the requirements of ADB and the government.

156. The PIC will ensure that quality assurance is maintained during construction supervision and will wherever possible, work with the trainers to ensure the management and operation of the storage unit is satisfactory. Approval for payments under the construction contract must be ratified by the PIC before being authorized for payment through the PMU.

157. The PIC will work with the contractors and then with the PDA to ensure efficient implementation given the limited resources and experience of the PMU staff related to the management and operation of drying and storage units. The PIC in conjunction with the PMU will ensure interagency coordination.

6. Role of Subproject Beneficiaries

158. The agricultural cooperative will provide land or purchase land to site the storage unit, which will be an area of no less than 1,000 m2.

159. It is expected that the beneficiaries, in this case, the agricultural cooperative members and more importantly the agricultural cooperative board with the PDA will appoint a manager to manage and operate the store and business. Some agricultural cooperative members that already

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have marketing contacts will be required to undertake marketing tasks for the agricultural cooperative agribusiness.

160. The project aims to turn over the unit to the Seda Senchey Cooperative when ready for operation. It is expected that with training they will operate and maintain the physical facilities of the unit. The cost for minor repairs and maintenance should be shouldered by them.

C. Subproject Implementation Schedule

161. The implementation schedule for the subproject is dependent upon the time needed for program approval through ADB and the government, as well as the length of time it takes to set up implementation structures and operational accounts. The construction will take 4–5 months. While significant advance action has been proposed and the design consultants have submitted relatively detailed plans and bill of quantities providing considerable start-up support, the subprojects can commence in the second quarter of 2018 provided that project implantation commences mid-2018.

162. If there is uncertainty or slippage in project implementation the subproject implementation schedule is detailed in months rather than dates. Implementation schedules may need to be further modified once the implementation structures have been established and operating accounts for payment opened.

D. Procurement

163. Based on the procurement plan in the PAM, the procurement packages required to implement this subproject will be (i) consulting services for reviewing the design consultant’s feasibility work, later the submission of the detailed design proposed and bill of quantities elaborated, then revisions to the work and estimated costs and to prepare bid documents and supervision of infrastructure construction; and (ii) the civil works construction contracts. Procurement associated with this subproject will be overseen by the PDA and possibly PDRD and overseen by the PMU and will be assisted by the PIC. A third procurement contract for the associated activities to maximize the benefit from the subproject investment will not be specific for this subproject but for all subprojects identified within the activities such as laser leveling and external capacity building.

164. All procurement of goods and works to be financed by the ADB loan will be in accordance with ADB’s Procurement Guidelines. NCB procedures will be followed for contracts valued at less than $2,500,000 but more than $100,000 for civil works and less than $500,000 but more than $100,000 for goods. For NCB procedures, the provisions of the governments standard operating procedures will be followed. In case of inconsistency between ADB procedures and the government’s procedures, ADB procedures will apply. The proceeds of the Loans will be disbursed in line with ADB's Loan Disbursement Handbook. Prior and post review thresholds are included in the procurement plan for the overall program as part of the PAM presented in the report and recommendation of the President.

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VI. SUBPROJECT OUTCOME AND IMPACT

A. Subproject Outcome and Impact

1. Performance Indicators

165. The performance indicators will include (i) beneficiaries; (ii) rural livelihoods; (iii) increases in production and decreases in post-harvest losses; and (iv) value chain linkages. It is estimated that the majority of subproject beneficiaries will be women given the levels of out-migration of males from the area and the fact that this project is gender mainstreaming. The proposed subproject has the following potential impacts:

(i) The storage unit will offer a marketing outlet for 600 tons of dried chips equivalent to approximately 1,100 tons of fresh produce, which is a conservative estimate.

(ii) Off season prices will be 10%–20% higher than in season.

(iii) Increase household income for not only those households that are members of the agricultural cooperative but other household that market their fresh cassava to the Seda Senchey agricultural cooperative and hence a reduction in poverty; a 10% increase in rural household income (from a base of KR1.16 million/$290) of farmers including women, and those employed in agribusiness operations and service providers over the lifetime of the project.

(iv) The subproject will generate additional demand for hired labor due to the increase in the need to manually cut cassava (as buyers prefer hand cut chips over machine cut chips) and there will be opportunities for direct and indirect employment.

(v) The agricultural cooperative trading business will offer continuity of supply, storage infrastructure and through quality management and an improved quality and uniform product, the value chain linkages between producer, processor, and trader/exporter will be stronger and in a glut market that product will sell before other lower quality or substandard products. There will be increased trust among the value chain players.

(vi) with expanded cassava production opportunities, the subproject may lead to some reduction in out-migration levels as cassava processing becomes more profitable.

(vii) services and technical information will be improved, with men and women through training in improved processing and production techniques, as well as accounting, agribusiness development, and mechanization.

(viii) Post-harvest losses are likely to be reduced by 10% (from baseline of 15%-25% loss on average). Cassava yields are expected to increase by 15% (from a base of 20 tons/ha, drought in 2015 lower the yield further to 18 tons/ha).

(ix) With increased household revenues, school drop-out levels may decrease as families are better able to pay for their children's education and women's access to extension. Increased household incomes will lead to a reduction in household debt levels, and a subsequent decrease in the incidence of domestic violence in farming households.

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(x) Increased awareness of gender equality may lead to improved sharing of household chores and tasks.

(xi) The storage unit will bring together the agricultural cooperative members more closely and the agribusiness will encourage more frequent management meetings and when the storage space is empty can double up for gatherings and local functions for the six surrounding villages. Thus, increased solidarity among agricultural cooperative members.

2. Evaluation Arrangements

166. The first month after the unit is completed and prior to hand over, a review of the implementation arrangements is undertaken, redefining the roles and responsibilities if the PMU, implementation agencies, private sector trainer, consultants, and the beneficiaries.

167. Evaluation parameters need to be determined; technical parameters will include agronomic, post-harvest and marketing initiatives and proposed outcomes, climate change and socioeconomic indicators. This will include those social profiles of the agricultural cooperative member household with different economic/poverty status.

3. Reporting Arrangements

168. Three different kinds of monitoring will be carried out: (i) implementation progress monitoring of the subproject; (ii) safeguards monitoring; (iii) beneficiary monitoring and evaluation. Implementation progress monitoring will be one of the main tasks of the PMU M&E officer with assistance from the safeguards consultants and the PDA.

169. The annual progress reports presented by the social development consultants will assess the beneficiaries, particularly those that receive training to determine the knowledge assimilation in accounting, agribusiness, and the O&M of the unit, evaluating the new technology adaptation and impact from the investment. Subsequently, annual surveys will be undertaken to measure the overall impact in the beneficiaries.

170. Safeguard monitoring will also ensure the EMP plan is implemented and achieves its expected outcomes during subproject preparation, implementation and operation, and gender action plan will be closely adhered to (see Annex 8).

171. The subproject completion report should report the impacts achieved from the investment and post project impact studies at a later stage can test the sustainability of these impacts.

B. Economic and Financial Evaluation

172. The economic and financial analysis for the subproject is in Annex 9. The analysis considers only the operation of the storage facility itself and does not take into account potential impacts on the crop production by members.

173. The economic internal rate of return for the subproject is 23%. This result is robust to likely changes in key variables, although a significant long term decline in cassava prices could affect subproject viability. The greatest risk to viability will be if skills available within, or employed by, the cooperative are not able to provide efficient and effective management for the facility. Training in business and management skills will be available to cooperative members through project supported programs at the provincial level, which will mitigate this risk (see Annex 9).

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174. At present, most farmers do not cut and dry their cassava themselves, but for various reasons tend to sell fresh cassava to buyers who then undertake the cutting and drying. However, if cooperative members were to cut and dry their own cassava the net benefit to them would be about $15 per ton of fresh cassava produced, equivalent to about $28 per ton of dry cassava chips produced.

175. The poverty impact ratio for the subproject is estimated to be 15.8%.

176. A cash flow analysis for the storage facility, based on conservative assumptions about the rate of increase in volume handled through the facility and using funds from the cooperative’s savings and loan fund reserves to provide most of the initial working capital concludes that, provided the it is well managed, by the middle of the fourth year:

(i) the initial working capital from the reserve fund will have increased from $10,000 to more than $30,000;

(ii) cumulative payments to the cooperative’s dividend fund for members will have been more than $16,000; and

(iii) operating surpluses will be starting to contribute to the cooperative funds, opening the way for expanding the business or investing in other agribusinesses.

C. Social Impact Assessment

177. Given it is a gender mainstreaming project, it is expected that the majority of subproject beneficiaries will be women due to the levels of out-migration of males from the area. The main expected subproject social impacts are:

(i) a 10% increase in rural household income (from a base of KR1.16 million/$290) of farmers including women, and those employed in modern agribusiness operations and service providers over the lifetime of the project;

(ii) average farming household income from cassava production. Cassava yields are expected to increase by 15% (from a base of 20 tons/ha);

(iii) with expanded cassava production opportunities, the subproject may lead to some reduction in out-migration levels as cassava processing becomes more profitable;

(iv) school dropout levels may decrease as families are better able to pay for their children's education and women's access to extension services and technical information will be improved and men and women will be empowered through training in improved processing and production techniques;

(v) increased household incomes will lead to a reduction in household debt levels, and a subsequent decrease in the incidence of domestic violence in farming households;

(vi) increased awareness of gender equity may lead to improved sharing of household chores and tasks;

(vii) increased solidarity between cooperative member farmers; and

(viii) increase in trust between value chain actors.

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D. Environmental Impact Assessment

178. The IEE was prepared following the ADB SPS (2009), the 2003 ADB Environmental Assessment Guidelines and relevant environmental policies and guidelines of the government. The project is classified under ADB guidelines/rules as a Category B project. Such projects are judged to have some adverse environmental impacts, most of which is occurring during the construction phase, but to a lesser degree and/or significance than those for category A projects. An IEE is required to determine whether or not there are significant environmental impact which will warrant an EIA. If an EIA is not needed, the IEE is regarded as the final environmental assessment report.

179. During pre-construction: The issues related to project location encompass the site development and construction of a 200-ton cassava chip and drying unit with a footprint of 1,000 m2.

180. During construction: The major issue during construction concern compliance with the EMP regarding civil engineering using heavy plant and machinery, ensuring site cleanliness, careful treatment of spoil from land clearance and the building foundations, the mixing of concrete and disposal of excess building materials and taking into account the protection of existing waterways, natural drainage channels, and vegetation.

181. For post-construction, the main concern is the maintenance of the subproject which require a systematic approach to maintenance and management and the efficient and safe use of the construction and the material and equipment. The unit will not be connected to the grid but instead will use solar panels to produce renewal PV energy. Maintenance of the PV equipment is important.

182. There will be increased traffic in the area when the cassava (either fresh or dried chips) is delivered to the site and this will cause dust, fumes, and a certain amount of noise pollution.

183. The initial rapid environmental assessment for the project identified a medium climate risk, however, the AWARE classification is that of high risk. This project preparatory technical assistance has therefore completed a climate change assessment. In addition, there is a need to undertake a climate risk and vulnerability assessment for this subproject including construction and operational (post construction) periods. This work has been included in the TOR for the international climate change and environmental specialist to complete during implementation, and to be site specific.

184. The environmental impacts will be measured to mitigate through good design of infrastructure. Mitigation of construction-phase impacts relies heavily on responsibility of works contractors, to follow specification clauses specifically designed to minimize noise nuisance, road accident, pollution of air and water and soil erosion, illegal solid waste disposal and waste water discharge, conflict between up-stream and downstream water users, worker safety and sanitation. This mitigation will in turn rely on enforcement by the PMU environmental and social management officer and also by construction supervision consultants. Post-construction mitigation will benefit from capacity building and training under the project to the storage unit manager and the agricultural cooperative board members on the safe use of the unit’s equipment.

185. The IEE includes an EMP which will be implemented by a contractor to avoid or minimize negative environmental effects by following the IEE documents. To ensure that the contracting company are able to implement the mitigation measures effectively, the PMU will put in place the following arrangements: (i) environmental specifications will be included in the bidding documents

37

to contractors; (ii) an appropriate environment section describing standards and responsibilities will be included in the TOR for bidders; and (iii) clauses referencing the EMP mitigation provisions and monitoring plans will be written into the construction contracts. Following the award of contracts, the successful contractor will prepare a site environmental management and supervision manual, including an emergency preparedness and response plan for construction emergencies and site environmental health and safety plan, for approval by the PMU. The contractor will prepare quarterly report on environmental management to the PMU. The PMU's safeguard officer will be active in site supervision, management and appraisal, particularly during construction, so as to identify problems and solve them timely (see Annex 7).

VII. CRITICAL RISKS

186. The common constraint for not storing is that the produce has to be sold off immediately to pay off debts and satisfy creditors, with product storage affecting cash flow. To counter this risk, there are examples of storage being economically viable with the following advantages (i) the prices received out of season are better; (ii) the quality in both loss of starch content and chip deterioration does not occur and the product can be stored for up to 6 months, if the correct insect proofing and storage conditions occur; and (iii) once good relationship are established between supplier and buyer, the buyers will offer storage credit (20% of stock) in order to secure off season supplies.

187. Concerning financing, the Law on Agricultural Cooperatives (2013) stipulates that 20% of gross profit is deducted and placed in a reserve fund, 3% deducted for training members, external auditing is not required for agricultural cooperatives that have funds of KR100,000,000 ($25,000). The problem is the remainder of the profit is paid to members without further reinvestment into the agricultural cooperative business; to build up the business further, this has to change. The culture of reinvesting in the business will be promoted through the agribusiness training.

188. Insufficient allocation of O&M costs within the business is addressed in the agribusiness capacity building activities within the project to encourage sufficient reinvestment in the business and not looking at a business for maximum profit taking.

189. Small numbers of workers will be present at the start of the subproject during civil works, however, the risk of increasing the local population's exposure to communicable diseases is rated as very low.

38 Annex 1

DESIGN AND MONITORING FRAMEWORK

Subproject Results Chain

Performance with Targets and Baselines

Data Sources and Reporting

Risks

Impact: increased productivity, quality and safety, value addition and rural household incomes through the development of climate friendly agribusiness value chains

Average hh earnings rise by 75% by 2020 (base 2010) 600 tons of cassava chips marketed per annum end of year 5 Post-harvest losses reduced by 10% (base – 15 -25% losses) Cassava yield increase by 15% (base – 20 tons/ha but 2015 drought year 18 tons/ha)

National household survey MAFF Agriculture Census and production & marketing statistics Project generated reports and impact studies

Government commitment to Subproject management not support Sustainability through commercialization not fully implemented

Outcome: Climate friendly value chains for inclusive and environmentally sustainable economic growth

The AC enters the value chain as group and has trade linkages with at least two buyers (Base – no linkage) 50% of all those trained are women (base - 20%) women’s access to extension and technical information improved

Project generated reports and impact studies, including M&E and project completion reports PDA progress reports Safeguards feedback & business registration

Government support to AC limited (financial and personnel provision) and not sufficient VC linkages remain weak

Output 1: Critical agribusiness value chain infrastructure improved and made climate resilient.

Efficient use of inputs using CSA production practices Storage unit fully operational and achieves 3 x 200 ton cycles in one season (base – 0) PV off grid system is effective and efficient

Cost of production studies PDA Progress reports Project performance management systems report Project generated reports and impact studies

AC management remains weak Catastrophic climatic conditions overcome resilience infrastructure and water resources

Output 2: Climate smart agriculture and agribusiness promoted

At least 6 designated AC members competent in bookkeeping, trading and agribusiness (base – 1 member

Project performance management systems report

Participating provincial institutions not fully committed to the subproject to take on the capacity building role.

39

fully conversant in trading and another in bookkeeping) CSA training methodology developed and used to demonstrate its benefits in cassava production. PDA staff have the capacity to support AC in storage and trading operations

Project generated reports and impact studies PDA reports

Activities and Milestones Output 1: Cooperative value chain infrastructure enhancement The construction and operation of a 200-ton cassava chip storage unit powered by renewable PV energy Output 2: Associated initiatives and activities to enhance the subproject investment Storage unit manager trained and is competent in S/he work AC members and other farmers in the commune are trained in CSA AC Management trained in basic accounting, book and record keeping and agribusiness PDA staff competent in support trading operation of the AC

Inputs Provision of a 200-ton storage unit with a cutting and drying area The partial sponsoring of a storage unit operations manager Capacity building support by PIC and capacity building consultants for PDA staff and AC members in bookkeeping, agribusiness, CSA, storage unit O&M

Subproject Results Chain

Performance with Targets and Baselines

Data Sources and Reporting

Risks

Impact: increased productivity, quality and safety, value addition and rural household incomes through the development of climate

Average hh earnings rise by 75% by 2020 (base 2010) 600 tons of cassava chips marketed per annum end of year 5

National household survey MAFF Agriculture Census and production & marketing statistics

Government commitment to Subproject management not support Sustainability through commercialization not fully implemented

40

friendly agribusiness value chains

Post-harvest losses reduced by 10% (base – 15 -25% losses) Cassava yield increase by 15% (base – 20 tons/ha but 2015 drought year 18 tons/ha)

Project generated reports and impact studies

Outcome: Climate friendly value chains for inclusive and environmentally sustainable economic growth

The AC enters the value chain as group and has trade linkages with at least two buyers (Base – no linkage) 50% of all those trained are women (base - 20%) women’s access to extension and technical information improved

Project generated reports and impact studies, including M&E and project completion reports PDA progress reports Safeguards feedback & registration

Government support to AC limited (financial and personnel provision) and not sufficient VC linkages remain weak

Output 1: Critical agribusiness value chain infrastructure improved and made climate resilient

Efficient use of inputs using CSA production practices Storage unit fully operational and achieves 3 x 200-ton cycles in one season (base – 0) PV off grid system is effective and efficient

Cost of production studies PDA Progress reports Project performance management systems report Project generated reports and impact studies

AC management remains weak Catastrophic climatic conditions overcome resilience infrastructure and water resources

Output 2: Climate smart agriculture and agribusiness promoted

At least 6 designated AC members competent in bookkeeping, trading and agribusiness (base – 1 member fully conversant in trading and another in bookkeeping) CSA training methodology developed and used to demonstrate its benefits in cassava production. PDA staff have the capacity to support AC in storage and trading operations

Project performance management systems report Project generated reports and impact studies PDA reports

Participating provincial institutions not fully committed to the subproject to take on the capacity building role.

Annex 2 41

SOCIO-ECONOMIC SURVEY

1. Tboung Khmum Province is located in the central lowlands of the Mekong River. It borders the provinces of Kampong Cham to the west, Kratié to the north, Prey Veng to the south, and shares an international border with Viet Nam to the east. Its capital and largest city is Suong City. Tboung Khmum Province was formed when Kampong Cham Province was split in two by a royal decree signed on 31 December 2013. Tboung Khmum Province consists of six districts and one city with a total area of 4,928 km2. The six districts are: Dambae, Krouch Chhmar, Memot, Ou Reang Ov, Ponhea Kraek, Tboung Khmum, and Krong Suong.

2. The total population of Tboung Khmum province in 2014 was 850,304 and women represented approximately 50.28% of the total population. The total number of males under 18 years was 172,560 and the total number of females under 18 years was 170,100. The total number of males over 18 years was 250,170, and the number of females over 18 years was 257,474 (see Table 2.1). The total number of households was 183,703 of which 13.75% were female headed households.

3. The number of people in Tboung Khmum that have work associated with agriculture is 40,226 or 82.2% of the population. The complement of the Provincial Department of Agriculture (PDA) is 15 staff members.

Table A2.1: Size of Population in Tboung Khmum Province Province Male

>18 years Female

<18 years Male over 18 years

Female over 18 years

Total male

Total female

Total

Tboung Khmum 172,560

170,100

250,170

257,474

422,730 427,574 850,304

Source: Ministry of Planning, Cambodia Socio-Economic Survey 2014.

4. The province is located between two main national roads No.7 and No.73. A water reservoir capable of holding 3 million cubic meters of water is being developed to supply water to the new capital city and also to provide tourist facilities. The priority for the province is to construct the provincial government infrastructure. The site of the new provincial capital covers 2,000 hectares (ha) and is expected to expand further as land is available.

5. Tboung Khmum province has number of development plans and the priorities are:

(i) The provincial infrastructure development plan is the main priority, starting with the construction and development of the government secretariat and the public services within a new town.

(ii) The planning of the commercial area will include retail and shopping outlets.

(iii) The agricultural and industrial area sector development plans, will aim to increase trade between Cambodia, Viet Nam, and the other regions in the country and the province will create a special economic zone.

(iv) The province is planning to create ecotourism for provincial job creation with the administration planning nation parks or green belts and has highlighted the conservation of 10 existing ancient temples again for tourism.

42 Annex 2

(v) Building knowledge centers and higher education facilities is included in the develop plan to promote provincial research activities.

6. Tboung Khmum province is one of the eight provinces along the Cambodia-Viet Nam border and both governments plan to build 13 new border gates to help boost trade that has already been growing between the two countries. For the border gate connectivity plans are being developed to connect the central highlands of Cambodia with the Mekong Delta region of Viet Nam. The new border gates plan will improve provincial trade with Viet Nam. Cambodia's total exports to Viet Nam rose 4% ($504 million) in 2013, while during the same period Viet Nam's exports to Cambodia reached to $2.93 billion. Trade between Viet Nam and Cambodia has been rising fast in recent years, reaching $3.3 billion in 2012, up from $2.8 billion in 2011 and $1.8 billion in 2010. The two countries plan to increase trade volume to $5.0 billion by 2015-2016.

7. There are six villages in the commune - Seda Senchey, Krasang, Andong Lagneang, Beung Thmey, Chung Tasao and Sampor. The total number of households is 975 households. The total population is 4,254 of which 2,028 are female. 298 persons have out-migrated of whom 156 to urban areas in Cambodia and 142 to other countries. Approximately 90% of total households are involved in agriculture the average farm size is 1.5 ha. The total available area for farming is 2,106.7 ha including 1,948 ha for rice production and 158.7 ha for crop production. In Seda commune, nearly 100% of farmer households have land titles from the government. There are 94 ID-Poor 1 households and 138 ID-Poor 2 households in the commune. The community is characterized by substantial numbers of older women who are taking care of their grandchildren and receiving remittances from their adult children working in urban areas. Those households that only have 1–3 ha or less are considered to be the most vulnerable. Farming households have debts brought on mainly because of the recent droughts causing them to lose crops. The area is again currently suffering from drought (June 2016). The local pond has dried out this year and households must purchase bottled drinking water.

8. Approximately 20% of the community is illiterate and of these, 90% are women. The access to information, knowledge, and education is limited and inadequate for both men and women although more so for women who have rarely attended formal agricultural training

9. Between husband and wife there is joint access to and control over productive resources such as land, as the land title they possess is in both their names. There is joint access to and control over capital, i.e. revenue from agricultural production, although the household budget is always controlled by women. There is joint access to markets although in practice it is farm women who negotiate with the cassava collector about the price.

10. The main division of labor between men and women in cassava cultivation is that women are responsible for planting cassava and men are tasked with digging holes for cassava planting and for harvesting. Men are also responsible for cassava transportation. Wage rates for women are lower than men’s. Wage rates are different for male and female day laborers causing a great deal of dissatisfaction. Women who plant cassava receive KR20,000 per day and men who dig the holes receive KR25,000 per day.

11. Farmers grow rubber, cassava, mango, pepper, and rice. They also work as day laborers in cassava production doing tasks such as planting and harvesting. Cassava produced in the area is bought to be transported to a buyer in Viet Nam. Women raise pigs and poultry. As an alternative to hiring day laborers, farmers are increasingly hiring tractors for land preparation.

12. Poverty in subproject area: The incidence of poverty in the community is indicated by the number of households which are designated as ID-poor. Households designated ID-Poor 1 are

Annex 2 43

usually landless. The poverty profile in Sedasean village is as follows: approximately 10% of households are ID-Poor 1 and approximately 30% of households are designated ID-Poor 2. For the commune of Dambae: approximately 15% of households are classified as ID-Poor 1, and 10% are ID-Poor 2.

13. The report on Seda Senchey Cooperative submitted by the public-private partnership/private sector consultants.

Table A2.2: Seda Senchey Cooperative Name of cooperative Seda Senchey (six villages consolidated)

Province Seda Senchey Village, Seda Commune, Dambae District, Tboung Khmum

# Members from 50 agricultural cooperative members at the beginning it now has 98 agricultural cooperative members

Date of visit 31 May 2016

Date Established Registered with PDA

Assets No land available, but have the financial resources to buy land, however, two warehouses with 500 ton capacity belong to agricultural cooperative members

Yield(s) Average yield is around 18t/ha, poor this year because of drought, However, a few farmers can get high yields to 28t-30t/ha

Crop Rotation Cassava, farmer monocrops plants in April and harvest from November to May, some farmer shifting to mango or rubber crop in the past several years

Price Range (riel/kg) Fresh root is KR280 and lowest price is KR120 in May 2016

% members with loans from Coop

100% for cassava production - KR5.0 million; for planting mat - KR2.0 million; to buy cassava from farmers

Activities Credit, supply agricultural inputs mainly for poultry production

Sell to Collector - who sells to Viet Nam trader and sell to local processing enterprise but small volumes, as farmer has to transport the crop, better for Vietnamese traders to take off farm

Issues 1. Farmers need their cash at harvest time, because of some reasons: payback to the loan from MFI and agricultural cooperative loan, pay back to creditors (fertilizer pesticide companies, pay to labor for harvesting and transportation fee etc.)

2. Limited technical capacity on cassava cultivation like the use of good planting material (free from pest or diseases)

3. Limited capacity on the use of appropriate fertilizer on different stage of cassava plant growth and type of fertilizer

4. Low productivity less than 20t/ha, harvested by some agricultural cooperative members,

5. Drought 2015 affected crop yields 6. Price of fresh cassava root from KR280/kg to KR120/kg on date visited 7. Better to sell cassava chips to add some value within the cooperative.

Chips will get prices of over KR700/kg 8. Predatory pricing by Viet Nam traders over a few years has forced

Cambodian cassava processors to close

44 Annex 2

Name of cooperative Seda Senchey (six villages consolidated)

Future Possible option 1: to build supply chain among cassava dry chip producing farmer to exporter like: Siek Hun Advance Logistic Co. that exports to PR China; But need strongly technical support to agricultural cooperative on processing. Clear contract agreement between agricultural cooperative with this export company Possible option 2: Build market linkage with local collector in order to allow farmer access to market information regularly and harvesting should take into account e.g. Early harvesting when price is high (KR280-KR300/kg) compared to KR120/kg after Khmer new year. Possible Option 3: Develop a new product that can be derived from cassava

Competition Strong market network between local collector and Viet Nam buyer and supply to Viet Nam buyer along border, the prices are determined by the Viet Nam market

Needs Training - bookkeeping, operation management, marketing and contracting

Contacts Thav Chanthy (Mrs.) - Collector - Hoy Meng 012584343

PDA Sun Sarath, Deputy Director of PDA-Kg Cham, 077996639

45 Annex 3

ENGINEERING DESIGN

1. This annex presents a more detailed breakdown of the various parts of the cost estimate and provides working drawings for the store and drying area upon which the bill of quantities have been derived. The engineering designs have been presented in the text of the report above and the costs are summarized in Annex 5.

2. The design of the super structure of the store is based on similar structures commonly constructed in the region. It consists of a reinforced concrete frame on pad foundations, tied by a reinforced concrete ground beam. Blockwork walls support a reinforced concrete ring beam that in turn supports the roof trusses constructed from hollow steel sections. The floor is reinforced concrete laid on a sub grade that is treated for termites and on a damp proof membrane to prevent the upward movement of water into goods laid on the floor. The roof is of pressed TRIMDEK metal sheeting, and incorporates a raised section to allow passive movement of air from within the store.

3. Access to the store is through two sets of sliding doors. The doors on the gable end of the building are intended to give access to vehicles, while the door on the side wall is intended to allow easy pedestrian access from the drying area to the store. An office is sited within the warehouse that commands a view of both of these doors.

4. The store warehouse area is divided into 4m x 4m bays by concrete blockwork walls. These are strengthened by concrete columns and tied by concrete beams at the midpoint and with a capping beam on the top which links to the adjacent bays or wall to provide further bracing. Each bay contains approximately 27 tons of dried cassava chips.

5. The drying area is sited against the side of the store and is raised above ground level. The area is constructed from reinforced concrete and has been designed to drain rainfall away from the main storage building.

Annex 3 46

Annex 3 47

48 Annex 3

Annex 3 49

50 Annex 3

51 Annex 4

ASSOCIATED INITIATIVES

1. Associated initiatives will include activity dedicated to capacity building in accounting, agribusiness, cooperative management, and operation and maintenance of storage units, with the TA being provided in cooperative management and agribusiness and business development support. Government officials will be identified as resource persons to enhance their capacity and eventually lead the activities. The capacity building work will be formal in the case of cooperatives in association with the GDA Department of Cooperative Development relating to the Law on Agricultural Cooperatives, cooperative management (bookkeeping, accounts and business plans), agribusiness development with particular reference to post-harvest management and trading, management and operation of storage units. In each province a model agricultural cooperative that is trading or on the cusp of a successful trading enterprise will be used for training purposes, to convene workshops, and become a pilot.

2. The project will prepare training materials, if such materials do not exist, there is a JICA project in Takeo, Kampong Cham, Svay Rieng and Kampong Speu provinces, which started in August 2013, to develop business-orientated agricultural cooperatives and this can be built upon in the provinces of Takeo and Kampong Cham. Use existing JICA elaborated training manuals and guidebooks on agricultural cooperative management, business planning, auditing, monitoring and facilitation and develop further training materials particularly with emphasis on storage unit management and operation and crop marketing

3. The project will also support the development of tissue culture as a method of cleaning up cassava planting material stocks, in order to improve varietal characteristics, achieve virus elimination and the in-vitro production of pathogen free plants and the rapid multiplication of plants that have good climate resilient characteristics. The tissue culture unit in the National Agriculture Laboratory is at present working on banana propagation but needs to develop uniform variety stocks in cassava and to clean up the varieties from virus (Mosaic Virus) and mycoplasma (Witches Broom).

4. There will be a climate smart agriculture (CSA) training and capacity building program to help agriculture production undergo significant transformation to meet the climate change challenges. CSA includes (i) soil and nutrient management which includes increasing the use of organic fertilizers; (ii) improved water harvesting and retention; (iii) understanding the changing distribution and pest control management; (iv) encouraging resilient eco-systems which includes variety climatic adaptation; and (v) improving efficiencies in post-harvest management practices to reduce losses. There is potential for CSA practices primarily to improve soils, the use of clean germplasm and more rationale use of inputs, which can achieve cassava yields above 40t/ha.

A. Donor Project Synergy

5. JICA. Project for Establishing Business-Oriented Agricultural Cooperative Models, the project goal is for agricultural cooperatives that plan to undertake agribusiness initiatives under the Law on Agricultural Cooperatives are supported with training and capacity building in the Provinces of Takeo, Kampong Cham, Svay Rieng and Kampong Speu provinces. The project consists of four outputs; output 1: the support systems of both DAE/Department of Agricultural Cooperative Promotion and Provincial Department of Agriculture for providing technical assistance for agricultural cooperatives are improved; output 2: the organizational and business operation systems of agricultural cooperatives are strengthened in the target areas; output 3: pilot businesses are introduced and operated in model agricultural cooperatives; and output 4: agricultural cooperative business networking with other agricultural cooperatives, the private

52 Annex 4

sector such as rice mills, wholesalers, buyers, and retailers in the markets and customers are introduced/strengthened in the target areas. The project duration is for 5 years from August 2013.

6. USAID HARVEST (Helping Address Rural Vulnerabilities and Ecosystem Stability). Cambodia HARVEST is a five-year integrated food security and climate change program completed end of 2015. The program worked in Battambang, Kampong Thom, Pursat, and Siem Reap provinces to improve food security; strengthen natural resource management and resilience to climate change. One initiative was to provide agricultural cooperatives with basic 40 tons rice seed stores primarily to secure farmers supply of quality rice seed.

7. Cambodia – Australia Agricultural Extension Project. Phase II (2001–2007) developed technological implementation procedures which were used in the ADB Loan 2023-CAM: Agriculture Sector Development Project. These included production technologies for rice (including integrated pest management, strategic rice improvement, and soil management), upland and fruit crops (including watermelon, taro, and coconut), involving group demonstrations and farm visits.

8. Cambodia Agriculture Value Chain Program of the Australia Department of Foreign Affairs and Trade. During Phase I that was completed in 2015, the project supported the establishment of 53 cooperatives and demonstrated laser levelling. In Phase II which is due to start mid-2016, the recommendation is not to support more cooperatives but instead build on the capacity of existing cooperatives. Phase II will also focus on increasing gender equality outcomes relating to female representation and decision making within cooperatives.

9. Previously the ADB has supported the extension service through the Loan 2023-CAM: Agriculture Sector Development Project, the project closed 30 June 2010. The relevant activity is to strengthen institutional capacity for competitive agricultural commercialization which included support services for agro-enterprises by providing technology and business training. Assistance to agricultural commercialization by improving local access to effective research and extension services. The improvement of public institutions to promote marketing and export of agro-based products to remedy these issues. The activity aimed to provide training programs, seminars, equipment, and office facilities to agricultural institutions within the Ministry of Agriculture, Forestry and Fisheries. The Ministry of Water Resources and Meteorology developed farmer water user communities under this project with 29,300 farmers in 13 pilot areas of 11 provinces.

53 Annex 5

INVESTMENT COST ESTIMATES

Bill No. Description Amount USD

1 FOUNDATION 14,168.64

2 STRUCTURE 39,444.17

3 MASONARY WORKS 7,848.13

4 FINISHING WORKS 856.96

5 DOORS AND WINDOWS 1,591.10

6 MISCELLANEOUS 14,681.00

Total Amount 78,590.00

SUMMARY BILL OF COOPERATIVE 200 TON CASSAVA STORAGE UNIT WITH

CUTTING AND SUN LIDHT DRYING AREA

54 Annex 5

No. Description of work Unit Quantity Rate (USD) Amount USD

1 Bill No.1 FOUNDATION

1.1

Compacted stone 4x6cm with cement and sand for base of footing

h=15cm, floor slab h=10cm, storage, cutting and drying area m3 115.35 46.33 5,344.34

1.2

Blinding concrete for footing and slab h=0.05m, storage, cutting and

drying area m3 55.92 70 3,914.09

1.3 Reinforced concrete of footing, storag and cutting area m3 14.88 176.77 2,630.96

1.4 Reinforced concrete of columns h=1.0m, storage and cutting area m3 2.92 362.16 1,057.53

1.5 Back fill with sand h= 1.0m in footing area, storage and cutting area m3 70.45 10 704.52

1.6

Termite treatment of formation by Premise® or similar compound

after completion of sand layer for storage m2 318.89 1.08 344.40

1.7

Polythene damp proof course 250μm thick Under concrete ground

floor slab and continuous with DPC of ground beam for storage. m2 240.00 0.72 172.80

Total for Bill No. 1 (Carried Forward to Grand Summary) 14,168.64

2 Bill No.2 STRUCTURE

2.1

Reinforced concrete beam GB = 20cm x 30cm for storage and

cutting area m3 10.26 324.18 3,325.70

2.2

Reinforced concrete ground floor slab h=15cm for Storage and h

= 10cm for cutting and sun light drying area m3 103.69 156.38 16,215.06

2.3 Reinforced concrete Ramp of entrance h=15cm for storage m3 2.47 156.38 386.57

2.4 Reinforced concrete Intermediate beam 20cm x 20cm for storage m3 3.63 374.18 1,356.63

2.5

Reinforced concrete Head Wall Beam for stoage and roof beam for

cutting area 20cm x 30cm m3 8.61 374.18 3,221.99

2.6

Reinforced concrete beam under and over doors, windows, Tie

beam 10cm x 20cm for storage m3 1.40 374.18 522.22

2.7 Reinforced Columns storage and cutting area m3 7.33 448.01 3,285.53

2.8 Gypsum board Ceiling for solar room m2 2.74 10 27.40

2.9 Fiber glass insulation over ceiling for solar room m2 2.74 4 10.96

2.10

Steel Roof Structure Covering with Trim deck t = 0.6mm, storage

and cutting area m2 478.39 23 11,002.92

2.11 Roof Cap for storage and cutting area m 22.30 4 89.20

Total for Bill No. 2 (Carried Forward to Grand Summary) 39,444.17

3 Bill No.3 MASONARY WORKS

3.1 Hollow brick 10cm for storage m2 25.50 5.74 146.27

3.2 Cement blocks 20cm for storage m2 240.40 16.42 3,946.41

3.3 Plastering Wall for storage m2 531.80 4 2,127.20

3.4 Plastering Columns and Beams for storage and cutting area m 229.69 4 918.76

3.5 Ventilation Concrete block for storage m2 2.40 20 48.00

3.6 Glass block for storage no 150.00 3 450.00

3.7 Mortar slab for side walk around the building of storage m2 42.30 5 211.50

Total for Bill No. 3 (Carried Forward to Grand Summary) 7,848.13

BILL OF QUANTITY FOR COOPERATIVE 200 TON CASSAVA STORAGE UNIT WITH CUTTING AND

SUN LIDHT DRYING AREA

Annex 5 55

No. Description of work Unit Quantity Rate (USD) Amount USD

4 Bill No.4 FINISHING WORKS

Painting

4.1

Sealer for internal (office room) and external wall (ICI Dulux 1050) for

storage m2 161.71 1 161.71

4.2 Sealer for Columns and Beams (ICI Dulux 1050), for cutting area m 52.53 1 52.53

4.3

Emulsion paint for internal (office area) and external wall (ICI Dulux

W'shiel) for storage m2 161.71 3 485.13

4.4

Emulsion paint for columns and Beams (ICI Dulux W'shiel), for

cutting area m 52.53 3 157.59

Total for Bill No. 4 (Carried Forward to Grand Summary) 856.96

5 Bill No.5 DOORS DND WINDOWS

5.1 D1 Security door 4.0m x 4.0m Steel sliding door Unit 1 673.81 673.81

5.2 D2 wooden door 0.9m x 2.0m Unit 2 120 240.00

5.3 D3 Security door 2.0m x 4.0m Steel sliding door Unit 1 404 404.29

5.4

W1 Aluminum frame glass sliding window with steel grill and

mosquito screen 2.0m x 1.3m Unit 1 156 156.00

5.5

W2 Aluminum frame glass sliding window with steel grill and

mosquito screen 1.5m x 1.3m Unit 1 117 117.00

Total for Bill No. 5 (Carried Forward to Grand Summary) 1,591.10

6 Bill No.6 MISCELLANEOUS

6.1

Solar PV system 2.5 KWp PV array, 12KWh batteries, grid tie

inverter Unit 1 7000 7,000.00

6.2 PVC Palette 1.10m x 1.10m, for over floor area Number 106 25 2,650.00

6.3 Maintain Vehicle Transportation for Engineer government staft Month 4 1000 4,000.00

6.4 Project Information Board Number 1 331 331.00

6.5 Site preparation and Site clean up L.S 1 700 700.00

Total for Bill No. 7 (Carried Forward to Grand Summary) 14,681.00

BILL OF QUANTITY FOR COOPERATIVE 200 TON CASSAVA STORAGE UNIT WITH CUTTING AND

SUN LIDHT DRYING AREA

56 Annex 6

LAND ACQUISITION AND INDIGENOUS PEOPLES/ETHNIC GROUPS

Please see separate document.

Annex 7 57

INITIAL ENVIRONMENTAL EXAMINATION

Please see separate document.

58 Annex 8

SOCIAL AND GENDER IMPACT ASSESSMENT AND SUBPROJECT GENDER ACTION PLAN

A. Summary of Main Findings

1. One of the significant characteristics of the local population is that farming households have debts brought on mainly because of the recent droughts causing them to lose crops. Subsequently they migrate to urban areas in order to earn money to pay off their debts. It is estimated that out migration is affecting 60% of the households in the community with migrants going mostly to find work in Malaysia, Republic of Korea, and Thailand with only a few people going to Phnom Penh. When there is out migration the workload of women who remain behind increase considerably. Frequently when adult children migrate, they leave their children in the care of the grandmother. Because of the shortage of money in the household, the grandmother herself is forced to work outside the home in order to earn money to feed and take care of the children. This is because the remittances are usually inadequate. Those farmers who only have 1–3 hectare (ha) or less are considered to be the most vulnerable and likely to be in debt. Approximately 20% of the community is illiterate and of these 90% are women. 2. There was a general consensus and approval about the proposed subproject. In addition, the discussion group mentioned other priority needs which included:

(i) the need for a village water pond which can provide water all year round;

(ii) information about improved techniques to cope with the drought;

(iii) the inclusion of activities for very poor households;

(iv) the cooperative would like to be able to sell agricultural inputs to farmers to support the cooperative;

(v) income generating activities for women and for which there is a market for the product they can make;

(vi) include visual aids in all agricultural training so that illiterate women can understand.

B. Gender Analysis

3. Between husband and wife there is joint access to and control over productive resources such as land, as the land title they possess is in both their names. There is joint access to and control over capital, i.e. revenue from agricultural production, although the household budget is always controlled by women. There is joint access to markets although in practice it is farm women who negotiate with the cassava collector about the price. 4. The access to information, knowledge, and education is limited and inadequate for both men and women although more so for women who have rarely attended formal agricultural training. They recommend that they be formally invited to a training event otherwise they always miss out. When there is a training event in the commune it is usually the men who are invited to attend as heads of household. Women so far, have received some technical information about rice and vegetable production. 5. A gender action plan has been elaborated for the subproject and is detailed below.

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C. Introduction

6. From mixed gender discussion, women’s focus group discussions, and group interviews with commune council members and commune council women and children focal point, the following assessment of social and gender conditions in the subproject target area has been elaborated. 7. The area suffered from drought in June 2016; the local pond has dried out and households were forced to purchase drinking water. In this area, farmers grow rubber, cassava, mango, pepper, and rice. They also work as day laborers in cassava production doing tasks such as planting and harvesting. Cassava produced in the area is bought to be transported to a buyer in Viet Nam. Women raise pigs and poultry. As an alternative to hiring day laborers, farmers are increasingly hiring tractors for land preparation. 8. The largest land holding is approximately 10 ha. Those farmers who only have 1–3 ha or less are considered to be the most vulnerable and likely to be in debt. Those who do not own a land are able to rent land at KR900,000 per ha per year. 9. Approximately 20% of the community is illiterate and of these 90% are women. The cooperative members currently farm individually although they have recently received financial support from the international nongovernment organization, CARITAS to organize collective production. D. Poverty, Household Debt and Migration

10. One of the significant characteristics of the local population is that farming households have debts brought on mainly because of the recent droughts causing them to lose crops. Subsequently they migrate to urban areas in order to earn money to pay off their debts. The community members estimate that approximately 10% of farmers have lost their land as a direct consequence of their bank debt. When they are unable to make loan repayments to the bank, in desperation they borrow from moneylenders at high interest rates in order to repay bank loans. Local moneylenders include cassava collectors, motor repair shops, and grocery shops. The average loan from moneylenders is $500–$750 for 1 year. There have been examples of farmers absconding because of their inability to repay loans and in some instances their land and property has been seized by the moneylender. 11. The incidence of poverty in the community is indicated by the number of households which are designated as ID-poor. Households designated ID-Poor 1 are landless. The poverty profile in Sedasean village is as follows: 12. Approximately 10% of households are ID-Poor 1 and approximately 30% of households are designated ID-Poor 2. For the commune of Dambae: approximately 15% of households are classified as ID-Poor 1, and 10% are ID-Poor 2. These households do not have enough rice for the whole year. E. Domestic Violence

13. There are incidents of domestic violence between husband and wife, mainly caused by the husband’s drunkenness and arguments about household debt. Women explained that they feel their husbands act irresponsibly by ignoring their debt problems and are not sufficiently concerned about the consequences of non-repayment. The burden does not seem to be shared

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equally and in most cases, it is the wife who shoulders greater responsibility for trying to find ways to repay bank loans. Women do not feel valued by society. Often it is the husband who does not agree for his wife to participate in commune committee activities because the meetings are held in the evenings. 14. The women explained that even though there is gender awareness today, in reality it does not exist and there is no gender equality yet. They would like to know how women can achieve better status and equal rights. F. Vulnerability and Inclusion

15. There is a complaint that the government-run health center does not have sufficient staff to attend to the community’s needs. There is no midwife, no ambulance, and it is closed during weekends so it is difficult to find assistance. For this reason, it is considered useful only for treating minor illnesses. For serious illnesses, people prefer to go to private clinics for treatment. 16. The village has a primary school and secondary school which only teaches pupils up to Grade 9. However, many families are unable to provide education for their children because of shortage of money. G. Climate Change, Biodigesters

17. The community is of the opinion that the climate has changed very much. It is now very hot and disease incidence has increased leading to more deaths and people fall ill with influenza much more frequently. The sun is also very strong, there are violent storms, and also frequent flooding. For example, in 2016 the pond has dried out and there is no water in the village. 18. The floods have destroyed rice crops. Although the locality has an irrigation canal, it does not have gates and the rice paddies were subsequently flooded and the crop was lost. 19. There are no biodigester units in the village because of the insufficient number of livestock. 20. The main access to and control over productive resources in the community is as follows:

(i) There is joint access to and control over productive resources such as land, as the land title they possess is in both their names.

(ii) There is joint access to and control over capital, i.e. revenue from agricultural production, although the household budget is usually controlled by women.

(iii) There is joint access to markets although in practice it is farm women who negotiate with the cassava collector about the price.

(iv) The access to information, knowledge, and education is limited and inadequate for both men and women although more so for women who have rarely attended formal agricultural training. They recommend that they be formally invited to a training event otherwise they always miss out. When there is a training event in the commune it is usually the men who are invited to attend as heads of household. Women so far, have received some technical information about rice and vegetable production.

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H. Work Profiles: Agricultural Labor/Using Machinery

21. Regarding cassava cultivation, the main division of labor between men and women is that women are responsible for planting cassava and men are tasked with digging holes for cassava planting and for harvesting. Men are also responsible for cassava transportation. 22. Wage rates are different for male and female day laborers causing a great deal of dissatisfaction. Women who plant cassava receive KR20,000 per day and men who dig the holes receive KR25,000 per day. 23. In this area women did not express interest in learning about how to use agricultural machinery. The responsibility for managing the household budget is almost always with women. 24. When there is out migration the workload of women who remain behind increase considerably. Frequently when adult children migrate, they leave their children in the care of the grandmother. Because of the shortage of money in the household, the grandmother herself is forced to work outside the home in order to earn money to feed and take care of the children. This is because the remittances are usually inadequate for meeting all the household needs, and in some cases, the migrants are unable to send any remittances at all. I. Female Cassava Collector/Moneylender

25. In this area, the local cassava collector is a female and 32 years old. She has three children and her husband is 40 years old. Both the husband and wife take care of the children. She has been a cassava collector for 10 years. She is also one of the local moneylenders. She learnt the skill from her sister. Her husband works with her sister’s husband who is responsible for the transportation of cassava and both are responsible for weighing. They rented a truck and picked up the cassava from each farm individually 10 years ago, but now they have their own vehicle. Farmers also bring cassava directly to their store. In order to purchase cassava from farmers she borrows approximately $50,000 to add to her own fund of $20,000. The collector’s client is a buyer in Viet Nam who sets the price which has fluctuated in recent years and very low prices have created discontent amongst local farmers. Sometimes the wholesaler in Viet Nam also does not pay her on time. When buying cassava from the farmers, the cassava collector is usually contacted by the female farmer. In previous years she was never asked to lend money to farmers but now farmers ask her for loans of about $50-$500 for 3 months. She loans money to those farmers whom she knows very well, and does not charge them interest. Some farmers are late in repaying. If a farmer asks for a loan of $1,000, she charges $30 as interest per month. The commune land title is the security for the loan. However, for people that she knows well, she does not take the land title. She also gives loans to people outside the village. The main problem she faces is that some farmers do not pay back the loan, and do not sell them their cassava. She explained that in this area moneylenders are usually women. J. Property Rights, Inheritance, Divorce

26. In discussions concerning land titles, the community members stated that they were confident concerning security of tenure because they were in possession of land titles for the parcels they were cultivating. 27. In the case of divorce, property is divided equally between the husband and wife.

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K. Discussion and Feedback on the Proposed Subproject

28. There was a general consensus and approval about the proposed subproject. In addition, the discussion group mentioned other priority needs which included:

(i) the need for a village water pond with water all-year round;

(ii) information about improved techniques to cope with the drought;

(iii) the inclusion of activities for very poor households;

(iv) the cooperative would like to be able to sell agricultural inputs to farmers to support the cooperative;

(v) income-generating activities for women and for which there is a market for the product they can make; and

(vi) include visual aids in all agricultural training so that illiterate women can understand.

Table A8.1: Subproject Gender Action Plan Cassava Chip-Drying Subproject – Tboung Khmum, Cambodia

Project Outputs Actions and Targets

Output 1: Critical value chain insfrastructure improved and made climate resilient

• At least 50% of trained cooperative members are women for integrating adaptation measures in post-harvest infrastructure investments in the value chains.

• Local commune gender focal point is involved in project implementing, capacity building, and monitoring women’s participation in demonstrations and training.

• At least 50% of trained staff of the Provincial Agricultural Development Centers and Provincial Agricultural Engineering workshops are women, for the creation of resource and training centers for service provision, agribusinesses and farmer value chain linkages.

Output 2: Climate smart agriculture and agribusiness promoted

• Women are to represent at least 50% of farmers trained in improved production techniques and downstream value chain linkages.

• Local commune gender focal point is involved in monitoring capacity building activities and performances of women farmers, female cooperative members.

• All women in target areas have access to information on improving climate resilience and resource efficiency.

• Women are to be included as members of effective cooperative management boards which are fulfilling legal, management and accounting obligations, and operating profitable agribusiness/trading ventures.

• Women are trained to operate a range of agricultural machinery and represent 50% of increased labor pool over the baseline.

• Commune women and children focal points are invited to participate in all trainings provided by the project to develop their capacity and for ensuring they are capable of monitoring the performance of women farmers.

• Women are 50% of trainees at all training workshops organized for government staff and farmers’ groups on project management, agronomic resource efficiency, and climate resilience in value chains and agribusiness.

• Gender equality and equity training in climate-friendly agribusiness value chains sector is provided to commune councils and women and children focal points, village chiefs, assistants to village chiefs, and male and female farmers as project beneficiaries.

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L. Design Features of Subproject 3 Gender Action Plan

29. Ensure that gender issues and analysis inform all the subproject foundation studies such as socioeconomic baseline survey, value chain assessment, and market studies. Training materials will be produced on safe migration and life skills including gender issues in migration, gender dimensions of risk, vulnerability and protection and will be prepared in consultation with the commune women and children focal point, community women, and other interested stakeholders to ensure gender and ethnic minority sensitivity and easy understanding.

30. All agriculture training materials will be prepared in prior consultation with the commune women and children focal point, community women, and other interested stakeholders to ensure that they will be easily understood, and that they are sensitive to gender and ethnicity.

31. All cassava chip drying training and demonstration activities will be conducted at times convenient for women farmers and child care provisions will be available to ensure the full participation of women farmers.

32. Any business development/accountancy/ financial management training which is related to cassava chip production will be conducted in a convenient location for local women farmers.

33. Rural men will also receive awareness-raising in gender so that they understand the importance of women’s participation in project activities and to avoid household conflict.

M. Implementation Arrangements of Subproject 3 Gender Action Plan

34. Overall responsibility for the implementation of the subproject gender action plan will rest with the project implementing agency in Cambodia. An international social development and gender specialist and a national social development and gender specialist will provide technical assistance to the implementing agency. Regular gender sensitization training will be provided to all agency staff. All subproject progress reports will report progress against the subproject gender action plan. Gender specialists will be responsible for reporting and monitoring the progress of the subproject gender action plan, and ensuring it is on track.

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Women’s Group Meeting, Seda Senchey Cooperative, 10 June 2016

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ECONOMIC AND FINANCIAL ANALYSIS

A. Background

1. Agricultural cooperatives are established under the Royal Decree on the Establishment and Functioning of Agricultural Cooperative (2001) and the subsequent Law on Agricultural Cooperatives (2013). Most cooperatives start with developing savings and loan schemes, which in general are competitive with microfinance institutions. Other businesses are developed later and typically include input supply, retail shops, and agricultural commodity trading. A number have already or are planning to purchase land to develop agribusiness enterprises primarily to market crop commodities, primarily rice, maize, and cassava.

2. At present, the post-harvest drying of these crops takes place on the ground on tarpaulins or on concrete and any storage facilities are rudimentary. Post-harvest losses can be high and impact on the efficiencies of the value chain from both quality and safety viewpoints:

(i) Rice: Post-harvest losses can account for between 15% and 20% of the total paddy production in Cambodia. High moisture content affects the storability of the paddy, reduces seed viability, increases the percentage of broken grains, and will lead to molds, fungi, and insect infestations.

(ii) Maize: The crop is usually rainfed and as such drying it to 13%-14.5% moisture content can prove difficult. Storage traders tend to on-dry the crop, but usually using wood fueled driers which gives smoke tainted and discolored grain is rejected by feed processors. Poor drying practices and storage conditions will lead to mold, fungi, and disease infestations as well as block spotted grains.

(iii) Cassava chips: A stable product is attained when the moisture content is below 14%, the product needs to be stored at 13% and above 14% leads to cassava chip degrading, black spot, and molds. The starch percentage in cassava is also affected by lack of or poor storage. Gravel and dirt in the sample can be problematic for the traders and processors and this needs to be addressed.

3. The activity rationale is to support the establishment of drying and storage units for agricultural cooperatives with parallel capacity development to support agribusiness activities and develop management and operations expertise. This will enhance rural household incomes and agricultural competitiveness by (i) providing improved critical post-harvest infrastructure; (ii) securing the supply chain through linkages to traders or processor; (iii) reducing energy costs by promoting bio-energy; and (iv) improving market connectivity.

4. The subproject assesses the technical, social, environmental, and economic viability of a drying and storage unit for a cassava producing agricultural cooperative in Tboung Khmum Province.

B. Present Situation in the Project Area

1. Cassava Production and Marketing

5. Cassava is the main crop in Seda commune and is the principal cash income source for cooperative members. Most of the cassava grown in the district is sold to buyers representing Vietnamese processors either as fresh root or dried chips. There is one cassava flour processor

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(Song Heng Processing) in Tboung Khmum Province located just outside Suon City but it is approximately 50 km from Seda and is not considered a market outlet.

6. Seda Senchey Agricultural Cooperative, located in Seda Commune, Tambae District of Tboung Khmum province was established as a cooperative with the support of Centre d’Etude et de Développement Agricole Cambodgien, primarily to develop a savings and loan scheme in 2012. The nongovernment organization provided training to support the development and growth of the savings scheme and also worked with farmers to provide agricultural technical training on ecofriendly agricultural practices in rice production, animal production, and soil fertility improvement, as well as training on collective community business and investment. The cooperative has also benefited from Caritas supported activities in the commune, primarily related to book keeping and business activities, which were completed on 30 June 2016.

7. The cooperative initially had 50 members, but this has grown to 98 members from 51 households.

8. Cooperative members mostly have 1–3 ha of land for cassava, but a few have up to 10 ha. Due to lack of technical capacity and limited soil maintenance and improvement activities, the average yield is as low as 18 tons/ha, although some farmers can achieve 28–30 tons/ha. This compares with a national average of about 24 tons/ha and potential yields for cassava of up to about 40 tons/ha. Relatively low prices for cassava in the last few years have been discouraging for growers. If the cooperative is able to expand its activities into the storage and trading of cassava chips, this will provide opportunities for members to gain a better return on their crop and incentives for increasing production.

9. Cassava can be cut for chips either manually or by machine. In Tboung Khmum, all cassava is cut manually and then sun dried on tarpaulin or plastic as Vietnamese buyers prefer hand cut cassava chips to maintain starch percentages and will pay a premium of $10 per ton for hand cut over machine cut chips. Machine cutting of cassava costs about $3.75 per ton (equivalent to 75% of the daily wage) while hand cutting requires about 1.5 to 1.6 days to cut 1 ton (i.e. about $7.50 to $8.00 per ton), so the premium covers the cost of hand cutting. In the western provinces, hand cutting is less common as Thai traders do not have a preference for the hand cut product.

2. Marketing of Cassava

10. The market price for cassava in Cambodia fluctuates and is strongly influenced by the demand from neighboring countries. Approximately 90% of the cassava produced in Cambodia is exported to Thailand and Viet Nam with the remaining 10% sold for domestic starch processing and the export of cassava chips to PRC. During 2015, Cambodia exported 150,000 tons of the dry cassava chips and 27,034 tons of starch to P.R. China with increased exports expected in 2016. According to official data from MAFF exports of chips to Thailand and Viet Nam in 2015 were 1.79 million tons and 330,874 tons, and exports of fresh roots were 106,500 tons and 464,020 tons respectively.

11. The main sources of demand for cassava and cassava chips are for processing into starch (for various food and industrial uses), as an input for livestock feeds and for biofuel production. The latter two provide a large and growing international demand for cassava.

12. The average farm gate price for dry cassava chips in 2015 was KR756 per kilogram (kg) ($189/ton) and for fresh cassava was KR270 per kg ($67/ton). The conversion ratio from fresh to

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chips is 60%. Prices vary seasonally, and towards the end of the 2015-2016 season the prices for fresh cassava were depressed further to KR120–KR280. Traders usually assess quality by touch and visually and quality price variations can be between KR50 and KR100 per kg for chips. The changing prices for fresh cassava and chips for 2011 to 2015 are shown in Figure 1.

13. There is no official data available for cross border trade to Thailand and Viet Nam although these are the most important markets for Cambodia cassava and are expected to remain so for the foreseeable future. However, the Chinese market is also becoming important. Local processing is still relatively small but it is expected that with the right economic environment, national processing will increase because of high domestic demand for the product. It is estimated that in the next 5 years, Cambodia cassava production will increase by about 20% with production reaching about 15,000,000 tons due to improving soil nutrition, improved germplasm, and increased productivity. By 2020, domestic demand is estimated to be 800,000 tons in fresh roots and exports in dried chips to PRC will increase to 350,000 tons, with the remainder still being exported to Thailand and Viet Nam (see Table A9.1).

Figure 1: Farmgate Prices for Cassava 2011-2015 (KR/kg)

Table A.9.1: Estimated Cassava Production and Sources of Demand (‘000 tons)

Description 2012 2013 2014 2015 2020

Production (fresh) 7,614 7,933 11,943 13,298 15,000

Domestic demand (fresh) 150 200 250 600 800

Cross Border trade (fresh & dry chips) 7,000 7,200 9,000 11,767 13,000

Official exports ( dry chips) N/A 71 101 200 350

Source: MAFF, Traders 2016.

3. Other Aspects

14. One woman member of the cooperative owns two storage units for fresh and chipped cassava storage, with an estimated total capacity of 500 tons. She has established links with

0

100

200

300

400

500

600

700

800

900

2011 2012 2013 2014 2015

Dry Fresh

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Vietnamese buyers and processors and receives a stock credit from the buyers who pay 20% deposit advance for her holding of the stock until it is required by them. The experience and links of this member have encouraged the cooperative to plan to begin cassava storage and trading and her experience will be invaluable for the cooperative’s new business operations.

C. With Project Scenario

1. Subproject Interventions

15. The subproject will provide a 200 ton capacity cassava storage facility and an associated drying floor. The store will allow the cooperative to consolidate the product in sufficient quantities to facilitate the formation of close linkages with processors and or traders. The drying area will be used by cooperative members and will provide for quality and uniform product through the introduction of sound selection, processing, drying, and storage techniques.

16. To support the subproject provision of physical infrastructure, cooperative members will participate in project level initiatives to provide and improve training and capacity building available at provincial level in accounting, agribusiness, cooperative management, and operation and maintenance of storage units.

17. The cooperative will also be able to take advantage of the project’s climate smart agriculture training and capacity building program to help agriculture undergo significant transformation to meet climate change challenges. Climate smart agriculture includes (i) soil and nutrient management; (ii) improved water harvesting and retention; (iii) pest control management; (iv) encouraging resilient ecosystems which include variety climatic adaptation; and (v) improving efficiencies in post-harvest management practices to reduce losses. The project will also support the development of tissue culture methods for cleaning up cassava planting material stocks in order to improve varietal characteristics; achieve virus elimination and the in-vitro production of pathogen free plants; and the rapid multiplication of plants that have good climate resilient characteristics. The adoption of these improved practices and inputs by cooperative members will have the potential for them to achieve yields of 40 tons/ha or more.

2. Subproject Benefits

18. The direct, quantified benefits of the subproject come from the trading margins from the management and operation of the storage facility. This is a benefit that accrues from the service of buying and storing cassava chips until they are needed by traders and processors further down the value chain. Only these benefits are included in the economic analysis.

19. Indirectly, the subproject will benefit cooperative members who grow cassava, and perhaps other cassava growers in their immediate area, who are provided with an incentive to improve cassava growing methods. Further, to increase yields and to undertake the cutting and drying of some of their own production in order to take advantage of the significantly greater returns on the sale of chips compared with fresh cassava. This would be a change for cooperative members and others as at present most growers in the area choose to sell only fresh cassava.

20. The common constraint for selling fresh cassava rather than storing it as chips is that cash is required by most farmers immediately after harvest to repay debts and satisfy creditors. However, the ability to store increases the returns for the crop as the prices received out of season typically improve by 10%–20% depending on demand. Also, the quality in both losses of starch

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content and chip deterioration does not occur for up to 6 months provided the correct insect proofing and storage conditions are provided.

3. Beneficiaries

21. The direct beneficiaries of the project will be the 91 members of the Seda agricultural cooperative. Other households in the commune may also benefit from the increased economic activity generated by improved output and profitability of the cooperative and its members. Cassava traders in the area may also benefit from increased volume and quality of locally available cassava chips.

4. Subproject Costs

22. The subproject costs are summarized in the following table (Table A.9.2). The total financial cost is $147,822 and in economic prices is $139,700 including training and project management costs. The construction period for the store and associated facilities is 4 months, after which it can be immediately available for use.

Table A.9.2: Subproject Costs ($)

Item Base Cost Economic Cost a

Foundation 14,169 12,858

Structure 39,444 36,763

Masonry works 7,848 7,095

Finishing works 857 789

Doors and windows 1,591 1,543

Miscellaneous incl. solar systems 14,681 14,086

Subsidy for cooperative manager 6,960 6,960

Construction supervision 3,929 3,929

Land for storage facility b 3,000 3,000

Training 50,306 47,917

Project management 5,037 4,759

Total 147,822 139,700 a For economic costs, estimated taxes are removed, imported goods are adjusted with the SERF

and unskilled labor by the SWRF. b The cooperative buys land (1,000 m2) for the facility. Source: Consultants’ feasibility estimates.

5. Economic Assessment

D. Assumptions Used in the Analysis

23. The economic assessment for the cassava drying and storage facility is based on the assumption that the cooperative purchases of cassava chips from members, and possibly from other growers and sells to (mainly) Vietnamese buyers. The facility accumulates up to 200 tons at any one time enabling it to supply in bulk to buyers when it is needed. From the point of view of the cooperative members, it provides selling power that will enable them to benefit from higher prices for their product than they would otherwise obtain.

24. For simplicity, it is assumed that the drying floor attached to the storage facility may be used by cooperative members to dry their own cassava, which they then sell to the cooperative

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but the cooperative itself does not carry out cutting and drying of cassava. Eventually the cooperative may extend activities to include purchasing of fresh cassava and cutting and drying on its own account, which would allow it to capture the profits of this operation as well as the benefits purely of the accumulation, storage, and trading of chips.

25. Operation and maintenance (O&M) costs for the facility infrastructure will be low for many years and is expected to be zero for the first few years. O&M costs at 1% of capital costs are assumed from the fourth year.

26. The capacity of the facility will be 200 tons and since cassava can be harvested throughout the year except during the wet season, the facility is expected to operate for most, if not all year, with product cycling through the store. For estimation purposes, the average storage period is assumed to be 3 to 4 months, once the management is fully operational, 3.5 complete cycles per year (i.e., total of 700 tons of cassava chips). This may well prove to be an underestimate of the volume handled since with efficient management and well established linkages to growers in the area (in addition to cooperative members) and to buyers, shorter average storage times could easily be achieved and the annual throughout could significantly exceed this amount. However, for the purposes of this analysis the conservative assumption of 3.5 cycles per year is maintained. Since those responsible for the management of the facility will have to learn to manage it effectively as well as building up and downstream market linkages, it is assumed that this level of activity is only achieved in year 5, after starting with a volume of 100 tons in the first 12-month period.

E. Prices

27. The prices used in the analysis are shown in Table A9.5. The financial prices are based on the third quarter 2016 prices. Prices for fresh cassava and cassava chips are those advised by cooperative members and traders buying and selling in Tboung Khmum and nearby provinces.

F. Economic Assessment and Sensitivity Analysis

28. The economic assessment of the cassava storage facility results in an economic internal rate of return (EIRR) of 17.8%. This assessment takes into account only the use of the facility for accumulating cassava chips purchased from local growers (including cooperative members) and storing them until they can be sold. The storage facility allows volumes to be accumulated and stored and then sold at better prices than could be achieved by individual growers acting alone.

29. For the purposes of this assessment, the facility includes a drying floor that is assumed to be used by cooperative members for drying cassava, but not by the cooperative itself. The cooperative could buy fresh cassava for cutting and drying, but to do this it would mean assuming the additional management and financial burden. If and when the cooperative might start to undertake the cutting and drying of cassava chips on its own account, the additional financial benefit from this activity would be about $15 per ton of fresh cassava purchased or about $28 per ton of chips produced.

30. As noted above, a conservative approach has been taken in the analysis to the time it will take the facility management to develop the skills and contacts for managing high volumes through the facility. It is assumed that the annual volume handled will reach 700 tons per year only in year 5. However, if it is assumed that the volume handled in year 5 reaches 800 tons (four cycles equivalent) then the EIRR would be 19.8%. It is possible that by the end of the fifth year,

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higher volumes than this might be handled, in which case, the viability of the subproject would be even more secure.

Table A9.3: EIRR and Sensitivity Analysis

EIRR (%) NPV ($) Switching

Values

Base 17.8 46,054

Cassava chip prices a +10% 20.3 67,480 -21%

Cassava chip prices a -10% 15.2 24,628

Storage costs +10% 17.2 41,691 +106%

Capital costs b +10% 16.4 37,433 +53%

Capital costs -10% 19.3 54,675

O&M costs 2% of capital costs per year 17.3 41,796 -

Benefits delayed one year 12.3 2,388 -

No. storage cycles in year 5 +0.5 19.8 65,736 -

Cycles in year 5 +0.5 & chip prices +10% 22.4 89,411 -

Cycles in year 5 +0.5 & chip prices -10% 17.1 42,061 -

EIRR = economic internal rate of return, O&M = operation and maintenance. a Purchase and sale price of chips varying by same percentage.

b Capital excluding training and project management costs. Source: Consultants’ estimates.

31. The EIRR is not greatly affected by changes in significant variables, although a 1-year delay in achieving benefits would reduce the EIRR close to 12%, but the risk of this is rather unlikely since once the facility is completed there should be no reason for it not being put to use. A large long-term decline in cassava prices would be a major risk to economic and financial viability. However, the greatest risks will be if skills available within or employed by, the cooperative are not able to provide efficient and effective management for the facility or if the facility’s managers do not develop successful linkages with potential buyers along the value chain. These risks will be mitigated by the training in business and management skills that will be available to cooperative members, especially to those involved in the management of the facility, through project supported programs at the provincial level.

32. Variations in the SERF have negligible impact on the result. If the SERF were 1.05 (SCF=0.95) the EIRR would be 18.0% and if it were 1.18 (SCF=0.85) the EIRR would be 17.6%. For variations in the SWRF the result is similar - the EIRR is 18.0% and 17.6% for SWRF values of 0.8 and 1.0, respectively.

1. Financial Assessment

a. Seda Senchey Cooperative

33. An indicative cash flow has been carried out for the storage facility.6 For Seda Senchey

Cooperative, the financial benefits of the facility become apparent within a relatively short time frame.

34. This analysis is based on the following assumptions:

6

The cooperative is responsible for providing land for the facility. This cost ($3,000) is not included in this cash flow analysis.

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(i) the cooperative uses $10,000 from its reserve fund (which stood at $15,875 at the end of 2015) as working capital to fund the purchase of cassava chips from members or other growers in the immediate area; these funds accrue interest at 2.5% per month, the same as if lent out as micro-finance loans;

(ii) buyers pay a 20% advance on purchase in order to secure future supplies;7

(iii) any additional financing requirements are obtained from a commercial bank at 12% per annum;

(iv) operating costs include the purchase of cassava chips, labor, the services of the manager, and transport to the Viet Nam border (or to the purchaser if in Cambodia). In addition, storage losses are incurred which are estimated at 5% of volume, based on information from operators of similar facilities in the region;

(v) revenues are only from the sale of cassava chips from the store; and (vi) the net profit on operations is divided; 50% is allocated to dividend funds for

cooperative members and 50% is reinvested in the business. According to the Law on Agricultural Cooperatives, only 20% of the profits of cooperative activities is required to be placed in the cooperative reserve fund (and 3% must be earmarked for training), but for this facility it is hoped that members will agree to reinvest the higher percentage, at least in the early years, to build up working capital and facilitate the expansion of activities.

35. In the analysis, the interest on the cooperative’s savings and loan funds and the portion of gross profit allocated for reinvestment are added to the cooperative funds at the beginning of the next cycle. As these funds increase, the loan from the commercial bank is reduced correspondingly. Under this assumption and with the relatively slow build up in volume assumed, bank funding ceases after the first cycle in year 4 and thereafter the operation is entirely internally funded. A faster build up in activity would require more bank financing and some bank financing could be retained, or increased, to facilitate alternative uses of the cooperative’s funds, such as expanding the storage business or investing in a new agribusiness.

36. With these assumptions, funds would be available from year 4 onwards to repay the original loan from the savings and loan fund or for other purposes.

37. If well managed and if good linkages are established along the value chain, in particular with buyers, the storage facility can become a productive and profitable business activity for the cooperative.

b. Cooperative Member Households

38. Cooperative members directly benefit from the project and subproject in two ways: (i) from increased dividends accruing from the cooperatives new business; and (ii) through improved cassava production and the opportunity to cut and dry all or part of their freshly harvested cassava to supply to the cooperative storage facility. Member households will be able to take advantage of the training provided under the project to help improve their cassava yields and will also have the incentive of improved market opportunities through the cooperative.

39. Cooperative members may be constrained to sell part of their cassava harvest fresh to meet financial obligations, but with the new facility can also opt to sell part of the harvest fresh and process the remaining part into chips. At present, the average yield obtained in the area is 18–20 tons per ha, although some farmers in the area achieve 28-30 tons per ha. This cooperative

7

This will typically be the case once good relationships are established with buyers. For this subproject this is assumed from the beginning of operations because of the established relationships with Vietnamese buyers that one member of the cooperative already has on her own account.

Annex 9 75

average can be increased to around the national average of 24 tons per ha. If an average for cooperative members of 25 tons per ha is assumed in year 5 of the project, then the net benefit to farmer households would be $426.50 per ha ($17.06 per ton). If the cassava is sold fresh, it will only be $62.76 for every ton of fresh cassava processed by themselves into chips.

40. In addition, there would be increased dividends from the cooperative based on the analysis. The funds available for incremental dividend payments to members would increase from $1,240 in the first year to about $6,000 in the fourth year.

2. Distribution Analysis

41. The distribution analysis for the subproject is show in the table below. The differences accrue principally to the unskilled labor employed during construction and for the day to day operations of the storage unit. Private companies transporting cassava chips to the border with Viet Nam or to other locations in Cambodia also gain a portion of the net benefits. Applying the most recent poverty rate estimate from the Ministry of Planning gives a poverty impact ratio for this subproject of 17.3%.

Table A9.4: Distribution Analysis

Item

Net Present Values ($) Private sector

Labour Government/

Economy Total Financial

(A) Economic

(B) Difference

(B)-(A)

Project Benefits

Net revenue 214,257 214,257 0

Storage unit operating costs -45,465 -43,633 1,832 1,221 611 1,832

Total Project Benefits 168,792 170,624 1,832

Project Investment Costs

Storage unit costs 127,343 120,312 -7,032 3,516 3,516 7,032

Land for storage unit 2,679 2,679 0

O&M costs 4,534 4,258 -276 276 276

Total Costs 134,556 127,248 -7,308

Net Benefits 34,236 43,375 9,140 1,221 4,403 3,516 9,140

Benefits (losses)

Proportion of the poor 0.0% 20.0% 20.0%

Benefits to the poor 0 881 703 1,584

Poverty Impact Ratio 17.3%

Note: The proportion to the poor is the rural poverty rate for 2012 which is the most recent estimate available from the Ministry of Planning.

76 Annex 9

Table A9.5: Prices Used

unit Financial

($) Economic

($)

Outputs

Cassava (fresh) ton 37.5 37.5

Cassava chips (purchase)a ton 182.0 182.0

Cassava chips (sale)a ton 245.0 245.0

Inputs

Cassava plants bundle 0.875 0.80

Herbicides / pesticides ha 30 30.30

Tractor hire - miscellaneous use day/job 40 36.36

Tractor Hire / field preparation ha 37.50 34.09

Nitrogen (urea) kg 0.45 0.32

Di-ammonium phosphate (DAP) kg 0.30 0.48

Potassium chloride (KCl) kg 0.54 0.36

Manure ton 5.00 5.00

Transport to Vietnam border ton 5.00 4.55

Labour day 5.00 4.50 a Purchase and sale prices for the storage facility.

77 Annex 9

Table A9.6: Economic Assessment

Seda Senchey Cooperative Cassava Storage Facility (200 ton capacity)

($, economic prices)

Unit Unit Cost 1 2 3 4 5 6 7 – 20

Costs

Drying & Storage facility 83,666

Storage facility O&M 1.0% 837 837 837 837

Operations

Storage capacity ton 200

Storage cycles per year No. 0.5 1.5 2.3 2.75 3.00 3.0 3.0

Cassava chips purchased ton 100 300 450 550 600 600 600

Cost of chips ton 182 18,200 54,600 81,900 100,100 109,200 109,200 109,200

Losses during storage ton 5% 5 15 22.5 27.5 30 30 30

Available for sale ton 95 285 427.5 522.5 570 570 570

Transport to Vietnam border ton 4.55 95 285 428 523 570 570 570

Storage unit labor costs day 4.50 45 135 202.5 247.5 270 270 270

Storage unit manager month 200 6 12 12 12 12 12 12

Storage costs 1,834 4,303 5,254 5,889 6,206 6,206 6,206

Sale of cassava chips ton 245 23,275 69,825 104,738 128,013 139,650 139,650 139,650

Net revenue for cooperative 3,241 10,922 17,583 22,024 24,244 24,244 24,244

Net benefits -80,783 10,082 17,583 21,184 23,404 23,404 23,404

EIRR 23.8%

NPV 65,617 Notes: 1) Assumed average storage time is 4 months and cooperative has three storage cycles per year once in full operation. 2) Cassava chips have optimum 13% moisture content. The moisture content of fresh cassava is 60%. 1 ton of fresh cassava produces 530 kg of chips. 3) Losses during storage average is 5%. 4) Labor inputs estimated at 75 days per complete storage cycle. 5) "Storage cycles per year" refer to full capacity equivalents. 6) O&M costs for the infrastructure will be very low, at least in early years.

78 Annex 9

Table A9.7: Cash Flow for Storage Unit

Year 1 Year 2 storage

cycles Year 3 storage cycles Year 4 storage cycles Year 5 storage cycles

Unit Unit cost

1 1 2 1 2 3 1 2 3 1 2 3

Average length of cycle month 4 4 4 4 4 4 4 4 4 4 4 4

Revenue:

Sale of chips (period end) ton 245 23,275 34,913 34,913 34,913 34,913 34,913 42,671 42,671 42,671 46,550 46,550 46,550

Sources of funding

Cooperative S&L fund 10,000 11,990 15,154 18,461 21,916 25,527 29,298 33,962 37,739 38,121 41,437 41,561

Bank finance 7,961 14,727 11,562 8,256 4,800 1,510 3,576 0 0 0 0 0

Subsidy for managera month 200 800 800 800 800 800 480 480 480 240 240 240 0

Advance from buyerb 20% 245 4,655 6,983 6,983 6,983 6,983 6,983 8,534 8,534 8,534 9,310 9,310 9,310

Total funding 19,925 29,263 29,263 29,263 29,663 32,588 35,488 39,118 39,968 41,025 43,755 43,618

Costs

Purchase of cassava chips ton 100 150 150 150 150 150 183 183 183 200 200 200

- storage losses ton 5% 5.0 7.5 7.5 7.5 7.5 7.5 9.2 9.2 9.2 10.0 10.0 10.0

Cost of chips ton 182 18,200 27,300 27,300 27,300 27,300 27,300 33,367 33,367 33,367 36,400 36,400 36,400

Storage Unit costs

- manager month 200 800 800 800 800 800 800 800 800 800 800 800 800

- labor month 5.00 450 450 450 450 450 450 450 450 450 450 450 450

- transport to borderc ton 5.00 475 713 713 713 713 713 871 871 871 950 950 950

Total cost 19,925 29,263 29,263 29,263 29,263 29,263 35,488 35,488 35,488 38,600 38,600 38,600

Gross profit 3,350 5,650 5,650 5,650 5,650 5,650 7,183 7,183 7,183 7,950 7,950 7,950

Allocation of gross profit

Interest on bank financing year 6.0% 134 285 191 92 0 0 27 0 0 0 0 0

Interest on coop S&L funds month 2.5% 750 899 1,134 1,381 1,641 1,884 1,918 2,258 2,340 2,361 2,565 2,573

Net profit (to Coop funds) 2,466 4,466 4,325 4,177 4,009 3,766 5,239 4,926 4,844 5,589 5,385 5,377

Net profit for members' dividend 50% 1,233 2,233 2,163 2,089 2,004 1,883 2,619 2,463 2,422 2,795 2,692 2,688

Cooperative's funds

Advance from own S&L fund 10,000 11,983 15,115 18,411 21,881 25,126 25,567 30,104 31,194 31,475 34,205 34,308

Interest on S&L funds 750 899 1,134 1,381 1,641 1,884 1,918 2,258 2,340 2,361 2,565 2,573

Profit on storage activities 1,233 2,233 2,163 2,089 2,004 1,883 2,619 2,463 2,422 2,795 2,692 2,688

Surplus to S&L fund 0 0 0 0 -401 -3,326 0 -3,631 -4,481 -2,425 -5,155 -5,018

Cooperative's funds for next cycle 11,983 15,115 18,411 21,881 25,126 25,567 30,104 31,194 31,475 34,205 34,308 34,552 a Subsidy paid by the project for the facility manager: 100% for years 1 and 2, 60% for year 3, 30% for year 4. b Paid by buyers to guarantee supply held until required. c For sales to Viet Nam, cost of transport up to the border is paid by the seller.