Madagascar: Irrigation and Watershed Management Project (World Bank - 2008)

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Document o f

The World Bank

FOR OFFICIAL USE ONLY

Report no. 4611 1-MG

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT FROM THE

GLOBAL ENVIRONMENT FACILITY TRUST FUND

IN THE AMOUNT OFUS$5.9 MILLION

TO THE

REPUBLIC OF MADAGASCAR

FOR AN

IRRIGATION AND WATERSHED MANAGEMENT PROJECT

September 30,2008

Agriculture and Rural Development

P u b l i c D i s c l o s u r e A u t h o r i z e d



c l o s u r e A u t h o r i z e d



MADAGASCAR

Irrigation and Watershed Management Project

A SCAFDAPO

BVB V - P I

C A SDAIR

CD PcscDFB

N P C U

DRDR

D S I

DTA

FERHA

FMG

(F)WUAsGD PGEF

GELOSE

G o MIDA

C U R R E NC Y E Q U I V A L E N T S(Exchange Rate Effectiv e M a y 2008)

Currency Unit = Ar iary (MGA)

1 MGA = US$0,00047SDR = US$1.48620

US$ = SDR0.67286

FISCALYEAR

January 1 - December 3 1

ABBREVIATIONSAND ACRONYMS

Agricultural Service CenterAgence Franqaise de Dkve lopp emen tAgricultu ral Professional Organization

Bassin versant (Watershed Management)Bassin versqnt -Pkr imdtre i r r igu k (Watershed Management - r r igat ion

Scheme)Country Assistance Strategy

Di rec t i on de 1 Appui aux Investissements Ruraux (Directorate for RuralInvestment)Communal D evelopment PlanCom muna l Support CentreDirectorate for Finance and Budge t

National Program Coordination UnitDirec t ion Rkg iona le de Dkve loppement Rura l (Regional Directorate for

Rura l Development)Department o f nform ation Systems

Decentralized Territorial Autho ritiesFonds d Entretien de Rkseaux Hy dro A gricoles (Irrigation MaintenanceFund).

Malagasy Franc

(Federation of) Water Users AssociationsGross Domestic Product

Glob al Environmental Facil i tyGestion Locale Skcuriske (Community Management)

Government o f MadagascarInternational Development Association



FOR OFFICIAL USE ONLY

PNJBV-PI

PMUPRSF

PSRPFUD

RDFBR D P

RPMU

S L MTT

U N C C DWB

WUA

W D PW M P

Programm e Na t ion al Bassins Versants - PdrimGtres [email protected] (NationalIrrig ati on and Watershed Management Program)Project Management UnitPoverty Reduction Strategy Frame workPoverty R educ tion Strategy PaperResearch-Development

Regional Directorate f or Finance and Budget

Regional Development PlanRegio nal Project Management Unit

Sustainable La nd Manageme ntTranobe n’ny Tantsaha -Chambers of AgricultureUn ited Nations Convention to Combat Desert if ication

W o r l d B a n kWater Users Association

Watershed Developme nt PlansWatershed Master Pla n

Vice President: Obiageli Kat ryn Ezkw esil iCountry Director : RuthKagia

Sector Manager: Kar en Mccon nell BrooksTask Team Leader: Zi va Razafintsalama





MADAGASCARIrrigation and Watershed Management Project

TABLE OF CONTENTS

A. S TRA TE GIC CONTE X T AND RATIONALE .......................................................... 1

A 1 Cou ntry an d Sector Issues ........................................................................................... 1

el ig ib i l i ty................................................................................................................................ 3

A.3. Highe r leve l objectives to wh ich the project i s contributing ......................................... 4

A.2. Rationale for Ba nk involvement, relation to Coun try Assistance Strategy and GEF

B. PROJECT DESCRIPTION .......................................................................................... 5

B 1 Lend ing Instrument..................................................................................................... 5

B.2. Program Objectives a nd Phases .................................................................................. 5

B.3. Project Developme nt Objectives and Ke y Indicators ................................................. - 6

B.4. Project Components .................................................................................................. - 7

B.5. Lessons Learned and Integrated int o the Project Concept .......................................... 11

B.6. Altern atives considered and Reasons for R ejectio n ................................................... 13

C .l . Partnership Arrangements......................................................................................... 14

C.2. In stitu tion al and Operational Arrangements ............................................................. - 1 4(2.3. Mo ni tor in g and Evaluation of Outcomes/Results ...................................................... 16

C.4. Sustainability and Replicability ................................................................................. 17

C.5. Critical r isks and Possible Co ntrove rsial Aspects ...................................................... 17

C.6. Cre dit conditi ons and covenants ................................................................................ 18

C . I M P L E M E N T A T I O N .............................................................................................. 14

D. PROJECT BRIEF SUMMARY.................................................................................. 19

D 1 Economic and Financial analysis .............................................................................. 19

D.2. Technical .................................................................................................................. 20

D.3. Fiduciary .................................................................................................................. 21

D.4. Social analysis .......................................................................................................... 22



Annex 3: Results Framework and Monitoring and Evaluation ........................................ 38

Annex 4: Detailed Project Description.............................................................................. 45

Annex 5: Project Costs........................................................................................................ 59

Annex 6: Institutional and Implementation Arrangements ............................................. 60

Annex 7: Financial Management and Disbursement Arrangements ............................... 73

Annex 8: Procurement Arrangements............................................................................... 83

Annex 9: Economic and Financial Analysis ...................................................................... 89

Annex 10: Safeguard Policies Issues................................................................................ 107

Annex 11: Project Preparation and Supervision.............................................................. 114

Annex 12: Documents in the Project File........................................................................ 116

Annex 13: Incremental Cost Analysis.............................................................................. 117

Annex 14: Technical Annex Land Degradation in Madagascar..................................... 131

Annex 15: APL Triggers ................................................................................................... 144

Annex 16: Statement of Loans and Credits...................................................................... 146

Annex 17: Country at a Glance ........................................................................................ 148

Annex 18: MAP ................................................................................................................ 150



MADAGASCAR

Irriga tion and Watershed Management Project

L O C A L C O M M U N I T IE S

Total:

GEF Pro jec t Br ie f

Afr ic a Reg iona l Of f ice

AFTAR

04.24 00.16 04.4

33.55 06.75 40.3

Date : September 30,2008 Tea m Leader: Z iv a Razafintsalama

Country Director: Ruth Kag ia Sectors: Ir rig at io n and drainage (5O%);Agro-

Sector DirectodManager: Inger Andersed industry (30%);Crops (20%)

Kar en Mc conn ell Brooks Themes: Other ru ra l development (P); OtherProject ID: PO74086 trade and integ ration (S)

Le ndi ng nstrument: A daptable Program Lo an Environm ental screening category: Full

Assessment

Gl ob al Supplemental ID: PO88887 Team Leader: Zi va Razafintsalama

Lend ing Instrument: Specific Investment Lo an Sectors: Irr iga tion and drainage (50%); Agro-

Focal Area: Lan d Degradation industry (30%); Crop s (20%)Supplement Fully Blended?: N o Themes: Ru ra l marke ts (P); Other trade and

integration (S)

[ ] L o a n [I redit [ X I Grant [ ] Guarantee [ 3 Other:

Glo bal Environment Fa ci l i ty (US$m): 5.90Fo r Loans/Credits/Others:

Total Ba nk financing (US$m.): 30.00 (approved in Novem ber 2006)

Proposed terms:

Borrower:

Government o f Madagascar: Ministry o f Economy, Finance and BudgetB.P. 61

Antananarivo 10 1Madagascar

Tel: 261 20 22 382 86Fax: 261 20 22 34530

Responsible Agency:

Ministry of Agriculture, Lives tock and Fisheries

B.P. 301



Project implementation period: January 30,2009 - December 3 1,2012

Expec ted effectiveness date: January 30, 200 9

Expected closing date Decem ber 3 1,20 12

[ ]Yes [XINOoe s th e project depart fro m the CA S in content or other s ignific ant respects?

Re$ PA D A.3

Does the project require any exceptions f ro m Ba nk policies?

Re$ PAD D. 7

I s approval for any po l icy exception sought from the Board?

Does the project include any crit ical r isks rate d “substantial” or “high”?

Re$ PAD C.5

Does the project meet the R egional criteria f or readiness for implemen tation?

Re$ PAD D. 7

Project development obiective Ref: PA D B.2, Technical Annex 3

[ ]Yes [XINO

[ ]Yes [XINO

[ ]Yes [XINO

[XIYes [ ] N o

Hav e these been approved by Ba nk management? [ ]Yes [ IN0

The developmknt objeci ive o f he proje ct s o sustainably increase agricultural productivity infour high pote ntial watershed areas and thei r associated irrig atio n schemes.

Glob al Environment object ive Ref: PA D B.2, Technical Annex 3

The global environmen& obje ct i ie o f he project i s to improve the environme ntal sustainability

o f and management practices in ou r targe ted watersheds areas.

Project description [one-sentence summay o each component] Re$ PA D B.3.a, Technical

Annex 4The GEF project i s fully complementary with the IDA -f inan ced project that was approved in

November 2006 and that has three technical components covering major strategic orientations:(i) evelopment of Commercial Agriculture, (ii)rr igat ion Development and (iii) atershed

Development. The fourth component i s Program Management. In accordance with the ‘growth

poles’ approach, the project proposes four similar sub-projects in the four regions concerned

(Annex 1).

The GEF project w i l l focus on tw o o f the three technic al components that are financed under theIDA operation - development o f commerc ial agriculture and watershed development.

Development o f Comm ercial Agriculture aims at imp rovi ng access to markets and support ing

the development o f commercial agriculture value chains respecting principles o f sustainable lan dmanagement and pro vid ing demand-based support to private investment. Watershed

Developm ent aims at sustainably managing watersheds inc lud ing irrigated agriculture,

preserving the natural heritage, bene fit ing fro m th e product ion potent ial o f he natu ral resources

and contribut ing to im proved living conditions and incomes o f the rur al populat ion. The Project

Management component aims at managing and using resources in accordance with the project’s



Grant efiectiveness:

NoneCovenants appl icable to project implementation:

ensure that operational modalit ies o f management and replenishment o f FERHA (Fonds

d’Entretien de RCseaux Hy dr o Agricoles) be defined by November 30, 2008; after

consulting with the B ank and

ensure that: (i) draft law to harmonize the irrigatio n related legal framework, inc ludingbut no t limited t o L a w 90-016 and subsequent implementation texts with the provisions

o f he Program be prepared by November 30, 2008; and (ii)he relevant implementation

textsbe

adoptedby September

30, 2009, after consultingwith th e

Bank.





A. STRATEGIC CONTEXT AND RATIONALE

A.l. Country and Sector Issues

1. Background. Madagascar i s one o f the poorest countries in the world, with per capita

income o f about USD 32 0 per year (2007). The economy i s basically rural, with agriculture as

one o f the m ai n engines o f economic development. Th e poor represent about 69 percent o f the

total population, whic h i s 77 percent o f he rura l populat ion.

2. The ne w government in place since 2002 has moved to restore public services and

macroeconomic stability after the contested elections o f 2001. GD P g row th rebounded to 9.8

percent in 2003 f ro m a 12.7 percent plunge a year before and continued to gro w at an average

rate o f about 5 percent per year between 2004 and 2006. Econom ic gro wth in 2007 o f 6 .3

percent was dri ven by strong secondary sector growth but agricultural gr ow th was disappointing.

The country was hit by six tropical storms/cyclones in the f i rs t four months o f 2007 leading to

exceptional rains in most parts o f he country, while a drought continued to affect the south o f the

country. These storms contributed to heavy floo din g in populated and cultivated areas

throughout the country, inc lud ing the capital region, the northwest, west and southeast regions.

In 2008, there was another round o f cyclones that devastated farm, transport and tourist

infrastructure in key areas o f he country.

3. Poverty Reduction Strategy Framework The government has put in place the

Madagascar Ac tion Pla n (MAP), a development plan for 2007-12 that i s the second-generation

Poverty Reduction Strategy. The M A P envisages accelerated and better-coordinated reforms and

outlines the strategies and actions that will i gn i te rap id growth. “Rural development and a green

revolution” and “cherish the environment” are two o f he core eight commitments o f the M A P .

The specific objectives with respect to rur al development are (i)o increase agricultural value-

added (through, i nte r alias, Agri cul tura l Service Centers), (ii)iversify rura l act ivit ies (focusing

on support to producers’ organizations among other activities), (iii)aunch a sustainable greenrevolution through integrating environmental dimensions in agricultural activit ies and (iv)

promote m arket-oriented a ctivit ies through strengthening farmers’ organization and investment in

infrastructure. The M A P Commitment to “cherish the environment” focuses on reducing naturalresource degradatio n throu gh better la nd use practices. T h i s GEF project, in collaboration with

i t s equivalent IDA project, and their results indicators are closely aligned with these M A P

objectives.

4. As previous approaches to irr igation development have fa iled due to cont inued uplanddegradation mak ing investments in irrigation schemes unsustainable, the Government i s n o w

pursuing a more integrated and holistic approach with the National Program of Watershed

Management and Irrigation Improvement adopted in October 2006, where agricultural

develop ment takes in to account lan d management issues at the watershed scale. Addi tion ally , theproject i s in l ine with the new National Program for Ru ra l Development, among whose pi l l ars



5. Agriculture, R i c e and Irrigation. Agriculture remains the foundation o f Madagascar’s

domestic economy. I t contributes about one third o f the to ta l GDP and 40 percent o f totalexports. Ab ou t three quarters o f the popu lation depend on agriculture fo r their l ivel ihood. About

one-half o f Madagascar’s la nd area i s cultivable, but l i t t le m ore than Spercent o f the land i s

currently under crops, with a large part o f the cultiv ated area under irriga tion (about 40 percent).Performance o f the sector has been disapp ointin g in recent years, despite the lib eraliz ation o f the

economy, the sharp devaluation o f the exchange rate and the privatiz ation o f state enterprises.The under-performance o f the agricultural sector i s a ma jor cause o f the deep poverty in ru ra lareas. Farming systems are s t i l l very tradit ional. Two-thirds o f al l rural households live at

subsistence level and yields are generally very lo w. W eak infrastructure hampers the transport o f

produce, whether for export or for the domestic market. Agricultural productivity i s also

hampered by the poor access to agricultural technology, inputs and other agricultural services.

Extension services are all but lacking. Only 1.5 percent o f Madagascar’s sm all farmers have

access to credit, and a mere 5 percent o f otal le nding goes to agriculture. Trad itional l and tenure

systems do no t give farmers sufficient security.

6. Rice represents nearly 7 0 percent o f agricultural production and accounts for 48 percent

o f otal calorie consumption. Rice prod uction has increased by 1.2 percent per annum since the

1980s but average paddy yield at the national leve l remains l o w (about 2.6 t/ha). Annu alproduction o f paddy rice has virtu all y stagnated over the past ten years, stabilizing between 2.3

and 3.0 m il l i o n ons. Area plan ted to paddy has increased by only 0.4 percent per year fro m 1970

to 2004; yields have increased by 0.7 percent per year, much slower than in other major r ice

producing countries. With an annual populat ion g rowt h o f 2.7 percent, product ion per person has

fal len from 275 kglperson in 1970 to 179 kglperson in 2004. Rice farming techniques are largely

traditional and use o f nputs i s the exception in many places. Fertil iz er use has rema ined stagnant

at 10 k g h a on average, as compared to 14 k g h a in sub-Saharan Africa, and 291 kgha in

Indonesia. The vast difference in prices between wet and dry season i s explained by the lack o f

fluidity in movement o f goods fro m prod uct ion areas to the markets due to a poor road

infrastructure and lac k o f management capacity o f storage facilit ies by farmers. On average, 28

percent o f he paddy product ion s mar kete d (750,000 t), but ric e sales are highly concentrated. In

2001, the top 10 percent o f rice farmers (by value o f sales) accounted for 73 perc ent o f totalnatio nal rice sales. These farmers sold o n average 2.2 tons pe r household. An estimated 48 percent

of ic e farmers did not sel l any r i ce in 2001,

7. Irr iga tio n occupies an important place in the agricultural sector, supplying water to more

than one mi ll io n hectares, or 40 percent o f cultivated lands (as compared to 6 percent o n averagein sub-Saharan Africa). I t i s estimated that 85 percent o f the active farming population are

direct ly o r indirect ly employed by the irr iga tio n sector. Since the 1950s, ir rig ati on has benefited

from public investment. However, the impact o f these efforts o n rura l incomes i s mixed, and

sustainability i s far fro m certain. The r ap id degradation o f infrastructures requires frequent

rehabilitation, and many schemes are caught in a v ic ious c i rc le o f poor yields, l o w capac it y o f



degradation dynamics in the uplands and lowlands are often l in ke d and reinforcing each other.With the stagnation o f yields in the irrigated low lan d areas and demographic growth, farmers

extend their agricultural activit ies on the hillsides. Upper watershed land use i s often based o nextensive and unsustainable management practices, the mo st importan t be ing l ack o f erosion

control and lac k o f soi l fe rt i l i ty management on agricultural plots, slash and burn agriculture

(tavy), and the frequent burningo f pastures. La nd degradation i s also caused by deforestation fo r

agricultural purposes. These practices no t on ly contribute to the degradation and lo w prod uctivity

o f uplands but also impact lowland agriculture signif icant ly. Upland soi l erosion and water

surface run-off also causes sedimentation for downstream infrastructure, contributing to the

reduct ion o f cult ivated area under irr igation, local f lo odin g o f r ice paddies in the rainy season

and water shortages in th e dry season. The impact on the overall production landscape has

therefore seen such global costs as increased carbon emissions an d dec lini ng ecosystem services

such as water provis ioning and filtering, habitat fragmentation and destruction leading to loss o f

above and bel ow ground biodivers ity, and reduced carbon storage capacity. Clima te change i s

expected to exacerbate the trend. Recent ana lytical w o rk supported by the W or ld Ba nk suggests

that the signs o f climate change are becoming increasingly v isible through changes in climate

var iab ility a nd the exposure to cyclones.

9. The need to adopt an approach to agricultural intens ification that reaches beyond mere

rehabilitation o f infrastructure has been confirmed by the Economic and Sector Work“Madagascar - Rural and Environment Sector Review (2003)”. The l i s t o f constraints to

increasing productivity includes access to finance, inputs, markets and equipment, problems

associated with lan d degradation and sedimentation, and lac k o f maintenance o f irrigation

infrastructur e. Past experience thus strongly emphasizes the need to adopt an integrated approach

to agricultural intensification in Madagascar’s watersheds. The approach being adopted in the

IDNGEF project (i) ims to establish an appropriate incentive and financing framework for

efficient operation and maintenance o f irrigation infrastructure, as well as for the mit igat ion o f

damage caused by the freque nt hurricanes that affec t the country; but also (ii)ddresses a wide

range o f issues in agricultural development as well as soil and water conservation in upperwatersheds.

A.2.eligibility

Rationale for Ba nk involvement, relation to Country Assistance Strategy and GEF

10. The Government o f Madagascar requested W or ld Ban k (WB) and Global E nvironmental

Faci l i ty (GEF) funding for an Irr iga tion and Watershed M anagement Project to accelerate

economic growth in rur al areas, through an integrated effort aimed at increasing produ ctivity inhighpotential production zones (benefit ing fro m public irrigatio n systems). The WB has played a

unique role among the donor com munity in Madagascar, with the largest portfolio in terms o f

comm itments an d disbursements, and i s seen as the lead G o M partner for poverty reduction. The

IDA-f inanced part o f the project was approved in November 2006 and made effective in April

2007. Since that time, implementation has been getting o f f the ground slowly due to the



have been supported by past investment operations. More recently, the Bank supported the

Government in he establishment o f the Fonds d ’Entre tien de Rbe aux H ydr o Agrico les (FERHA,

the Irr iga t ion Maintenance Fund).

12. The Cou ntry Assistance Strategy (CAS ) fo r Madagascar i s designed to support the

implementation o f Madagascar’ Act io n Plan (MAP) wh ich has the objective to reduce poverty by

h a l f in en years. The W o rl d Bank’s Country Assistance Strategy for FY 07 -11 supports the areas

o f the M A P that have the highest prior ity and those where the Ban k Group has a comparativeadvantage. The Country Assistance Strategy (CAS) continues the Bank Group’s focus on

removing bottlenecks to sustainable and shared growth, anchored in good governance, withcorresponding improvements in welfare indicators. The specific sets o f results supported by the

Country Assistance Strategy are organized around two ma in p i lla rs. The f i rs t concentrates on

activities that will help remove constraints to investment and growth in rur al and urban areas.

The second brings together ac tivit ies geared toward im pro vin g th e scope and quality o f service

delivery. Madagascar i s eligible for GEF support. I t rat i f ie d the United Nations Convention to

Combat Desert i f icat ion (UNCC D) in 1997, the Convention on B iolog ical Diversity in 1996, theUnitedNations Frame work Convention on Climate Change in 1999, and i s a contracting party to

the Ramsar Convention o n Wetlands since 1999. G o M has also prepared and submitted a

UN CC D Nat iona l Ac t ion P lan in 2001, and a Natio nal Act i on Program for Climate Change

Adaptation in 2006.

A.3. Higher level objectives to which the project i s contributing

13. The proposed project constitutes a ke y element o f he Bank’s strategy in Madagascar, and

will contribute to achieving the priori ty objectives o f the M A P. In recognit ion o f the fact that

g rowth in Madagascar will be derived fro m the country’s unique natural resources and f ro m the

transformation o f t s natu ral products, and in accordance with the vision outlined in the MAP , the

project would contribute to developing a diversified and r ic h natural resource base that will

contribute to the creation o f products with high value added. Mo re specifically, the project aimsto turn around a vicious cycle o f lo w productivity, deferred maintenance and poor watermanagement into a virtuous cycle o f increased produ ctivity, full cost recovery and acceptable

O&M. I t wou ld thus contribute to creating favorable conditions for accelerated agricultural andru ra l g rowth in a number of clearly identifiedhigh potent ial rura l gro wth poles.

14. The proposed project w i l l be part o f the GEF-SIP, a priori ty program o f TerrAf i ica,

which was launched by N E P A D and focuses on region al partnership, knowledge generation and

dissemination, as we ll as investment developm ent and donor alignmen t. The project i s consistentwith the GEF Operational Program 15, concerning the m itig atio n and prevention o f land

degradation. I t will prom ote sustainable la nd management across the watersheds that create long -

term global environmental benefits within the context o f agricultural development, ecosystem

services creation and preservation, p rotec tion o f pr im ar y habitats, as well as rural l ivel ihoodimprovement. The operation will support both Strategic Objectives (SO) o f the focal area: (i)n



in po llut ion and sedimentation o f international water bodies. The project will also directlycontribute to the execution o f the N ation al Action Program for Climate Change Adaptation,

NEP AD’s EA P (Action Plan for the Environment Init iat ive) and C AA D P (Comprehensive Afr i caAgricultu re Developmen t Program). In addition, U N D P and WB as TerrAfrica partners have

started exploring modalities to collaborate to support the development o f a national SLMInvestmentFramework.

B. PROJECT DESCRIPTION

B.1. Lending Instrument

15. The proposed GEF project i s part o f an overall program approach to watershedmanagement and irrigation development that includes IDA financing and other donor financing.

Th e GEF support for this operation comes in compleme nt to the already-approved first phase o f12 year IDA APL. An AP L w hich prov ides the G o M with the necessary fle xib ili ty to implement

the program in accordance with preferences and capacities o f users groups. I t also lays adequatefoundations for scaling up o f the project’s activities on the basis o f essons learned from earlier

phases. The first phase o f the IDA APL was approved in November 2006 and made effective in

April 2007.

16. The content o f he subsequent phases o f the IDA AP L are not yet known at this stage, andwill be determined by the lessons learned fr om the experience during the f i r s t phase. The three

phases provid e the Bank with the possibility to support the long-term GoM’s national Irrigationand Watershed Man agemen t program, while at the same time p rovi din g incentives for achievingthe program’s development objectives.

B.2. Program Objectives and Phases

17. Government’s National Irrigation and Watershed Management Program (PNBV-PI). The Government’s Nation al Irr iga tio n and Watershed Management Program (PN/BV-PI) i s

a central part o f the MAP and Government strategy for the development o f agriculture. The

global objective o f the P N/ BV -PI program, as formulated in the B V-P I Pol icy Let ter o f theGovernment i s to sustainably improve the living condit ions and incomes o rur a l populat ions in

irr iga tio n schemes and th eir surro und ing watersheds and the management o natu ral resources.

18. The PN /B V-P I covers al l medium - and large-scale irrigation schemes in the country, andwill include bot h newly prepared (includin g the proposed Irriga tio n and Watershed Management

project) as well as on-going operations that wi l l gradually be retro-fitted into the nationalprogram and i t s institutional framework. The PN/BV-PI w i l l be supported by a l l interested

donors. The French Development Agency (AFD), the Afr ican Development Bank (AfDB), theEuropean Union, US AID , the F ood and Agriculture Organization (FAO), International Fund fo r

Agricultural Development (IFAD), Kreditanstalt fiir Wiederaufbau (KfW), Organization o f the

Petroleum Exp ortin g Countries (OPEC), the Japanese Internation al Deve lopm ent Agenc y (JICA )



added for inclus ion in the Program’s future phases will be selected o n the basis o f experience o f

the f i r s t phase. Overall, the six sites will require the rehabilitation o f about 66,000 ha o f r r igated

perimeters and the management o f about 200,000 ha o f watersheds. The object ive o f the Programi s to sustainably improve the l iving condit ions and incomes o rur a l popu la t ions in s ix main

irrigation sites and their surrounding watersheds, and the management o natural resources.

T h i s i s the same as the Government’s PN/BV-PI but appli ed to six sites. I t s global environmental

objective i s to improve the environmental sustainabil i ty o land management practices in four

targeted watersheds.

20. The focus o f GEF support under the Program will be to promote the sustainable

development o f the watersheds’ resource base through an integrated watershed management

(WSM) approach with innovative, long-term approaches to deal with complex natural resources

management issues (such as fir e use, deforestation, and unsustainable far ming practices). Withthat, GEF w i l l support the development goals o f local communities and secure global

environmental benefits. GEF will also emphasize capacity strengthening in sustainable land

management, and i den tify successful processes and outcomes and disseminate lessons learned inorder to strengthen the Nat ion al Program and facilitate i t s scaling up. Annex 3 shows both the

Program’s expected fina l imp act and the milestones and outcomes wh ic h will be used to monitordevelopment and imp leme ntatio n progress.

B.3. Project Development Objectives and Ke y Indicators.

2 1. In he context o f he broader A P L objectives described above, the development objective

o f the Project (the f i r s t Phase o f the Program) i s to establish a viable basis for i r r igated

agriculture and natural resources management in four main i rr igation si tes and their

surrounding watersheds: (i)ndapa (Sava Region), (ii) arovoay (Boeny Region), (iii)tasy

Region, and (iv) Lac Alaotra (Alaotra Mangoro Region). A detai led descript ion o f the project

zones i s ncluded in Annex 1 and Annex 16.

22.

sustainability o f and management practices in our targeted watersheds.

The global environmental objective o f the p ro jec t i s to improve the environmental

23.

fol low ing targets:

Triggers. Triggers fo r mo vin g to the second phase o f the A P L include at ta inment o f he

Watershed Master Plans (WMP, including Scheme Development Plans (SDP) and

Watershed Development Plans (WDP)) and associated Performance Contracts executed

satisfactorily’ ;

0 an acceptable institutional mechanism for the funding o f non-transferable irrigatio n

infrastructure (FERHA) established and operational;

0 private sector investments in agriculture increased as eviden ced by disbursements under

the matchin g grant mechanism;

0 Ag ricu ltur al Service Centers (ASCs) established and operation al in the four p rojec t sites;



rapi d kick -o ff o f growth, inclu ding relat ively easy access by road, and better access to finance,

inputs, marke ts and equipment. A mor e reliab le access to water puts a high premium on the us e

o f product ivi ty enhancing inputs, provides more flexibility, diversity, reliability, quality andproduct uniformi ty to sat isfy the requirements o f markets, and enables farmers to capture highe r

seasonal prices . In addition, the sites are similar in the sense that institutional issues such as a

clarif ica tion o f roles and responsibilit ies throug h ir rig atio n management transfer represents a

high prior i ty fo r imp rovin g performance o f rr igated agriculture.

26. The f i r s t phase covers about 21,780 ha o f rrigatio n schemes (out o f a total o f 66,000 ha

for the sites to be included in the IDA-fundedA P L in six sites). Dir ect beneficiaries include

about 30,000 smallholder households produ cing irriga ted and rainfed crops, and farmers’ groups

and private operators pr ov idi ng services, selling products and perfo rming various functions in hevalue chain. The four sites meet a number o f condit ions for ra pid growth, including relat ively

easy access to markets for outputs and inputs and good agricultural development potential.

Howev er, the y are also sufferin g fro m severe institution al weaknesses fo r the management o f he

irrigation perimeters and significant upstream watershed degradation. Correcting these

weaknesses in support o f fast and sustainable developm ent wil l be one o f the ma in ob jectives o f

the project, thus buildinga strong base fo r the subsequent phases o f he Prog ram.

27. Project total cost i s estimated at US$40.3 million, to be financed by: (i)DA: US$30.0m il l i on (74 percent o f total cost); (ii) EF: US$5.9 m il li o n (15 percent); and beneficiaries:

US$4.4 mi l l ion (1 1 percent). The expected project outcomes include (i) issemination o f

innovative technologies and equipment to 30,000 beneficiary households through extension,

capacity strengthening and targeted cost sharing, (ii)mpro ved management o f about 21,780 h a

o f irrigation infrastructure through investments in rehabilitation, training and institutional

reforms, (iii)0 percent increase o f and area under sustainable lan d management and 15 percent

imp rov ed vegetation cover as a percentage o f the baseline in targeted watershed areas (iv)

impro ved management o f about 8 sub-watersheds through capacity strengthening and investment

in watershed infrastructure and sustainable watershed management, and (v) increasedgovernment support for sustainable agricultural intensification in irrigated and rainfed areas

throu gh increased pub lic expenditures.

B.4. Project Components

28. The IDA -fin an ce d project comprises three technical components co vering m ajo r strategicorientations: (i) evelopment o f Commercial Agriculture, (ii)rr iga t ion Development and (iii)

Watershed Development. The fo urth component i s Program Management. In accordance with the

‘growth poles’ approach, the project proposes four similar sub-projects in the four regions

concerned (Annex 1). A more detailed description o f he components and activit ies i s attached in

Annex 4. The GEF funding i s mainly directed towards tw o technical components: (i)he

development o f commercial agriculture, and (ii)atershed development, as we ll as the progr am

management component. Inf orm ati on on GEF funded activit ies within the components can be



Component 1 Development o f Commercial Agriculture

(US$12.46 mi l l ion , inc lud ing an IDA contr ibut ion o US$7.45 mil l ion, a GEF contr ibut ion o

US$2.50 mill io n, and a beneficiaries ’ contr ibution o US$2.51 mil l ion)

29. The objective for this component i s to lay the foundations for improved market access

and sustainable intensiJication and diversiJication o irr igated and rainfed ag r icu l tur al systems

in the pro ject ’s watersheds.

30. The ‘Development o Comm ercial Ag r icu l ture ’ comp onent includes the projec t area as a

whole: bo th irr igated and upland or tanety areas. I t s specific objective will be achieved through

an approach focused on market-driven demand, agricultural technology development and

dissemination, private sector init ia tive a nd vertical integration o f supply chains, as well as

promot ion o f partnerships amon g stakeholders (i nclud ing p ublic -priv ate partnerships, PPP). The

component aims at improving, al l along the targeted supply chains:

Access to market and mar keting systems in order to reduce costs and increase f ar m gate

prices

Added value through diversif icat ion into higher added value products and agro-

processing

Capacities o f armers, farmers groups an d professio nal organizations

integrating SLM principals, inputs, and credit

0

0

0

0 Agricultural productivity through better access to extension, improved technology

37. T h e component includes tw o sub components: one involving activit ies that largely

depend on public/ collective initiative; the other one depending essentially o n deman d fro m

stakeholders:

(i) Support to ag r icu l tura l services. (’USS7. I 4 mil l ion, including an IDA contr ibut ion oUS$5.15 mil l ion, a GEF contr ibut ion o US$1.97 mil l ion, and a beneficiar ies’

contr ibution o US$O.02 mil l ion)

The sub-component aims at improving access to markets and supports the

development o f commercial agriculture value chains, through innovative

technologies for sustainable production, storage and processing, and a stronger

enabling environment at the site level . The project i s funding services, work,

equipment, tr ain ing and operational costs. Ac tivi ties can be adjusted to sp ecific needs

o f each site, and include the follo win g (a) support to the development o f dynamic

market-driven supply chains, pa rticular ly by creating a nd strengthening l inks between

producers and markets, (b) building up o f farmers capacities and strengthening

professional organizations, as well as establishing Agricultural Service Centers(ASC), and (c) dissem ination o f technologies fo r sustainable agricultu ralintensification and diversification in lowlands and uplands, including support and

advisory services fo r the implementation o f agro-ecological and agroforestry

techniques in the upper parts o f he watersheds. These services have already begun as

part o f the IDA project that has been effective since April 2007 and are being



(ii)Support to pri va te investment. (US$5.32 m illion, includ ing an I D A contributio n o

US82.3 million, a GEF contribution o US$0.53 mil l ion, and a beneficiaries’

contribution o US$2.49 million )Th is sub-component i s providing demand-based support to private investment by

operators, farmers and farmer groups at all levels o f he agricultural activity. The sub-

projects funded under this sub-component are essentially private in nature and are

initiated u pon request by a farmer, a farmer grou p or a priva te sector operator. Th ey

are initiated by the latter, with f inancial support from the project i f government

considers them a priority and wants to promote them. Project support i s being

provided to p rior i ty ne w investments through a cost sharing mechanism according to

a pre-established positivehegative l is t . Private operators have been selected to be

responsible for implementing the sub-projects and related activit ies according toprocedures approved by the project. Sub-projects include investment in collective

storage, market research and supply chain development, technical and managerial

advisory services, new technology demonstration and dissemination (inc luding agro-

ecological cultivation techniques), support to seed production, private distribution

networks for inputs and equipment and microfinance institutions, and support to

contract farming and integrated sub-projects initiated by commercial or agro-industrial partners and in vo lvin g small scale producers. Th e proje ct i s taking a gender

sensitive approach and specifically supports vulnerable groups in their demands. Inaddition to investment in infrastructur e and equipment, sub-projects inclu de studies

and market tests and research, extension and advisory services, applied research,

training, and study tours. IDA i s f inancing act ivi t ies l in ked to the product ion o f big

com me rcial crops, such as rice, off-season vegetable crops, and others, whereas GEF

funding w i l l be directed towards i) ropping systems that apply agro-ecological

principles, ii) ruit tree cultiva tion as part o f agroforestry system developments, iii)

l ivestock product ion and with i t support sustainable fodder production, and the

integrat ion o f l ivestock and cropping systems, an d iv) f ire-less upland cropping

system as alternativ e to the slash-and-burn practices o f cultivation.

38. These GEF activit ies w i l l contribute to achieving the SIP Result 1 and Result 3 (Seeannexes 3 & 4 for more details). The financing modalit ies are described in further detail inAnnex 4. Implementation responsibilities are detailed in Annex 6 . Eligibility criteria for activit ies

funded under this component include the willingness to cov er part o f he associated costs and to

commit to develop and implement a capacity strengthening plan. More detailed in format ion o fGEF funded activit ies can be found in Annexes 4 and 15.

Component 2: Watershed Development

(US$4.33 m il l ion, including I D A funding o US$I. 2 mil l ion; GEF contribut ion o US$2.42

million, and beneficiaries’ contribution o US$O.09 million )



sedimentation; (ii)ncrease the prod uctivity and sustainability o f agricultural produc tion based on

agroeco logical and agrofores try technologies; and (iii)trengthen the management o f natural

resources to improve the environment and living conditions. The GEF f inancing here w o u ldconcentrate o n nvestments with long-term environmental impacts, and support to SLM groups.

41. The project i s f inancing the fol low ing sub-components:

(i) Planning and capacity bui lding for sustainable management o watersheds, (US4.33 m il l ion, including I D A funding o US$1.82 million; GEF contribution o

US$2.42 million, and beneficiaries contrib ution o US$O.09 mill ion) includin g (a)preparation, as par t o f Watershed M aster Plans, o f Watershed Development Plans

in the four project areas; (b) preparat ion o f part icipatory plans fo r managingapproximately eight sub-watersheds (each o f about 10-500h2);c) support to

comm unication and negotiation platforms, (d) training and capacity strengthening

o f SLM groups; (e) support to impro vem ent o f an d tenure security; and (0 the

establishment o f an integrated SL M knowledge and information system. IDA

funding has contributed to the development o f Watershed Master Plans and i s

supporting lan d tenure security through the installation o f nter-comm unal ‘Land

Tenure Windows’. GEF funding w i l l address longer-term environmental and lan d

degradation issues through a participatory and integrated approach. The focus willbe o n technical assistance, train ing and capac ity strengthening f or sustainable la nd

use alternatives, support to enviro nmen tal commun ication, a nd the establishment

o f a national SLM database.

Sustaina ble investments in watersheds, (US$I .20 mi ll ion, inc lud ing I D A unding

o US$0.57 mil l ion; GEF contribut ion o US$O..54 million, and beneficiaries

contribut ion o US$O.09 mill ion) inc lud ing (a) determining, thro ugh partic ipato ry

negotiations, l oc al strategies fo r con trol ling erosion, arr esting gullies and reducing

the sediment loa d o f r iver runoff .The

projectwill

finance investments in strategicanti-erosio n works (through, amon g others, bio log ica l methods and technologies);

an d (b) interventions on communally owned la nd to improve plant cover,

reforestation and pastures through strengthened technologies and managementtransfer o f na tural resources. IDA i s in charge o f (a) above and GEF will provide

i t s support to (b).

Eligibility criteria for support under this component include the severity o f l a n d

(ii)

42.degradation, an d the willingness o f stakeholders to cover part o f he associated investment costs.

43 . An MOU, one per Project Area, has been signed by MAEP through the Nat ional

Im ga tio n and Watershed Program and the Ministry o f Environment, Water, Forests and Tourism

(MinEnvEFT) through the Third Environm ent Pr ogram (EP3) to ensure adequate integration in

al l project areas, o f he project. The MOU specifies in detail the activities that will be financed by

each program. These activities will contribute to achiev ing SIP Results 1, 2 and 3 (see Annexes



upscal ing o the project at the nat ional level. This component finances the following sub-

components:

(i)Management o the project (US$I.89 mil l ion, including IDA funding o US$1.51mil l ion; and a GEF contr ibut ion o US$0.38 mil l ion), inc lud ing (a) provis ion o f

technical assistance, train ing, o fice equipment and vehicles, min or o@ce upg rad ing

works, audit ing and evaluation studies, and incremental operating costs in support

o f project management; (b) overall project planning, quality oversight, procurement,

financial management, and mo nito rin g o f proje ct activit ies; and (c) outsourcing o f

quality oversight through independent financial and technical audits, and evaluation

o f proje ct activities. P rojec t management encompasses a ll fo ur target watersheds as

well as national level coordination. GEF funding will contribute to this sub-component by rein forc ing the technical assistance already being provid ed.

(ii) Support to nat ional pol ic ies, (US$0.48 mil l ion, inc luding IDA unding o US$0.36mil l ion; and a GEF contr ibut ion o US$O.12 mil l ion) inclu ding (a) provision o f

technical assistance, studies, training, information campaigns, exchange visi ts an d

workshops fo r the development o f majo r national policies, regulations, and plans

considered crit ica l to the Government’s Nation al Irr iga tion and WatershedManagement Program; (b) provision o f support to emerging professional grou ps, in

particular the Platforme Consultative de Riz and the Associat ion Malgache deProducteurs de Semences; and (e) provisio n o support to prepare a mu lt i -partner

SLM investment development framework, in collab oration wi th UNDP. IDA i s

financing (a) and (b) above and GEF will finance (c).

(iii) oni tor ing and evaluat ion. (US$2.06 mil l ion, including IDA funding o US$1.58mil l ion; and a G EF contr ibution o US$0.48 mil l ion). T h i s involves data collection

and reporting on key performance output and impa ct indicators, includ ing targeted

data collection, surveys, participatory assessments and mid-term and f ina l

evaluations. GEF funding will contribute to the project mon itorin g and evaluat ionsystem by financing the satellite images and their interpretation to monitor, among

others, the glo bal and environmental ind icators.

45. The scope o f this sub-component wo ul d be national. The impro ved policies are expected

to benefit al l key operators and producers inv olv ed in the sub-sector. The GEF funded activit ies

will contribute to achieving the SIP Result4. Fo r mo re details see Annexes 4 an d 15.

B.5. Lessons Learned and Integrated into the Project Concept

46. The design o f the project i s based on lessons drawn fro m evaluations2 o f programs and

projects in the irrig atio n sub-sector that were oft en unsuccessful. De spite significa nt investm ents

in the rehabilitation o f irrigation infrastructure, there has been l i t t le diversification to higher

valued added crops, and sus tainability has been questionable because o f la ck o f maintenance.

Some o f the reasons for the failure identif ie d by the different studies are lack o f market access



stakeholder capacity; la nd tenure constraints; non-respect o f com mitm ents by users an dGovernment; and indiscipline and impunity.

47. The conditions o f success identif ie d by these same studies include the followin g:

(i) An integrated approach that contributes to increased productivity and incomes inirrigation schemes and surrounding watersheds, safeguards natural resources in

watersheds, improves the provision o f agricultural extension and inputs, and actively

supports emergence o f a private sector.

A conducive economic environment including a price pol icy fo r products and inputs,

market access in t e rms o f road infrastructure and information; prom otion o f the

private and associative sectors for marketing o f products and supply o f nputs; access

to appropriate and effici ent a gricu ltural services; and access to ru ra l finance.

An unambiguous institution al fram ewor k with clear responsibilities in accordancewith polic ies such as decentra lization and legisla tion (land, water an d forestry codes)

for farmers and their associations; communes, inter-communes and regions;

decentralized Gover nment services; and agencies and privat e operators.

An approach that emphasizes capacity strengthening o f al l stakeholders to help themplay their respective roles an d respons ibilities.

A participatoy approach, coordinated decisions and respect for commitments,

including stakeholders with established and acknowledged rights and obligations,

adequate resources and capacities, who fully participate in decision-making;

incentives an d mechanisms in place to encourage approp riate beha vior an d respect for

commitments made; and interfaces f or cooperation and dialogue in accordance with

decentralization po licies.

(ii)

(iii)

(iv)

(v)

Experience with implementation o date

48. Since the launc h o f the IDA project in April 2007, the Implementation Status Report

(ISR) rat ings o f the project fro m the start have been "satisfactory" fo r bo th Impl eme ntatio n

Progress (IP) and Project Develop ment O bjective (PDO). T he commitment from the Governmentan d the M A E P s ta f f to launch the project and to w ork with the other development actors in the

project sites has beennoted. There i s a high leve l o f expectationwithin the country o n the project

and a lo t o f goodwi l l to see i t become a success. The project i s designed to be fully aligned with

the existin g structures and institu tion al entities in the four sites through wor ki ng with the regions,the decentralized M A E P staff and the relevant lo ca l management committees.

49. The project implemen tation structure i s in place as the Steering Com mitte e at the natio nalleve l and the regional steering committees (CORES) are already operational. Howe ver, these s t i l l

need strengtheningas regards planning, execution, coordination, communication and M&E. At



project activit ies, especially with respect to the crit ical watershed master plans wh ich are being

finalized. As foreseen under the Project, the capacity o f he MA E P s ta f f has to be built to plan,

execute a nd coordinate a complicated project such as the Irr iga tion and Watershed Develop mentProject. The project i s recruiting strategic partners for each site to support the DRDR in

implementing f ie ld activit ies.

B.6. Alternatives considered and Reasons for Rejection

5 1. A number o f alternatives were considered and rejected in project design:

Develop the program as a Sectoral Investment Loan (SIL). However, i t was f e l t

that the investment part o f the project requires a flexible implementationmechanism with an appropriate incen tive framewo rk that ca n respond to different

preferences an d capacities o f stakeholders.

Spli t t ing the project into three separate projects - (i)n agricultural product ivi ty

project focusing on irrigation and agricultural services; (ii) commun ity based

natural resource management project focusing on watershed management and

decentralization; and (iii) land refor m project focusing o n implementat ion o f herecent economic and sector work findings. However, i t was felt that this design

wo ul d fai l to capture evident synergies and create implem enta tion gaps.

Putt ing in place a sector-wide mult i -donor approach similar to the Th ird

Env i ronmental Program . However, discussion with other donors suggested that

more flexible donor collaboration, possibly in preparation for close collabo ration

thereafter, was more appropriate.

Expanded ocus on complementary rur al development act iv i t ies l ike ru ra l j n a n ce

reform, a nd land administratio n. However, i t was felt that this wo uld exacerbate

projec t complexity and create impleme ntation risks.

Reduction in the geographic scope o the project to three areas. However, thiswould n ot min im ize complexity and wo uld be at odds with the government’s

scaling up objective; and

Designing the project to respond to the government’s nascent decentralization

program, transforming the project into a multi-sectoral, rather than agricultural

operation. I t was felt that the policy, institutions and disbursement mechanisms

associated with decentralization were no t yet sufficie ntly clear and mature.



C. IMPLEMENTATION

C.1. Partnership Arrangements

52. Th e project i s a blendedoperation between GEF and IDA. I t contributes to the Nation alIrrigation a nd Watershed Management Program, for w hi ch the G o M has prepared a pol icy letter(see Annex 18). The Nation al Program i s also supported by Agence Franqaise de Developpem ent(AFD) and other donors (see An nex 2).

53. In each o f he fou r project areas, the project works with regio nal partners. These includ e

P L A E in Marovoay, WWF in Andapa and Durell in Lac Alaotra for watershed activities; andBAMEX and CT H T K T H A for marketing and business promotion activit ies.

54. The project benefits from the Memorandum o f Understanding signed between the

National Irrigation and Watershed Management Program and the multi-donor Third

Environmental Program to ensure coherence and synergies between activities in the lo wer andupper watersheds.

55. The conceptual de sign o f the ASC s and “guichets fonciers” has been elaborated in closecollaboration with FAO, EU and AFD. The EU i s provid ing signif icant support to M A E P in the

establishment and capacity strengthening o f ASCs.

56. This project i s part o f the Strategic Investment Program for Sustainable Land

Management in Sub-Saharan Africa (SIP) program, the goal o f wh ich i s to support sub-Saharancountries in imp rov ing natural resource-based livelihoods by reducing land degradation, in l i ne

with MDGs 1 an d 7 . T h i s will particularly enhance the opportunity o f mutual learning viaregional kn owledge sharing, by exchanging targeted analytical work, and by harmonizing, i f

advantageous, M&E approaches. In that context the two global environmental indicators o f theproject (increased vegetation cover and increased area under SLM), are among the keyperformance indicators o f SIP. Th is will create complementary inf orm ati on and be o f d irec t

benefit to b oth programs. Emphasis o n mutu al learning via regional knowledge sharing will be

through drawing linkages with the recently completed Wor ld Bank supported M ed ium SizedProject Inst i tut ional Strengthening and Resource Mobi l izat ion for Mainstreaming Integrated

Land and Water Management Approaches into Development Programs in Afr ica; the UNDP-

GEF funded Stab i liz ing Rura l Popula t ions through the Ident if i ca tion o Systems for Sustainable

Management and Loca l Governance o Lands in Southern Madagascar, an d the UNEP regional

project Addressing Land-based Activi ties in the Western Ind ian Ocean.

C.2. Institutional and Operational Arrangements

57. The project i s being implemented under the responsibi l i ty o f the Ministry o f Agriculture,



Ministry o f F inance and Budget, Ministry o f National Education and Scient i fic

Research, Ministry o f Economy, Industryand Trade - to ensure consistency o f project

actions with national policies;

0 the Chairperson o f the Permanent Steering Team o f the Rur al Developme nt Actio n

Plan,

0 the main professional organizations such as the Chamber of Agriculture and

associations/forum nvolved in he m ai n value chains such as the (( Rice Platform D.

59. The National Steering Committee i s supported by a technical secretariat under the

responsibil i ty o f the National Program Coordinat ion Unit a t M AEP. I t i s responsible for (i)annual programming o f project act ivi ties and approval o f the w or k p lan and budget, (ii)monitoring implementation and results, in particular the analysis and approval o f activity reports

and financial and operational audits, and (iii)ecommending co rrective measures that m ay be

necessary. TheNa tion al Steering Comm ittee meets twice a year.

60. Regional Monito ring Committees have been established in each o f he four p roject areas.

They are chaired by the Head o f he Re gion and made up o f members o f GTDR3.The Regional

Moni tor ing Committee i s supported by the GTDR’s Tec hnic al Secretariat, a nd i s responsible for(i)nsuring consistency o f project actions with bo th national strategy and policy, and regional

development priorit ies and programs; (ii) reparing and validating detailed work plans and

budgets at the regional level; (ii)eviewing project progress and performance, and the

implemen tation o f corrective measures i f necessary. The Region al Mo ni to rin g Committee meets

twice a year.

6 1.

Unit (NPCU) at MA EP , as follows:

Th e overall coordination o f the project i s ensured by the Natio nal Program Coordinat ion

0 The National Program Coordinat ion Unit i s responsible for project coordination at

national level;

0 The Regional Director for Rural Development (DRDR) i s responsible for project

coordination and project investments in heir respective region s.

0 To help them in these tasks, the project has financed the recruitment o f an international

technical assistant for operations at the national level, and (ii)our national technicalassistants, as advisors to the Reg ional Direc tor for R ur al Dev elop men t for operations at

the site level.

0 The N P C U a nd DRDR have selected fro m within their respective units one staff member

wh o provides support fo r coordina tion and project monitoring.



o f he DRDRDepartment o f Finance and Budget (RDFB). The pr ojec t has recruited a specialized

national financial management and procurement agency that provides technical f inancial

management assistance to M AE P’ s Finance Direc tor. Th e project has also recruited, for each o fthe four sites, a regional Ch ie f accountant, w ho w orks closely with the DRDR and who i s in

charge o f financial management. T h i s person works closely with MAEP’s Department o fAdm inistratio n and Finance and reports to the national financial management and procurement

agency.

63. MAEP’s Directorate o f Finance and Budget i s responsible for: (i)onsolidat ion o f wo rk

program s and budgets; (ii)aintenance o f records and accounts for a ll transactions made at thecentral level; (iii)imely preparat ion o f quarterly In teri m Financial Reports (IFRs), consolidated

project financial statements and other required reports; and (iv) cash management andreplenishment applications for the Designated Account. The Regional Department o f Finance

an d Budget at each o f the four sites manages disbursements from the ”Regional Accounts”,

maintain records and accounts for all transactions related to the regions, and prepares financial

and other basic inform ation o n project managementlmonitoring as required by the M A E P

Financial Directorate.

64. Procurement i s ensured, at central level, by the Person Responsible for PublicProcurement (PRMP) o f M A E P and, at regional level, by relevant units o f the DRDR. The

project has recruited (i) national financ ial management and procurement agency that pro vides

technical assistance to the PRPM, and (ii)t the l eve l o f each region, an additional staff, under

contract to the national agency, which i s full t ime in charge o f project procurement. This staff

work closely with the PRMP and benefit f rom the project support in procurement technical

assistance at the natio nal lev el.

65 . Tec hnic al assistance. Recruitme nt o f technical assistance (TA) has already been done

under two separate contracts (one for financial and procurement management, and one for

operational assistance) with specialized f i r m s . The international “Operations” TA i s in charge o f(i) dvis ing the NPCU and DRDRs on operational strategy, project implementation andmonitoring; and (ii) raining and operat ional support to MAEP staff involved in project

implementation. Four national “Operations” TAs are posted at the l e ve l o f DRDRs to advise and

support them in project im plementation and ensure coord ination o f all project components at the

regional level. Nation al consultants in f inancial management and in procurement are responsible

for financial management and procurement and for pr ovi din g technical support to DRDR staff.The four financial and four procurement consultants at the regional level are responsible for

financial management and procurement at the regional level. They have been recruited under one

contract with the national le ve l financial management and procurement specialist, and report tothe natio nal specialists.

C.3. Monitoring and Evaluationof Outcomes/Results

66. Monitor ing and Evaluat ion (M&E) i s the responsibi l ity o f MAEP ’s Department o f



impact indicators, at mid-termand at completion . The pr oject has already established a baseline

as o f mid-2007. T he results framew ork i s presented in Annex 3.

R i s k s

Operational

C.4. Sustainability and Replicability

Risk rating Risk Mitigatio n Measures

67 . Sustainability o f proje ct investments will be achieved in he fol l owi ng manner:

(i) In linking so il and water management in upstream watersheds to irrigation, theproject contributes both to more profitable rainfed agriculture, and more

sustainable and cost-effective irrigation management. In so doing, the project

seeks to set o f f a cycle o f increased productivity, higher inco me and improv ed

capacity to pay for irrigatio n services.

In v ie w o f the experience in Madagascar, p rio rity i s being given to capacity and

institutional strengthening. The project will not establish new institutions, but

builds o n GOM’s prio ritie s and on what has already been established. Inv estmen tsare being done on ly where conditions associated with institutional performance

and governance h ave been met.

Client demand, contribution in cash or in kind and ownership i s the determiningfactor in deciding to go ahead with investments in agriculture, irr iga tio n and

watersheds.

Past experience provides abundant confirmation that irrigation schemes that

depend on pumping are not sustainable. The project therefore selects irrigation

sites that depend on gravity fl ow only.

(ii)

(iii)

(iv)

68. Successful proje ct outcomes and lessons learned can be disseminated through the

Na tio nal Program and replicated to other regions. The fact that the proje ct i s work ing in four

distinct sites will allow for repl icat ion o f essons learned within each region, taking in to accountloc al specificit ies and conditions. I f successful, the project wil l also have a good potential for

transferability to other countries in the Afr ica region. Dissemination o f good practices and

successful approaches would be essential in facilitating the scaling-up process. A detailed

replica tion strategy wo uld be propose d after the mid-termevaluat ion o f he project.

C.5. Critical risks and Possible ControversialAspects

69. The potential r isks o f he pro ject are presented in he table below.

Table 1: Critical risks and mitigation measures



PolicyG oM does not follo w a sound seed andfertilizer po licy based on private providers, aswe ll a favorable environment for privateagrobusiness development.

Country Level:

Audit may not be conducted in compliance with

international auditing standards due to: weakcapacity of the accoun ting profession in

Madagascar, and; ii)nadequate number o fsk illed and experienced auditors at the“Chambre des comptes” in particular.

!-Control Risk

Funds flowRisk o f non availabil i ty o f communitiesparticipation;

C.6.

70.

71.

0

a

72.

Credit conditions and covenants

Effectiveness conditions: No n e

Legal Covenants

Moderate

S

S

The Government will ensure that operational

higher grant money for activities wit hhigher public service values

The project invests in capacitystrengthening o f project participants

0

The implementation of the G oM fertilizerand seed policy i s a covenant under the

project.

The F M aspect o f his project has been

entrusted to a Financ ial ManagementAgency (FMA) acquainted w ith Bankprocedures, and the audit w il l be carried outby the international accounting firm

recruited under the ongoing Irrigat ion and

Watershed Management Project. The qualityo f the audit conductedso far i s satisfactory.

Com munity Contribu tion to Sub Projects

w i l l be in abor and in kind.Financialcontribution i s no t required.

moda l i t ies o f management and

replenishment o f FERHA be defined by November 30, 2008; after consult ing with the

Bank, and

The Government will also ensure (i)hat a draft law t o harmon ize the i rr igation related

lega l f ramework, inc lud ing butn o t l i m i t e d t o L a w 90-0 16 and subsequent implementation

texts with the provis ions o f the Program be prepared by November 30, 2008 and (ii)ha t

the relevant implementation texts be adopted by September 30, 2009, after consult ing

with the Bank.

Disbursement conditions: no wi thdrawal sha l l be made for any Sub-project Matching

Grant under Category 2, unless: (i) Sub-project Agreement has been signed between the

relevant Imp lemen ting Inst i tut ion and the Sub-project Beneficiary, in terms and conditions

satisfactory to the Wo r ld Bank;



D. PROJECT BRIEF SUMMARY

D.1. Economic and Financial analysis

Summary o f Benefits and Costs:

73. Pr oje ct benefits. Fo r each watershed, tw o types o f benefits were identif ied: (i)dditional

agricultural product ion in irrigated perimeters and uplands or tanety areas and (ii)educed

situation and avoided cyclone damages to i rrigation infrastructure. The benefits were quantif ied

and valued using hypotheses on (i)elay and increment in generating additional agricultural

product ion in rriga ted areas (ma nly paddy ) a nd uplands (main ly cassava, maize, and tomatoes)

an d (ii)elay and increment in reducing siltation and damages, and (iii)ent values associated

with increased productivity and reduced O&M costs. T he results are presented in he table below.

The gross benefitvalue o f he project i s US$62 mil l ion.

74. Economic Analysis. For the purpose o f the economic analysis, the I r r igat ion and

Watershed Management Project has been divided in four watersheds that were assessed

separately: Marovoay, Itasy, Andapa and Lac Alaotra. For each watershed, the economic costs

have been regrouped in (i)nvestment costs (public commercial agriculture development,irrigated perimeters, watershed development, and project management); (ii) hysicalcontingencies, an d (iii)ncrem ental recurrent costs. The results are presented in the table below,

and detailed in Annex 9. The higher economic costs for Marovoay come from i t s i rr igat ioncomponent whi ch involves a larger area than in he other watersheds.

Table 2: Economic Costs per Watershed

Type o Costs, Present Value ($ ’ 000) Marovoay I tasy Andapa A lao tra Tota l

Commercial Agricultural Development 2,763 2,585 2,528 2,185 10,061Irrigated Perimeters 4,510 1,944 1,465 3,392 11,311Watershed Developm ent 2,714 1,279 2,463 885 7,342Project Management 1,529 1,529 1,529 1,529 6,116Phy sica l contingencies 1,095 566 507 946 3,113Recurre nt Costs 1,736 820 824 1,505 4,885

Total 14,347 8,722 9,316 10,442 42,827

75. The calculation o f the N e t Present Values (NPV) and Economic Rates o f Return (ERR)

for each watershed show (see table below) show that Marovoay i s by fa r the most economical lyvaluable watershed, with an estimated ERR o f 28 percent. As a whole, the project i s l i ke ly to

increase the welfare o f the country by about US$19 mill ion corresponding at an ERR o f 17



Table3: Economic benefits, NPV and ERR per Watershed

Watershed BeneJts/Costs (Present Va lue, $ 000) Marovoay I tasy Andapa Lac Total

Well Irrigate d Areas Prod uction 25,833 6,675 3,846 5,503 41,857

Par tially Irri gat ed Areas Prod uctio n 2,121 3,072 3,081 1,419 9,694

Tanety Pro duction 1,536 4,079 2,150 266 7,876

Siltation Reduction in rr iga t ion systems 43 171 70 27 31 0

Avoi ded Cyclone Damages in rri ga tion systems 947 485 420 279 2,130

Project Cost (investment and recurrent) 12,611 7,903 8,492 8,937 42,827

Alao t ra

Net Present Value NPV 17,867 6,579 1,076 -1,441 19,041

Economic Rate of Return (ERR) 28% 20% 12% 7% 17%

Sensitivity analysis

76. The variables that mo st influe nce the project outcome include (i)he producer price o f

paddy; and (ii)he abi l i ty o f WUAs and the government to maintain irrigation infrastructure

beyond the project l i fe ( including whether a cyclone hits the structures). I f producer price fallsbelow 15 cents next year (compared t o 20 cents now) and stays at this level, the project will no t

be profitable. I fW A s do no t maintain productiv ity o n rrigate d areas more than 7 years after the

project or i f a cyclone hits Marovoa y's 16,000 hectares o f rrigated perimeters after four year o f

project implementat ion without being repaired, the project 's NPV drops to zero. The main

beneficiaries o f the proj ect (farmers) should therefore pay th e incremental recurrent costs to

ma inta in the infrastructur e as we ll as for insurance mechanisms.

D.2. Technical

77. Irr iga tio n investment operations have had a mi xe d experience in Madagascar. While

investments were generally justif ied in terms o f ncrease in production, sustainability has been

far from sure. The project focuses o n increased production and higher value, but in part icular o n

translating higher income into better maintenance o f infrastructure through capacity

strengtheningand im pro vin g governance o f hydraulic assets. In addition, the project invests in

upper watersheds to prom ote sustainable la nd use practices, w hi ch i s expected to deliver higher

product ion o f rainfed agriculture, while at the same time reducing sedimentation and thus

maintenance costs. Based on internatio nal experience, the project supports a demand-dr ivenapproach to extension services that are, u ltima tely, to be provided by priva te service providers o n

a co mmerc ial basis. Establishment o f Agric ulture Service Centers i s being supported by the

project as a pla tfor m to bring ogether supply and demand for extension services.

78. Watersheds fo rm integrated spatial management units with irrigatio n schemes. Failure to



D.3. Fiduciary

79. Procurement: The third Country Procurement Assessment Revie w (CPAR) for

Madagascar was conducted in November 2002, fo l lowe d by a workshop in June 2003 for the

val idation o f a jo in t CP AW CF AA action p lan to ensure rap id implementation o f procurement

reforms. K e y elements o f these reforms are: (i)evision o f he draft procurement code to ensure

transparency, simplify procedures, a nd com ply with intern ation al standards, (ii)stablishment o f

effective procurement institutions to ensure that the new regulations will be adequately applied,

and to provide su fficient oversight and control; and (iii)dequate train ing and capacity building

to ensure the sustainability o f the procurement reforms. A new procure ment code was enacted in

July 2004 and regulations are in application. The World Bank ascertained that the deficientfeatures identified in he 2003 C PA R have beenprop erly addressed.

80. A remaining area o f concern i s the Government’s cumbersome and overl y bureaucratic

approval process f or contract signing, wh ic h causes unnecessary delays. In addition, insufficient

procurement planning contributes to delays in project implementat ion whic h results in slow

disbursement. To mitigate the risk o f delays, proper prerequisites for the use o f Ban k standard

bidding documents, in cludin g evaluation reports for N atio na l Compe titive Bidding procedures

(NCB) have been agreed up on with Government during negotiations.

81. A Procurement Capacity Assessment of the MA EP , inc lud ing training needs and

arrangements, was co nducted as part o f the project preparation. On the basis o f the i n i t ia lassessment, a n action p la n was drafted to address areas where M A E P needs to be strengthened.

T h i s includes (i) specific section o n procurement in the Project Implementation Plan (ii)

improved filing organization o f procurement-related documents (inc luding in the regional

offices); (iii)rocurement training sessions for project staff; (iv) the recruitment o f technical

assistance to help MAEP handle the project procurement load, and (v) the f inancing o f

independent procure ment and tec hnical audits o n a regular basis.

82. F inan c ia l management: The overal l conclusion o f this revi ew carried out during the pre-

appraisal mission i s that the DFB ( through PNBV PI) and RDFB continue to m aintain a sound

financial management system in l ine with the requirements o f the OP/BP 10.02. The financial

management risk i s assessed as being moderate. The GEF-f inanced project will us e the sameChart o f accounts and the current models o f IFRs that have been used for ID A-f in anc ed project.

The models o f FRsare presented in the exist ing accounting manual o f procedures.

83. To mit igate r isks raised by the weak capacity o f the acco unting profession and the

Auditor General Office (Chambre des Comptes) the audit o f the projec t financial statements,

including GEF grant, has been entrusted to an international auditing firm recruited under the

ongoing Ir rig ati on and Watershed Management Project supported so fa r by IDA f inancing. The

terms o f reference o f the audit have already been reviewed by the financial management



D.4. Social analysis

84. T h e large rice pro ducin g irrigation schemes constructed over the last fifty years haveattracted migrants fr om other parts o f the country. Some o f the farmers wh o have landed in theirrigation schemes also often also have landed in the watersheds surrounding the irrigation

schemes. Other farmers have only landed in the surrounding watersheds. Degradation o fagricultural production systems in the irrigation schemes and in the watersheds has led to

reduced agricultural production and consequently to increased poverty. Degradation in the

watersheds, in particular, has been dramatic and ma y over time lead to abandonment o f he land.The project aims to sustainably increase agricultural production, diversification and revenues inthe four sites. Agro-ecological agricultural practices, which have the potent ial to tr iple

agricultural production, are being promoted in the watersheds to increase farmers’ income, butalso to reduce or stabilize man-made erosion, increase soil ferti l i ty, impro ve vegetation cover,

and reduce bush f ires. T he project i s also expected to c ontribute to increased land security in bo th

produ ction irrig ated and watershed systems.

85. The project i s examining carefully the position o f sharecroppers in he irrig atio n schemes,

where share croppin g i s most common. I t aims to ensure that the capacity o f the priva te operators

i s no t strengthened at the expense o f smallholders, ma rgin aliz ing vulnerable groups.

86. The project i s working towards strengthening WUAs in order t o imp rove the managementand maintenance o f the irriga tion schemes. I t wi l l also establish or strengthen communicationand consultation platforms in each watersheds (which will include WUA representatives) to

imp rov e the management o f natural resources and develop sustainable agric ultura l systems. I t s

expected that these activities w i l l have a positive environmental and social impact on the

sustainable use o f the natural resource base and reduce siltation on the downstream irr igat io n

schemes, which in turn wo uld have a positive impact o n poverty reduct ion in both production

systems.

D.5. Environm ental analysis

87 . Madagascar i s a mountainous country with a relat ively low populat ion density. The

country has abundant land and water resources, wh ich are only partly developed, and biodiver sity

resources o f global significanc e. Madagascar has a high natu ral erosion rate, as a consequence o f

i t s soi l types and heavy rain fall, often exacerbated by cyclone s and heavy rains. T h i s high natural

erosion rate has been exacerbated by deforestation o f erosion prone fragile soils, frequent bush

f ires (many o f whic h li nk ed to livestock grazing) and unsustainable agricultural practices in th e

watersheds, wh ich made most o f the watershed soils infertile and marginal for agricultural andlivestock production. Th is pattern o f severe land degradation has lead over the years to reduced

agricultural pr oduc tion and increased poverty. Th i s , together with increased land scarcity in the

four high pot ent ial sites, has increased the pressure o n the watersheds an d has lead to increased

deforesta tion and pressure o n the globa lly importan t biodivers ity resources in the watersheds in

three project sites: Marojejy National Park, the South Anjanaharibe Special Reserve, and the



poverty. The impact o f the degraded environment on the agricultural productio n systems i s

significant. T h i s situation was made worse by the absence o f adequate maintenance o f the

schemes

88. The p rojec t seeks to reverse this trend by rehabilitating and im pro vin g the management o f

the existing irrigation schemes, as well as by stabilizing or reversing land degradation in thewatersheds throug h the promot ion o f mo re sustainable agro-eco logical practices. These imp rov ed

practices should, over time, reduce soil erosion and sedimentation in the downstream schemes.

Over the short term, i t i s expected that these improved practices will significantly increase

agricultural product ion o f traditional and new crops in the watershed areas, and thereby help

reduce poverty. One o f the requirements for increased production will be the integrat ion o f

agriculture and livestoc k (such as use o f dung as fertil izer and organic soil conditioner). I t s alsoexpected that inte nsifie d agricultur al practices will reduce or stabilize agricultural expansion and

thus reduce the pressure o n the remaining highbiodiv ersity resources in the watersheds.

89. The project i s expected to ha ve mostly beneficial environmental and social impacts, as

demonstrated by GoM’s Regional Environmental and Social Assessment (RESA). The ma in

positive environmental impact will be the improvement o f environmental services o f the

watersheds through the adoption o f agro-ecological product ion systems and better management

o f pastures, wh ic h will stabilize o r reduce eros ion rates.

90 . Intensified agricultural pro ductio n ma y require increased use o f chemical fertil izers and

pesticides. G o M has thus prepared a Pest and Pesticide Man agem ent Pla n (PPMP) to m itiga te the

health and environmental impacts o f ncreased pesticide use. I t s at present not clear i f armers

will be able to afford and maintain the financing o f ncreased inputs.

9 1. Irr iga tion schemes in Madagascar are the m ai n sources o f waterborne diseases, such asmalaria an d urinary and intes tinal bilharz ia and diarrhea. The four selected project sites are no

exception. The Environm ental and Social Management Plan (ESMP) wh ic h already exists,includes measures to reduce these diseases in order n ot to im pair the product ion capacity o f the

farmers and improve their quali ty o f i fe.

92 . The major potential environmental risk posed by the project would be the potential

attract ion o f an inf lux o f migrants f ro m other areas o f Madagascar should the project be

successful in ncreasing agricultural produ ction in the watersheds. These migrants w ou ld increase

the already high pressure o n lan d in the four project watershed areas, which cou ld lead to further

deforesta tion o f the sites, increased us e o f steep hills for agriculture production, and further

clear ing o f reed lands in Lac A laotra for r ice production. La nd zoning, transfer o f landmanagement to exis ting soc ial groups, an d empo werme nt o f farmers and farmer’s groups to

manage these lands will therefore be o f undamental importance during project implementation.

D.6. Safegua rd Policies



integrated into project design. However, increased us e o f fertilizers and pesticides m ay have

negative impacts on the Lac Alaotra Ramsar site, Lac Itasy, the mangrove habitats in the

Maravoa y area and the Lo ko ho River in Andapa. In man y areas, ri ve r and lake water i s also used

fo r drinkingpurposes.

95. The fol low ing W or ld B ank Safeguard Policies were tr iggered:

Table 4: Safeguard Policies Trigge red by the Project

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment (OP/BP/GP 4.01)Natural Habita ts (OP/BP 4.04)

Pest Management (OP 4.09)

Cultural Property (OPN 11.03, being revised as OP 4.11)

Involuntary Resettlement (OP/BP 4.12)Indigenous Peoples (OP 4.10)

Forests (OP/BP 4.36)

Safety o f Dams (OP/BP 4.37)

Projects in DisputedAreas (OP/BP/GP 7.60)'Projects on International Waterways (OP/BP/GP 7.50)

96. Environ mental Assessment, Na tu ra l Ha bit at and Forests. As part o f preparat ion of he

IDA project, the Government prepared a Regional Environmental and Social Assessment(RESA) which has been disclose d at the project sites, at the national level, and in the Infoshop inWashington prior to appraisal. Agro-ecological production systems and improved pasture

management will be promoted in degraded and deforested soils in the watersheds. Sites where

large amounts o f sediments originate and w hic h affect the downstream irrig ation schemes will be

given priori ty. By preparing and implementing a land use zoning plan and transferring themanagement o f land in the watersheds to communities i t i s expected that land use will change

fr om an open access situatio n to a regulated access natural resource, w here m igran ts cannot any

longer sett le f reely. Intensif icat ion o f the watershed agric ultura l systems and a change to high er

productive and less erosion prone agro-ecological practices i t also expected to reduce thepressure on the globa lly im portant biodive rsity resources in the upper watersheds. This approach

satisfies the Enviro nme ntal Assessment Safeguard Pol icy O P/BP 4.0 1, Natura l Habita t Safeguard

Policy OP/BP 4.04 and the Forests Safeguard Polic y OP /BP 4.36.

97. The project also finances sub-projects, such as check dams, anti-erosion structures, small

irrigation dams, markets or other structures. These sub-projects are screened for environmental

and social impacts by the Technical Secretariat o f the Ma tch ing Grant Mechanism (to b e

financed under the project), that will also iden tify i f a Resettlement Ac tio n Plan (RAP) and/or a

small Environm ental Assessment study wil l be needed as part o f he feasib ility analysis.



pesticides used for malaria control in the project areas. The PPMP w i l l also promote thedevelopm ent and establishment o f ntegrated Pest Manage ment Practices (IPM).

99 . Involuntary Resettlement. G o M has also met the requirements o f the Bank’sInvoluntary Resettlement Safeguard Policy (OP/BP 4.12) by preparing and disclosing aResettlement Policy Framework (RPF). I t i s expected that any potential resettlement, landacqu isition or loss o f access to trad itiona l natura l resources will occur at a lim ite d scale. Should

this happen, a Resettlement Action Plan (RAP) will be prepared to ensure that people are fully

compensated (at replacement costs) and will no t be worse o f f than before the project intervened.Sub-projects will be screened to id ent ify wh ether a RAP will be requ ired (see also Environm ental

Assessment, above).

100. Safety of Dams. The Safety o f Dams Safeguard Polic y i s not triggered. The project will

rehabilitate a scheme that i s served by an irr igat ion reservoir. At the same time the safety o f thedam (less tha n<Imeter) w i l l be inspected and if needed brou ght up to international dam safety

standards.

101, Analysis of alternatives. Feasible alternatives are (i)o no t implement the project; or (ii)to implement i t with out a watershed management component. The “no project” alternative wo uldal low further deterioration o f he irrig atio n schemes and the watersheds with consequent negative

impacts on poverty, agricultural production, and glo bally significant biodiversity sites. Thealternative “without watershed management” w ou ld leave the irrig atio n systems exposed to largesediment loads, wh ich wo uld endanger and potentially undermine the investments.

102. Public consultation. Public consultations have been carried out on the Terms o f

Reference o f the Regio nal Environ ment al and Social Assessment, o n the draft report, as we l l asduring the preparation o f the RPF. T h i s i s in conformity with the requirements o f OP 4.01 andOP 4.12.

103. Borrower Capacity and Implementation and Monitoring of the ESMP. TheBorrower’s capacity to supervise and monitor the implementation o f the Environmental and

Social Managemen t Plan (ESMP) i s bei ng strengthened. One o f the Technical Assistants hiredunder the project i s qualif ied in environme ntal and social management and i s already in charge o f

the adequate implementation and monitoring o f he ESMP. Depe nding on the need, some o f he

ESMP activit ies will be implemented by contracted service providers.

104. Disclosure. The Regional Environmental and Social Assessment, the Pest and Pesticide

Management Plan and the Resettlement Policy Framework have been disclosed at the fourpro ject sites, in Antananarivo, and in the Infoshop in Washington p rio r to appraisal.

D.7. Policy Exceptions and Readiness



Annex 1: National, Sectoral and Progra m Context

Madagascar: Irriga tion and Watershed Management Project

A. National and Sectoral Contex t

1. Th e Island o f Madagascar covers a total area o f 588.841 km2.The population, estimated

at 16.4 m il l i o n nhabitants in 2003, i s increasing at an annual rate o f about 2.8 percent. N early 78

percent o f the populat ion l ives in the rural area. The country i s characterized by majo r

biodiversity and considerable c ultural and socio-economic diversity. The economy i s essentially

rural-based and agriculture remains the m ai n engine o f economic development. Per capita

income i s US$290. Poverty affects 68.7 percent o f the total populatio n and 73.5 percent o f therura l populat ion.

Poverty Reduction Strategic Fram ew ork

2. The government has put in place the Madagascar Ac tio n Pla n (MAP), a development pla n

for 2007-12 that i s th e second-generation Poverty Re duction Strategy. The M A P envisages

accelerated and better-coord inated reform s and outlines the strategies and actions that will ign i te

rapid growth. “Rural development and a green revolution’’ and “cherish the environment” aretwo o f the core eight commitments o f the MAP. The specific objectives with respect to rural

development are (i)o increase agricultural value-added (through, inter alias, Agricultural

Service Centers), (ii) iversify rur al activit ies (focusing o n support to producers’ organizationsamong other activities), (iii)aunch a sustainable green revolut ion through integrat ing

environmental dimensions in agricultural activit ies and (iv) promote market-oriented activit ies

through strengthening farmers‘ organization and investment in infrastructure. The M A P

Commitment to “cherish the environment” focuses on reducing natural resource degradation

through better lan d use practices.

3. MA P’S goal i s also to ensure that the country develops in response to the challenges o f

globalization and in accordance with the national vision “Madagascar Nafurellement’’ defined

by the President in November 2004. I t states that Madagascar will be a newly industrialized

country with maximized competitiveness by 2020. Th e core o f growth will be derived from the

country’s unique natural resources and fr om the transformation o f t s natural products. The vision

aims to develop a diversified and ri c h natu ral resource base (agriculture, livestock, fisheries, and

mining) that will contribute to the creation o f products with high value added such as essential

oils, agri-business, pharmaceuticals, and mining products. A broader impact o f growth and a

progressive redistribution o f t s benefits will help reduce pove rty substantially. Madagascar will

be known worldwide f or the beauty o f i ts rich and well-protected biodiversity and i t s

environment will be cherished and protected and used in a wise and responsible wa y to enhance

development. The Malagasy people, both in rural and urban areas, w i l l be healthy and well-

educated, will be active participants in the development process and will be gainful ly employed



watershed scale. Additionally, the project i s in l i ne with the new National Program for Ru ral

Development, among whose pillars are the impro ved management a nd use o f natural resources

an d the protection o f natural production factors and ecosystem functions. T he operation will also

dovetail with the im plementation of the Third Environmental Program, with which a MOU has

been established. I t s activit ies also fit together with the Nat ional Forestry La w w hich seeks to

prote ct watersheds, promote reforestation, comb at wild fires, and protect natural habitats andbiodiversity. Furthermore, the 'project (i)irectly contributes to the implementation o f the

U N CC D Nat ional Act io n Plan, and (ii)ddresses priorit ies under the National Biodiversity

Strategy and Act ion Plan and UNFC CC N A P and NA PA .

Agriculture, rice, and irrigation

5. Rice represents nearly 70 percent o f agricultural production and accounts fo r 48 percent

o f otal calorie consumption. Rice production has only increased by 1.2 percen t per annum sincethe 1980s and average paddy yield at the national level i s s t i ll l o w (about 2.4 t/ha). Ann ual

production o f paddy rice has virtually stagnated for about ten years, stabilizing between 2.3 and

3.0 m il li o n ons. Area planted to paddy has increased by onl y 0.44 percent per year fro m 1970 to

2004; yields have increased by 0.71 percent per year, m uc h slower than in other major r ice

producing countries. With population gro wth o f 2.7 percent per year, p roduc tion per person has

fal len from 275 kglperson in 1970 to on ly 179 kglperson in 2004. R ice far ming techniques are

largely traditional and use o f inputs i s the exception in many places. E.g., fertilizer use hasremained stagnant at 10 k g h a on average, as compared to 14 k o a n sub-Saharan Africa, and

2 91 k g h a in Indonesia. Vast differences in prices between wet and dry season are explaine d by

the lack o f fluidity in movement o f goods from product ion areas t o the markets due to a lac k o f

road infrastructure and la ck management capacity o f storage facilit ies by farmers. On average, 28percent o f the paddy product ion i s marketed (750,000 t). Rice sales are highly concentrated. In

2001, the top 10 percent o f r ice farmers (by value o f sales) accounted for 73 percent o f total

natio nal ric e sales. These farmers s old o n average 2.2 tons/household. An estimated 48 percent o f

rice farmers did not sel l any rice in 2001.

6. I rr iga t ion occupies an important place in the agricultural sector, supplying water to mo re

than one mi ll io n hectares, or 40 percent o f cultivated lands (as compared to 6 percent o n average

in sub-Saharan Africa). Irrigated crops represent 15 percent o f GDP, whereas 7 0 percent o f

agricultural product ion and 88 percent o f r ice p roduct ion originate fro m irr igated agriculture. I t s

estimated that 85 percent o f the active farming popu lat ion are direct ly or indirect ly em ployed by

the irrigation sector. Since the 1950s, irrigatio n has benefited fro m pu bli c investment. However,the impact o f hese efforts on rura l incomes i s mixed, and sustainability i s far fr om certain. The

rapid degradation o f infrastructures requires frequent rehabilitation, and many schemes arecaught in a vicious circle o f poor yields, lo w capacity o f water users to pay fo r O&M, and rapid

degradation o f the schemes. Weak capacity to pay i s accompanied by lo w wil l ingness to pay,

reinforced by institutio nal weakness o f the WUA and a la ck o f support from loca l authorit ies.

Moreover, erosion o f watershed upstream i s weighing heavily o n cost o f maintenance o f



agents, (v) unrealistic expectations about the volume o f public (human and financial) resourcesavailable.

Nat ura l resources, soil development and role of communes

8. One o f he basic problems o f he rural and agricultural sectors i s the rapid degradation of

natural resources, particularly watersheds. The stagnation o f yields in irrigation areas and

demographic grow th lead to an extension o f rain-fed crops on hill slopes (tanetyhavy), of ten by

removing the forest cover and by replacing i t with inappropriate farming practices. Un produ ctive

pastures are degraded by frequent passage o f bushfires. As a result, soils are increasingly

degraded and fragil ized, and even lo w levels o f run of f ead to high levels o f erosion that cause

damage to downstream assets, reduce the lowland area under irrigation through sedimentation,wet season flooding and dry season droughts. In addition, there are important implications in

terms o f biodiversity loss and decl ining buffering and regulatory ecological services. More

sustainable la nd management practices have demonstrated that i t i s possible to achieve the du al

object ive o f higher prod uctivity and reduced soil degradation and erosion.

9 . Communes and Regions are responsible for lan d use plann ing and play an important r olein providing land tenure security: the communes should therefore be at the centre o f al l natural

resources management and watershed development initiatives. The Communes have been

established to provide a number o f basic services to the populations (role o f public serviceprovider) and to act as the engine o f development on i t s terri tory. T o that end, the capacities o f

the Communes i s being strengthened in he fo l low ing areas: (i)nit iat ing development within the

Commune, including: (a) support for the elaborat ion and monitoring o f Commu nal Development

Plans (CDP), (b) f inancing o f investments; (ii)mpleme ntation o f their specific mandate,

including: (a) implemen tation o f responsibilit ies in the area o f education, health, water,

sanitation, and maintenance o f nfrastructu res that have been transferred to th em by the centralGovernment, (b) technical assistance in the area o f economic development and management o f

natur al resources, (c) la nd tenure pol ic y (land tenure counters), and (d) the integration o fintercomm unal priorit ies in the development pol icies o f he Commune4.

10. Tenure security through delivery o f ormal documents i s important because i t can lead to

better use o f land and i t facilitates impro ved fisca l resources. T raditional leasing arrangements,

currently outlawed in Madagascar, prov ide an en vironment that i s non-conducive for investmentsin product ivi ty.

11. Giv en the importance o f the responsibilit ies entrusted to communes and the l o w lev el o f

hum an and financi al resources at their disposal to meet these challenges, i t s indispensable to putin plac e a support mechanism. The Ministry o f Decentra lization and Lan d U s e Planning (MDAT)

has put in place a progra m fo r strengthening the capacities o f Communes in administrative and

financial management. T o that end, Di str ic t Support Centres (DSCs) are beingestablished in theregions. These DSCs are responsible for : (i)raining elected officers and staff o f the Communes



Land tenure security

12. Madagascar has a high dema nd fo r la nd tenure security, as evidenced by the many

requests for land t i t le deeds (which the present system i s incapable o f meeting), and thedevelopment o f an info rm al local system o f “petits papiers” that i s highly solici ted to record

transactions.

13. Specifica lly, situations o f high tenure insecurity exist concerning those farmers

cult ivat ing land in former AMVR, ZAF, colo nizati on areas or indigen ous reserves that are often

the subject o f com petitiv e claims, and farmers wh o cultiv ate as sharecroppers or tenants. Eithe r

category i s widespread in the irrigation schemes in the intervention areas o f the project, as

evidenced by the diagnostic studies. The uno ffic ial nature o f hese rights weakens partic ularly thefunct ion ing o f WUAs an d O&M o f rr iga t ion schemes.

14. T o meet the high demand for l an d tenure security, the Govern men t rece ntly adopted a

Land Pol icy Letter, w h ich i s organized around 4 strategic orientations: (i)estructuring /modernizat ion o f land services; (ii)ecentralization o f lan d management; (iii)ev is ion o f land

regulations and (iv) capacity strengthening. T h i s po l icy i s being implemen ted under the National

Land Tenure Program that i s already supporting, o n p il ot basis, several decentralized la nd

management experiences with support fr om several donor agencies.

B. Lessons learned

15. Previous attempts to boost agricultural produ ction through investments in i rr igat ioninfrastructure have been unsuccessful, in particular with respect to the sustainability o f the

investments. Despite m odest increases in yi eld levels on those schemes that have bene fited from

investments, a weak institutional environment and high O&M costs have under mined capacity

and will ingness to pa y O&M charges. In addition, on ly 10 percent o f irrig ati on schemes have

benefited fro m investment, and modest yiel d increases have no t been visible in erms o f nationalaverages. The reasons for low yields and weak sustainability are notably: (i)ack o f marke t

opportun ities (isolation, unattractive prices); (ii)ac k o f access to advice and inputs; (iii)ailure

to take in to account watersheds upstream; (iv) l ack o f c la r it y in responsibilities and capacities o f

the different public, associative and private partners; (v) non-respect o f commitment by both

users an d the State; and (vi) indiscipl ine and impunity.

16. The ma jori ty o f Malagasy farmers only benefited marginal ly fr om the technologicaloptions proposed, and average yields are we ll b elo w the actual potential. Tr ad itio n and risk

aversion only partially expla in the failure o f agricultural intensification. Other factors can bementioned, such as: (i)eak capacity o f agricultural research to respond to request o f armers, aswell as their l o w leve l o f organization and part icipation in the development process; (ii)oor

extension services (in te rms o f access an d quality); (iii)and tenure ins ecurity a nd inequitable

sharing o f profi ts, part icularly by sharecroppers; and (iv) lo w tolerance o f potential technologies



17. Th e conditions o f success include: (i)n integrated approach to irrigate d agriculture and

surrounding watersheds; (ii)onducive economic environment; (iii)lear responsibilities, in

conformity with Government polices and strategies (poverty reduction, decentralization,

agricultura l, environm ental and la nd polic y, etc.); (iv) fully responsible partners with adequate

capacities; (v) clear and unambiguous comm itments corresponding to the capacities o f each o f

the parties, contracted freely and kno win gly ; and (vi) mecha nisms to ensure respect o fcomm itments made that are applie d systematically.

18. The BV -P I ntegrated approach i s a “win-win” approach, w hi ch at the same tim e helps to

increase productivity and incomes in irri gati on schemes and surroundings watersheds, conserve

natural resources in watersheds, limit erosion o f slopes and sedimentation in irri gat ion schemes,

thereby reducing the need for maintenance and rehabilitation o f he latter.

19. An attractive economic environment implies: (i) pol icy on pr ices o f agr icu l tura l

products and inputs; (ii)ccess to markets in terms through roads, information, promotio n o fprivate sector and producers’ organizations for marketing (including storage) and supply o finputs; (iii)ccess to effi cie nt e xtension services well adapted to lo ca l needs; and (iv) access to

finance.

20. Clear inst i tut ional framewo rk: clear institutional responsibilities in i n e with Government

policies and regulations for producershsers and their associations, communes, inter-communesand regions, decentralized p ub lic services, specialized agencies and authorities (ANDEA, etc.),and priva te operators.

2 1. Par t ic ipatoy approach, concerted decisions and respect o commitments made: actors

with clear and acknowledged rights and obligations, and adequate resources and capacities,

participating fully indecision-making; incentives and mechanisms ensuring responsible

ownership and respect o f commitments made; interfaces for dialogue and communication; and

equitable access to resources, espec ially fo r the most vulnerable p opula tion groups.

22. Th e improvem ent o f irrigation infrastructure and the establishment o f sustainable

mechanisms for funding O&M will not be enough to increase rice production beyond about

3.5 tha, which i s s t i l l lo w compared to the technical potent ial. Prom otion o f intensif icat ion o f

rice production systems in IP S S W S R I ) , including in areas with poo r control over water, will

need to be undertaken. Moreover, the agro-ecological techniques o f seeding and plant ing o npermanent plant cover (SCV) developed by the Groupement Semis Dir ec t Mad agascar (GSDM),

supported by CIRAD, are opening new prospects for sustainable and profitable agriculture on

slopes. The environme ntal advantages o f S CV techniques include: (i) rosion control, soilconservation and regeneration o f soil fer til i ty at reduced cost; (ii)mprovement o f inf i lt rat ion,

efficient management o f water in the upper watersheds; (iii)ustainable improvem ent o f soilfer t i l i ty and product ivi ty in the upper watersheds; and (iv) indirect contrib ution to sequestration

o f carbon and reduction o f the greenhouse effect. Fina lly, agricultural diversification, includ ing



consequently, strengthening dialogue and decision- making c apacity o f the peasant com mu nity

constitute the cornerstones o f sustainability.

C. National Irrigation and Watershed Management Program

24. The National Ir rigati on and Watershed Management Program i s part o f a program under

the PRSFRRSP that aims at reducing rural poverty through sustainable improvement in the

living condit ions and incomes o f rura l populat ions in irrigated perimeters and surrounding

watersheds, and efficie nt management o f natur al resources.

25. The Government has clearly defined i t s new medium-term vision o f the management o f

BV- PI, based o n nat ional pol icies o n rura l and agricultural development and the decentralizationpolicy, which i s at the centre o f i t s development and pov erty reduction strategy. Th is approach

requires: (i)lear responsibilities fo r each o f he actors in he management o f rrigatio n schemes

and surro unding watersheds (farmers, water users, professional associations, districts and inter-

communities, regions, central Government); (ii)f fect ive part icipat ion o f rur al populat ions indiagnosis o f problems and ident i f icat ion o f opt ions; (iii)o-management o f P I and BV by al l theactors concerned; and (iv) incentives and efficient mechanisms to ensure that all stakeholders

respect their commitments.

26. One o f the key object ives o f the f i rs t phase o f the PN/BV-PI, o f which the IDNGEFfunded project constitutes a major part, i s to put in place a clear and attractive institutional

environment as well as adequate capacities at all levels, with a view to attaining theGovernment’s vis ion and objectives. F or i t s implementation, the project will adopt a flexible

approach adapted to the real i ty in the f ie ld and evolut ion o f capacities o f he inst itutions, whic hwill be gra duall y strengthened with a view to their empowerment.

27. The project will engage in the development o f agricultural production, irrigatio ndevelopment and watershed management. IDA funding will focus on commercial agricultural

development, irrigation infrastructure development and management, and finance some critical

watershed interventions, that are direc tly li nk ed to the irriga tion schemes (e.g. treatment o f

specific ero sion spots etc.). GEF -SIP will contribute in developing and implementing innovative

agricultural approaches and activities directed towards sustainable land management, especially

in the upp er watershed areas, a nd the lake and marsh zones downstream o f the irrigatio n schemesas these areas are highly vulnerable to degradation. Natural resources management issues are

complex, need specific attention, and have to be addressed with a long-term vision, especially inview o f ncreased cl imate variabil i ty, in order to strive fo r an overall sustainable development o f

the watershed.

28 . T h i s blended operation i s a targeted investm ent under the GEF-SIP umbrella, a regional

strategic multi-donor program designed to scale up the area o f Af ric an cropland, rangeland, and

woodlan ds und er sustainable management. The SIP i s a pr ior i ty program of TerrAfrica, which



D. Project Zones

Marovoay

29. The Maro voay plains i s a rice produ ction zone o f pri me national importance, situated inthe Boeny Region, about 80 km South-East o f Mahajanga. The Marovoay river i s a tributary o n

the right b a nk o f the Basse Betsiboka, in the upper delta o f the riv er. Subjected to quasi-complete

submersion during th e annual flooding o f he Betsiboka, the development o f he valley started in

the early 20th Century for off-season ric e pro duc tion (once the water- level has dropped). Later

extensions to the gravity systems included schemes supplied through pumping f rom the

Betsiboka. The scheme i s divided into 13 completely independent irrigation sectors, fe d fr om a

great number o f different sources. The system faces serious O&M challenges. The submersion o fschemes by waters from the river requires annual rehabilitation o f the irr igation infrastructure,

thus making O&M expensive and the overall economic pro fita bil ity uncertain. Fo r a total area o f

about 20,000 ha, an estimated area o f 12,000 h a was cultiva ted in 2004. Beneficiaries o f al l plots

developed during the successive programs were mainly immigrant populat ions from otherregions o f the country. The percentage o f sharecroppers i s today very high.

30. Until recently, the central Government was responsible for O&M o f the i rr igat ion

schemes and pumps. Presently, public funds for m aintenance o f structures considered as ‘ non

transferable’ are unreliable. Restruc turing int o WUAs and federations o f W A S as not resulted

in the establishment o f an adequately O&M . The Performance Contract signed with the

federation for the period 2001-2003 was not renewed and funds earmarked for 2004 were

reallocated.

3 1. The m ai n watershed serving the Maro voay irrigated perimeters i s that o f Riv er Betsiboka,

whose hydrology i s determined by phenomena occurr ing some hundreds o f km upstream. Sub-

watersheds o f River Marovoay and i t s tributaries supply a ma jo r par t o f he system: their sources

are main ly in the zone o f Ankarafantsika Na tional Park, where huma n activit ies are controlled.Final ly, al l around the plain, small lateral watersheds with mainly intermittent f lows do not

constitute a source o f irrigation water supply but have a major impact in terms of erosion,

sedimentation and destruction o f protection and distribution structures alongside irrigate dperimeters.

Itasy

32. Itasy Region, located around Lac Itasy, i s situated about 100 km to the West o f

Antananarivo. All irrigatio n schemes in Itasy (Grappe du Lac Itasy 1 980 ha, Ifa nj a 1900 ha,Mangabe 270 ha, Analavory 140 ha, Am pa ry 90 ha, Antanimen akely 80 ha - or a to tal o f

446 0 ha) are presently cla ss ifie d as autonomou s perimeters, as com ple x ‘non-transferable’

infrastructure i s absent. The re gion offers great potential for agricultural production, given the

natural fertil ity o f volcanic, basal and alluv ial soils and i t s favorable climate for agricultural



34. Althou gh mos t o f hese schemes benefited fro m projects implemen ted fro m 1998 to 2000

(project PPI 2), they are currently facing serious problems due to a com bination of erosion o f he

upper watersheds and la ck o f maintenance o f the systems. In addition, storage infrastructure has

been silted up an d i s n o long er adequate, also giv en the change in the f l ow reg ime o f he rivers(increase in f lo od fl ow and reduction o f dry-weather flow). Hence, 30 - 50 percent o f the

perimeters are no longer adequately irrigated. Giv en (or as the ori gin of) these problems , W A S

have stopped collecti ng maintenance fees for several years, since a greater pa rt o f the users have

refused to pay as they are no longe r benefit ing from water control. Th e actions o f he W A S rel im ited to maintenance works carried out by interested users, i.e., in mo st cases, those o f the

downstream sectors o f he irrig ated perimeters.

Andapa

35. The Lokoho watershed at Andapa, situated in the Sava Region at about 100 k m s South

West o f Sambava, i s formed by three concentric landscapes: (i)he f i rs t covers a vast pl ain o f

crops, 18,000 ha, drained by 4 ma in rivers whose confluences form River Lokoho at the ex it o f

the basin; (ii)he second i s constituted by tanety, at the periphery o f ric e farms, m arked by a

diversity o f annual crops (m ainly rain-fed rice) o n cleared forest (tavy) or planted fa llow lands,

as well as coffee a nd vanil la crops; (iii)he third, at an altitude o f over 900 m s distinguishedby

a denser tree cover. The basin i s bordered in the North-East by Mar ojejy Na tional Park, in the

South-East by Anjananaribe South Special Natural Reserve, w hic h i s the only forest zone o f thebasin where tree cutting i s s t i l l authorized, thou gh regulated.

36. From 1962 - 1997, the Andapa ba sin has benefited fro m a development program fundedby EDF. The project com prised an infrastructure component, wh ich includ ed the road linking

Andapa and Sambava, drainage o f the basin, internal network o f access roads, development o f

the m ain waste water outfal l o f he basin and construct ion o f a pumping station. The agricultural

component focussed on development o f rice farms o n a total area o f 4,400 ha, introdu ction o f

double season rice cultivation, measures aimed at imp rov ing collectio n and marketing, and anextension and diversification program. In 1979, the public company "Andapa Mamokatra" took

over as the organization in charge o f the Andapa basin development project. The impact

evaluat ion o f the project in 1998 was severe, particularly: (i)ai lure o f pumping r r iga t ion o n the

Ankaibe perimeter (2,100 ha); (ii)ack o f maintenance o f structures o n a ll perimeters developed

by the project; (iii)he total disorganization o f the AWUs; (iv) failure o f ntensification attempts.

Lac Alaotra Sa ham alot o Irrigation Scheme

37. The Lac Ala otra watershed form s a vast depression o f around 1,750 km2,with an averagealtitude o f between 750 and 770 m, surrounded by eroded hills. The lake (a Ramsar site) i s

shallow and surrounded by swam py marshes. I t covers an area o f about 220 - 25 0 km2 free water

surface) and aroun d 550 km2with surroun ding marshes. The watershed serves about 80,000 h a o f

rice farms, o f wh ic h 30,000 ha are developed. The watersheds are subjected to strong man-made



SO MA LA C ensured the maintenance o f the irr igation system, supervised rehabilitation works

carr ied out between 1984 and 1989, with notably the creation o f water users associations (1989-

1991). These efforts were accompanied by the implementation o f projects a iming to intensify

agriculture.

39. The watershed supplying Sahamaloto i rrig atio n scheme stretches over an area o f 356 km2.

The irr igation scheme has a developed area o f 6,400 ha, o f wh ic h 80 percent i s cultivated when

the rain fa ll con dition s are favorable. The area i s supplied by a storage dam constructed in 1957.

The in it ia l storage capacity o f 26 mi l l io n m3,was gradually reduced to about 13-14 m il l i on m3.

The scheme was fully rehabilitated in 1988-1989, inc lud ing the construction o f a new intake

tower, an increase in the volume o f storage water to 18 m il l i on m3.Emergency repair and

rehabilitation works were in i t iated in 1998-1999.

40. The 12 federated WUAs o f the irrigate d perimeter, with a total o f 1,800 members, are

physical ly part icipat ing in the constru ction o f secondary canals, thus contributing to the

maintenance costs o f the primary system and operational costs o f the off ice o f the federation.Contribut ion in cash for the maintenance costs at the charge o f the W A S secondary systems)

varies from one WUA to the other, but remains generally weak, with recovery rate rarelyexceeding 60 percent o f amounts voted.

E. Rehabilitation of hydro-agricultural Infrastructures in the Project Zones

41. The def in it ion o f a prio ri ty investment program demands that ranking cri teria be def ined

for determining priori ty interventions. The fol lowing three levels are defined. Level I

interventions consist o f hose works that wo uld resolve problems that are o f capital importance to

the entire area. The rehabilitation o f nfrastructures in this category helps to ensure: (i)ccess to

water resources by protecting the headwork and primary structures that are indispensable forsupplying the second system; (ii)ccess to cultivated la nd by rehabilitating cultivated schemes

during raining season lost through dysfunctional drainage; and (iii) rotect ion o f property, byprotecting the structures against floods o r a strategic structure. The non-intervention o f Lev el 1

blocks the funct ion ing o f the system. Hence, in most cases the interventions concern primary

infrastructure: con trol dam and diversion offtakes, supply channels, m ai n canals, m ai n drainagesystems, or f lo od protect ion dyke.

42. Level 2 interventions consist in structures that b lo ck access to water or access to la nd or

protect ion o f assets o f part o f the network: secondary or upstreaddownstream l inks. The non-

in tervent ion o f Le vel 2 makes i t impossible for part o f the users to cultivate or harvest. I t

concerns ma in ly secondary systems, sections o f the ma in canals or ad dition al structures o n them a in canal (floodgates, co ntr ol structures), secondary canals and secondary drainage systems.

43 . Level 3 interventions consist in structures that w ou ld boost ag ricultural produc tion either

by im pro vin g water con trol (irrigation and drainage), or increasing the cultiv able area. I t nvolves



45. I t i s important not to focus solely on total amounts. Hence, the major budgetaryallocations presented in this table are as follo ws: (i)y adding the Sahamaloto perimeter at Lac

Alaotra, the total budget i s tripled, f rom US D 5.8 m i l l i on o USD 17.6 mil l ion ; (ii)or the three

pr ior ity intervention zones (Marovoay, Itasy and Andapa), 65 percent concerns prio rit y 1 works,27 percent priority 2, and 8 percent priority 3; (iii) n the other hand, for the Sahamalotoperimeter at Lac Alaotra, 71 percent concerns pr io rit y 3 works; 29 percent priority 2, and 0percent pr ior it y 1; (iv) for a ll possible intervention zones, 50 percent concerns priority 1 works,

28 percent pr io r ity 2, and 21 percent prio rity 3.

Alaotra

Sub-total 2

46. I t should also be noted that the pumping stations in some of the blocks in the Marovoay

scheme, and their primary system, whose rehabilitation falls under priority 1, accounts for 50

percent o f he total rehabilitation budget for the Marovo ay zone.

3 2930 5 423 7 277 12 855 25 55 5

47. T h e project will not to tally finance the rehabilitation o f works that the users should cater

for in the future. The contribution o f users will be equal to what they should pay in future forO&M o f these structures. In that regard, the envelope that the project will allocate to

rehabilitation works will be calculated by deducting the annual amounts users sho uld pay formanagement and maintenance in he future.

Site installations & miscellaneous @

Table 5: Cost o f rehabilitation works on hydro-agricultural irrigation schemes

1085 145 5 2 571 5 11 1



Annex 2: M aj or Related Projects Financedby the Bank and / or Oth er Agencies

Madagascar: Irrigation and Watershed Management Project

Table 6: M aj or Related Projects Financed by the B an k and/or other agencies

World Bank

Other Agencies

Protection des Bassins Versants duLac Alaotra (BV-Lac

de ia Vallee-Marianaet PC 15Projet d’Appui a l a Diffusion deTechniques Ago-Ecologiques a

MadagascarProjet de RChabilitation du Perimktredu Bas MangokyProgramme de Lutte AntiCrosive(PLAE 11)DCveloppement Rural etAmtnagement des basins Versants

dans l e La c AlaotraProjet Haut Bassin du MandrareProjet de Promotion des RevenusRurauxProgramme d’Appui aux CollectivitCset Organisations Rurales pour l e

I Business and Market ExDansion

(BAMEX)Participatory Community-basedConservation in the Anjozorobe ForestCorridorWind and Hydro Energy MarketDevelopment

AFD

AFD

AFD

AfDB

German Cooperation

JICA

IFADIFAD

European Union

Swiss CooperationUSAIDUSAID

UNDP

UNEP

Active

+ctive

Active-ctive

ActiveIctive

Active

Active

Active

CEO approved

Proposed



Y - m NOI

r

CA

E

e"

a

N

h

w



Annex 3: Results Framework and Monitoring and Evaluation

Madagascar: Ir rigatio n and Watershed Management Project

1. Performance indicators are lin ke d directly t o the CA S go al o f prom oting broad-basedsocial and economic growth, an d in particular (i)o reach an economic gr owth rate o f 8 - 10

percent per annum; (ii)o increase the l eve l o f investment to 20 percent; (iii)romote the

v i ta li t y o f the private sector so that it participates in an investment ra te o f 12 - 14 percent;(iv) to open up Madagascar’s economy to greater competition with a view to reducing costs

and improv ing quali ty; and (v) foster the wil l ingness o f he popu lation to participate.

2 . Overa l l monitor ing o f the project’s implementation, as well as assessing thedevelopment impact o f the project i s under the responsibil i ty o f the Department o f Statistics

and Information (DSI) under MAEP. I t i s supported by technical assistance. A specialized

project M&E / management informatio n system has been prepared and appro ved by the Bank,as wel l as the procedures for data collection and reporting. M&E s based on direct rep orting

by inst itut ions inv olve d in project implementation (MFI, MEF, ASC farmers and W A S ) ,

relevant data collected on a systematic basis for other purposes, participatory assessments,

user satisfaction surveys (e.g., in irrigation schemes), income surveys, and targeted data

collection (among others through satellite photos), as established in the project

implementation manual. DSI will commission two evaluations o f project output and impact

indicators, at mid -ter m and at comple tion. The proje ct has already established a baseline. The

output of the M&E will provid e sufficient evidence in linking periodic and annual mon itorin g

with subsequent annual pro ject p lannin g activit ies so that M&E data are interpre ted and used

as an instrument for project planning.

3. The project has established Regional Monitoring Committees in each o f the four

proje ct areas that are chaired by the Head o f the Region and made up o f members o f GTDR.

The Regional Monitor ing Committee i s supported by the GTDR’s Tec hnic al Secretariat, an di s responsible for (i)nsuring consistency o f project actions with project objectives and wo rk

plan, national strategy and policy, and regional development priorities and programs; (ii)

preparing and validating detailed wo rk plans and budgets at the re gional level; (ii)eviewing

project progress and performance, and the implementation o f corrective measures i f

necessary. The Regional Mo nito rin g Committee meets twice a year.

4. Similarly to what i s already being done fo r IDA funded activities, the M A E P will be

responsible for submitting to IDA semi-annual progress reports on the GEF activit ies under

the project. Progress reports will focus on (a) k ey performan ce outcome, output and inputindicators as indicated in the Results Framework; (b) progress in procurement; (c) progress in

implementation works; (d) progress on technical assistance and training; (e) status o f

disbursements from the credit; ( f ) progress on comm unity sensitization and mobilization, in particular

with respect to the Performance Contracts; (g) work plan for the next six months.



MAEP will provide to IDA a project Implementat ion Complet ion Report (ICR). T he

completion report would include: original and revised project targets and actual

achievements; projec t impac t assessments focusing o n results; and performance o f project

management and IDA in fulfilling their respective obligations under the credit. The projectoutputs and outcomes relevant to SIP will be periodically shared with the SIP M&E

coordination desk, where data on portfolio progress wil l be synthesized, aggregated and

annually reported. The SIP M&E system will be used for investment and program

improvement, mutual learning, accountability purposes, progress reporting to GEF Council,

enhancing stakeholder participation, a nd consolidating A fri ca n leadership o n the SLMagenda. The projec t can also benefit from SIP M&E support tools,

A. Results Framework

"I-.. ~ -I. -

PrograWAPL. Objectives Outcome Indicators

Increascd average producti\ ty o fconditions and incomes o f rural

populations in six main irr igationsites and their s urrou ndingwatersheds, and the management o fnatural resources.

irrigated rice in the projectareas (M Tha ):

___.-aseline Endo f

Andapa 2.0 3.5

Maro vay 2.0 3.5

Lac Ala otra 3.5 5.0Itas y 3.0 4.5

* Increased average pro ductiv ity o f

rain fed rice in projec t areas(MTiha):

_ _ _ -aseline End o f

proiectAndapa 1.5 2.25

Mar ova y 1.5 2.25

Lac Alaot ra 1.5 2.25Itas y 1.5 2.25

non ric e area in rrigated schemes

as a percentage o f overallcultiva ted area over two seasonsincreased b y 25 percent

increase in area under product ionin irrigate d schemes during the dry

*

season incrcased by 25 percent

Project Development Objective

To establish the basis for-v;ablc Dissemination o f nnov ative

ProjectOutcome indicators-I_

irrigated agriculture and natural

resources management in four mainirrigatio n sites and their surrounding

technologies and equipment t o

30,000 households throug hextension, capacity strengthening

- ~ll.__lI" -

Use of ProgramOutcome

Informstion

Year 1 : establish baseline

Year 4 : con firm progress afterimplementation of project

activities, and adjustintervention strategy i f

required

Year 12 : measure projec t

impact

Report to SIP:- contributes to SIP PD OPhase 1 ndicator o f %

increased croplan d

productivi ty

Useof Praject Outcomeinfornrrtion

Year 1: establish baseline

Annually: confirm progress



Improve the environmental

sustainability of and managementpractices in four targeted watersheds

~ l _ l _ - l .iotermediate Outcomes

Result 1: DeveloPmento fCommercial Agriculture

Intensification, marketing, anddiversification o f selectedagricultural value chains in project

target areas wi th increased

uti l izat ion of demand driven S L Mtechnologies

Result 2: Irrigation Development

Better management of argeted

irrigated schemes throug hinfrastructure rehabilitation,impr oved institutional framework,

and capacity bui lding o f Water UserAssociations.

Result 3: Watershed Development

Enhanced capacity o f stakeholders

in he four watersheds to manage

natural resources in sustainable

manner, accounting also for climate

varia bility and change

watershed infrastructure

Increased governm ent support foragricultural intensification in

irrigated and rainfe d areas through

increased pu blic expenditures. ~

Outcome Indicators

Increase in and area under

sustainable management as a

percentage o f baseline, in argeted

project intervention areas

Increase in vegetation cover as a

percentage o f baseline

l ".EntermediateOutcome Indicators

Five A SC established that are able to

deliver S L M advisory services to

land users

50 OPs, unions and federations o f

active producers havin g registered

w i t h A S C

5,000 HH trained in ago-ecological

cropping practices

40 percent increase o f commun itiesadopting S L M options in argeted

Match ing Grants fully disbursed

areas compa red to baseline

21,780 ha irrig ation area rehabilitated

30 W A S rained

100 percent o f operation and

maintenance funds covered b y

irrigatio n service fees collected

satisfactory executed

Four WD P and eight participatory

sub-watershed m anagement plans

developed and adopted

60 commu nity S L M groups trained

and supported

145 hotspot erosion controlinterventions realized

Five guichets fonciers operational

Integrated Management Inform ation

System for S L M established

60 percent change in S L M

Four Performance Contracts

FERHA established

4.2,4.3)

Year 1: establish baseline

Annual ly: confirm progressafter implementation o f

project activities, and adjustintervention strategy i f

requiredReport to SIP: Contributes toSIP Indicators of SIP L ong-

term Program Goal 3 and 4.

I_ .-Use o f Iotermediate

Outcome MonitoringResults 1-3 :

A P L 1 mon itor progress

indicators on an annualbasis

Endo f project :assess and adju st

component strategy if

required.

assess lessons forextending program at

national level

Report to SIP:Result 1 contributes to SIP

Indicators o f R 1 (1.I),R 3(3.1, 3.2, 3.3)

Result 3: Contributes to SIPIndicators o f IR 1 (1.l),R 2

(2.2), IR 3 (3.1, 3.2, 3.3)



Nation al enabling environment more

conducive to SLM up-scaling.wo rk plans and reports (inclu dingM&E reports, expe nditure andaccounting reports)

Natio nal lev el multi-partner, multi-

sector SLM investment framework i s

established and un der

implementation

Effective oversight, monitorin g o f

project activities, p olicy guidance

and lessons learned.

(2.1, 2.2) an d IR 4 (4.3, 4.4,

4.5,4.6)



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recruited

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Match ing Grantoperational.

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technical studies

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transferableinfrastructurecompleted

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in all fou r sites

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contracts signedin al l four sites

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recovery in

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erosion control

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established andoperational in

the four project

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Contractsexecuted

satisfactorily.

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mechanism for

the funding o fnon-

transferable

irr igat ioninfrastructure

(FERHA)

established and

operational;

guichetsfonciers

established an doperational in

the four project

sites.WatershedDevelopmentPlans executed

satisfactorily

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Annex 4: Detaile d Project Description

Madagascar: Irrig ation and Watershed Management Project

1. The proposed GEF project i s part o f an overa l l program approach to watershedmanagement and irrigation development that includes IDA f inancing (already approved in

November 2006) and other donor financing. T h i s program approach i s described in detail

here, with specific reference to the joint IDA-GEF finan cing elements. The GEF projectincludes two technical components covering tw o strategic orientations: (i)evelopment o f

commercial agriculture, and (ii) atershed development. A third component i s related to

program management. In accordance with the “integrated ru ra l poles” approach, the project

proposes four similar subprojects in the four regions involved: Andapa, Marovoay , Itasy, andin the Lac Alaotra area, the Sahamaloto irrigation scheme (Annex 1). The GEF project i s

different to the already-approved IDA f inancing which covers an additional component -

irrigation development. GEF funding w i l l focus on sustainable agriculture based on

innovative techniques and approaches, soil conservation techniques and watersheddevelopment.

A. Project Objective, Outcomes and Components

2. The project development objective i s to establish the basis for viable irrigatedagriculture and natural resources management in four main irr igat ion sites and their

surroun ding watersheds: (i) ndapa (Sava Region), (ii) arovo ay (Boeny Region), (iii)tasy

Region, and (iv) Lac Alaotra ( Alaotra Ma ngoro Region).

3. The expected project results include (i)issemination o f nnovative technologies and

equipment to 30,000 beneficiary households through extension, capacity strengthening and

targeted cost sharing, (ii)mproved management o f about 21,780 ha o f irr igat ion

infrastructure through investments in rehabilitation, training and institutional reforms, (iii)impro ved management o f about 8 sub-watersheds through capacity strengthening and

investment in watershed infrastructure and sustainable watershed management, and (iv)

increased government support for sustainable agricultural intensification in i rr igated and

rain fed areas thro ugh increased pub lic expenditures.

4. The global environmental objective of the project i s to improve the environmental

sustainability o f land management practices in four targeted watersheds. The inte rim resul ts

are (i)0 percent increase in area o f la nd under sustainable management in targeted project

intervention areas (as a percentage o f baseline), and (ii)5 percent increase in vegetationcover (as a percentage of baseline)

5. The project concept i s based on the fol low ing principles: (i)lear responsibilities for

each o f the actors in the management o f irri gat ion schemes and surround ing watersheds



6 . The GEF-SIP intervention will support the advance o f sustainable lan d management(SLM), especially in upper watershed areas that are highly vulnerable to degradation andwhere natural resources management issues are complex in order to develop viable

agricultural intensification in the lowlands and the uplands, to prevent encroachment intosensitive upper watershed areas, and to help stabilize deteriorating upland catchments. Inaddition, the operation will help leverage poli cy reforms and a lign stakeholders in order to

drive larger uptake o f SLM practices in he keywatersheds an d elsewhere in the country.

7. The four sites have been selected based o n their accessibility, ava ilab ility o f

agricultural services and potential for increased productivity through improved water

management. At the same time, public irrigation schemes are characterized by serious

institutional weaknesses, la ck o f clarity with respect to roles and responsibilities o f

stakeholders, and watershed degradation.

B. Project Components:

Component 1: Development o f Commercial Agriculture

(US$12.46 mill ion, includ ing an IDA contribution o US$7.45 mill ion, a GE F contribution o

US$2.50 millio n, and a beneficiaries’ c ontribution o US$2.51 mill ion)

8. T h e objective for this component i s to lay the foundations for impro ved marke t access

and sustainable intensification and divers ification o f irrigate d and rainfed agriculture in the

project’s watersheds.

9. The ‘Development o f Commercial Agriculture’ component involves the proje ct area as

a whole: irrigated schemes and upland or tanety areas. In upland areas, i t s part o f a coherent

framework which i s ‘Watershed Development’ proposed in subcomponent 3.2. I t s specificobjective will be achieved through an approach focusing on market-driven demand,

agricultural technology development and dissemination, init iative by private operators andvertical integ ration and coordination o f selected supply chains by prom oting partnerships

among actors, includingpub lic private partnerships (PPP).

10. The component aims at im proving, al l along the targeted supply chains:

0

0

Access to market and marketing systems in order to reduce costs and increasefarm gate prices;

Adde d value through dive rsification int o higher added value products andagro-processing;

Capacities o f armers, farmers groups and professional organizations;

Agricultural p roduct ivi ty through better access to extension, improvedtechnology integrating SLM principles, inputs, and credit.



Table 8: targeted areas in terms of rice intensification and sustainable diversifica tion n ra in fedproduction (agro-ecological, etc.) and dry season (including priv ate irr igatio n)

Areas under seed multipl ication

Input Suppliers

Equipment Suppliers

Blacksmiths/mechanics

(Ycommune)

Agro-industrial and commercialonerators

/a: Rehabilitated phy sical areas (see RDC-IRAMstudy) x use intensity. RBME = r ice with good water control; MME= ice

with poor water control.

Ib : mgation infrastructure rehabilitation s focusing on Sahamaloto, but ac tivities to promote agricu ltural produ ction target a

larger area (8 communities), includin g Anony and a part o f Amparafaravola.

50 30 30 40

3 3 3 3

2 2 2 2

20 10 10 18

45 45 12 28

12.

Table 2:

Di re ct beneficiaries fr om the agricultur al develop ment component are presented in

Table 9: Dire ct beneficiaries fro m the agric ultura l development component

13. Intermediate results are (i)SCs established in each o f the four sites, (ii)ncrease by

50 o f the number o f POs, unions, and federations o f active producers who have registe red



14. Cr i t ica l r isks include: (i)apacity among producers and their organizations to meet

technologies supply and to manage the support-guidance scheme ;(ii)he will among private

operators to invest directly in on g term contractual relations with agricultural producers; (iii)maintaining and strengthening inc entive policies fro m the State in favor o f agricultural private

sector; (iv) lo w rates o f adoption o f S L M echnologies due to lo w capacity in project sta ff and

communities; (v) high vul ner abil ity to c limati c extremes and associated impacts.

Sub-component 1.1:Supp ort to a gricu ltural services.

(US$7.14 mil l ion, including an IDA contr ibut ion o US$5.15 mil l ion, a GEF contr ibut ion o

US$1.97 mil l ion, and a beneficiar ies’ contr ibution o US$O.02 mil l ion)

15. The aim in this subcomponent i s to la y the foundations for the development o f

commercially oriented agricultural production by implementing innovative technologies for

sustainable produc tion, storage and processing o f agricultu ral products, by im pro vin g access

to markets, and by supporting the development o f comm ercial agricultural supply chains.Investments under this subcomponent are targeted at im pro vin g the enabling en vironment and

prov iding incentives (in addition to on-demand support to investment projects by privateinitiative to be fund ed under subcomponent 2). This includes the prom otion o f sustainable and

profitable agriculture on hillsides and in lowlands (for example throu gh agro-ecological and

agroforestry techniques). The project takes a gender sensitive approach and also specificallysupports vulnerable groups in their demands. The project finances the services, work,

equipment, training and operational costs o f such public investment and o f the activit ies

corresponding to the core pub lic responsibilit ies. Activit ies will be adjusted to specific needs

o n each site, and ma y include the fol lowing:

(a) Support to the development o comm ercial agr icul tura l supply chains. The proje ct has

already recruited or i s recruit ing for each site one or several professional service

providers for promoting market-driven supply chains. The project uses as much as

possible the exis ting schemes for su pporting the private sector and agribusiness wh ic hare already opera ting in Madagascar, such as the net wor k o f “business centers” set up

by the BAMEX project and/or interprofessional technical support centers, such as

C T H T and CT HA . Such service providers are responsible for the follo win g activit ies :(i) arket research and surveys for national and export markets, as well as thematic

studies in storing, processing, packaging, post-harvest treatment and quality

management, (ii) /D on im pro vin g technical it ineraries for production, conservation,

and valorization, (iii)elping elig ible operators prepare documents fo r submission o f

sub-projects to the matching grant mechanism and to the banking system, and (iv)developing partnership contracts between producers and operators for the marketing

and processing o f argeted products. GEF wil l not contribute to this activity.

Strengthening the capaci t ies o farmers and professional organizations, as we ll as the

establishment o f agric ultura l service centers (ASC). The project aims to build(b)

B V P I area, as w el l as operating costs fo r the platform . GEF will provid e targeted



trai nin g o f farmers’ organizations, and facilitate farmers exchange visi ts to assure thatSLM princ iples are mainstreamed within the agricultural activities.

Strengthening the supply o technology or production and valorization o agriculturalproducts, in particular technologies geared at promoting intensification o f r ice

cultiva tion o n irrigation schemes, pr omo ting the adaptat ion o f agro-ecologicalcultiva tion techniques to sustainable rainfed produ ction systems and diversification o fproduct ion systems for targeted and priority supply chains, including livestock

production. The project supports: (i) ervice providers for adaptive research and

dissemination o f mpro ved technologies identif ie d as priorit ies by the partners, and (ii)

the strengthening o f capacities o f regional public services fo r seed quality and phyto-

and zoo-sanitary control. A distinction i s made bet ween (a) the more product ive landat the bottom o f the hillsides that lends itse lf mor e easily to inten sification compared

to some o f (b) the traditional agricultural upland systems that depend on slash-and-

bumpractices (tavy). These upland systems, fou nd in marg inal and remote areas o f theupper watersheds, are o ften based on deforestation, thus threaten biodiversity, degrade

soil product ivi ty quickly due to burning practices and short fallow periods, and

contribute to erosion. O fte n these farmin g practices do n ot al low farmers to achievesatisfactory incomes. However, it i s possible to develop sustainable agricultural

product ion systems that can be productive and profitable (e.g. through agroforestry,

agro-ecological and horticultural techniques). The im provem ent o f these systems willneed more t ime and effort than for the systems downstream, and needs intensive on -

farm technology development work in order to develop sustainable and profitable

farming practices. M os t o f GEF f inancing in this sub-component will be used under

this l i ne o f act ivi t ies. GEF will fund the service providers for adaptive research and

dissemination, and provide training and capacity strengthening no t on ly to farmers, but

also to the regional pu bli c technical services.

The project ’s main implementing body wil l be DRDR. Detai led implementat ion

(c)

16.

modalit ies for each activity group in subcomponent 1 are specified in the Table 3.

Subcomponent

Development o f sustainable a nd market-

driven supply chains

Capacity-building o f producers and

support to pr oducers organizations

Applied research and technolo gy

Implementation

Recruitment o f egional partners by DRDR

Recruitment o f service providers by ASC

Recruitment o f one or several service providers

dissemination (FOFIFA, TAFA, ON G, etc.), in a competitive

way and under contract with DRDR

a l l levels o f he supply chains. To this end, the project will finance, throu gh a matc hing grant,



ind ivid ual o r collectiv e initiativ es and sub-projects as presented in Table 4.

Table 11: Individual o r collective initiatives and sub-projects

Support to marketin g

chains

Support to input, credit

and equipment

providers

Support to prod uctive

investment

Marke t surveys, supply chain analysis, development o fquality and certification management systems;

commercial/market trials

0 Infrastructu re for grouping, storage and post-harvesttreatment

Integrated projects fo r setting up contract-based agricu lture

systems to the ben efit o f small scale producers

0 Establishinglextending networks for distributing inputs

and equipment ;

0 Technical and management advisory services (for

example, technical and managerial capacity building for

seed producers).

0 Technical support and extension o f mi cr o financenetworks

Technical support for the development andimplementation o f ne w prod ucts (e.g., weather insurance)

0 Adaptive, agricu ltural, and ago -in dus tria l research

(varieties, technologies an d pro duc tion and proces sing

equipment) ;

Introduction, dissemination and on-farm development o f

new agric ultura l pro duc tion techniques (agroforestry a nd

ago -ec olog ica l techniques, etc.);Awareness raising and demonstration campaign (inputs,

equipment, etc.)

Rehabilitatioddevelopmento f quality seed production;

Reforestation and improv ement o f degraded soils.

0

0

18. The implem entation modalit ies o f he cost sharing mechanism for financial assistance

to private - indiv idua l or col lect ive - investments corresponding to the broad objectives o f he

BVPI project i s outlined in the implementation manual. The manual includes a l i s t o f

el ig ibl eh on eligible activities, selected on th e basis o f their potential contribution to

project/government objectives. Eligible activit ies clearly relate to agricultural produ ction and

management o f natural resources sub-projects that are presented by beneficiaries, and co-

and targeting the improvem ent o f upland agricultural systems that are based on fire use (e.g.



taw

19. These activities will contribute to achieving the SIP result 1 (SLM applications o n theground are scaled up in the country-defined priority agro-ecological zones), and result 3

(commercial and advisory services for SLM are strengthened and readily available to land

users). The activit ies are rooted in the SIP components 1 and 3 (more specifically the

subcomponents 1.2, 1.3, 1.4, 1.5 and 3.2). In addition, IDA funds will specifically support the

SIP sub-component 3.3 and 3.4 and 3.5). M or e detailed inform ation o f GEF funded activit ies

can be found in he Incremental Cost Analysis (Anne x 15).

Component 2: Watershed Development.

(US$4.33 mil l ion, including IDA unding o US$I 82 mil l ion; GEF contr ibut ion o U S 2 . 4 2millio n, and beneficiaries contribu tion o US$O.09 mil l ion)

20. The object ive o f he component i s t o lay the oundations for sustainable management

o watersheds includin g irrigate d and rainfed agricu lture, the conservation o the natura l

heri tage, and improved product ivi ty o the na tu ra l resources.

2 1. A participatory and integrated approach to sustainable land management should

encourage loc al popu lation (male and female) to take respo nsib ility and engagein

the

sustainable management o f their natu ral resources. The component aims to contribute to (i)

the protection o f watersheds by reducing erosion and sedimentation; (ii)ncreased

produ ctivity and sustainability o f upland systems (including cropping, agroforestry, forestry,

and pastoral systems), (iii)mpro ved management o f natural resources to generate

environme ntal benefits, (iv) impro ved access to lan d and user rights.

22. Cri t ica l r isks include (i)armers may be hesitant to participate in activit ies outside

their o w n fields, as they fear not to directly ben efit from environmental improvements. Where

possible, on-site improvements that produce upland and low lan d benefits are promoted (w hic hare expected to be numerous due to advanced degradation status o f the land). In addition,

other incentive s such as support to la nd tenure se curity will be favored. Only in cases with a

distinct disconnect between upland and lowl and activities, the project may seek to pi lo t other

available and innovative incentive systems (e.g. payments for environmental services). T h e

project will remain f lexible with the response depending o n the analysis and the feasibility o f

implementing the various solutions; (ii)he handing over o f land rights to loca l communi ty

groups c ou ld be perceived by some as threat to free access to natural resources. The project

will establish and strengthen com mun icatio n and nego tiation platforms. By forming networks

o f community groups, loca l communit ies will be in a stronger pos ition to withstand outsideinterference; (iii)igh vulnerability to climatic extremes and associated impacts. The project

will draw on analytical activit ies o n mapping climate related vulnerabilit ies and also conduct

targeted risk screening for relevant activity lines to identify risk mitigating options, where

necessary. These include higher standards for irrigation and erosion control devices, and

and information system for S L M established, and (vi) 60 perce nt change in SLM applications



adopted by land users, against baseline data. GEF will finance the par ticipa tory sub-watershed

management plans, the training o f and support to the 60 S L M groups that w i l l lead to the

adoption o f SLM applications, and the establishment o f an integrated knowledge andinform ation system for SLM.

24. GEF contribut ion will complement ID A funding by addressing longer-term

environmental and land degradation issues at the watershed level, that negatively impact

lowla nd and upland agricultural product ion systems as well as global environmental goods

and services. GEF funding will be used to address these l an d degradation issues throug h a

participatory and integrated approach to a broader operation and scale up SLM practices onthe ground. Building upo n recent knowledge acquired on cl imate r isks in the country, i t will

strengthen integrated land use planning, reinforce upstream and downstream linkages,

promote environmental sustainability in watershed development, build-up loca l capacity and

promote the use o f echnologies to im prove agriculture produ ctivity w hil e conserving natural

habitats. The ac tivities fund ed by GEF are described in detail in he subcomponents below .

Subcomponent 2.1: Support to Watershed Man agem ent(US$3.13 mil l ion, including IDA funding o US$1.25 mil l ion; and a GEF contr ibut ion o

US$1.88mil l ion)

25. The watersheds in the four project zones are very different in terms o f geography,

climate, biod ivers ity, popu latio n density, la nd use, prod uctiv e potential, ongo ing developme nt

programs, a vailab ility o f potential partners, etc. The fol low ing description o f the component

and the various activities i s an overa ll description. The project i s adopting a flexible approach

that allows mo di fyi ng activit ies according to needs, on-going programs and collaborationpotentials with partners who are already wo rki ng in the proje ct areas.

26. Planning o f watershed management i s done in three steps:

(i) T he f i rs t step i s preparing a watershed management plan for the watershed

areas ad’acent to the irrigation schemes in the in the four project zones (about40 0 km for Sahamaloto/Lac Alaotra, 500 km2 for Itasy, 1,000 km2 for

Andapa, and 500 km2 or Marovoy). The “large” irri gat ion schemes consist o f

groups, clusters or sectors o f schemes, each associated with a sub-watershed.

The WSM p lan will cover all th e sub-watersheds that are directly associated to

the irrigation schemes7.The second step involves the development o f participatory W S M plans for the

approximately eight sub watersheds associated with the irrigation schemes

covering an area o f between 10 km2 o about 500 km2.

2’

(ii)

participatory zo ning and plannin g o f subwatersheds, the supp ort to comm unication and



negotiation platforms, the training o f S L M groups and technical staff, and the development o f

an integrated knowledge and inform ation system fo r SLM.

at the le ve l o f watersheds - the pro ject finances technical assistance to prepareone WSMplan for each of he four pro ject zones, w hic h includes :

(i) Zo ni ng and desc ription o f land use systems, ecosystems, settlements,institu tions and partners, includingclimate risks.

(ii) Strategic analysis o f erosion problems (as the m ai n source o f downstreamsedimentation) and o f natura l resource degradation;

(iii) specific and detailed analysis to identify responsibility for theimplemen tation o f project activities, wh ile taking into account existing

partners in he area(iv) Establishing a baseline for monitoring and evaluat ion o f component

results.

at the sub-basin le ve l - he project finances technical assistance to facilitate

preparation of :

(i) a part ic ipatory zoning o f sub-watersheds to determine the optim al la ndus e according to (a) topography along a gradient from downstream toupstream, (b) current land use and land rights, (c) diagnosis o f soil

fert i l i t y and so i l product ion potent ial, (d) locatio n and characteristics o fwater sources and streams, and (e) or ig in an d pathway s o f erosion, a nd

(ii)Part ic ipatory plans for sustainable sub-watershed development andmanagement.

Support to existing comm unication and negotiation platforms with the ai m to

(i) Involve stakeholders and partners (communes, farmer organizations,NGOs, etc.) in nform ation exchange and communic ation

(ii) Discuss, negotiate, and validate pa rticip atory WSM plans ;(iii) egotia te con flict settlement.

(iv) Support o f environmental platforms in the project areas

Train ing and capacity strengthening o f SLM groups, and o f ocal and regional

staff in, among others:

(i) Environm ental awareness raising campaigns fo r loc al communities.(ii) Tra inin g and/or strengthening o f farmer organizations in natu ral resource

management by pr ov id in g technica l assistance for instance for example,

fo r c attle herders or charcoal makers and the ir associations.

(iii) pecific training to loca l and regional staff (NGOs, technical government

services) in techniques that are required for the implementation o f thecomponent, such as participatory planning methods or agro-ecological

techniques.

Improvement o land tenure securi ty: The project contributes to the

inter ventio n area) in close consultation with the PNF. The pro ject also supports



communit ies in obtaining community-based land rights (e.g. GELOSE) and

will provide for technical assistance to support the preparat ion o f natural

resources management plan s within the f ramework o f GELOSE.

Integrated Knowledge and Information System for SLM ; Th is activi ty aims at

capitalizing existing national and international SLM knowledge, at collecting

relevant informatio n on technical S L M options, and at establishing a nationaldatabase on SLM. The act ivi ty can draw on the capacity and framework

developed under TenAf r ica . T h i s activi ty will furthermore substantially

contribute to information d istr ibut ion and communicat ion under component 1and 3.

( f )

Subcomponent 2.2: Sustainable investment in watersheds(US$1.20 million, including IDA unding o US$0.57 million; GEF contribution o US$0.54mil lion, and benepciaries ’ contribution o US$O.09 million)

28 . Depending on the WSM plans that have been prepared, a menu o f nvestments eligible

fo r project support i s bei ng prepared, and specific cond itions (po sitive and negative l is t) will

be prepared, f ro m w hic h lo ca l populations may select investments they conside r appropriate

fo r their specific needs. In principle, investments with long-term environmental impacts, and

community based groups or associations will be el igible. Specif ic el igibi l i ty condit ionsinclude co-financing (in kind or in cash), institu tiona l capacity a mong groups, and the

confirmation o f social and technical val idity o f the proposals. Additional support will be

provided in a competitive way, i.e., depending o n the targets that stakeholders agree to se t fo r

themselves, and the leve l o f their achievement.

29.funded by IDA, and activit ies in (b) by GEF:

(a)

The project finances the fol l ow ing act ivit ies, o f which act ivi t ies in (a) i s

Strategic erosion control. Ero sio n “hot spots” are being ident i f ied throughstrategic an d participa tory analyses conducted under subcomponent 1. Through

negotiations, local strategies are being developed for controlling erosion,

arresting gullies and reducing the quantity o f sediments transported to

downstream irrigation areas. The project finances the establishment o fstrategic anti-erosion works includ ing through works, and biolog ical methods

and techniques. Works are being built favoring use o f local manpower. Inprinciple, W A S n irriga ted schemes should participate in planning o f erosion

contr ol measures and should pay pa rt o f costs. M an y o f these strategic anti-

erosion works will actual ly be part o f the irrigation investments. Examples are:

constru ction o f reten tion structures (fascines) in combinat ion with vegetative

interventions for halting gully and lavaka erosion; and rev egetation a ndprotecting river banks and planting o f anti-erosion hedges (vetiver, fodder

points for cattle, rotational grazing, and keeping cattle in stables for



manure collection.

(ii) Awareness raising campaigns that address destructive traditional

practices such as fire use for pasture and agriculture, and providingsupport in developing technical alternatives with a participatoryapproach. (this will be complementary to activit ies conducted under

Environm ent P rogram (EP3))

(iii) eforestation and revegetation of degraded land, inc lud ing the restorationo f natural vegetation, support to c omm unity o r private reforestation

(iv) Provision o f support to protec t natural forests and i t s biodiversity, andnat ura l habitats such as marshes and lakes.

30. These activit ies will contribute to achieving SIP Result 1: SLM applications on theground are scaled up in country-defined prior ity ago-ec ologic al zones; Res ult 2: effective andinclusive dialogue and advocacy on SLM strategic priorities, enabling conditions, and

delivery mechanisms established and ongoing; and Result 3: commercial and advisoryservices fo r S L M are strengthened and readily available to lan d users. The ac tivit ies are also

rooted in the SIP Component 1 Supporting on-the-ground activit ies for sc aling up (1 2., 1.4.,

lS.), Component 2: Creating a conducive enabling environment for SLM and more

sp ec ificall y the sub-components (2.4., 2.6., 2.8.), an d Com pon ent 3: Strengthening

comm ercial and advisory services for SLM (3.1 .,3.2.).

Component 3: Program M anagem ent

(US$4.43 mil l ion, including IDA funding o US$3.45 mi l l i on ; GEF contr ibution US$O.98mi l l ion)

3 1. The object ive o f this component i s to manage and use resources in accordance with the

project’s objectives and procedures, a nd to put in place a pol ic y framework that i s favorable to

up-scaling o f he project at the national level.

32. Intermediate results include (i)l l f inancial and technical audit reports are unqualif ied,(ii)ational strategy on fertil izer supply and legal guidelines f or the ap plication o f ne w seed

legis lation adopted and implemented, (iii)rogram BV /P I ncorporated nto MAEP’s m edium

term expenditure framework, (iv) national multi-partner, multi-sector SLM investment

framework in the B V P I program context i s established a nd under implementation. GEF will

support projec t management and mo nit ori ng and evaluation to assure that the env ironmental

global objective i s we ll mainstreamed in the project, and will provid e support to establish and

implement the national SLM investment framework.

33. The GEF funded activit ies will contribute to achieving the SIP result 4: targetedknowledge generated and disseminated and monitoring established and strengthened at all

levels. They are also rooted in the SIP component 4 and more specifically in the

subcomponents 4.4. a nd 4.5.

Table 12: targets of component4



At least five policies/studiescompleted and discussed withkey stakeholders

0 1 2 2 5

Sub-Component 3.1: Project Mana gemen t

(US$1.89 million, including IDA funding o US$1.51 million; and a GEF contribution o

US$O.38 million)

34. This sub-component supports the project management through the provision o ftechnical assistance, training, office equipment and vehicles, minor office upgrading works,

auditing and evaluation studies, and incremental operating costs in support o f project

management.

35. The sub-component comprises over all proje ct planning, quality oversight,

procurement, f inancial management, and m onitorin g o f project activit ies. I t includes quality

oversight through independent financial and technical audits, and evaluation o f project

activities. Finally, the sub-component allows the design and implementat ion o f acom mun icatio n strategy to disseminate core proje ct messages to ben eficiaries and partners o f

the project. GEF will contribute to the funding o f he technical assistance.

36.

coordination.Project management encompasses al l fo ur targeted watersheds as well as national level

Sub-Component 3.2: Policy Support

(US$0.48 million, including IDA funding o US$0.36 million; and a GEF contribution o

US$O.12 million)

37. This sub-component provides technical assistance, studies, training, information

campaigns, cross visi ts and workshops for the development o f major national policies,

regulations, and plans considered crit ical to the Government’s National Irrigation and

Natio nal lev el mult i-partner, mult i-sector SLM investment framework in the B V P Iprogram



38. The sub-component also prov ides in it ia l technical assistance support to emerg ingprofessional groups, in particular the Platforme Consultative de Riz an d the Association

Ma lgac he de Producteurs de Semences.

39.

benefit a l l ke y distr ibutors and producers involv ed in he sub-sector.The scope o f this sub-component i s national. The impro ved policies are expected to

40. The two pro jects o f the Wo rld Bank and the UNDP under the GEF-SIP Madagascar

program will elaborate a Country S L M Investment Framework (CSIF) as a com mon output o f

the two operations. T h i s investment framework wil l be designed to cover a l l SLMinterventions in the country across sectors and multiple donors. These efforts will contribute

to scal ing up SLM to achieve the object ives o f the country’s U N C C D NAP, as we ll asNEPAD’s Comprehensive African Agriculture Development Program (CAADP) and

Environment Ac t ion Plan. GEF f inancing will focus o n the elaboration o f he CSIF.

Sub-Component 3.3: Monitoring an d Evaluation:(US$2.06 mil l ion, including IDA funding o US$1.58 mil l ion; and a GE F contr ibut ion o

US$O.48 mil l ion)

4 1. T h i s sub-component provides technical assistance and capacity strengthening to the

Department o f Statist ics and Inform ation (DSI) under M AEP t h a t will be responsible for

project M&E and assessment o f development impact. T h i s i s done o n the basis o f a

specialized project M&E / management information system, as well as procedures for data

col lect ion and report ing. In t s collec tion o f relevant data, DSI depends o n direct re porting by

inst i tut ions involved in project implementation (MFI, MEF, ASC farmers and W A S ) ,

systematic data collection for other purposes, participatory assessments, regular user

satisfaction surveys (e.g., in rrig atio n schemes), inc om e surveys, and targeted data col lec tion(among others through satellite photos), as established in the project implemen tation manual.

The data that will be co llected and monitor ed include those presented in Annex 3.

42. DSIwill comm ission tw o evaluations o f proje ct output and impact indicators, at mid-

t e rm and at completion. The output o f M&E would provide sufficient evidence in linking

periodic and annual monitoring with subsequent annual project planning activit ies so that

M&E data are interpreted and used as an instrument for project planning. In addition, theoutcome o f user satisfaction surveys will fo rm an input i n to the determination o f any merit

payments to consultants pro vid ing echnical assistance to the (F)W A S .

43. Regional Mo nito ring Committees will be established in each o f the four proje ct areas

that will be chaired by the H ea d o f the Region and made up o f members o f GTDR. The

44. GEF finding wil l contribute to the project monitoring and evaluation system by

financing the satellite images and their interpretation to moni tor the glob al and environm ental



indicators in order to assess impact o f project activit ies o n la nd degradation, carbon

sequestration, biod ivers ity, habitat protection, and area under SLM. In addition, a comm unity-based monito ring system will be supported. GEF finds will further contribute to the technical

assistance to M&E, to technical audits and the project evaluation, and to the environmentalsafeguard mon itorin g.

Annex 5: ProjectCosts



Madagascar: Irr igatio n and Watershed Management Project

NOTE: Th is annex presents the total fin ancin g fo r the IDA an d GEF parts o f he project

including the Irr igati on Development component wh ich s being funded only by IDA.

Loca l Foreign Total

$mi l l ion $mi l l ion $mi l l ionProject Cost By Component and/or Act ivi ty us us us

Component 1 Development o f Commercial 9.90 1.69

AgricultureComponent 2: Irr igati on Development

Component 3: Watershed Develop ment

Component 4: Program ManagementPPF

11.5911 78 2.08 13.863.41 1.17 4.582.58 1.15 3.730.59 0.59

Total Baseline Cost 27.67 6.09 34.35Physical Contingencies 1.38 0.37 1.75Price Contingencies 4.00 0.30 4.30

Total Project Costsa 33.64 6.76 40.40Interest duringconstruction

Front-end Fee

Total Financing Required 33.64 6.76 40.40

Totalommunit ie Borrowe

S rDA GEF

roject Cost By Component andFinancier

Component 1 Development o f 7.45 2.50 2.51 12.46Commercial AgricultureComponent 2: I r r igat ion 15.67 1.80 17.47Development

Development

Management

PPF 1.61 1.61

Component 3: Watershed 1.82 2.42 0.09 4.33

Component 4: Program 3.45 0.98 4.43

~~~~~

Total Financing Required 30 5.90 4.4 40.30

' Identif iable taxes and duties are US$4.68 mil l ion, and the total project cost, net o f axes i s US$35.72

Annex 6: Institutional and Implementation Arrangements




1. F or the purposes o f this document, the in stit utio nal and imp leme ntatio n arrangements

for the jo in t IDA-GEF project are presented. GEF f inancing will be focused only on the

development o f commercial agriculture and the watershed management components, as wellas the p rog ram management.

A. Project Implementation

2. The pro ject concept i s based on the fol low ing principles: (i)lear responsibilities for

each o f the actors in the management o f irrigat ion schemes and surro unding watersheds(farmers, water users, populations and their associations, C omm unes and Inter-communes,

Regions, centra l Government); (ii)f fective part icipat ion o f he populat ion in he diagnosis o f

problems and ident i f icat ion o f opt ions; (iii) o-management o f irrigation schemes and

watersheds by all the actors concerned; and (iv) adequate incentive systems and efficient

mechanisms to ensure that a ll respect their commitment.

3.

and Local.

The project i s implemented at four levels: National, Regional, Intercomm une/district

0

0

0

0

B.

Nat iona l . M A E P i s responsible for the overa ll implementation o f the project, in fullconsultation with the other Ministrie s at the national level that are invo lve d in order to

ensure that projec t activ ities are consistent with national policies.

Regional. The DRDR are responsible fo r the implem entation o f a large part of project

activities. The Region i s the opera tional lev el that ensures (i)oherence and plannin g

o f the project activities, and (ii)mplementat ion o f certain support or investment

activit ies (e.g., rehabilitation o f large irrigatio n schemes) at the l eve l o f the fourproject sites.

Intercommune/Distr ict. This i s the level responsible for the implem entation o f those

activit ies that require collaboration at the intercomm unal level (e.g., managem ent o f

watersheds and large irr iga tion schemes, ASC, guichetsfonciers).

Loca l : Main level for the implementat ion o f the project at the leve l o f grassrootcom mun ities and economic operators.

Implementation Arrangements

Steering Committee and Guidance

recommendations o f corrective measures that may be necessary t o ensure the efficient

carry ing out o f he Project and the achievement o f he objectives thereof; an d



5 . The Regional Monitoring Committee (RMC) at the regional level, one per Project

Area, each composed by GTDR and headed by i t s respective He ad o f the Region; each suchRMC shall ensure consistency o f Project activit ies with both, the NIWMP and pol icy and

regional development p riorit ies and programs; and shall be responsible for: (A) validating

detailed wor k plans and budgets at the regional level; and (B) reviewing Proj ect progress and

performance, and formulatio n and implem entation o f corrective measures that ma y be

necessary in order to ensure the efficien t carrying out o f the Project and the achievement o f

the objectives thereof; and

Implementation of Project Activities

6. The overall coordination o f the pro ject i s ensured by the National Program

Coordination Unit (NPCU) at MA EP . The Director o f N P C U reports to the NSC, responsible

for oversight and approval o f annual reports and work plans. The o verall coord ination

involves:

N P C U ensures project ownership at national level;

Regional Director for Rural Development (DRDR) i s responsible for projectownership o f project investments in their respective areas.

To support the implementation o f these tasks, through the IDA funding, the project

has financed the recruitme nt (i)t national level, o f an international technical assistant

(operations), advisor to NPCU, and (ii)t regional level o f four nat ional technical

assistants (operations), advisors t o DRDR for implemen ting project investments.

F inal ly , NP CU and DRDR have selected in their respective units one s ta f f memberwh o provides support for coordination and project monitoring.

The N P C U i s also responsible for th e implementation o f project act ivi t ies at the

national level, including capacity building at Ministry level, support to national

polic ies and strategies, etc.

The project financia l management i s ensured at national le vel by the Department for

Adm inistratio n and Finance at MA E P and, at regional level, by the DRDR f inance director.

The project has recruited under the ongoing Irr iga tion and Watershed Management Projectsupported by IDA a national financial management and procurement agency that provides

technical financial management assistance to MAEP’s Finance Director. Tb e project has alsorecruited at each DRDR a national financial manager, w ho i s under contract with the DRDR

and who i s in full time charge o f financial management o f the project. T h i s person works

who i s full t ime in charge o f project procurement. This s ta f f works closely with PRMP andbenefits fro m th e project support in procurement TA.



9 . Technical assistance. Recruitment o f TA - nternational (1) and nat ional (7 ) - has

been done under two separate contracts (one fo r fin ancia l and procurem ent management, andone fo r operation al assistance) with specialized f i rms. The International “Operations” TA i s incharge o f (i) dvising NPCU and their assistants and DRDRshheir assistants regarding

operational strategy, p roject im plementation and monito ring o f the project; (ii)raining and

providing operat ional support to MAEP staff involved in project implementation. T h e

Nation al “OperationsyyTAs wh o are recruited at the level o f DRDRs are in charge o f advisingand supporting DRDRs in project implementation in their respective areas and o f ensuring

coordination o f al l project components at regional level. National TAs in f inancial

management and in procurement are responsible for financial management and procurement

and for prov iding technical support to DRDR staff, The four financial and four procurement

consultants at regi on le ve l are responsible for financial management and procurement at the

regional level. They have been recruited under one contract with the national level financial

management and procu rement specialist, and wi l l repo rt to the nationa l specialist.

Implementationo f Project Components

Component 1: Development of Commercial Agriculture.

Sub-component 1.1 Support to agricultural services.

10.

activities are being imp lemented as follo ws:

The DRDR i s responsible for the implementation o f this component. The project

Support to the development o commercial agr icul tural supply chains. T h i s supportincludes identif ication and mobilization o f operators, strategic review o f market and

value chains opportunities an d constraints, identif ic ation and analysis o f productive

sub-projects and will be provided by regional partners rec ruited in each zone by the

DRDR. The priori t ies and wo rk p lan o f hese partners i s being def ined in consultation

with the ASC and loca l platforms, and approved by the GTDR who are responsible

fo r (i)dministration o f the matching grants; (ii)upport to eligible operators in the

prepara tion o f sub-project proposals; and (iii) trengthen capacities and provide

technical assistance to th e ASC. Remuneration o f the partners i s partly based on

performance.

0 Bu i ld in g the capaci t ies o farmers and strengthening o professional organizations, aswell as the establishment o f agric ultura l service centers (ASC ). These activit ies are

implemented under the responsibil i ty o f the ASC. The contractual sta f f o f the ASC

are recruited by the DRDR.

11. Support to private investment i s done through matching grants that are provid ed on a

demand-driven basis to individuals or groups. In each zone, matching grants operate as



follows:

A list with eligible (positive and/or negative) activities i s prepared, based on thecontribution that these activities will make towards achieving the project's

objectives.

The GTDR appoints a Selection Committee at the regional level. The GTDR

approves the request for matching grants after analysis and following a

recommendation from the Selection Committee. An external review will be

conducted twic e a year.

A regionalpartner is recruited by the DRDR and has the fo llo wi ng responsibilit ies

(i)dentify and analyze market and value chains opportunities; (ii) wareness

raising and m obiliza tion o f private operators and potential investors; (iii)acilitate

the preparation o f sub-project proposals by individuals or groups; (iv) facilitate

the ir access to a financier; and (v) conduct a technical and financial analysis o f he

sub-projects tha t request a ma tch ing grant.

Specialized service providers wil l be recruited by the DRDR on an as-needed basisto conduct strategic market and value chain studies. These studies can be

conducted either by the demander or by a service provider fol l ow ing competit ive

bidding.

A network o regionalpartners at the regional level i s being compiled by the ASC.

The network, with the ASC, wil l s ign multi-year contracts that specify the

mod alities and the expected results.

12. Ma tch ing grants are being provid ed to activit ies that have been identif ied as pri ori ty

by the Gove rnmen t: investments, technologies and advice. Inputs and technologies will only,

and temporarily (one or tw o year for the same beneficiary), be supported i f hey are necessary

fo r the dissemina tion o f inno vativ e technologies (e.g. conservation, agro -ecologic al

technologies). The project will under n o circumstances finance inputs that are already widely

available and used by the producers and financed by mic ro f inance inst i tut ions.

13. Financial public support can be justified by the proport ion o f "public good" o f the

investment (roads, information, etc) and therefore by the assumption that leaving theseinvestments to the private sector would lead to under-investment from a public resourceal location po int o f v iew.

14. Finan cial public support can also be jus tif i ed for those beneficiaries that don't have the

% public good



' Support to ma rketing

% G merit good ))

16. The beneficiary contribution i s pa id fully in cash, either from own means or through

credit, except for enviro nmen tal prote ction activitie s (forestation, revege tating farmers' f ieldsor reclamation o f degraded soils) by clear ly defin ed beneficiar ies (see com ponent 3), wherethe contribution can be in kind.

17.

operators' :

Eli gib le operators and activit ies. The project partia lly subsidizes the fo l lowing pr ivate

Professional agricultural and ago-in dustria l organizations;

Producers' organizations (crop, livestock, forestry, . .);

Rura l communit ies;Com mer cial agric ultura l operators and ago-processors;

ago-industrial companies ;

seed producers (associations and ind ividu als) ;

Distributors o f nputs and agricultu ral equipment;

M ic ro f inance networks.

18. El ig ib le activities are clear ly associated with agricultural product ion and with

management o f natural resources (a specific positive and negative l is t ) as presented in table13.

Table 13: eligible activities matching gra nt

Support to inn ovation

0

0

0

0

Market studies, value chain studies, development o f quality

management and certification, testing o f samples;

Adaptative agricultural and agro-industrial research (varieties,

technologies and produc tion and processing equipment);

Introduct iodtest o f new agricultural production techniques

(ex. ago-ec ological) ;

Awareness ra ising and demonstration (inputs ,equipments)

Development o f new micr o-fina nce products (e.g., weather

0

0

EstablishmenVextension o f input and equipment distribution

networks;

Integrated projects for the im plementation o f contract farming



0

between private investors and smallho lder producers;

Forestat ion reclaiming o f degraded soils.

Funds under the Matching Grant are disbursed as indicated in f igure 1.

Figure 1: Matching Grant disbursements

1

Information

disseminationand request for

proposals

Completion and

delivery by theTechnical

Secretariat

Submission o f

Iproposals andselection by

proposals Technical

Secretariat

Disbursement o f

remainder o f thegrant (10%)

11

Implementationo f sub-

project and monitoring

by Technical Secretariatand Disbursement of

(20%)

10Disbursement o f first

part o f the grant

Externalperiodic

review

Preparation o f

detailed sub-projects

Component2: Irrigation Development



19.

sub-components.

T h i s component i s implemented under the responsibil i ty o f the DRDR. There are two

20. Sub-Component 2.1: Management of Irrigation Schemes. Act iv i t ies in this sub-

component include (i)wareness raising and mobilization o f irrigation farmers and their

associations; (ii)articipatory diagnostic o f options for management and rehabilitation o f the

irrigation scheme (Scheme Development Plan or SDP); (iii)elect ion o f he preferred opt ion

for the mo bilizatio n and util ization o f water resources; and (iv) preparation o f a Performance

Contract between water users, Region, comm unities and M A E P . The DRDRhas recruited an

international consultant who, with support from a national consultant, i s implementing the

above activities in he four pr ojec t zones.

21. The rehabilitated irrigation schemes i s managed in accordance with the relevant

institutional framework (see table 14): (i) RDR i s responsible for the operation and

maintenance o f non-transferable irrigatio n infrastructure and for the m obiliza tion o f financialresources; (ii)F)WUAs are responsible for operation an d maintenance o f transferred

irrigation infrastructure, and for the mob ilization o f adequate financial resources among the

water users through O&M fees; (iii)he Communes are the owners o f transferred irr iga tion

infrastructure, andwill

be co-responsible,with the

WUA, for maintenance.They wil l

need toprovide adequate assistance to the (F)WUAs. They will also be responsible for the

maintenance o f roads within the schemes. However, the three stakeholders - Region,

Communes, WUA - will only be able to collect adequate funds progressively. This w i l lrequire: (i)ncreasing agricultural production and productivity, which will improve the

capacity to pay and (ii)mplementat ion o f effect ive mechanisms for th e mobi l izat ion o ffinancial resources (O&M charge, land tax, FERHA). Project resources will temporarily

provide financ ial incentives on a cost sharing basis. The Performance Contract will clearly

define the o bligations o f al l stakeholders.

22. Sub-component 2.2: Irrigation Investments. The DRDR i s responsible for the

implementation o f the i rr iga t ion rehabil itat ion works. In each region, spe cific activities c an be

outsourced to (i) national consultant for the technical studies and design o f the works,

includ ing supervision o f the works, and (ii) contractor for the construction works. A single

contract per reg ion i s signed with a consultant for the duration o f he project.

23. (F)WUAs s ign all contracts directly related to irrigation activit ies, and are co-

responsible for th e selection a nd evaluation o f consultants a nd contractors. They will need tos i g n o ff o n the complet ion o f he works and payments to contractors.


25.are responsible for the implementation o f activit ies under this sub-component:

Subcomponent 3.1: Support to Watershed Mana gemen t. The N PC U and the DRDR



0 Each DRDR i s recru iting a regional partner responsible f or (i)he m obi l izat ion and

capacity strengthening o f the loc al and regional consultation platforms; and (ii)participatory plan ning and impleme ntation o f the sustainable development and

management o f he various catchments.

0 Land registration ofices are being established by the respective communes. The

DRDR and the communes are receiving technical assistance from the Nat ional Lan d

Tenure Program (NLTP). The communes are responsible fo r the activities and the

proper funct ioning o f their La nd Tenure Offices, and in part icular o f the recruitment o f

adequate s ta f f and financing.

26 . The f i rst activities that the project has already launched included an intensive

awareness raising and com munication campaign to inf or m the populations o f the watersheds,inclu ding irrigators, o f the project object ives and to m obil iz e them with respect to i t s

implementation.

27. Subcomponent 3.2: Investment in watersheds. The Watershed Development Plansinclude a number o f nvestments that will be implementedas follows :

(9

(ii)

(iii)

(iv>

Strategic anti-erosio n work s that have been identif ied as priority in the Watershed

Development Plans. They will be 100 percent financed by the project and

implemented by priva te contractors contracted by the DRDR. In as far as possible,

works will be implemented through lo cal labor to promote the appropriation by the

local population. The selection o f contractors and payments made under thecontracts w i l l be cert i f ied by the invo lved communities.

Establishment o f zones under collective land management (GELOSE).The service

provider under contract with th e DRDR will be responsible fo r the facilita tion o f

these activities. The DRDR will be responsible for satisfying the administrative

requirements and the registration at the Land Tenure Offices. Necessary

investments, as well as the running costs o f the Land Tenure Offices, wil l bef inanced through Component 1

Dissemination o f ago-ecological technologies that require distr ibut ion o f special

inputs and access to extensio n will be implemented through the regional partners

that will be recruited by DRDR. Alternatively, in the case o f adaptive research,activit ies will be implemented by service providers that are contracted by the

DRDR under component 1.

Appropriate prod uctive investments (forestation, revegetation o f and) that wi l l be

percent to the investment costs (in kind or cash), with the exception o f the strategic anti-

erosion works (see (i)bove) that will be fully paid for by the project.



Component 4: Program Management

29. Sub-Component 4.1: Project Management. Respons ibility for the impleme ntation and

management o f the project i s assured by the N P C U a t the national level and the DRDR at the

leve l o f each o f he four project sites. The NP CU and the DRDR are in particular responsible

for (i)he preparation o f annual work plans and detailed budgets (at reg ional level, and

consolidated at the national level); (ii) onitoring o f mplementat ion progress in accordance

with the operations manual o f he project; (iii)reparation o f annual progress reviews that will

be presented to the Nation al Steering Comm ittee and to the Region al Mon ito rin g Committees;

an d (iv) conducting annual financial and technical audits. Specifically, the NPCU will be

responsible fo r the organization o f a bi-annual external technical audit o f pro jec t operations.

30.

o f strategic and technical support to the land tenure operations o f he project.

The N P C U will s i g n a MOUwith the National L and Tenure P rogram for the provision

3 1. Mon itoring and Evaluation. Mon itorin g and evaluat ion s being conducted under the

responsibi li ty o f the Director o f nfor mati on Systems (DISE) o f M A E P , w h o will be assisted

by the internationa l technical assistance located within the N PC U . In order to better integratemonitoring and physical investments, the project will adopt the Integrated Management

System (SIG) developed by the PSDR. Independent technical audits will be conducted by

service prov iders that will be qualif ie d annually, beginning in the second year o f the project.

T wo external impact evaluations will also be conducted: (i)t mid-term; and (ii)t the end o fthe project. T he analyses and recommendations o f these evaluation s serve to extend the

activities at the national level.

32. Mo nito r ing and evaluation consists o three separate but closely related systems:

(i) a system o f internal monitoring conducted by M A E P under the responsibi l i ty o f

D I SE in collaboration with N P C U staff at central and regional level so as to ensure

harmoniz ation and coherence in the monitoring o f he various programs implemented

by MA EP . However, this function can be delegated or outsourced to other entities

either for an entire component (e.g., PE3 for the Watershed component) or for all

activities at the reg ion al le vel (e.g., GTDR for each site);

(ii) system o f participatory eva luation at each o f he four sites (wh ich would al low for abetter appropriation and internalization by beneficiaries) by directly invo lv ing the

ma in beneficiaries (PO, (F)WUA, etc.) in the definition, collec tion and analysis o f

progress and impact indicators, and the identif ic ation o f corrective measures in the

event project objectives are no t being achieved.

region al monitoring and evaluation. These GTDR could be direct ly involv ed in the

mo nit ori ng and evaluation systems in each o f he site^)^.

33. Monitoring indicators. Overal l project monitoring i s based on indicators that will



form part o f he Project Brief Docum ent (see Annex 3), and o n the implementat ion plan thatwas agreed during proje ct negotiations. Specific achievements under each o f he components

will be measured more in detail with the a id o f a series of more specific indicators. These

indicators are grouped in wo categories: (i)erforma nce indicators that measure the resources

[input indicators] that the project has allocated and the activities i t has implemented [outputs

indicators]; and (ii)mpact indicators that measure the results that the project has achieved

[outcome indicators] as well as i t s impacts. These different indicators will be defined before

proje ct negotiations.

34. Integrated M anagement System (SIC). The m onito ring system will be integrated in toan Integrated Management System (SIG) that not on ly allow s f or a close interconnection

between the implementation o f act ivit ies from ident i f icat ion to f in al del ivery, but also and inparticular for establishing a connection between technical and physical achievements and

disbursements. The SIG also includes a procurement module that integrates the project

procurement pla n and the status o f each o f he procurement activi t ies o f he project.

35 . Sub-Component 4.2: Policy Support. The N P C U o f M A E P i s responsible for the

impleme ntation o f activit ies that aim to define nationa l policies relevant for theagriculturaVrura1 sector. That i s the case for the def init ion o f the operational modalit ies o fmanagement and replenishment o f FERHA. The N P C U has competit ively recruited the

technica l assistance that i t needs, and i s orga nizin g necessary consultations with stakeholders

at the national level (e.g. Consultative Platform for Rice, Fertilizer Producers’ Association,

Malagasy Association o f Seed Producers).



e .

e . e . .

e . . . e

e e . e . . . .

e . . . .

0b





Annex 7: Financial Management and Disbursement Arrangements




Introduction

1. In accordance with Bank policy and procedures, the financial management

arrangements o f the DFB ( ie PNBVPI) and RDFB (within the Min is t ry o f Agr icu l ture,

Livestock and Fisheries) responsible for the FM aspect o f this Project (GEF and IDA

f inancing) have been assessed in order to determine whether they are acceptable to the Bank.

T h i s review i s rather an update since the FM system o f these entities has already been

assessed in the context of the ongoing Ir rig ati on and Watershed Management Project (IDA

f inancing). The mai n conclusion of our review i s that DFB and RDFB f inanc ial management

systems meet IDA requirements [see Paragraph D (Q ) o f he PAD ].

Summary Project Description

2. The proposed e nding instrument for this progr am wo uld be a three-phase, twelve year

A P L (mid F Y 0 7 - FY19). The f i r s t phase (APL1) i s expected to be completed over a four-

year period (mid F Y 0 7 -mid FY1l),oweve r, fo r consistency purposes with the GEF grant,

the Association proposes to amend the IDA f inancing and extend the C losing Date o f the

Agreement to December 31, 2012. APLl aims to assist the G o M to implement innovative

approaches in support o f sustainable investments in agricultural product ivi ty in both i r r igatedand raine d areas, and consists o f the following components which are described in more

details in the paragraph B 4 o f the P AD : i)Development o f Commercial Agriculture; ii)

I rr iga t ion Development; iii) atershed Development and; iv) Program Management. A more

detailed description o f the components and activit ies i s attached in Annex 4. In format ion onGEF funded activit ies within the components can be found in the Incremental Cost Analysis

(Annex 15). The funding instruments for A P L l are as fol lows: $ U S 3 0 m i l l i o n f ro m IDA,US D 5 .9 m i l l ion f rom GEF an d $ U S 4.5 mi l l ion f r om loca l communit ies.

3. T h i s project i s being implemented by the National Program Coordinat ion Unit(NPCU) at the national leve l and the Ru ral Developm ent Regional Directorates (DRDR) at

the regional level. The FM assessments have take n this in to consideration.

Country issues

4. The W o r ld Ba n k ’ s C F M C PAR , co m p le t e d in 2003, and some diagnostic works

carried out over the last three years by the Bank a nd other donors, ide nti f ied a range o f

weaknesses and issues hamper ing the performance o f Madagascar’s budget and expendituremanagement system. To address these issues, the government has developed in 2004, 2005,2006 and 2007 in conjunction with a l l key development partners, a pri ori ty ac tion pla n for

public finance reform .

increased number o f missions to be undertaken. As a result, significant delays have been

noted regarding the presentation o f the budget execution laws to the Parliament. To mitigater isks in public expenditure management, the World Bank, through the Governance and

Institutional Developm ent Program (PGDI), and a number o f donors continue to support



Government’s public finance reforms reflected in t s annual prior i ty act ion plan.

6 . Regard ing the accounting profession, some posit ive developments have been note d

over the last three years. However, a number o f ocal accounting f i rms continue t o operate

bel ow the internation al standards. To improve the capacity and the competit iveness o f oca l

auditing f irms, the fo llo wi ng measures have been taken wh ile aud iting Bank/IDA financed

projects: i) bligatio n for loc al auditors to enter into partnership with international accounting

f i r m s ; ii) f fective part icipat ion o f the international accounting firm in audit f ieldwo rks and

submission o f audit report signed by the international audit f i rms. An accounting and auditingROSC i s presently underway to i de ntif y clearly bo th ssues and actions to be taken to

strengthen the capacity o f he accounting profession in Madagascar.

7. The us e o f coun try systems s t i l l remains r i sky for Madagascar due to some fidu ciary

weaknesses that require m uc h more time for their solving. To address this issue, and after

exchanges o f views with the borrower i t was agreed to (i)ntrust the FM aspects o f this

project to PN BV PI wh ich has experience from the ongoing IDA project (ii)se partially the

country system and (iii)stablish transitional financial management system arrangements

while the secto rhati onal f idu cia ry systems are being strengthened.

FM Risk Assessment and Mitigation

8.provides the measures to be taken to mitigate them:

The fo l lowing tab le ident i f ies the r isks that the project management may face, and

Risks

1- Inherent Risk

Country Level.

Audit may not be conductedin compliance withinternational auditingstandards due to: weakcapacity o f the accountingprofession n Madagascar,and; ii)nadequate number o fskilled and experienced

Risk

rating

S These issues are being addressedthrough the ongoing PFM reformssupported by IDA (through theGovernance and InstitutionalDevelopment Project) and otherdonors.The audit o f the project financialstatements will be carried out b y

Residual

Riskrating

M

system still remains risky due

to some fiduciary weaknesses

that require much more time

for their improvement.

support the GoM priority actionplan for public finance reforms in

the area o f public financial

management.



Project Level

Communities may not have

capacity to implement

subprojects.

Overall Inherent Risk

2- Control Risk

BudgetNomajor risk

AccountingN o major risk

Internal Controls

Procedures described in the

PIM may not be followedproperly by communities and

grants may not be usedfor

purposes intended

(implementationo fsubprojects)

M

M

L

L

M

In the meantime, a FinancialManagement Agency has been

recruited to handle the FM aspect

o f this project and assist DFB and

RDFB in this area.

Organization o f training session(s)

for communities to strengthen their

capacity in FM area and ensure

proper application o f proceduresdescribed in he PIM.

Strengthening the capacity o fcommunities n managing

subprojects and funds.

Regular audit carried out by the

Internal Audit Department (IAD)

complemented by the annual audit

conducted by qualified external

auditors

Semi annual supervision missions

including review o f the use o ffunds will be carried out by IDA.

NO: T h i s

training

must be

done prior to

transfer offunds to

communities

NO(see

above)

NO:To be

indicated n

IA D annual

work

program

NO

L

M

L

L

L

Financialreporting

kind.No Financial contribution i s

required.

L L



N o major risk

AuditingN o major risk

Overall Control Risk

OVERALL RISK RATING

Strengths, Weaknesses and Action P lan

L L

M L

M L

9.salient features:

The DFB (PNBVPI) and RDFB f inancial management i s strengthened by the fo l lowing

0

e

0

0

e

0

10.

Existence o f an organizational structure de fining clearly the l i nes o f responsibil i ties

and authority that exist, and are appropriate for planning, directing and controllingoperations;

existence of q ualif ied and s killed accounting staff very knowledgeable with Ba n kprocedures;

adequate internal control system including suitable authorization procedures,

appropriate segregation o f duties and responsibilities, reliab le budgeting system, and

adequate measures for safeguarding assets; MAEP also has an Internal Audit

Department in charge o f the internal audit functions

use o f an accoun ting system in compliance with genera lly accepted accoun tingstandards and IDA requirements, and prov idin g reliable and tim ely inform ation;

appropriate documentation o f he policie s and procedures applied by the project, covering

management o f inances, accounting, procurement and financial reporting;

use o f an integrated computerized system facilitating the management o f projectoperations and capable o f producin g in a timely manner a l l relevant info rma tion required

for managing and monitoring projec t activit ies, and appraising project’s overa ll progress

towards the achievement o f t s objectives.

With regard to weaknesses, n o m ajo r deficiencies have been noted so fa r in the projectfinan cial management system.

Institutional and Implementation arrangements (see Section C (K) an d Annex 6 of the

sector ministries (including MAEP) in the preparat ion o f their program budget in order to

impro ve the quality o f heir submissions. The accounting software already in place facilitates

significantly budgetary management.



Accounting Policies and Procedures

12. The proje ct applies budge tary execution procedures actu ally in place within the

MAEP (ie: preparation o f expense comm itment fo rm by the DFB, ver i ficat ion o f this request

by the Expenditure Commitments Oversight Directorate, executio n o f the transactions by the

project, determination o f he exact amount to be paid upon reception o f ina l bills, preparation

o f payment order and payment after appropriate v erif icat ion o f he val idi ty o f he transactions)

and provides the Budget Directorate o f the Ministry o f F inance with mon thly statement o f

commitment and payment drawn under the project credit l ines.

13.

he DFB an d RDFB (DRDR- Department o f Financial & Budget) i s using an accounting

system in compliance with “generally accepted accoun ting standards”/PCOP (P lan

Comptable des Ope‘rations Publiques) an d IDA requirements. T h i s system operates on a

decentralized basis with the four regions concerned and uses standard book accounts

(journals, ledgers and tria l balances) to enter and summa rize transactions. Revenue i s

recorded when cash i s received, while expenses and related liabilities are recorded when

incurred, especially upon receipt o f goods, works and services. Ea ch RDFB maintainsseparate financi al records fo r a ll transactions under i t s responsibility and sends, o n a monthly

basis, the balance sheet to the DFB for consolidation. The DFB, at the central level, i s incharge o f t imely product ion of: monthly trial balances for the ACCT (Agence Comptable

Centrale du Tre‘sor),quarterly FMRs and annual fina ncial statements.

14. The existing Chart o f accounts and models o f IFRs already reflect resources from GEF

and components/activit ies to be financed under this grant. They allow the product ion of

financial reports in compliance with ID Np ro je ct equirements.

15. To ensure timely product ion o f f inancial information required for managing andmonitoring project activit ies, the DFB an d RDFB i s using a computerized system

implemented by a consultant. T o av oid doub le data capture, this system allows for extracting

eff icient ly al l required information fr om the Data Base O RA CL E presently in place and used

by the MAEP fo r recordin g commitments, “liquid ations” and settlement orders.

Internal Control and Internal Audit

16. The PN BV PI has a good internal control system: proper authorization o f ransactions,

adequate separation o f duties, reliable budgeting system, and adequate measures forsafeguarding assets. In addition a financial management manual i s available describing

17. T o ensure efficien t use o f credit and grant funds for the purposes intended and

consistent app licatio n o f procedures on procurement, finan cial management, disbursement,the M AE P In te rnal Audit Department plays th e role o f nternal auditors. They report directly



to the Steering Comm ittee and make sure that al l issues identif ied during the internal aud it are

addressed qui ck ly to impro ve the projec t performance.

Flow o Funds and Disbursement arrangements

18. T h e f l o w o f funds f rom IDA, GEF and local Communit ies i s presented as fo llows :

World Bank

M A E P - Directorate o f

Finance and Budget @FB )- Designated account IDA (A)

M A E P - Directorate of

Finance and Budget @F B)- Designated account GEF1’

DRDRs- Department

of Finance and Budget

(RDFB):Regional BankAccount IDA (A)

I

DRDRs- Department

of Finance and Budget

(RDFB):

Regional BankAccount GEF (B)

Communities’ Bank Communities’ Bank

account for account forenvironmentalsubprojectsfinancing only

Contractors, suppliers o f goods and services

Disbursement rom ID A credit, G E F Gran t and Communities participation

Programs , Budgets, and Procurement Plans for IDA-funded activit ies; ii) eplenish

Regional Bank Account A managed by RDFB.

Designated Accoun t B to be managed by DFB: Denominated in US $, disbursements



f rom the GEF grant w i l l be deposited on this account to i) inance 100 percent o f al lcategories o f expenditures agreed with IDA and indicated clearly in the Annua l Wor k

Programs, Budgets, and Procurement Plans for GEF-funded activit ies ii) eplenishRegional Ban k Account B managed by RDFB;

19. While disbursing proceeds from grant accounts, IDA may: i)eimburse the recipient

for expenditures paid from the recipient’s resources; ii) dvance grant proceeds into the

Designated accounts opened in a commercial bank acceptable to IDA; iii)make a direct

payment to a third party; iv) enter int o special commitments in writing to pay amounts to athird party in respect o f expenditures to be financed out o f the grant proceeds, u po n the

borrower’s request and under terms and conditions agreed by IDA and the recipient. The

accounting manu al o f procedures describes in details the application steps a nd requirements

for requesting a reimbursement, a direct payment f or third party, and applying f or a special

commitment.

20. To ensure prompt payment o f contractors/suppliers operating in the regions, the

borrower ma y open two regional b ank accounts in a loc al commercial bank to be managed by

each RD FB :

0 Regional Bank Account A : Denominated in loca l currency (MGA) , disbursements

from the Designated Account A (IDA Credit) will be deposited on this account to:

finance 100 percent o f al l categories o f expenditures agreed with IDA and indicated

clearly in the Annual Work Programs, Budgets, and Procurement Plans for IDA-

funded activit ies in he regions ,

0

Regional Bank Account B: Denominated in loca l currency (MGA) , disbursementsf rom the Designated Account B (GEF Grant) w i l l be deposited on this account to

finance 100 percent o f al l categories o f expenditures agreed with IDA and indicated

clearly in the Annual Work Programs, Budgets, and Procurement Plans for GEF-

funded activit ies in he regions;

2 1. The i nit ia l advance paid to each regional bank account wou ld represent funds covering

no more than 30 days estimated expenditures based upo n submission o f satisfactory budgetedwork plans. Subsequent payments will be based on SOEs submitted by RDFB after

appropriate authorization and approval by the DFB. Th e RDFB will submit at least monthlyexpenditure reports indi cat ing sources and uses o f funds an d justifying the use o f funds, an daccompanied by reco ncile d bank statements.

productive investment). The com mun ity account receiving fr om IDA will be used for

micro-projects with the purpose o f commercial agriculture only.

O r



0 GEF to finance a ll aspects o f reestablishing vegetation cover t o reduce erosion to

improve the l and us e produ ctivity o f the upper watersheds and to support thecommunities in an im prove d management o f lands under secured lan d tenuremanagement. Eligible sub-projects include pasture management, reforestation and

revegetation, o f degraded land,, etc. T h e community account receiving funds f romGEF f inancing will be used for micro-project with the purpose o f lan d management,

so i l fer t i l i ty, and innovative technologies for environmentally-friendlyagriculture.

24. The transfer o f funds to these comm unity ba nk accounts wo ul d be made as follow s: i)

70 percent upon signature o f the contracthonvention between B V P I and Communities; ii) 0

percent based on physical progress (at least 50 percent o f the goods/services have been

deliveredrendered) after appropriate authorization and approval by DFB/RDFB; 10 percent

after fi nal reception. Com mun ity contribution to Sub-projects will be in abor or in kind.

25. The Designated Account w oul d be replenished on the basis o f documentary evidence

provided to IDA by DFB (see below paragraph “Designated account”) , justifying the

payments o f expenditures that are elig ible fo r financ ing under the credit.

26. All supporting documents will be retained by the project (DFB, RDFB) an d

communities, and made available for re view by periodic Ba nk supervision missions, internal

and external auditors. The accounting manual describes in details all procedural aspects

regarding finan cial management (payments, replenishment, accounting, repo rting and internalcontrols).

Disbursement Arrangements

27. Method o Disbursement: The DFB/PNBVPI wil l follow the transaction-based

disbursements procedures (trad itiona l mode) outlin ed in the Bank’s Disbursement Handbook.

28. M i n i m u m o Appl ication Size: The minimum application size for direct payments, tobe withdrawn direct ly fro m the Credit Ac count, and special comm itments i s 20 percent o f he

amount advanced to the related Designated Account.

29. Use o Statements o Expenditures (SOEs): Disbursements will be made againstStatement o f Expenditures (SOEs) certif ied by DFB for contracts and other expenditures not

requiring the Bank’s pri or review. All SOE supporting documentation will be kept by the

DF B/P NB VP I and made available for review by Ba nk supervision missions and internal and

for the designated account under the GEF grant shall be US$400,000. The DFB will be

responsible for preparing disbursement requests. The Designated Accounts will finance all

proje ct eligible expenditures infe rior to 20 percent o f the authorized allocation, andreplenishment applications wo uld be submitted at least o n a m on thly basis. Further deposits



by IDA n to the Designated Accounts will be made against withdraw al applications supportedby appropr iate documents.

Financial Reporting

3 1,reports that s hould be prepared in compliance with intern ationa l accou nting standards:

To monitor project implementation, the D F B P N B V P I will produce the fol lowing

0 Ann ual fin anc ial statements comprising: i) ummary o f Sources and Uses o f Funds

(by components/project activit ie dcre dit category and show ing all sources o f funds); ii)

Project Balance Sheet; iii)he Accounting Policies Adopted and Explanatory Notes;

iv) a Manage ment Assertion.

0 Quarterly FMRs: The FMRs include financial reports (IFRs) , physical progress

reports and procurement reports to facilitate project m onitorin g. The FMRs should be

submitted to IDA within 45 days o f he end o f he report ing period (quarter).

32. The for m and content o f quarterly FMRs and annual financial statements has been

determined duringproje ct appraisal and already agreed during the negotiat ions o f he ongoing

Irr iga tio n and Watershed Management Project supported so fa r by IDA f inancing. Mode ls o f

these repor ts are presented in the project accounting manual o f procedures.

Information Systems

33. The Irr iga tion and Watershed Management Project (IW MP ) i s using an integratedfinancial management system capable o f recording and producing in a t imely manner al l

f inancial reports required for managing and moni tor ing project activit ies. T h i s computerized

system in particular facilitate: annual program ming o f activit ies and project resources, record-

kee pin g (general accounting and cost accounting), finan cial an d budgetarymanagement, fixed

assets management, procurem ent management, follo w-u p o n pro jec t implem enta tion progress,

preparation o f project financial statements and quarterly Finan cial Mo nit ori ng Reports asrequired by the BanMID A.

Auditing

34. The proje ct finan cial statements will be audited annually by an international private

accounting firm acceptable to IDA, in accordance with International Standards o f Auditing.

I 1

Audit Report Due Date



1- Project specific finan cial statements Within six months after the end o f each

financial year.

I I I

(1) Goods, consultants’ services,and training

Supervision Plan

100%,640,000

35. A supervision miss ion w i l l be conducted twice a year to ensure that strong financial

management systems are maintained for the project throughout i t s l i fe . Our input to FMrat ing will be indicated in the Implementation Status and Results Report (ISR). Periodic

review will be also carried out when needed to ensure that expenditures incurred by the

project remain eligible for IDA funding.

Total

Table A. Allocatio n o Gran t Proceeds

5,900,000

I 1 A m o u n t o f t h e 1

FY

Category

9 1 10 I 11 I 12 I 13 I 0 1 0

Percentage o f Expenditures o eFinanced

Grant

Allocated

(expressed in

Annual I 0.6383 I 1.4425 I 1.9502 I 1.2090 0.6600 I 0.00 I 0.00

i (2) Sub-project Matc hing Grant I 2,260,000 I

Cumulative

100% o f amounts disbursed

I 0.6383 I 2.0808 I 4.0317 I 5.2407 I 5.9000 I 0.00 I 0.00

Annex 8: Procurement Arrangements

Madagascar: Irrigatio n and Watershed Ma nageme nt Project

A. General



1. Procurement for the proposed project wo uld be carried out in accordance with the

W or ld Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated Ma y

2004, and revised in October 2006; and "Guidelines: Selection and I Employment o fConsultants by W or ld Ba nk Borrowers" dated M ay 2004 and revised in October 2006, and

the provisions stipulated in the Legal Agreement. The various items under different

expenditure categories are described in general below. F or each contract to be financed by

the Grant, the different procurement methods or consultant selection methods, estimatedcosts, prior review requirements, and time frame are agreed between the Bor row er and the

Bank in the Procurement Plan. The Procurement P lan will be updated at least annually o r as

required to reflect the actual project implem entation needs and improv ements in nstitutional

capacity.

2. Advertisement: A General Procurement No tice will be published in UNDevelopment

Business and Development Gateway Market (dgMarket) and will show al l Internat ionalCompetitive Bidding (ICB) for goods and works and major consulting service requirements.

Specific Procurement Notices will be issued in Developm ent Business and dg Market and atleast one newspaper with nationwide circulation fo r I C B contracts and before preparation o f

shortlists with respect to consulting contracts above US$200,000, in accordance with the

Guidelines

3.works related to activit ies undertakenwithin Matc hing Grants.

Procurement o f Works: Works procured under this project would include: small

4. Procurement o f Goods: Goods procured under this project woul d include equipmentfor the treatment and exploitation o f satellite pictures and software for geographic inform ationsystem. The procurement will be done using the Bank's SBD fo r a l l ICB and National SBD

agreed with or satisfactory to the Bank and with any special requirements specific to theProject. To the extent practicable, contracts sha ll be groupe d int o bid packages estimated to

cost the equivalent o f USD250, 000 or more and would be procured through International

Competitive Bidding (ICB) procedures. F or contract estimated to cost less than USD250,000,

equivalent per contract, procurement o f goods ma y be carried out through N ational

Competitive Bidding(NCB) procedures and purchase o f sma ll furniture estimated to cost less

than USD30,OOO will be conduc ted through prudent shoppin g procedures.

5 . Direct Contracting for goods may be used in exceptional cases, such as for the

extension o f an existing contract, standardization, proprietary items, spare parts for existing

Selection (QCBS) method, using the Bank’s Standard Request for Proposals. Selection based

on consultants’ qualif ications (CQS) can be used for the recruitment o f training institutions

and for assignments that meet criteria set ou t in para 3.7 o f the Consultant Guidelines. S ingle

source selec tion ( S S S ) can be used to contract f i rms for assignment that meet criteria set ou t

in para 3.9 to 3.13 o f he Consultant Guidelines and for the purpose o f very sma ll assignments



referred in para 3.10 o f the Consultant Guidelines, and for w hic h th e contract estimated costs

do n ot exceed USD100,OOO. Specialized adv isory services wou ld be procu red through

Ind ivi du al Consultants Selection (ICs), based o n the qua lif ications o f individ ual consultants

for the assignment in accordance with the provisions o f paragraphs 5.1 through 5.3 o f the

Consultant Guidelines.

ExpenditureCategory

7. Community participation n procurement: Commun ity part icipat ion in Procurement

wou ld be based on AFR Guidelines - Sim pli f ied Procurement and Disbursement Proceduresfor Community-Based Investment. This wo uld comprise a broad spectrum o f act ivi ties related

to watershed management and irrigation. Procurement i s described in the Project

Implementation Manual.

Contract ValueThreshold (US$)

Operating Costs wou ld not be f inancedby the Grant

Consultant Services -

8. Review by the Bank of Procurement Decisions .The thresholds for p rio r review by

Ba nk are specified in he procureme nt plans. Table 1 shows (i)he proposed thresholds for the

different procurement methods, and (ii)he proposed initially-agreed thresholds for priorreview by the Bank. The Bank will preview procurement arrangements proposed by the

Borrower for the items specified in he procurement plans for their co nform ity with the Grant

Agreement and the applicable Guidelines. Any procurement item not specif ied for prior

review m ay be subjected to a post-review o f he procure ment process.

100,000 o r mor e

Thresholds for Procur ement Methods and Pri or Review

Works (related to

Matching Grants

activities)

Goods 250,000 or more

50,000 or more and

less than 250,000

Less than 50,000

Procurement Method

shopping

I C B

N C B

Shopping

QC BS

Contracts Subject toPrior Review (US$)

N o pr ior review

All

All (US$0.8Mio)

B. Assessment o f the agency’s capacity to implement procurement

9. Procurement activit ies are carried out by the National Program Coordination Unit(NPCU) at national level and Directions Rkgionales du D6veloppement Rura l (DRDR) at

regional level. These units are MAEP departments and properly staffed; the procurement



function under Unit6 de Gestion des marches Publics (UGMP) i s staffed by Procurement

Off icer and diverse ci vi l servants.

10. An assessment o f he capacity o f he Implementing Agency to implement procurement

actions for the project has been carried out o n October 2005 and rem ain val id The assessment

reviewed the organizational structure for implemen ting the project and the interaction between

the project’s staf f responsible for procurement and the Management’s relevant central unit f oradm inistr ation and finance.

11. The ke y issues and r isks concerning procurement fo r implementation o f the project

have been identif ie d and include the phasing o f activit ies to be undertaken and possible

emergin g o f emergency cases. The corrective measures w hi ch have be en agreed are the close

fo l low-up o f the agreed procurement plan and activ ity scheduling. A procurement action pla n

will be f ine tuned quarterly and the ma in procurement plan w i l l be up-dated accordingly.

12. The overall project risk for procurement i s Average.

C. Procurement Plan

13. The Borrower, at appraisal, developed a procurement pla n for the impleme ntation o f

IDA f inanced activit ies which provide the basis for the procurement methods. T h i s plan was

approve d on June 30, 2006 and i s available at the NP CU o ff ice . I t s also be available in the

project’s database and in the Bank’s external website. The P rocurement Plan will be updated

in agreement with the Project Team annually or as required to reflect the actual project

implemen tation needs and improvements in nstitutional capacity. The Procurement Plan for

GEF funded activities was also developed during project appraisal and finally approved onSeptember 09,200 8 by th e Bank.

D. Frequency o f Procurement Supervision

14. In addit ion to the prio r review supervision to be carried out fr om B an k offices, the

capacity assessment o f the Im pleme nting Agen cy has recommended annual supervision

missions to visit the field to carry out post review o f procure ment actions.

E. Details o f the Procurement Arrangements Involving International Competition

1. Goods, Works, and NonConsulting Services

Post)cost

(US$)

Date



(a) ICB contracts estimated to cost above US$500,000 for works and US$250,000 for goods percontract and al l direct contracting w il l be subject to prior review b y the Bank.

(c) List o f other contract packages

1 2 3 4 5 6 7

Ref. Contract Estimated Procurement P- Domestic Review

(yedno) (Prior /No . (Description) Method Q Preference by Bank

cost

Post)(US$)

8

ExpectedBid-

Opening

Date

Component

GEF-GO1

9

4: Program management

Equ ipmen t 87,000 Shoppingfor treatmentand

exploitationo f satellite

Comments

GEF-

2 contracts

picturesSIG software 70,800 Shopping 2 contracts

1 2

Ref. No . Description of

Assignment

Component 1 Development o fGEF-A02 Agriculture

researches b y

FOFIFAServices

agriculturalGEF-A06 Annual

2. Consulting Services

3 4 5 6 7

Estimated Selection Review Expected Comments

Cost Method by Bank Proposals

(US$) (Prior / Submission

Post) Date

commercial agriculture

146,000 Sole source Prio r August 2008

FOFIFA €2

TAFA are

agencies332,000 Sole source Prio r No v. 2008 Gov research

(a) List o f consulting assignments wi th sho rt-list o f nternational firms and sole sourcing.

GEF-DO1

GEF-DO2

GEF-DO3

Preparation o f 80,000 IC s Prior July 2008 -

GDT

technical audit 102,000 QCBS Prior Oct.2011

Project 136,000 QCBS Prior Oct.201 1

evaluation



(b) Cons ultancy services estimated to cost above US$ lOO,OOO per contract and single source

selection o f consultants (f irms) and o f ind ivi du al consultants assignments estimated to cost

above US$50,000 will be subject to pr io r review by the Bank .

(c) Short l is ts composed entirely o f nation al consultants: Short l i s ts o f consultants for services

estimated t o cost less than US$ lOO,OOO equivalent per contract ma y be composed enti rely o f

national consultants in accordance with the provisions o f paragraph 2.7 o f the ConsultantGuidel ines.

(d)List o f other c onsult ing assignments

1

Ref. No .

2 3 4 5 6 7

Description of Estimated Selection Review Expected CommentsAssignment Cost Method by Bank Proposals

(US$) (Prior / SubmissionPost) Date

I contracts

21,00077,700

Technical

IC s Post August 2008

QCBS Post July 2008 Mu ltip le

contracts



50,000 QCBS Post July 2008 Mu ltip lecontracts

Annex 9: Economic and F inan cial Analysis

Madagascar: Irrigation and Watershed M anagem ent Project

A. The Irrigation and W atershed Management Project



1. The Malagasy government i s preparing a new irr igat ion program based on a watershedapproach in order to increase agricultural productivity and farmer income in selected rural

areas. These two objectives should be reached through a mix o f software and hardwareinvestment in agricultural service improvement, irrigation scheme development and upperwatershed protection .

2. The W or ld B ank will support this program by financing, together with the GlobalEnvironment Facil i ty (GEF) and the private sector, direct investments in three areas: (i)

commercial agricultural development to better link farmers t o markets fo r inputs and creditsand introduce agricultural technology in irr igated areas and tanety, for a total o f US$12.9

m il li o n (baseline costs plus taxes); (ii)rrigation development in the lower watershed to

rehabilitate physical infrastructure (such as water intakes, dikes, canals, and drainage systems)

and financial for a total o f US$17.5 mil l ion ; and (iii)atershed manapementin the upp er watershed to promote more sustainable l and management f or a total o f US$5.2mil lio n. Fr om the poi nt o f view o f the economic analysis, these three components represent

one inte grate d package and cannot be treated separately. A fourth component will support theproject management for a total o f US$4.9 mil l ion, including the Project Preparation Fund.

3. Overall, the project will cost US$40.5 m il li o n (includin g physical and pricecontingencies), o f whic h 74 percent will come from IDA (US$30.0 million), 15 percent will

come from GEF (US$6.0 million), and 11 percent will come from the private sector (US$4.5mil l ion). GEF will support the watershed development (component 3), and the priv ate sector

will support the development o f comme rcial agriculture (component 1).

4. The project will target 30,500 hectares o f cultivated area in four watersheds with

potential for agricultural development: Marovoay, in the Northwest, and Lac Alaotra (theSahamalato scheme), in the Middle East, the two rice granaries in the country, and Itasy in he

mid-West an d Andapa in the North. The objective will be to sustainably and significantlyincrease ag ricultural produ ction in hese areas.

5 . The tota l irri ga ted area o f these fou r watersheds represents 71,800 hectares, a third o fwhich will be concerned by the projec t (2 1,800 hectares), also con stituting e ight percent o f he

irrigate d schemes area (300,000 hectares), and 2.25 percen t o f the co untry's tota l irrig ate darea" (1 m il li o n hectares). Some o f the irrigated perimeters, lik e Lac Alao tra and Marovay,

are over 1,000 hectares; others, like Itasy, are between 100 and 1,000 hectares; the rest, likeAndapa, are under 100 ha. All 21,800 hectares are already eq uipp ed with concrete irrigation

~ ~ ~~

loMain ly the Fonds d'Entretien et de Re habilitation Hydro -Agricole (FERHA) for the part o f he irriga tion nfrastructure that

infrastructure, but only 60 percent are considered irrigated areas; the other 40 percent, mostly

located downstrea m fro m the irrigat ed areas, are no t irrig ate d year-round.

6. T h e project will f inance the rehabil itat ion o f rr iga t ion nfrastructure in the 60 percent

o f the schemes that are well-irrigated , and wil l f inance the introduction o f agriculturaltechnologies (such as improved varieties) in the other 40 percent, w hic h should help raise



product ivi ty w ithout im prov ing water control over the year. On the irriga ted area, the pro ject

will develop off-season cropping (mostly tomatoes and potatoes) on 4,700 o f t he 21,800

hectares o f rrig ate d perimeters targeted by the project, mostly in tasy a nd Andapa.

7. The project will also develop rainfed agricultural pro ductio n in the l owe r part o f the

four watersheds (the f i r s t hillsides or tanety surrounding the irrigation systems) on around

7,700 hectares, less than 10 percent o f the rainfed c ultivated area (45,000 ha), through the

introdu ction o f agroecological techniques such as til lage a nd zero plowing. The objective o f

developing agro-ecology i s to increase on-site productivity and decrease off-site siltation.Indeed, as the intervention will target the f i r s t hillsides arou nd the systems, i t s expected that

erosion contro l will ead to decreased siltation.

Marovay

Itasy

Andapa

LacAlaotra

Total

Table 15: Areas and Beneficiaries of the Project

3,670 2,400 200 2,000 18,120

2,060 3,600 3,000 2,400 25,915

2,150 1,500 1250 1,500 14,85 1

6,000 400 1,800 30,676250

13,880 7,900 4,700 7,700 89,562

Watershed Art

Ilr*

8. The project investment cost will be around $1,330 per hectare for the four-year period

o f project implementat ion, or about $330 per hectare per year. This represents an increase o f

almost 4.5 t imes the investment of the last 20 years, which was about $1,500 for that time

period, or about $75 per hectare per year (see section 2 o f this annex).

9. The project will take place in rur al areas where the vast m ajo rity o f households live

under the threshold o f absolute pove rty (less than US$1 a day). The project will bene fit about90,000 households or, with an average o f 5 .5 people per household, around ha lf a mi l l io n

people in a country that has a total population o f about 20 mi ll i on people.

10. The improvement in agricultural product ivi ty will likely contribute to poverty

B. Public Spending and Irr iga tion P roductivity in Madagascar

11. A W o r l d B a n k ESW (P096045) entitled Madagascar: The impact o pub lic spendingon perimeters produ ctivity, 1985-2004, has looke d carefully at the impact o f public spendingon irr igat ion system product ivi ty during the last twenty years, a period that started with a



major regulatory shift - he l iberal izat ion o f the rice sector - accompanied by an abrupt

transfer of the operation and maintenance (O&M) o f the medium-sized and large irrigation

systems (irr igate d areas eq uipped with infrastructure meant to improve water management andthus intensify production) from the State and State-owned enterprises to Water UserAssociations ( W A S ) .

12. A sample o f 108 irrigation schemes that were given help to organize O&M,representing a n area o f 123,500 hectares and 400 W A S , eceived US$190 mi l l ion, or ha l f o f

publ ic s ending, through 25 irrig ation projects (includ ing 2 extension projects) financed by 11donors . These irrig ation schemes represent around 60 percent o f he ir rigated areas o f more

than 50 hectares that were endowe d with concrete infrastructure at the beginning o f he period

and represent around 11 percent o f Madagascar's total irr igated lands (believed t o cover

around 1 m il l i on hectares). The beneficiaries were the about 100,000 water users, or aro und

600,000 people, and about 60 percent o f the $190 m il l i on was invested in hardware forirrigation infrastructure, while the other 40 percent was invested in software, m os tly for

capacity building o f W A S nd, less importantly, for promoting agricultural technologies,

such as chem ical fertilizers, imp rov ed seeds, off-season crops, early ri ce transplanting, and thesystem o f r ice intensif icat ion (SRI) that was inve nted in Madagascar.

13. Overa ll, the investments resulted in increased system prod~ct iv i ty '~ ,rom 1.5 at the

beginn ing o f the p eriod studied to 2.4 tons o f paddy equivalent per hectare, a 60 percent

increase and a significant achievement in view o f Madagascar's reputation for stagnant

productivity (the FA0 f igures) and irrigation projec t failure. In these systems, paddy yield15

increased fro m 2.2 to 2.7 tons o f paddy equivalent per hectare, contributing to 50 percent o f

the productivity increase, while the other 50 percent came from the increase in croppingintensity16, w hi ch grew f rom 0.6 to 0.8.

14. The latter improvem ent i s a direct consequence o f nvestment in the hardware (better

infrastructure improves areas under irrigation) wh ile the former i s believed to be the indirect

and combined result of nvestment in he hardware and in prom oting agricultural technologies

(better infrastructure allows better water control, which encourages the adop tion o f new

methods that have a direct effect o n yield).

15. T h i s overal l improvement in paddy productivity, when compared with the

counterfactual s ituation - the situation withou t the investments o f the past twenty years,

including the ones devoted to repair cyclone damage - shows that without investments inirrigation infrastructure and in building the capacity o f W A S , he 123,500 hectares o f

irrigated perimeters wou ld have produced, at the end o f the studied period, 140,000 tons o f

paddy less than in the alternative situation. The difference between the two scenarios

I?

translates in to economic b enefits fo r the cou ntry that represent a N e t Present Valu e (NPV) o f

US$200 m il li o n at a 10 percent discount rate or an Economic Rate o Return (ERR) o f 18.5

percent.

16. Therefore, overall, the don or investments in the irrigatio n sector during the past twenty

years, while seen as a failure, in reality have significantly improved country welfare, and,



given what i s known o f the relationship between paddy prod uctivity increases and poverty

alleviation they have contributed to pove rty alleviation in ur al areas as we ll.

17. However, tw o factors helped limit the impact o f these twenty years o f investment inthe irrigation sector to th e low er bound o f what was possible: cyclone damages and the

somewhat poor functio ning o f the W A S . Bo th kept cropping intensity improvement at a

lower leve l than wha t was expected. Indeed, 20 percent o f the hardware investment during the

last twenty years was diverted fr om in iti al objectives to repair c yclone damages. The

financing c ou ld have been used to expand the irrigated area and thus the cropping intensity.Moreover, W A S ave been losing, o n average, 5 percent o f the i rrig ate d area each yearbecause o f a lo w O & M fee recovery rate. Therefore, an important part o f he investment was

used, in fact, t o rehabilitate the forme r investment.

18. In addition, paddy yiel d improvem ent could also have been more important i f compare

with green rev olu tion technologies achievement in other co untry such as Indon esia that share

the same natural conditions than Madagascar and reached 4 tons per hectare. In the

Madagascar case, tiny extension projects combined with relat ively low producer prices

(compared to fertil izer prices) could give a reasonable explanation o f that relatively l o wimprovement.

C. Basis o f the Watershed Management Project Economic Analysis

19. The econom ic analysis i s carried ou t separately fo r each o f the fou r watersheds

selected by the project because the in i t ia l condit ions of the irrigation systems and upperwatersheds are different along with the amount and balance between the three components

that will be applied to each o f he watersheds. The results are added to provid e the economic

analysis for the whole p roject.20. The type and magnitude o f the expected incremental economic benefits o f he project

depend on what w ou ld have been the situation in the absence o f he projec t and on what the

project will affect. Thus, the counterfactual situation i s described and defended be low b efore

the different categories o f expected benefits f ro m the proje ct are presented.

Counterfactual Situa tion (baseline)

21. The baseline describes the evolu tion o f paddy productivity in irrigated areas and

uplands (tanety) in the four watersheds in the absence o f the project. As far as paddyproduct ivi ty i s concerned, the economic analysis builds on the database assembled during the

ESW, extracts cropping intensity, the paddy yield an d the un-irrigated production, and

simulates their progression over the next 25 years i f n o investment in the rehabil itat ion o f

Watershed

Marovay

Irrig ate d Partially- Off-season Tanety To tal Paddy

Areas irrigated Irrig ate d (tons) production

(tons) Areas (tons) (tons) (tons)9,151 3,584 300 11,887 12,735



Itasy

Andapa

5,952 6,801 6970 9,389 12,752

4,914 1,929 1090 7,820 6,843

22 . In the four areas targeted by the project, paddy production in irrigated areas i s

currently at around 53,000 tons per year, or 2 percent o f the estimated current national padd y

production (around 2.8 m il l i on tons). Mo re than two-thirds o f the paddy product ion comes

fro m w ell-irriga ted areas, located upstream fr om the irr iga tio n systems, as mentione d in the

introduction, and one-third o f the paddy production comes from partially-irrigated areas,

located downstream from the irrigation systems. Alm os t 38 percent o f the paddy product ion

comes from the Sahamaloto perimeter located in the Aalotra watershed, which covers only

around 28 percen t o f the irr igate d areas concerned by the project. In addit ion to this paddyproduct ion, w hic h comes from the 21,800 hectares o f rrigatio n systems that w i l l be targeted

by the project, around 44,000 tons per year are produced o n the 7,700 hectares o f tanety

located in the low lan d parts o f the watersheds and the 1,075 hectares o f irrigate d perimeters

that are cultiva ted off-season and that wil l targeted by the project. These so-called tanety and

off-season irrigate d productions are composed o f 45 percen t cassava, 13 percent sugarcane, 12percen t tomatoes, 10 percent maize and 6 percent rainfe d rice. Th e remaining 14 percent are

sweat potatoes, potatoes, bananas, peas and groundnuts.

Table 17: Productivity and Cropping intensity at the beginning of the project

Lac Alaotra

Total

19,567 904 240 6,579 20,471

39,583 14,504 8,600 35,675 52,801

25. Off-season irrigated produ ctivity i s at a weighted average o f 8 tons per hectare, 10 tons

per hectare fo r Itas y and 5 tons per hectare in he 3 other watersheds.

26. In he absence o f he project, paddy produc tivity in partially-irrigated areas i s i ke ly to

decline as w el l as the productivity o f uplands, the former because o f decl ining water controlon w ell-irrigated upstream areas and the latter because o f soil erosion and the related loss o f

nutrients. Off-season irrigated produc tivity and areas are lik el y to rem ain the same.



27. The analysis undertak en in: The impact ofpublic spending on perimeters productivity,

1985-2004 shows that, during the last twenty years, when any irr iga tio n scheme does notreceive investment in hardware and does not face any external shock, i t on average loses

around 5 percent o f t s irrigate d area (cropping intensity) per year. The analysis also shows

that this loss o f 5 percent o f rr igated area per year i s quite homogeneous a ll over the co untry

over the studied period. Therefore, i f there i s no investment in the irrigation systems, 5

percent o f well- irriga ted areas o f hese schemes will be transformed each year i nt o partially-irriga ted areas and w i l l therefore show a produc tivity loss o f around 1 ton per hectare pe r year.

As far as tanety are concerned, in Madagascar, other analyses show that soil erosion i s

important and results in a produ ctivity loss that can be estimated rou ghly at 5 percent per year.

28. The firs t analysis shows also that around 50 percent o f the 123,500 hectares of

irrigatio n systems studied were fo und to b e sensitive to c yclonic floods during the last twentyyears. The capital cost o f these floods was US$ 23 m il li o n for an area o f 65,000 hectares, or

US$350 p er hectare for the whole pe rio d and US$17.5 per hectare per year. The amount was

thus not used to direct ly improve produc t ivi ty but to ensure that these 65,000 hectares wouldcontinue to be irrigated. As a result, they wo ul d have a mu ch lower produc tivity than current

levels‘7.

29. With a l l o f this inform ation about the irrigated areas and the di mi nu tion o f uplands

product ivi ty without investment in the irrigation and watershed management project, the

progression o f production in the counterfactual situation can be reconstructed for the project’s

period it se lf as we ll as for the next 21 years so that the analysis w oul d cover a total o f 25

years (2007-203 1). The evolut ion i s shown below in igure 3.

Figure 3: “No Investment” Mode l of the Irrigation Systems and Tanety’s Produ ction Evo lution

,000 Tonnes per year100

I

80

60

30. Wi tho ut the irrigatio n and watershed management project, the paddy produ ction o f he

irrigated areas that would have been concerned by the project w oul d decrease fro m around

54,000 tons per year at the beginni ng o f the perio d to 43,000 tons by the end o f the period

(without taking in to account the impact o f cyclonic damages o n product ivity), or a loss o f 21

percent. At the same time, the tanety prod uctio n wou ld decrease fr om 35,000 tons to 11,000tons, or a loss o f 69 percent. The loss in paddy produ ction alone i s equivalent to the m il le d



r ice consumption o f 12,000 households for an entire year.

Origins and Order o Magnitude o Economic Benejts Associated with the Project

31. The approach to estimating the economic benefits o f the irrigation and watershedmanagement project i s mostly traditional. Most o f he investment aims to prov ide the software

and hardware infrastructure necessary to generate increased agricultural development,

enabling the four watersheds to support greater productivity both in rrigate d areas (well, badand off-season) and in owla nds (tanety) around irriga tion systems.

32. Thus, the economic benefits o f the project are based o n projected agricultural

produ ction increases in the four watersheds, compared with agricultural product ion in thesituation without the project. This additional agricultural production will come f rom of

additional paddy from well- and partially-irrigated areas, potatoes and tomatoes that are

cultivated off-season in irriga ted areas, and fr om u plands where crops such as cassava and

maize are cultivated.

33. Paddy produ ctivity will increase in well-irrigated areas as a result o f investment inirrigatio n infrastructure (software and hardware). The pr oduc tivity increase will be main ly

driven by cropping intensity improvement, and marginally by paddy yield improvement.

Meas ured for a 20-year p erio d and an area o f 100,000 hectares (see section 2 o f this analysis),

the product ivi ty gain was around 0.9 ton per hectare. With this project, one can expect an

additional 1 ton per hectare (therefore an average productivity o f 4 tons per hectare in the

areas concerned by the project; see table 3) one year after investment in i rr igat ion

infrastructu re because the project will focus on the rehabilitation of the upstream parts o f the

irrigatio n systems.

34. In partially-irrigated areas, paddy productivity w i l l increase as a resu lt o f the

introduction o f agricultural technologies adapted to l o w water contr ol situations (mainly using

the rice variety called Sebota) co mbined with extensio n services and better access to credit.

As a result, paddy y ie ld will increase significantly withou t i mp ro vi ng water management in

these areas. Current experiments in the Lac A laotra watershed show very pro mi sin g results.

With this project, the expected gain wil l be 1 ton pe r hectare one year after the introduct ion o f

the technology, mea ning an average o f 3 tons per hectare compared to 2 tons p ar hectare (see

table 3).

35. Off-season, the area cul tivate d will increase by a factor o f mor e than 4, fro m 1,075

hectares up to 4,700 hectares, and pro duc tivi ty will reach 10 tons by the end o f the project inAndapa and Alaotra, and will reach 15 tons per hectare in Itasy.

siltation vary greatly f orm one region to another; therefore, the magnitude o f he benefit will

on ly be estimated through order o f magnitude. As a hypothesis, so il erosion will be reducedby 5 tons per hectare 3 years after techniques have bee n introduced, wh ic h means that 0.45tons o f sediment will not have to be removed form the irri gat ed areas, at US $2.50 per ton, or

around US $1 pe r hectare.

38. Addit ional benefits will come from soil erosion control and natural resource



management (pasture and forests) in the upper parts o f the watershed concerned by the

project. This may help, in the me diu m term, to m itigate cyclone damage to ir rig ati on

infrastructure. Fo r the last 20 years, the capital costs have been estimated at US$17.50 per

hectare o f irr igation schemes. By hypothesis, with this project, one can expect to reduce

capital cost in the irri gat ion schemes that are concerned by the project by an amount o f US$5

per hectare the f i r s t year after project completion, increasing by an additional U S$ 1 each year.

39. Consequently, the major categories o f ncremental economic benefit fro m the projectw i l l be (i)ddit ional paddy product ion coming f ro m improvement in cropping intensity inwell-irrigated areas and in yield l inked to in t roduction o f new varieties in partially-irrigated

areas, (ii)ther additional crop product ion coming fr om a reduct ion in nutrient depletion, and

(iii)ower O &M costs com ing fr om a reduct ion in siltation and in cyclone damages.

Table 18: Categories and order of magnitude o f expected incremental benefits

Category

Paddy Productivity

Paddy productivity

Off-season irrigate d

Other Crops

product ivi ty

O&M reduction

Avo ided

infrastructure

damages repair

Location Origin Increment

well- irr igated Ma inl y cropping 1 tonhalyear after

schemes intensity rehabilitation

part ial ly-irr igated yield 1 ton/ha/year afterschemes introduction

Well-irrigated Area and yield 5 tons per hectare after 3

schemes years

tanety yi el d 2 tons/ha/year after 3 years

al l irrigate d areas Av oid ed tanety $ l/ha/year starting after 3

erosion years after technolog y

introduct ion

al l areas Av oid ed cyclone avoided $5 per hectare after

damages 7 years

40. I f here i s a substantial production increase due to the project, there might be some

D. Economic Costs

42. The watershed project’s econo mic costs are composed of : (i)he full base costs o f hepublic investment18 withou t taxeslg (fr om COSTAE3- see Annex 5 and project f i les for more

details) in agricultural development (component l),ii)he full cost o f nvestment in rr igat ion

development without taxes (component 2); (iii)he full base costs o f investment in thewatershed develop ment with out taxes (component 3); (iv) the full base-costs o f project



management withou t taxes (component 4); (v) phy sical contingencies that represent real costs

and, un lik e price contingencies, are included in proje ct economic costszo, and (vi) incrementalrecurren t costs.

43 . Adverse environmental effects ma y represent major economic costs. As mentioned in

Annex 10 o f this PAD , the project has been classified as Category A. Negative externalities

associated with irrigation infrastructure investments are believed to be f ixed because they

consist o f rehabil i tation o f ci vi l works. However, as stated in Annex10, the success o f theproject in the watersheds that are concerned by the project might present a majorenvironmental risk. Poor migrants fr om other parts o f Madagascar might f lock to the

watersheds t o demand their share o f ncreased agricultural productivity, the expected outcome

o f this project, and therefore am pl ify s oi l degradation and deforestation. T he costs o f the

project’s environmental and social prevention needed to address this mig rat ion have beenintegrated into the various project components, as stated in Annex 10. Moreover, f rom a

country perspective, this pressure might be assimilated by a transfer from the departing

watersheds to the watersheds that are g oing t o be targeted by the project and therefore being

neutral. Therefore, these prevention costs will be used as a pro xy fo r the negative social and

environ mental externalities.

44. Incre men tal recurre nt costs are recurrent costs spe cifica lly generated by the project at

completion. In this project, incremental recurrent costs are: (i)dditional maintenance costs

associated with investment in public infrastructure to support marketing chains

subcomponent 12, support to pr ivat e investment; (ii)dditio nal maintenance costs associated

with irrigatio n infrastructure rehabilitation in subcom ponent 22(b), rehabi l i tat ion o i r r iga t ion

infrastructure; (iii) dditional maintenance costs associated with erosion control (mainly

retention structure and hedge works) in subcomponent 32(a), strategic erosion control ; an dadditional natural resource management costs associated with pasture management and

reforestation in subcomp onent 32(b), reestablishment o vegetation cov er.

45. In all four situations, the incremental recurrent costs have been estimated, by

hypothesis, at 5 percent o f the total cost o f nvestment for 4 years without taxes. In table 4below , they appear as a 21 year sum, in he last column.

46. The economic costs o f projec t objective achievement are summarized for the four

watersheds in table 4 below, which also shows the contribution o f each o f the major costcategories to the calculated aggregate present value o f the project economic cost. The detailed

calculation s for each o f the 4 watersheds are presented in Appendix 9.1. Th e calculations

assume a real discount rate o f 10 percent, a total l i f e o f public investment o f 25 years, and use

Table 19: Project investment and recurrent costs (US$millions),all watersheds

1 Type of investment I PV 1 2007 I 2008 I 2009 I 2010 12011-2031 I



47 . In total, the present value o f the irrigation and watershed management project’s

economic costs will be US$32 m i l l io n o f which US$27.6 m i l l io n represent investment costsand US$4.4 m ill io n represent recurrent costs. The bulk o f the cost resides in commercial

agricultural development and irrigatio n systems investments, whi ch account for 72 percent o fthe project economic cost’s present value. Investments in watershed management will

represent onl y 13 percen t o f he project economic cost’s present value, w hile costs of projectmanagement and physica l contingencies will represent 15 percent.

48. Alaotr a and Maro vay will represent respec tively 32 and 25 percent, wh ile Andap a and

Itasy each represent 21 percent o f the total economic cost o f the project (see table 5 below).

The difference lies in component 2. T h i s component’s economic cost wil l be 2 times more

important for Alaotra than for Itasy. In Alaotra, the high cost i s explained by the importance

o f he c iv i l works invo lved in the rehabilitation o f the dam.

Table 20: Economic Costs per Watershed

Type o f Costs, PV ($thousand) Marovay Itasy Andapa Alaotra Total

Commercial AgriculturalDevelopment 2,308 2,312 2,312 2,312 9,245

Irrig atio n Systems 3,390 2,8 15 2,138 5,799 14,142

Watershed Development 1,171 1,018 980 903 4,072

Project Management 836 882 882 882 3,482Physicalcontingencies 323 313 250 488 1,374

Total 8,027 7,340 6,563 10,385 31,979

Recurrent Costs 1,119 703 692 1,887 4,401

49. Recurre nt costs will be a signif icant part o f the project econom ic cost’s present value:14 percent, representing a yearly f lo w o f US$0.75 mill ion, immediately after project

completion. The bulk o f he recurrent costs will be generated by the incr ementa l maintenance

o f the rehabilitated irrigatio n infrastructures (8 1 percent), foll ow ed by the incrementalmaintenance o f eros ion wo rks and management o f orest and pasture (12 percent).

50. The Lac A laotra and Marova y watersheds will account for 68 percent o f the recurrent

cost o f the project. The discussion about who will finance the recurrent costs and how i s

yields linked to the introduct ion o f new variet ies in partially-irrigated areas; (ii)dditional

product ion of other crops coming fro m the development o f off-season irr iga t ion product ion

and from a reduction in nutrient dep letion on tanety; and (iii)ower O&M costs com ing fro m

a reduction in siltation and in cyclone damages.

52. Fo r each o f these three categories, the amount o f economic benefits that will bebrought by the proje ct depends o f he unit rent or cost re ducti on associated with each category



o f benefits and their importance, as w el l as their pace o f appearance in conjunction with

proje ct investment.

0 Incremental Agr icultu ral Product ion

53. Ag ricu ltur al rent associated with additional crop production i s the difference between

the producer price and the cost o f production under the ne w conditions. Fo r paddy, the unit

rents are taken at $82 per to n in well-irrigated areas and at US$ 81 per ton in partially-irrigatedareas, with a paddy producer price at 20 cents (US$) per kg. Fo r the other crops, the unit rent

i s a combina tion o f agricultural rent associated with cassava, tomatoes, beans and rai nf ed rice;it i s taken at US$70 per t on in irrigate d areas and US$71 per tons in tanety, reflecting the

proport ion o f crops that are going to be gr own with the project in each o f he four watersheds.

54. The pace o f production grow th i s given by the pace o f investment during the project.

For example, the pace o f paddy product ion grow th in well-irrigated areas i s g iven by the

distr ibut ion o f nvestment o f component 2 in each watershed: The p rod uct ion increase i s the

proportion o f i r r igat ion systems that have their infrastructure rehabilitated times the

produ ctivity increase that i s associated with infrastructure rehabilitation (+1 to n per hectare).

/

Figure4: Paddy Production With and Without Project

56. The cumulated difference o f product ion in the situation with th e project compared to

the situation withou t the project i s 105,000 tons during the 4 years o f project implementation,55,000 tons o f whic h are paddy, the equivalent o f the annual consumption o f 355,000 people

or around 65,000 households.

Reduction in O M osts associated with reduced siltation and avoided cyclone

damages



57. The hypotheses regarding the benefits link ed to reduced erosion and reduced flo od in

irrigation systems are very conservative. The f i rst benefits appear proportionally to tanety

areas that benefit f ro m the introduction o f agro-ecology techniques and stay stable over time.

The second, as ment ioned earlier, appear begin ning in year 8. The f i rs t benefit i s US$12.5 per

hectare o f tanety c ultivated with agro-ecology techniques, one year after their introduction,

being stable over time. The second i s US$5 per hectare for irrigation systems after 7 years,

then gro wing at US$1 per year to reflect the growing vegetation in the upper watershed andtheir better abili ty to absorb water and avoid floods in he downstream part o f he watersheds.

Table 21: Compositionof Gross Benefits, A ll Watersheds (2006 US$thousands)

58. The ma in economic benefits o f he irrigatio n and watershed management project will

come fr om the paddy product ion grow th in bo th well- and partially-irrigated areas: This will

represent 49 percent o f the total benefit, under the conservative hypothesis that productiv ity

won’t increase under the inf luence o f he project after project complet ion. The in t roduct ion o f

ago-e colog y techniques on tanety and in irrigated areas to grow off-season crops will

constitute 47 percent o f the benefit o f the project, bringing the total from additional

agricultural produc tion to 96 percent o f he benefit o f he project. The benefits associated with

O&M reduct ion will represent the rem ainin g 4 percent o f he project’s benefit.

59. Benefi ts might also be regrouped more o r less by component: the increase in paddy

production and off-season cropping in well- irr igated areas coming mainly from water

F. Results o f the Cost-Benefit Analysis

60. Because o f the weakness o f the available data, the cost-ben efit estimates presented

below are necessarily imprecise and should be considered only in terms o f order o f

magnitude, especially for recurrent costs, but also for benefits derived from agricultural

production o n tanety along with reduced cyclones damages. For the latter, the estimates arerea lly conservative given the absence o f data.



6 1. Using conservative estimates fo r the unit rent, the pace, an d the quan tity o f benefits, as

table 3 shows, the investment i s ike ly to increase the welfare o f he country by about US$9.5

mil l io n, corresponding to an economic rate o f return (ERR) o f 14 percent, and is, therefore,

justified f rom this p o int o f view.

Table 22: Summary of Costs and Benefits, Present Values as of 2006 ($ thousand)

62. At watershed level, these calculations show differences a mon g watersheds (see tab le 8

below and detailed tables in appendix 9.1 at the end o f this annex). Itasy shows greater ERR

than the project as a whole (20 percent), wh ile M aro va y and Andapa show rates o f return o f

13 percent, respectively, and Lac Ala otra a n 8 percent whic h i s lower than the ERR for the

pro jec t as a whole.

63 . In the example o f Marovay, the relat ively lo w ERR i s attr ibuted to investment in

agricultural development that concerns a relatively small area o f off-season irr iga tio n

comp ared to the other watersheds (as show n in table 8 by the small PV o f the third benefit)

an d by a relatively important investment in the irrigation development. Therefore, thiswatershed yields relatively less benefits than the other watersheds.

64 . In he example o f Lac Alaotra, the l o w ERR i s explained by the relat ive importance o finvestment in irrigatio n infrastructure compared to the irrigated area that i s concerned by the

investment. I t i s also the result o f conservative hypotheses regard ing the im prove ment o f

paddy product ivi ty.

Table 23: Comparison of costs and benefits between the four watersheds

Watershed Benefits/Costs PV, Marovay Itasy

Thousand $) AndapaPaddy Production in Well-irrigated

Areas $3,968 $2,391 $2,235

Lac

Alaotra

$7,382



Paddy Production in Partially-irrigated Areas

Off-season irrigate d crops

$1,207 $1,810 $754 $20 1

$428 $6,422 $2,676 $535

65. The variables that influence the fl ow o f project benefits the mos t are likely to be (i)he

evolut ion o f the paddy producer price, (ii)he eff iciency o f the W A S n maintaining therehabilitated canals, especially in Lac Alaotra, and (iii)he l ik el iho od o f cyclone damages

combined with the existence or non-existence o f a disaster-risk f ina nci ng mecha nism that will

immediately repair cyclone damages.

66. The benefi ts have been calculated with a paddy producer price at 21 cents per kg.

Duringmost o f he last twenty years, the producer price stayed rela tive ly constant at 10 cents

per kg. During the last two years, however, the producer price increased drastically, to more

than 20 cents, ind uci ng changes in farmer b ehavior tha t have started to rega in interest in rice

production. There i s a risk that the pric e will shrink again. I f he producer price fal ls be low 17cents per kg next year (compared to 20 cents per kg now) and stays at this level, the projectwill not be profitable.

67. The inabil i ty o f W A S o maintain the irrig ati on nfrastructure was one o f he reasons

why i rr igat ion projects were not able to maintain product ivi ty gains long after irr igat ioninfrastructure was rehabilitated: W A S ere lo sing o n average 5 percent o f the irrigate d area

o f systems every year after the investment was made. As far as cyclone damages are

concerned, the relative ly impo rtant physic al contingencies should be sufficient during project

implementation to repair cyclone damages to infrastructure. After the project, repairs will

depend on th e FERHA or any disaster risk f inancing that could be set up during project

implementation.

68. I f W A S o n ot maintain product ivi ty o n well-irr igated areas for more than 7 years

Other Crops Product ion o n Tanety

Siltation Reduction in r r igat ion

systems

Avoid ed Cyclon e Damages in

I r r igat ion systems

Project Cost (investment and

recurrent)

Net Present Value ( ERR)

$3,546 $2,828 $2,246 $499

$170 $204 $127 $153

$282 $263 $170 $298

$8,027 $7,340 $6,563 $10,385

(13%) (20%) (13%) (8%)

1,574 6,578 1,645 -1,4317

70. The project’s outcome wil l greatly depend on the sustainable fina ncin g mechanisms

that will be put in place to increase the recovery rate o f the O &M fee, to cope with cyclone

damages and, to some extent, to pay the lower and upper watershed farmers for theenvironm ental services they will provide i f they maintain natural resources, and control

erosion.

G. Financial Analysis/Fiscal Impact



7 1. The ma in winners in the irrigatio n and watershed management investment will be the

loc al rura l populations (around 90,000 households mos tly living under the absolute poverty

l ine) o f the four watersheds (Marovay, Itasy, Andapa and Lac Alaotra), especially farmers

producing paddy with good water control. Ne t benefits for farmers will be around US$22.6

mi l l ion ( the sum o f the four benefi ts accruing from additional agricultural production, less

what i s giv en to communes and to traders), or 51 percent o f he present value o f the project’s

benefits. The other net gainers o f he proje ct are the traders in agricultural products that will

receive US$11.8 mi llio n, o r 26 percent o f he present value o f the project’s benefits.

72. Un de r the conservative hypothesis that there will not be any additional fisc al revenuesgenerated from the project other than the US$8.5 million in taxes generated by the project

investment plus the taxes alon g the value chain between paddy producers and consumers, the

government i s the main oser in this simple analysis because i t does invest the bulk o f he $28

mi l l i on o f he pro ject cost (part o f which i s supported by the beneficiaries) and receive a fiscal

compensation o f only $8.5 m il l ion , or 19 percent o f the total benefits, in return for i t s

investment (1 1 percent for communes through additional production, and 8 percent to the

central g overnm ent throug h taxes associated with the project’s investment).

73. W A Swill gain US$1.7 m il l i on from the reduced costs o f si l tat ion and from some

prevention o f cyclone damages, but wil l also bear most o f the project recurrent costs. An

addi t ional US$4.4 mi l l ion o f recurrent costs wil l come both from irr igat ion rehabil i tat ion

maintenance an d natura l resource management in the up per watershed. Therefore, they will

lose US$2.7 mi l l io n from the project. T h i s cost, which will happen mostly after projectcompletion, will represent a f lo w o f around US$0.75 m il l i on a year, or an additional US$33

per hectare o f well- and partially-irrigated areas where the project will intervene. Therefore, inorder for the project to be sustainable, there will be the need to transfer US$33 p er hectare

from irrigated agriculture farmers to WUAs so that the W A S an pay for the additionalmaintenance cost. Given that the farmer will gain around US$50 per addit ional ton o f paddy

and around US$35 per addi tional ton o f other crops produced, this op tio n sounds feasible.

74. The exist ing lo w rates o f O&M recovery and the relative failure o f past projects to

improve i t mean that this project should work on institutional arrangement, involving, for

example, the communes, and putting in place enforcement mechanisms to make sure that this

transfer will happen. Taxes at the commune le ve l are one possibility.

75. Cyclone damages o n irrigatio n infrastructures are another type o f recurrent cost that

needs to b e financed by project for sustainability reasons. Part o f he project’s benefit will be a

H. Conclusions

76. In sum, the analysis shows that the expected incremental economic rents, based on

several assumptions about the counterfactua l pace o f rrig atio n infrastructure degradation, soi l

erosion, an d cyc lonic damages, o n the one hand, and the additio nal agric ultura l produc tion, on

the other hand, are robust enough to justify the proposed investments by the Malagasygovernment, even i f the numbers themselves are not very high. However, assumptions on

addi tional agric ultura l pro duc tion are conservative, as well as the incremental benefit



associated with them. Moreove r, some benefits o f new production , such as rent, w hi ch will be

generated alon g the value chains betwee n producers an d consumers, have n ot bee n take n int oaccount in this analysis.

77. Th e ma in beneficiaries will be the about 500,000 people that will see their income

grow through gains in agricultural product ivi ty. However, in order to make these gains

sustainable, the project will have to put in place transfer mechanisms from these farmers(particularly those who wo rk in he irrigation systems) to W A S nd to the FERHA in orderto fund infrastructure maintenance and to in sure them against cyclone damages. In addit ion to

this f i rs t transfer, i t i s also possible to envisage payment for environmental services from

W A S o farmers to help prevent soil erosion in the low er and upper parts o f he watersheds.

G.

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e

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References

Wor ld Bank. 2005. Madagascar: The impact o f public spending on rrigated

perimeters prod uctivity (1985-2004).The W or ld Bank: Washington, D.C.Brand (J.) M a rch 2006. SynthBse des etudes de preparation par site d’intervention.Processed.

W o r ld Ba n k Inst i tute. 200 1. Economic Analysis o f nvestment Operations. Analyt ic al

tools and practica l applications. WBI development studies. Th e W o r ld Ba n k:Washington, D.C.

Minten B. and Barret C. 2005. Agricultu ral technology, produ ctivity, pove rty and foodsecurity in Madagascar. Processed.

IRAM. Janvier 2006. Renforc ement des capacites des parties prenantes dans l e pro jetbasins versants perim btres irrigues . Processed.

Horns. DCcembre 2005. Etude de prepara tion du pro jet basins versants-pkrimetresirriguks. Etude des filikre s. Processed.

Annex 9.1: Project Economic Costs, Economic Benefits and NPV per Watershed

Table 24: Marovoay Watershed, Project Economic Costs (US$ thousands)



Total 8,027 I 1,623 1 2,091 I 2,956 1 2,171 I 3,410

Table 25: Itasy watershed, Project Economic Costs (US$ thousands)

Recurrent Costs 1.119 I 0 1 0 1 0 1 0 1 3.410

Table 26: Andapa watershed, Project Economic Costs (US$ thousands)

Total

Table 27: Alaotra Watershed, Project Economic Costs(US$ thousands)

7,340 I 1,508 I 1,991 I 2,871 I 2,144 I 2,498

Recurrent Costs 703 I 0 1 0 1 0 1 0 1 2.498

Table 28 : Marovay, Summary o f costs and benefits, NP V as of 2006 (US$ thousands)



Av oid ed cyclone damages

Project Cost (investment and recurrent)

Ne t benefits (ERR=20%)

Table 29 : Itasy, Summary of costs and benefits, NPV as of 2006 (US$ thousands)

263 0 0 0 0 1,375

7,340 1,508 1,991 2,871 2,144 2,498

6,578 -1,508 -1,943 -2,504 -1,211 46,307

Table 30: Andapa, Summary o f costs and benefits, NPV as of 2006 (US$ thousands)

Table 31: Alaotra, Summary o f costs and benefits, NP V as of 2006 (US$ thousands)

Annex 10: Safe gua rd Policies Issues

Madagascar: Irrig ation and Watershed Management Project

Enviro nme ntal Assessment Category and Safegua rd Policies triggere d

1, The Madagascar Irr ig at io n and Watershed Manage ment Project has been classifie d as



a "Category A" operation under the World Bank environmental screening proceduresspecified in OP 4.01. The package o f safeguard documents prepared fo r the proj ect comprises

three primary reports: (i)he Regional Environmental and Social Assessment (RESA)containing and En vironment and Social Management Plan (ESMP); (ii)he Pest and PesticideManag ement Plan (PPMP), and; (iii)he Resettlement Policy F ramew ork (RPF). The RESA,

PPMP a nd RPF address the W or ld Ban k Safeguard Policies that are triggered by the project.The proposed activities for management and mitigation of the Project impacts are in

compliance with the following World Bank Safeguard Policies: Environmental Assessment

Policy OP/BP 4.01, Natural Habitat Policy OP/BP 4.04, Forests Policy OP/BP 4.36,

Invo lun tary Resettlement OP/BP 4.12, a nd Pest Manag ement OP/BP 4.09.

Analysis o f alternatives

2. La nd degradation in Madagascar has been extensive and dramatic. I t has led to a

significant reduction in agricultural productivity, exacerbation o f rampant natural erosion by

human caused erosion and widespread poverty o f the rura l population. The no-projectalternative w i l l lead to a deterioration o f the existing situation, expansion o f the area o f lo wagricultural productivity leading to the destruction o f globally important biodiversity

resources (e.g. Ma ro je jy Na tio na l Park, the South Anjanaharibe Special Reserve, and the

Makira Conservation Site all located in the upper watersheds around the Andapa irrigation

scheme; the Ankarafantsika Natio nal Park located in the upper Mara voay watershed; and theLac A laotra Ramsar site) and will lead over time to abandonment o f man y ru ra l areas.

3. The present project addresses in an integrated manner the land degradation in fourma jor irrigatio n schemes and their associated watersheds and reduces the pressure on glo ba llyimportant biodiversity resources. The present project design has as objective to increase

agricultural production in an environmentally and socially sustainable manner, stop the

expansion o f the agricultural area in the project sites through intensification and to reducerural poverty, w hich s expected to lead to a reduced rura l to urban migration.

Enviro nme ntal and Social Impacts

4. The environmental and social impacts o f the project are mostly positive.Enviro nmen tal and social management measures are almost fully integrated int o the design o fthe various p roject components. The promo tion o f agro-ecological produ ction techniques are

unsustainable levels and exacerbate human induced erosion and i t might also increase

deforestation in the globa lly impo rtant biodiversity sites in the upper watersheds and increase

the clearance o f reed marshes for rice pro ductio n in the Lac Alao tra Ramsar site. Transfer o f

the management o f hese sub-watersheds to lo cal farmer organizations will need to provide a

social fencing system to preven t the entry o f migrants fr om elsewhere.

6. Intensif ication o f agricultural product ion normally goes hand in hand with increased

use o f chemical fertil izers and pesticides. To manage the health and environm ental impacts o f



increased pesticide use, the borrower has prepared a Pest and Pesticide Management Plan

(PPMP). T h i s PP MP envisages strengthening the capacity o f the Plant Prote ction Service on

the Regional level (DRDRs) to increase the oversight and control o f pesticide use and

improve awareness among farmers and pesticide distributors. The PPMP also envisages

strengthening the development and implem entation o f Integrated Pest Management (IPM )

practices. Agro-ecological practices require more inputs: herbicides and fertilizers. Thequestion i s can farmers afford this? These agro-ecological practices reduce the r isks fo r

farmers during droughts. This makes the farmers less vulnerable to clim ate varia bility.

Environmental and Social Management Plan (ESMP)

7. Environmental and social management measures and their costs have been integrated

into the various project components. An overview o f these environmental and social

management measuresi s

presented inthe table

below.

Contractor EMP

8. The contractors who will be awarded the contracts for the rehabil itat ion o f the

irrigatio n schemes need to prepare their ow n Environm ental Management Plans (ContractorEMPs). These EMP s need to spec ify ho w the contractors will handle occupational health and

safety issues, in compliance with IFC Occupational Health and Safety Guidelines, during

construction and ho w hydrocarbons (waste oils), solid and liquid wastes wi l l be handled,

where their workers will be housed, training and means to prevent HIV/Aids infect ions oftheir workers and loc al communities. The contractors should have a license to establish and

operate the quarries and a fter use should rehabilitate these quarries t o acceptable in terna tiona lstandards. The establishment, operation and reha bilitatio n o f he quarries sh ould be negotiatedwith the local communities.

Agro-industries

9. The project will prom ote the use o f agro-industries, such as ric e mills and related

processes, biodiesel production from Jatropha seeds, oil palm and groundnuts industries

(crushing, o i l refini ng, soap and me al production), cashew nut processing, fruit ju ice and pulp

processing plants (citrus, mangoes and litchis). These agro-industries are essential for

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Resettlement Issues

10. In order to protect the r ights o f vulnerable groups and farmers who might lose

land o r in come or lose access to other natural resources a Resettlement Po licy Fram ework

(RPF) has been prepared by the borrower. I f certain project activities requireresettlement, land acq uisition o r certain pe ople lose incom e o r access to n atural resources

a Resettlement Acti on P lan (RAP) wil l be prepared in compliance with the Wo r ld Bank

Poli cy o n Involuntary Resettlement (OP 4.12) to ensure that these peo ple don’t beco me



poorer then they were before the project intervened. A Resettlement Act io n Pla n (RAP)

or a sm all Enviro nmen tal Assessment (EA) might be needed in case check dams, anti-

erosion structures, mini dams, markets or other infrastru cture will be built. The Technical

Secretariat o f the Ma tch ing Grant Mechanism, to b e financed under the project, wil l

screen sub-projects and identify i f a RAP and/or a small EA study as part o f thefeasibil i ty w i l l be needed.

11. The project will loo k carefully int o the po sit ion o f share croppers in the irr igation

schemes, where share cropping i s more common and in the watersheds where share

cropping i s less common. The project will take care that the capacity o f the private

operators i s no t strengthened at the expense o f the smallholders (marg inalizat ion o fvulne rable groups).

ESMP Implementation and Monitoring

12. The implementat ion and the monitor ing o f he ESMP wil l need to be carried out

per region. One o f the Technical Assistance attached to the DRDR and to be f inancedunder the project, needs to be qual i f ied in environmental and social management issues

and will be responsible for the implementation and monito ring o f he implementation o f

the ESMP .

Communication Plan

13. Com munic ation between the differe nt projec t components i s fundamental for an

adequate implementation o f the project and to build synergies. One o f the Technical

Assistance in the DRDR financed by the project needs to be responsible for the

communication between the components, but also for comm unication with other regions

and the national level and the media.

A n n e x 11: Project Preparat ion and Supervision

Madagascar: Irri gat ion and Watershed Ma nagement Project

Planned Actual

PC N review June 28,2004 June 28,2004



Ini tia l P ID to PIC October 22, 2004 October 22,2004Ini t ia l ISDS to PIC August 25,2004 August 25,2004

Appra isal June 6,20 06 June 6,2006Nego tiation s September 13,2006 September 14,2006

Bo ard RV P approval November 14,2006Planned date o f effectiveness February 28,20 07

Planned date o f mid-term review Ma y 2009Planned closing date August 3 1,201 1

Key institu tions and persons responsible for p reparation o f he Project:Ministry o f Agriculture, Livestock and Fisheries, B run o Rakotomahefa, Rad0

Rakotondralambo

Bank s ta f f and consultants w ho worked o n the Project included:

Name Ti t le Unit

Ziv a Razafintsalama Team Task Leader, Sr. Rural AFTAR

Sofia BettencourtMohamed Arbi Ben-Achour

Soulemane Fofan aSuzanne Mo rri sGervais RakotoarimananaSylvain RambelosonLova N iaina RavaoariminoPaul Jean Fen0Eavan 0 Halloran

Christophe CrepinGilles Veui l lot

Erik a StygerRobert Robelus

Patrick Labaste

Development

Lea d Operations Of fice rSr. Social Scientist

Operations OfficerSr. Finance OfficerSr. Financ ial M anagement SpecialistSr. Procurement SpecialistProcurement AnalystEnvironmental SpecialistSr. Country Officer

Lead Environment SpecialistSr. Counsel

ConsultantConsultant

Lea d Agriculture Economist

AFTEN

AFTCS

AFTARL O A F CAFTFM

AFTPCAFTPCAFTEN

AFMMG

AFTEN

LEGAF

AFTEN

AFTAR

AFTAR

Bank funds expended to date o n Project preparation:

1. B an k resources: US$1,250,567

2. Trust funds: 03. To tal: US$1,250,567

Estimated Approva l and Supervision costs:1. Rem ain ing costs to approval: US$18.00 0

2. Estimated annua l supervision cost: US$35.000



Annex 12: Documents in the Project F i le

Madagascar: Irrig atio n and Watershed Managem ent Project

Bank Reports



Aide-memoire - April 2004 mission

Aide-memoire - July 2004 mission

Aide-memoire - June 2005 mi ssi on

Aide-memoire - Ma rch 2005 mission

Aide-memoire - November 2005 missionAide-memoire - June 2006 miss ion

Aide-memoire -November 2007 mission

Aide-memoire - February 2008 mission

Aide-memoire - June 2008 mission

Prep arat ion Studies - W o r k i n g P a p e rs

I rr iga t ion and Watershed Management Poli cy Letter

Document de t ravai l sur la Skcurisation Foncibre, v ersion provisoire, December 2005

Renforcement des capacitks des parties prenantes dans l e projet Bassins Versants

PCrimbtres Irriguks, July 2005

Etude des FiliBres, December 2005

La nd Titles, Investment, and Agric ultural Productivity in Madagascar, Octo ber 2005

Lan d and Property Rights Review, Draft

Synthesis o f he Preparatory Studies on Interve ntion Sites - Lac Aloatra

Synthesis o f he Preparatory Studies by Intervention Site - Andapa site

Synthesis o f he Preparatory Studies by Intervention Site - Itasy site

Synthesis o f the Preparatory Stud y by Intervention Site - Marovoay Site

Analyse Institutionelle et Juridique du Progra mme Bassins Versants PCrimetres

I r r i g uC s , October 2005

Cadre de Politiq ue de Rkinstallation -Marc h 2006

Evaluation Environnementale e t Sociale Rkgiona le - February 2006

Plan de G estio n des Pestes et des Pesticides - March 2006

Irrigat ion and Watershed Development Policy on July 12,2006

Annex 13: Incremen tal Cost Analysis

Madagasca r: Irriga tion and Watershed Management Project

1. T h i s section discusses the incremental costs eligible for GEF funding for the“Irriga tion and Waters hed Mana gemen t Project”, defin ed as the difference betwee n the GEF

alternative scenario an d the IDA baseline. Fo r each o f he four components o f he project, the

section will:

0 Identify the baseline,



0 Describe what wo uld happen i f he baseline i s mplemented,

0 Indicate the costs o f the baseline,

0 Descr ibe the alternative scenario,

Descr ibe the expected benefits under the alternative scenario,

Report the cost o f he alternative and the increm ental cost.

2. The relations hip between the activit ies o f each component and the environmental

benefits generated i s synthesized in the below tables. The Incremental Cost Mat rix i s reported

at the end o f the section. As mo st o f the decisions, practices and technologies that the

beneficiaries o f the project w i l l adopt cannot yet be determined, the analysis favors a

qualitative approach.

Component 1: Development of Comm ercial Agriculture

3 . The objective for this component s to la y the foundations fo r im prove d market access

and sustainable intensification and diversification o f rrigate d and rainfed agricultural systems

in the project’s watersheds.

(a) Baseline:

4. T h i s component will promote agricultural development in lo wl an d and upland areas.

The aim will be to imp rov e (a) access to mar ket and marke ting systems in order to reduce

costs an d increase fa rm gate prices, (b) added value through diversific ation int o higher added

value products and agro-processing, (c) capacities o f farmers (male and female), farmers

groups and profession al organizations, and (d) agricultural product ivi ty through better access

to extension, improved technology, inputs, and credit. T h e component includes two sub

components: one in vo lv ing activit ies that largely depend on public/collective initiative; the

other one dep ending essentially on demand fr om stakeholders.

@) Exp ected results und er the baseline scenario:

5. The results expected under this component will be the increase in number o f producer

organizations, unions, a nd federations o f active producers, the increase in he vo lume o f cred i t

6 . GEF funding will contribute to assuring that intensification and diversification o fagricultural product ion will be based on sustainable la nd management principles . These are

based on improved organic matter management through improved rotations, cover crops,

impro ved fallows, agroforestry technologies and divers ified and loc ally adapted varieties and

crops. T h i s w i l l lead to improved above-ground and below-ground carbon sequestration,

increase o f agrobiodiversity within the cropping systems and reduce pressure on natural

habitats, and thus secure imp ortan t global enviro nme ntal benefits. The GEF grant will be usedfo r capacity strengthening o f echnicians, and farmers in agroecological techniques and SLMprinciples, and by supporting adaptive research and dissemination o f mpro ved technologies.



For more details o n activities see Ann ex 4. S pecial attention wil l be paid to upland systemsthat are based on slash-and-bum ag riculture (tavy), wh ic h causes deforestation, threats to

biodiversity, carbon loss and soil fer t i l i ty loss. The improvement will need more t ime andeffort then the systems downstream area that lend themselves better to agricultural

intensification.

7 . These activities w i l l contribute to achieving the SIP Result 1 SLM applications on the

ground are scaled up in country-defined priority ago-ecological zones, and Result 3:

Comm ercial and advisory services fo r S L M are strengthened and readily available to l an d

users. The activit ies are rooted in the SIP components 1 and 3 (more specifically the

subcomponents 1.2, 1.3, 1.4, 1.5 and 3.2). In addition, IDA funds will specifically support the

SIP sub-com ponent 3.3 and 3.4 a nd 3.5).

(e) Expected ocal and global benefits under the GEF alternative(OP15)

Activities

Technical

assistance,

t ra ining o ftechnicians an d

farmers, and on-farm research o f

agro-ecologicalproduct ion

techniques

Direct impact and local

environmental benefits

Improved loca l capacity

(technicians, exte nsio n agents and

farmers) in mpleme nting agro-ecological fa rming techniques

0 Improved agricultural product ion

based ono Technical improvement through

ago-e cologic al and agroforestry

techniques.

management and nutrient

recy cling through organic mattermanagement,

o Improved so i l fert i l i ty

o Improved protect ion o f soi ls

Global environmental

benefits

Increase in carbon

sequestration, so il carbon,

above-ground carbon(through cover cropping,

relay cropping,

agroforestry)Increase in agrobiodiversity

(through diversification)

and below-groun d

biodiversity (through

improved s oi l organic

matter status)Reduced environmental

degrada tion and pressure o n

integrated pest management

Divers if ication o f agricultural

produ ction system

Improved ecological resi lience o f

agricultural system, with improvedresistance to climate v ariability

Availa ble alternative farming

techniques to slash-and-burn

practices, through agro-ecological

and possible restorat ion o f

ecosystem integrity



techniques, improved nutrient

cy clin g and targeted inputs,

agroforestry and horticultureReduct ion o f pressure o n forests,

and protects biodiv ersity

GEF Alternative costs: 12,460,000 USD (IDA, Beneficiaries and GEF)

( f ) Incremental cost: 2,500,000 U S D GEF. The incremental cost wil l f inance activit ies suchas the technica l assistance to the project, t rai ning o f technicians and farmers, and

adaptat ion o f ne w techniques thro ugh on-fa rm research.

Component 2: Irrigation Development

8. The object ive o f this component i s to lay the foundations for impro ved management,maintenance and sustainability o f irrig ati on services provis ion in four large-scale imgation

schemes through rehabilitation o f irrig ati on infrastructure, capacity strengthening o f

stakeholders and clarif icatio n o f roles and responsibilit ies, and establishment o f an

appropriate incentive framework.

(a) Baseline:

9 . The component will contribute to improving the quali ty o f irr iga t ion services and

operation and maintenance (O&M) o f the irrigation schemes. The project will finance the

rehabilitation o f irrigation and appurtenant infrastructure, including technical design studies,

implemen tation of works and their supervision. In addition, the project will fund theparticipatory preparation o f a Scheme Deve lopment Plan (SDP) and an annual Performance

Contract (PC), negotiated between (F) W A S , the Communes and Regions, and MA EP . The

project will also prov ide support to stakeholders during implementation o f the PC, including

capacity strengthening, development o f a strategy for mob ilization o f water users, annual

evaluation o f performance indicators a nd user satisfaction surveys.

(b) Expected results under the baseline scenario:

(c) Baseline cost: 17,470,000 U S D (15,670,000 USD IDA and 1,800,000 USDBeneficiaries)

(d) GEF alternative scenario (OP15):

11. IDA funding wi l l b e used for irrigation rehabilitation (infrastructure work) andcapacity strengthening o f water users associations fo r the management o f the i rr igat ion

schemes. There will be no addit ional GEF funding to this component. Aspects o f interests to

GEF, such as env ironm ental management in relation to agricultural improvement i s covered



under component 1 and the environmental management at the watershed or landscape level

with global environmental impacts are found under component 3.

(e) Expected local and global benefits under the GEF alternative (OP15)

12. Environm ental benefits with signif icant impact on irr iga t ion schemes wil l be created

through GEF incremental funding under component 1, 3 an d 4. Reduced sedimentation o f

irrigation infrastructure (which reduced O&M costs) wil l be a result f rom overal l GEF

increment.

GEF Alternative costs: 17,470,000 U S D (15,670,000 USD IDA and 1,800,000 USDBeneficiaries)

( f ) Incr eme ntal cost: 0 U S D GEF


13.

o f watersheds inclu din g irrig ated and rainfe d agriculture, the conservat ion of he natural

heritage, a nd improv ed produc tivity o f he natural resources.

The object ive o f he component i s to .dy the foundation s for sustains .e management

(a) Baseline:

14.management o f watershed and b) investments f or watershed protection.

T h i s component will finance the a) plann ing and capacity building for the sustainable

15. The proje ct will finance technical assistance to prepare a watershed management pla n

for each o f the four project zones. I t wi l l include (i)oning and description o f land us e

systems, ecosystems, settlements, institutions and partners, (ii)trategic analysis o f erosion

problem s fo r d ownstre am sedim entation and natural resources degradation; (iii)specific and

detailed analysis to define pro ject activities, and (iv) establishing a baseline for monitoring

and evaluat ion o f component results. The project wil l also support land tenure security

through the installation o f ntercomm unal ‘Land Tenure Wind ow, that assist in recording non-

works favorin g biolo gical methods and techniques. Possible mechanical works will be built,

favorin g lo cal manpower.

@) Expected results under the baseline scenario:

17. Successful impleme ntation o f this component wil l resul t in four WatershedManagement Plans that will provid e a diagnosis o f natural resources and ide nti fy pathways o fintervention s fo r sustainable lan d and water management at the watershed lev el. In addition,

hot-spot erosion will be identified, strategies developed for their control and erosion control

works implemented preferably with the participa tion o f concerned stakeholders. Thro ugh



im pro ve d lan d tenure security, farmers w i l l be more willing to invest into and protect their

lan d fr om degradation.

(c) Baseline cost: 1,9 10,000 USD (1,820,000 U S D IDA and 90,000 U S D Beneficiaries)

(d) GEF alternative scenario (OP15):

18. GEF contribution will complement IDA funding by addressing longer-term

environmental and land degradation issues at the watershed level, that negatively impact

lo wl an d and upland agricultural produc tion systems as we ll as global env ironmental goods

and services. M os t imp ortant degrading la nd uses are pasture management based on pe riodic

burning, extensive agricultural practices based on slashing (primary forest or fallowvegetation) and burning to produce food crops such as upland rice. Additional destructive

forest extraction practices concern logging, charcoal production, firewoo d collection, over-

ex tract ion o f N lT P, and hunting o f emurs and small mammals. These act ivit ies contribute t o

natural resource degradation, depletion o f vegetation cover and biodiversity. (See also An ne x

16 f or land degradation analysis). Often, these extensive la nd use practices d o n ot even a l low

farmers to achieve satisfactory incomes.

19. GEF funding will be used to address these land degradation issues through aparticipatory and integrated approach, and will provid e technical assistance to develop lan d

use alternatives that should encourage loc al popula tion to take re sponsibility and engage in

the sustainable management o f their na tural resources. The approach will include under sub-

component 3.1: a) establishing a part ic ipato ly zon ing with the stakeholders at the sub-

watershed level to determine optim al la nd use according to topography, current lan d use and

land rights, diagnosis o f soil fe rtil ity and s oil prod uction potential, location and characteristics

o f water sources and streams, and the orig in and pathways o f erosion; b) environmentalawareness rais ing campaigns; c) tr ain ing an d capacity strengthening in alternative sustainable

NRM practices according to stakeholders’ needs; d) provision o f support to environmentaland other communication and negotiation platforms that influence natural resources

management at the watershed level, an d e) the establishment o f an Integrated Know ledge and

inclusive dialogue and advocacy o n S L M strategic priorit ies, enabling conditions, and

deliv ery mechanisms established and ongoing; and resu l t 3 : comm ercial and advisory services

fo r SLM are strengthened and rea dily a vailable to la nd users. These activ ities are also rooted

in the SIP Component 1: Supporting on-the-ground activities for scaling up (1.2, 1.4, 1.5),

Component 2: Creating a conducive enabling environment for S L M and more specif ical ly the

sub-components (2.4, 2.6, 2.8.), and Component 3: Strengthening comm ercial and advisoryservices for SLM (3.1, 3.2).

Expected local and global benefits under the GEF alternative(OP15)



Direct impact and local

environmental benefits

Global environmental

benefits

Activities

Increased awareness o fstakeholders on

environmental issues at

the watershed leve l and

improved capacity o f

stakeholders forenvironmentally

sensitive decision-

mak ing and planning that

impacts environmental

conditions at the

watershed le ve l

positively, and at the

same time provides loca l

stakeholders with

environm ental services

that impro ve land

product ivi ty and livingconditions

1.2. Participato ry watershedmanagement plan s

1 3 . support to

environmental

commu nication platforms

D In format ion exchange

SLM tc)

Improved nformation

a Improved capacity o fstakeholders to integratethe creation o f global

environm ental benefits

in to their activities. T h i s

will result in he design

and implementation o f

participatory watershed

management plans

where the creation o fglobal environmental

benefits at the

watershed le ve l will beconsciously integrated

(such as soil (carbon)

protection, biodiversity

conservation, wa ter

resources protection ,increased carbons

sequestration throug h

exihanges favorscoordination and

collaboration and allows

for strategic decision

mak ing by variousstakeholders to address

global environmental

1.4. Awareness campaigns,

training a nd capacity

strengtheningo n

environme ntal issues

environmental and rura l

development activit ies

Improved knowledge

and capacity in regards

to la nd degradation

impacts as w el l as

exis ting alternatives by

o Rural populat ion

o Loc al and regional

sta f f (technical

Increased knowledge

and awareness o n globa lenvironm ental issues at

the loca l and regional

level will al low for

strategic decis ion

mak ing by various

stakeholders (rural



1 5. Support to o f

commun ity based land

tenure secu rity

1.6 Integrated Knowledge

and Information System or

SLM.

services, NGOs)N ew ly created or

reinforced NRM farmers

groups or associationswith improved capacity

Secured com munity lan d

rights wi ll provide

incentives for improved

NRM practicesEstablish ed management

plans provid e

communities guidelines

on volumes for

extraction, management

practices, and info rm o n

long-term product ivi ty o f

resourcesStimulates

environmental

stewardship o f

communities

Will mproveproduct ivi ty and

pro f i tab i l i ty o f NR use.

Collect ion and dif fus ion

o f nternat ional andnational knowledge w i l lal low for an in formed

development,

environment, private

sector etc) to engage in

S L M act iv it ies thatcreate globa lenvironmental benefits

(carbon sequestration,

increase in agro-

biodiversity)

Ma inta in ecosystem’s

integrity through

sustainable extr actio n

and harvest o f productsfro m natural habitats

Protect biodiv ersity by

mainta ining habitats

Avo ided deforestation

due to community land

rights (avoided carbon

loss)

Increased availa bility o f

knowledge and awarnesso n SLM issues and

options at the local,

2.2. Revegetat ion o f

com mun al lan d (pastures,

reforestation, protectio n o f

natu ral forests)

scaling up at the

landscape level, and

beyon d at the national

leve l

Pla nted fodd er grasses

and imp roved pasture

management w i l lcontribute to

o mpro ved cattle

nutr i t ion and

environme ntal benefits

Impro ved above andbelo w ground carbonsequestration (fodd er

grasses, re fore statio n)Avo ided carbon loss

(pasture fires,



product ivity, whic h

enables im prove d crop

and l ivestock

integrationo regenerat ion o f

vegetation

o reduce d sheet erosion

Reforestation will

contribute to impro vedo Fuelwood and

construction wo od

supplyo Erosion controlRegenerat ion o f natural

vegetation will

o provide multiple

products for extraction

(fuelwood, medicinalplants, wild f rui ts and

other foo d plants)

o reintroduce nativebiodiversity within

produ ction landscape

Protect ion o f natural

habitats will contribute

too Biodiversity

conservat ion o f many

endemic and

endangered species

regu latory services and

o Protect ecosystem

deforestation, reduc ed

forest product extraction)

Regenerat ion o f nat ive

vegetation increasesabove and below gro und

biodiversity

Reduc ed pressure o nprim ary forests, leads to

improved protect ion o fo biodiversity

o mportant

environmental

regu latory services suchas wate r source

protection (Marovoay)

farm, dissemination o f mproved technologies, part icipatory mo nitori ng o f development

processes.

Component 4: Project M anagement

21, The objective o f this component i s to manage and use resources in accordance withthe project’s objectives and procedures, and to put in place a pol icy framework that i s

favorable to upscaling o f he project at the national level.

22. Baseline: Management o f he project, including (a) provision o f techn ical assistance,



tra ining, of ice equipment and vehicles, minor of ice upgrading works, audi t ing and

evaluation studies, and incremental operating costs in support o f project management, (b)

overall project planning, quality oversight, procurement, financial management, and

mo nit ori ng o f project activities; and (c) outsourcing o f quality oversight through independentfinancial and technical audits, and evaluation o f project activit ies. Project management will

encompass all four target watersheds as well as national level coordination. Projectmoni tor ing will be undertaken at internal and external levels. T h i s component will also

include support to nationa l policies.

(a) Expected scenario under the baseline scenario: Successful implementation o f thiscomponent will result in efficient implementation arrangements, effective oversight,

monitoring and evaluat ion o f project activities.

(b) Baseline cost: 3,450,000 U S D (IDA)

(c) GEF alternativ e scenario (OP15)

23. GEF funding will contribute to the project monitoring and evaluation system by

f inancing the satellite images and their interpretation to mon ito r the global an d environmental

indicators in order to assess imp act o f project activit ies o n land degradation, carbon

sequestration, biodiver sity, habitat protection , an d area under SLM. GEF will also contribute

to the costs o f echnica l assistance to M&E and the project implemen tation team, and the f ina l

evaluat ion o f the project. On the policy support side, GEF will co-finance with other donors

the development o f he Country Strategic Investment Fram ewor k for SLM.

24. The activit ies will contribute to achieving the SIP result 4: targeted knowledge

generated and disseminated and mo ni to rin g established and strengthened at a l l levels. They

are also rooted in the SIP component 4 and more spec ifically in the subcomponents 4.4. and

4.5.

Expected local and global benefits under the GEF alternative (OP15)

indicators, and provision o fsupport to pro jectimplemen tation team

causes, processes and

dynam ics associatedwith lan d degradation

environmental

information system an d

environmental

indicators

knowledge will be

Improved

State-of-the-Art

the projectIn fo rm g lobal

community, pol ic y

makers, research, and

development

communit ies on projectoutcome.



Nat ional leve l multi-

partner, multi-sector SLM

investment framework inthe BVPIprogram context

i s establishedand under

implementation

available at local evel

Al ignment o f donors

and stakeholders at

local, region al andnational leve l will be

possible in regards o f

S L M approaches and

SLM interventions.

Scaling up SLM will

allow achieving

U N C C D N A P andN EPAD ’s C A AD P an d

E A P

(d) GEF Alternative costs: 4,430,000 U S D (GEF + IDA)

(e) Incremental cost: 980,000 USD GEF Incremental costs will cover the reinforcement o f

the M&E system with GI S and the participatory mon ito rin g at the loca l level.

Incremental Cost Matrix

25 . The incremental costs are calculated as the difference between the GEF alternative

scenario an d the IDA baseline scenario. The results are repo rted in the matr ix be low. As most

o f the decisions, prac tices and technologies that th e beneficiaries o f the project will adopt

cannot yet be determined, the analysis favors a qualitative approach.

Component 1

Development o f

CommercialAgriculture

Category

Baseline

Estimated

Expenditures

(US $1

9,960,000

Local Benefit

Increase in producerorganizations,

increased creditallocation, improved

agriculturalproduction through

increased inp ut use

Global Benefit

~

Global environmentalbenefits are minor,

and may results from

reduced pressure onforests or marshesthanks t o agricultural

intensification



W i t h GEF

Alternative

WM)

12,460,000

(fertilizer, seeds,

pesticides),improved agro-

processing and

marketing o fproducts

Improved oca l

capacity(technicians,extension agents and

farmers) in

implementing agro-

ecological farming

techniques

Improved

avai lab il i ty o f a widerange o f agro-

ecological

technologies at fa rm

level

Increased

agriculturalproductivi ty thanks

to agro-ecological

and agroforestrytechniques

(including improved

rotations)

Improved erosion

control on upland

fields thanks t ovegetative measures

especially in areas

w i th s t i l l high forestcover such as Andapa

Significant globalenvironmental

benefits through:

Increase in carbonsequestration (soi l

carbon, above-ground

carbon: covercropping, relaycropping,

agroforestry)

Increase in agro-

biodiversi ty andbelow-ground

biodiversity (through

impro ved soil organic

matter status)

Reducedenvironmentaldegradation and

pressure on na tural

habitats foragricultural fields

(deforestation) due to

satisfactory and

increased agricultural

production onexisting fields;

result ing in

Reduced carbon

Component2

Irrigation

Development

Category

Baseline

Estimated

Expenditures

(U S $)

17,470,000

Local Benefit

Rehabilitated

irrigationinfrastructure and

well organized andfully functional waterusers associations

Global Benefit

Global

environmentalbenefits minor aspeople mayconcentrate ocultivate lowland sand abandon



Component3

WatershedDevelopment

With GEF

Alternative( S W

Category

Baseline

17,470,000

Estimated

Expenditures

(US $)

1,9 10,000

Significant

environmentalbenefits on irrigationschemes will be

created hrough GEF

incremental fundingunder component 1,3and 4.Reducedsedimentation o firrigation

infrastructureReducing O&M

Improving

costs

irrigation water

Local Benefit

Reducedsedimentationthrough strategicerosion control

WS M master planimprovesknowledge base onresources and loca ldevelopment goalsand needs

degrading upland

Global Benefit

Some global benefits:

Improved knowledge anddecision making onsustainable managemento f natural resources andbiodiversity protection

Reduced and degradation(upland soil loss througherosion, lowlandagricultural surface loss

W i t h GEF

Alternative

( S W

4,330,000 Improvedcoordination and

collaborationbetween

environmental and

rural developmentstakeholders and/ororganizations

Improved local

capacity toencounter land

Significant global

benefits:

Improved nformation,

knowledge and decision-

making on globalenvironmental benefitsthrough loca l actions.

Protect globa lly

significant ecosystems(forests, wetlands, lakes)



2,420,000 .

degradation wi thalternative lan d us e

Securedcommuni ty landrights

Management plans

for sustainable us e

and extraction o f

NR

Improved

landscape

product iv i ty o f

communal land:pastures,

reforestation plots

and protect ion o f

natural habitats

Improved

productivi ty in

fragile upper

watersheds o fprivate agricultural

land hrough agro-

ecologicaltechniques.

Ma inta in ecosystems'

functional integrity (e.g.

protect ion o f watersources) through habita t

preservation

Protect glob allysignificant endemic

biodiversi ty withi n natural

habitats.

A vo id deforestation,

burningo f pastures,fallow vegetation, over-extraction o f forest

products and thus avoid

carbon loss

Improve carbon

sequestration in soils andabove-ground throu gh

agro-ecological

techniques, agroforestry,

reforestation andregeneration o f natural

vegetation

Project Basel ine

Management

Estimated

Expenditures

(U S $)

3,450,000

Local Benefit

M&E system to

mo nitor basel ineactivities

Effect ive project

management

Global Benefit

Limitedknowledge

o f and degradation,and ecosystem

dynamics due to

l imited moni tor i ng o f

ecosystem a nd la nd

degradation processes



TOTAL

Alternat ive

Basel ine 32,790,000

With GEF 38,690,00021Alternat ive

( S LM)

I ~ L M ’I Increment

5,900,000

4,430,000Comprehensive

mechanism

established fo r

mon i to r ing o f

NRM S L M a nd

land degradation

processes and

trends

Signif icant

contr ibut ion inquanti fying the

im p ac t o f S L M on

global environmental

benefits

Annex 14: Technical Annex La nd Degradation in Madagascar

Madagascar: Ir rig atio n and Watershed Management Project

La nd degradation in Madagascar

1. La nd degradation i s one o f the m ost serious and widespread problems for the

agricultural sector in Madagascar. The degradation dynamics in he uplands and lowlandsare often l inked and reinforcing each other. With the stagnation o f yields in the irrigated



low lan d areas and demographic growth, farmers extend their ag ricultura l activities on the

hillsides. Upper watershed land use i s often based on extensive and unsustainable

management practices, the most important being lack o f eros ion control and lack o f

improved soil fertility management on agricultural plots, slash and bum agriculture ortavy, and the frequent burning o f pastures. La nd degradation i s also caused by

deforestation for agricultural purposes, with consequence o f ncreased carbo n emissions,

biodiv ersity loss and dec linin g regulatory ecological services. These practices not o nlycontribute to the degradation and lo w produc t ivi ty o f up lands but also impact lowland

agriculture significantly. Upland soil erosion and water surface run-off is causing

sedimentation fo r downstream infrastructure, contrib uting to the reductio n o f cultivate darea under irrigation, loca l f looding o f r ice paddies in the rainy season and water

shortages in the dry season

2. Despite Madagascar’s important assets in irrigation infrastructure, pastapproaches have failed to achieve great success in boosting yields and reducing poverty

in rural areas, mainly as they lacked an integrated approach. Today, yields f or irrigatedr ice s t i l l rem ain l o w (-2.lt/ha), and are even lowe r for non-irriga ted upla nd rice

(-1.Wha) and slash-and-burn uplan d rice (-0.8tha). Ne xt to poor maintenance o finfrastructure and poor water management, vulnerability towards extreme events such as

cyclone damages, environmental challenges, such as erosion and land degradation areparamount. The seriousness o f the lan d degradation pro blems and interconnectedness

between upland and lowland land use has been acknowledged by the recently createdNational Irrigation and Watershed Management Program (PNBV-PI), which i s par t o f

the PRSP. The project will be par t o f the Nation al Program that aims to combat rural

pover ty through sustainable improveme nt o f the living condit ions and incomes o f rural

populations in irrig atio n schemes and surrounding watersheds, and through the efficien t

and sustainable development o f natu ral resources.

3. The project wil l focus its intervention on four large-scale public irrigationschemes (out o f six in otal) that cover 33,000 h a (out o f 81,000ha in otal). The four sites





* * *

* *

MM3

* *

I

mW ^



0 0 0 . 0 0 0 0 0

0 0 0

0 0 0

0 .



D

Site description an d lan d degradation at the four sites Marovo ay, La c Itasy, Andapa

and Alaotra

N o M W S

5. A s the four sites have different climatic and geographic conditions as well as

different land us e histories, a short description o f he four sites with the most importantissues o f and degradation is pro vide d hereafter.

Size o f W S R ice p la in N o N o



1 (Sahamaloto)

13 (according

to irr igation

sections)

1 SubWS(Lokoho),

multitude o fM W S

4

(ha)

Total: 6,400 ha356 km2

Size o f

communes:

5750 km2 12,000 ha

Size o f

communes: 4,460 ha4280 km2

Total: 1040

km 2

20,000 ha

Alaotra

Marovoay

Andapa

Itasy

Alaotra

Marovoay

Andapa

Itasy

Climate

Tropical

temperatehighland climate

Sub-humid

tropica l climate

H o t humidtropical cl imate

Altitude

750m

20 m

470m

1220m

Annual

Rainfa l l (mm)

1100-1200

1540

> 2000 (1800-

2000 plain,2500 hil l tops)

Communes

8

10

12

12

Rainfa l l

days(number)

100- 150

90

240

--

population

107,900

175,000

150,100

227,700

Av annual

tem p "C (avmin-max)

20 (15 - 27)

28 (24.4 -29.3)

(19.1 - 25.1)

Marovoay

6. The Marovoay pl ain is a r ice product ion zone o f pr ime nat ional importance,

situated in the Boeny Region, about 80 km South-East o f Mahajanga. The riverMarovoay i s a tr ibutary on the right bank o f River Basse Betsiboka, in the upper delta o f

the river. Subjected to quasi-complete submersion during the annual f looding o f RiverBetsiboka, the development o f the valley started in the ea rly 20th Century for off-season

rice prod uction. Schemes supplied through pumping fr om Ri ver Betsiboka were added to

the gravity systems fed by run-of-the-river and storage dams. The scheme is divide d int o



13 completely independent irrigati on sectors, f ed f ro m a numb er o f different sources. The

entire system i s facin g serious O&M challenges. Fo r a tot al area o f about 20.000 ha, an

estimated area o f 12.000 ha was cu ltivated in 2004. Beneficiaries o f al l plots developedduring the successive programs were main ly imm igra nt populations fro m other regions o f

the country. 90 percent o f he people o f 122,000 are immigrants. The ethnical diversity

implies a weak social cohesion, which i s l im i ted to the vil lage level. The percentage o f

sharecroppers is today very high. Until recently, G o M was responsible for O &M o f

irrigation schemes and pumps, but State funds for O&M o f even ‘non transferable’infras tructu re are nowadays uncertain. Establishment o f wate r users associations, unio ns

o f associations a nd federations has not resulted in the emergence o f an adequate

operational mechan ism f or sustainable O&M. The Performance Contract signed with theFWUA for the period 2001-2003 was not renewed and funds allocated for 2004 were

reallocated.

7. The m ai n watershed serving the Marovoay irr igation scheme is the Betsiboka

watershed, one o f he largest watersheds in Madagascar with an extension o f 40,000km2whose hydrology is determined hundreds o f ki lometers upstream. During the rainy

season, the irrigation scheme is submerged by the waters o f the river, depositing

sediments o n the ric e paddies. Whereas qu ality o f these sediments used to have a

fertilizing effect, the current sediment quality i s reported to be coarser and less fertile.The submersion o f perimeters as w el l as the high pumping costs requires annual

rehabi li tation o f the irrigation systems, thus making the maintenance expensive and theoverall economic pro fitab ility uncertain. The culti vatio n season can start once the water

has receded fr o m the plain. The m ai n cropping season corresponds to the dry season fr o m

April to October. Water availabil i ty for irr igation i s therefore critical and gets oftenscarce towards the end o f the cu ltivation cycle. Sub-watersheds o f the Marovoay River

and i t s tributaries supply a major part o f he irr igation system. Their sources are ma in ly

located in the zone o f he Ankarafantsika Nat iona l Park, a primary forest located on the

hillcrest. Finally, all around the plain, small lateral micro-watersheds with main ly

the end o f the ir riga tion season. This results in inundations o f r ice f ields after strongrains, and lack o f irr igation water towards the end o f the cropping season. As many o frice farmers ar e sharecroppers, they are hesitant to pay irrigation maintenance fees.

Agricultural services are weakly developed in the region. There i s only one cult ivation

cycle per year, which i s dominated by rice. The use o f fert il izer is insignif icant and riceyields are overall lo w (1 to 1.5tha). I mpr ove d techniques such S R I are weakly adopteddue to weak control o f water and badly le veled rice fields. O fte n earth dams are damagedby cattle grazing in the paddy fields and often not repaired. In most cases, the upland

population i s not the same as the low lan d ricp growers, thus their interest i s l im i ted toprev ent sedimentation. On the lower parts o f the hillside, the PLAE project works in 10



out o f 12 communes around the Mar ovo ay plain, to inst all some erosion contro l works.The projec t takes a pa rticipato ry approach and efforts are slo wly translating in effective

results.

9. M a i n degradation factors in the uplands are f i r e use o n pastures, deforestation an d

slash-and-burn agriculture, i l l ic it cutt ing o f wood, and charcoal production. M os t o f the

erosion comes from the extended pasture areas that are pe riod ical ly burned. The fodder

qua lity o f hese grasslands i s very lo w and farmers burn the uplands fo r fresh regrowth.Through frequent burning, no woody species resist. The resistin g grasses gro w in tuffs

and have very ba d soil coverage. Thus, with each rain event sheet erosion at the large

scale i s happening. The Park Service ANGAP i s work ing with surrounding com munitiesand herders to diminish burning activities and to limit fire use to the early season fires.This has allowed to reduce fires to 300 ha in 2004 compared to 2 000 and 3000 h a in the

previous years. Further degradation is provoked through the deforestation and thetraditional slash-and-burn agriculture or tavy. Farmers cut primary forests to cultivate

upland rice. In addit ion, i l l ic it wo od cutt ing and charcoal production i s threatening theprimary forest. Since 2002 this forest is protected and known under ‘AnkarafantsikaNational Park’ covering 130,000 hectares. I t is one o f the last large forest remnants in

Northwestern Madagascar o fdry

dense forest. Over 92 percent o f he wo od y species areendemic. The par k i s r i ch in birds with 129 species (74 percent endemic), reptile s with 70species (87 percent endemic), and has 22 ma mm al species (74 pe rcent endemic).

Lac Itasy

10. The Itasy Region, with i t s Lac I tasy in the center, i s situated about 100 km to the

west o f Antananarivo. The irr igation schemes do n ot have complex infrastructure and

represent independent schemes: Grappe du Lac Itasy 1980 ha, I fan ja 1900 ha, Man gabe

270 ha, Anala vory 140 ha, A mp ary 90 ha, Antanim enak ely 80 ha - or a to ta l o f 4460 ha.

Fo ur sub-watersheds can be distinguished associated with the irrigation schemes: grappe

11. High soil ferti lity and established irrigati on infrastructure, attracted immigrants.

Popu lation density i s high in the region with 107 p e o p l e h 2 in average, reaching up to

200 p e o p l e h in the communes o f Ampa ry and Sarobaratra Ifjana. Consequently,

upland agriculture is very common and often extends over the entire hil ls ide on the

volcan ic soils.'

12. Ric e pr od uct ivi ty increased steadily fr o m 2,4 t/ha in 1998 to 3 ,l t/ha in 2003. This

i s due to im pro ved cul tura l techniques such as imp rove d weeding, SRI, improve d direct

seeding.

13. Theoretically tw o rice crops can be cultivated, the f i rs t extending from July /Aug



to Nov/Dec, and the second fro m Dec/Feb to ApriVJune. Y ield s are between 2.5 t o 3 t/ha

but can reach up t o 6 tha under SRJ and good water management. With bad watermanagement yields can be as l o w as 0.5 to 1 t/ha. Mo st impor tant crops are rice, manioc,

mais, sweet potato, beans and potato. Fo o d crops make up 90 percent o f he production

compared to 10 percent o f cash crops. Rice occupies 33 percent o f he cultivate d surface,

ma is and beans each 17 percent an d potato 13 percent. Due to irregular water availabil i ty,

farmers adjust their cropp ing cycle accordingly, thus cropp ing can be encountered aroundthe entire year. Live stock produ ction i s most imp ortant and cattle i s used for f ieldwork,

transportation, and as a mon etary safety net.

14. Althoug h most o f hese schemes benefited fro m projects implemented fro m 1998

to 20 00 (project PPI 2), they are currently facing serious O & M problems o f he i rr igation

and drainage systems, due t o erosion o f watersheds and lack o f maintenance o f the

systems. Today, 30 - 50 percent o f he schemes are no lo nge r adequately i rrigate d. Given

these problems, the Water User Associations ( W A S ) have stopped collecting

maintenance fees fo r several years, since a greater par t o f he users refuse d to pay. The

actions o f the W A S re l im ite d to maintenance works carried out by interested users.

The p robl em o f water resources management i s common and a serious constraint for

lowland production. Inundat ion o f r ice fields happens periodically during strong and

heavy rainf all events. 1/3 o f the schemes are under inundation risk. On the other hand,

there i s as problem o f wate r shortage in the begin ning o f he rainy season, forcing farmersto wa it fo r the accumulation o f enough rainfall. This often delays planning which

negatively influences the yields. In addition, climate variability during the cropping

season with dry spells and inundations impacts yields negatively. Sedimentation o f the

irrig atio n scheme i s at the or igin o f water management problems. In fanja-Anosibe, fo rinstance, a large part o f he irri gat ion canals are bloc ked with 2 m o f sand o f a 1 2 km o f

canal (Ambohimandroso-Antsira) diminishing rrigate d area significan tly.

lavaka), deep slopes, l i t t l e vegetation cover and lack o f erosion control. Lav aka

formation, nex t to gully erosion and surface soil erosion are very common. This i s

enhance by frequent upland f i res that lea d to sparse vege tation cover. A bo ut one quarter

o f he 1andscapelWS present criti ca l zones o f degradation. L a nd slides and lavakas extend

over 1050ha. T he area under refore statio n stagnates and even regresses whe rereforestation plots are destroyed by f i re or overexploited for fuelwood use.

16. There is a small surface o f emaining primary forest left in the upper watershed o fAmbohimanana whi ch is a Tapia (Uapaca boieri) forest. But this forest is disappearing

progressively. M a n y o f the landless farmers, cultivatin g l ow lan d fields as sharecropper,don't produce sufficiently to cover the basic family needs. They look fore addit ional



fields in the uplands, as one o f he options, and deforest the st il l available tapia forests. In

addition, people collect fire woo d and produce charcoal fr om the forest. With i t disappearsalso an economic opportunity for very lucrative wild silk production, as the wild silk

moth s native to these forests.

17. The other important natural habitat i s Lake Itasy. Sedimentation o f lake

diminishes its de pth and creates floati ng islands. Fishproduc tiv ity diminished from 25-35t/year earlier o n to 12-13 t/year today. T o what extend this i s due to si l tation or

overharvesting i s no t clear. Loca l ru les for fish extraction have been established and some

fisher associations were created. Their effectiveness in regulat ing f ish populat ion is notknown.

Andapa

18. The Lo koho watershed o f Andapa, is situated in the Sava Reg ion about 100 km

southwest o f Sambava. A vast agricultural pl ai n o f 18.000 ha i s drained by 4 rivers thatmerge into Lokoho River. The plain is surrounded by a concentric landscape with

adjacent agricultural fields that are either upland rice fields based on slash-and-burnpractices or agroforestry plots with vanil la and coffee as ma in crops. Above 900 m

altitude i s the primary forest zone that is very extensive and vast. T he ba sin s bordered inthe North-East by the Marojejy National Park, in the South-West by Anjananaribe

Special Na tur al Reserve, and in the South by the Ma ki ra Special Nat ura l Reserve.

19. Andapa has a ho t humid climate with a mean annual rainfal l o f over 2000m m

distributed over 24 0 days. M ea n temperature varies f ro m 18,8C in July to 24.8C inJanuary. This climate pattern al lows for double cropping o f ice.

20. Fr om 1962 - 1997, the Andapa basin benefited from a development program

received an unsatisfactory rating in 1998 during the evaluat ion o f the EDF project,

particularly: (i)ai lure of pumping i r r igat ion on the Ankai%e perimeter (2100 ha); (ii)

lack o f maintenance o f structures o n a ll perimeters developed by the project; (iii)he

weak capacit ies o f he W A S ; nd (iv) fai led intensif ication.

21. The lowlands have a high potential for agricultural production with relatively

good yields and with the possibil i ty to having two crops per year. Out o f 12,000 h a

plante d rice less then 2,000 are curren tly imgated. The surface cultivated in the pl ai n areestimated to b e During the rai ny season between 9,000 to 12,000 h a are cultiva ted with

yields o f 2 to 3.5 t/ha and in the win te r season betw een 1,000 to 2,000 h a are cropp ed

with y ields o f 1.5 t o 2.5 t/ha. Tavy upland r ice i s cul t ivated on 2000 to 3000 ha with



average yields below Itha. Sedimentation seems not be as big o f a problem such as in

Itasy, Ala otra or M arovo ay. Nevertheless, the loss o f vegetation cover can provoke la nd

slides that can create large quantities o f sediments. In addition, steep riverb eds can sw ellvery fast during big ra in events and transport la rge amounts o f sediments, wh ic h resulted

in he currently silted-up ir riga tion structures. Th e pl ai n s irrigated throug h small streams

from small watersheds around the basin. This characteristic would support the idea to

encourage and prioriti ze sm all hydr olog ical infrastructure, w hi ch i s easier to manage for

the population, easier to ma intain and wh ich could have a signif icant impact o n people’slivelihoods.

22. The uplands are used throu gh mixed agroforestry systems that contribute to

stabil i ty in income through cash crops such as vanilla, coffee, clove, but also to

sustainable up land management. Mo re problematic for the en vironment i s the tavy system

that i s based on slashing an d burningeither primary forest or fallow land. Deforestation s

an important problem in the region, and is not ef ficie ntly enough stopped despite the

creation o f parks and reserves. One o f the reason i s that there are no efficient and forfarmers feasible alternatives o f uplan d rice cultivatio n available.

23. Maro ieiv National Park and Aniananaribe Special Natura l Reserve have beensupported from 1994 to 2004 by WWF with activities focusing on conservation,

environmen tal training, and ecotourism. F ro m 2000 to 2004 22 la nd rights could betransferred to local communities, all ow ing them to manage and extract products fr om the

natura l forests in the dis tr ict o f Andapa in the peripheral zone o f he protected areas. The

recently established M ak ir a Special Natur al Reserve, the largest reserve in Madagascar,

is receiving support from WCS (Wildl i fe Conservation Society). WCS supportscommunities in the peripheral zone throug h agricultural advise, provid es support fo r la nd

rights etc. Marojejy harbors a remarkably diverse set o f plants and animals, many o fwh ic h are endemic to the area. This i s due pr imar i ly to the wide range o f habi tats found

lemur species, 149 reptiles and amphibians, 35 palms, over 275 fer n species to g ive a fe wexamples, man y o f he species beingendemic to the re gio n and endangered.

Lac Alaotra S ah am alo to Irrigated Perimeter

24. The La c Ala otra watershed forms a vast depression o f around 1,750 km2,with an

average alt i tude o f between 750 and 7 70m , surrounded by eroded hil ls. The lake i sshallow and surrounded by swampy marshes. I t covers an area o f about 220 - 250 km2

(free water surface) an d arou nd 550 km2with surro und ing marshes. The watershed serves

about 80,000 ha o f rice farms, o f wh ic h 30,000 ha are developed. T he watersheds aresubject to strong population density. Deforestation, overgrazing (with bushfires) and



increasing pressure f ro m ra in-fed crops have seriously degraded the fragile soils o f

slopes, already markedby

numerous lavaka. The effects aresilting-up

o f beds o f r iversand dams, degradation o f derivation and protection o f acil it ies. The climate is a tropical

temperate highland climate with a significant dry season from M a i to October. Me anannual temperature i s 20C, with average maxima o f 26 to 27C and a average m inim a o f

14-15C. Me an annual rain fal l is between 1100 and 1200 mm within 100-150 days.

25. The watershed supplying Sahamaloto irrigated p erimeter stretches over an area o f

356 km2.The irrig ated perimeter has a developed area o f 6,400 ha, o f wh ich 80 percent i s

cult ivated when the rainfall conditions are favorable. Average irrigated surface by

household i s 5.8ha, and on ly 13 percent o f households’ crop o n uplands and 26 percento n baiboho. Average rice yield s are estimated to b e 3.5 tiha. Th e area i s supplied by a

storage dam that was constructed in 1957. The in i t i a l s torage capaci ty o f 26 mi l l io n m3

was gradually reduced to about 13-14 million m3.The scheme was fully rehabilitated in

1988-1989, inclu ding the construction o f a new inta ke tower to increase the volume o f

storage water to 18 m il li o n m3.Emergency repair and reha bil i tation works were init iatedin 1998-1999, but some works could not be completed. The estimated sedimentation

which i s the major environmental threat for rice cultivation that enters yearly into the

retention d am i s 250,000 m3/year. M a i n erosion form s in the area are surface erosion,

gully erosion and lavakas that come from upland areas that are frequently burned for

pastures and have a sparse veget ation cover. The upper watershed i s weakly populated.

The zone o f r ice f ields i s located on the deltas o f he la ke between uplands an d marshes,

where also villages are located along the road, and where most o f human act ivi t ies i s

happening.

26. The ent i re watershed o f La c Ala otra has been designated as a RAMSAR site

(722,50Oha), with 19,971 ha o f lake surface and 23,000 ha o f marshes in 2003,formaliz ing the new regional and national commitment to conserving i t s biodiversity and

27. Alaotra has the largest wetlands in the cou ntry and i s also a center o f endemism.

Three species are endemic to Alaotra, a ll o f which are critically endangered: Alaotran

gentle lemur Hapalem ur griseus alaotrensis, Alaotra l i t t le grebe Tachyb aptus rufolavatus

and Madagascar pochard Aythya innotata. These two endemic bird species may already

be extinct. O f the 50 water bird species recorded at the lake, a fu rther 8 are Madagascar

endemics. Six fish species are Madagascar endemics. The endemic fauna is threatened

due to ma jor en vironmental changes includi ng habitat degradation, over-hunting, over-fishing, competit ion and predation by introduced fish species, siltation from erosion

causing an acidif ication o f the lake, pollution by hum an waste, fertilizers and pesticides

and invasion o f ntrod uced aquatic plants.



Annex 15: APL Triggers

Madagascar: Irrigation and Watershed Managemen t Project

1.

targets:

Tr iggers for mo ving to the second phase o f he APL include attainment o f he fol lowin g

0 Watershed Master Plans (including Scheme Development Plans and Watershed

Development Plans) and associated Performance Contracts executed satisfactorily;

0 an acceptable institutio nal mechan ism for the funding o f non-transferable irr igation

infrastructure (FERHA) established and operational;



0 private sector investments in agriculture increased as evidenced by disbursements

under the matching grant mechanism;

0 ASCs established a nd operational in he four project sites;

0 guichets fonciers established and operational in the four p roje ct sites.

2. I t s agreed that achieving these triggers im plie s the follo wing : Watershed Maste r Plans

(including Scheme Development Plans and Watershed Development Plans) and associated

Performance Con tracts executed satisfactorily:

3. W MP s (includ ing WD Ps and SDPs), prepared with full stakeholder involvement, as

evidenced by minutes o f meetings, records, a nd development options that were prepared andpresented to stakeholders.

4. WD P wo uld include land use zoning plans, identif ication o f rr igable and irr igated area, a

local land tenure plan, identification and establishment o f zones under collec tive la nd

management and iden tifica tion and establishment o f zones fo r management transfer tocommunities, identif ication o f strategic anti-erosion works, iden tifica tion o f possible agro-

ecological technologies that require support, identifica tion o f appropriate p roduct ive investments(forestation, revegetation o f and). I t wo ul d also include support options to communication and

negotiation platf orms o f stakeholders within watersheds, conditions reg arding the pa rticipatio n

of beneficiaries and the support that they wil l receive through the matching grant (nature o f the

interventions, capacity to pay). Satisfactory execution involves the implem entatio n o f the

activities that the projec t has committe d to.

5. SDPs would include a section presenting the vision o f stakeholders with respect to

irrigated agriculture, their objectives and the targets that they aim to achieve, constraints

associated with the function ing o f the irrig atio n scheme, as we ll as possible solutions, and

commitments regarding operation and maintenance. Execution o f the SDP involves the

implementat ion o f he PC wil l be allocated in accordance with the leve l o f amb ition expressed in

the targets, and based on the performance in previous years. Satisfactory execution wouldinclude full achievement o f commitments by a ll stakeholders.

An acceptable institutional mechanism for the funding o non-transferable irr iga tion

infrastructure (FERHA) established and operationa l:

7. Identification, adoption and imple menta tion o f appropriate and sustainable fina ncing and

replenishment mechanisms, recruitment o f staff, administrative and financiaVaccou ntingmeasures taken, and disbursements made.

Private sector investments in agriculture increased as evidenced by disbursementsunder th e matching gra nt mechanism



8. Preparation o f a l i s t with eligible (positive and/or negative) activities, Regio nal SelectionCommittee appointed by GTDR, external rev iew conducted twice a year, and recruitment o f a

regional partner and specialized service providers. Satisfactory implementation implies fulldisbursement o f he match ing grant at the end o f he project.

ASCs established and operationa l in the our projec t sites:

9. Establishment o f ive A SC and platforms at distr ict level, pro vision and rehabil i tation o f

off ice space, purchase o f equipment, coverage o f operational expenses, recruitment o f staff, andcompi la t ion o f a networ k o f egion al partners at the regiona l level. Operationa l imp lies that there

i s a demand fo r the services pro vide d as evidenced by the number o f contracts between farmers

and service pro viders that the A S C has facilitated.

Guichets onciers established and operationa l in the our pro jec t sites

10. Establishment o f five “guichets fonciers” at district level, pro visio n and rehab ilitation o f

offic e space, purchase o f equipment, coverage o f operational expenses and recruitment o f staff.Operational implies that lan d i s being registered as evidenced by the annual progress in landregistration.

11. Triggers for m ovin g to the third phase o f he APL include indicatively:

Satisfactory management o f irriga tion schemes by W A S and watersheds by

sustainable land management groups with adequate support from Communes,

Regions and MAEPInc lus ion o f the nat ional I r r igat ion and Watershed Management Program into

MA EP ’s med ium term expenditure framework;

Annex 16: Statement o f Loans and Credits


Difference betweenexpected and actual

disbursementsriginal Amount in US$ MillionsProject I D FY Purpose IBR D ID A SF GEF Cancel. Undisb. Orig. Frm. Rev’d

P103950 2008

PO74086 2007

PO95240 2007

P103606 2007

PO90615 2006

MG-Governance& Inst. Dev. I1 TA L

MG-Imgation & Watershed Project (FY07 )

M G -Pw r/Wtr Sect. Recovery and Restruct.

MG-Sust. Health System Dev. (FY07)

MG-MultiSec STYHIViAIDS Prev I1(FY06)

0.00

0.00

0.00

0.00

0.00

40.00 0.00

30.00 0.00

10.00 0.00

10.00 0.00

30.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

39.78

25.66

6.81

1.66

19.90

0.00 0.00

2.20 0.00

5.37 0.00

-1.16 0.00

12.09 0.00



PO83351 2006

PO82806 2004

PO74448 2004

PO74235 2004

PO76245 2003

PO73689 2003

PO72160 2002

PO51922 2001

PO55166 2001

PO52186 1999PO01568 1998

MG-In teg Growth Poles

MG-Transp Infrastr Invest Prj (FY04)

MG-Gov & Inst Dev T AL (FY04)

MG-Env Prgm 3 (FY04)

MG-Mineral Res Gov SIL (FY03)

MG -Rural Transp APL 2 (FY03)

MG-Priv Sec Dev 2 (FY02)

MG-R ural Dev Supt S I L (FYO1)

MG-Com Dev Fund S I L (FYO1)

MG-Microfinance (FY99)MG-Com munity Nutrition I 1 (FY98)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.000.00

129.80 0.00

150.00 0.00

30.00 0.00

40.00 0.00

32.00 0.00

80.00 0.00

23.80 0.00

89.05 0.00

110.00 0.00

16.40 0.0027.60 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 1.23

0.00 0.00

0.00 0.000.00 0.00

78.19

36.92

0.67

13.54

7.36

29.74

4.36

8.67

0.41

4.146.90

3.99 -5.09

12.90 12.90

-7.64 0.00

8.27 0.00

-4.00 0.00

15.91 16.87

-0.12 -3.95

-3.23 -3.23

-81.92 -31.92

-1.88 1.20-14.54 0.97.

Total: 0.00 848.65 0.00 0.00 1.23 284.71 - 53.76 - 12.25

M A D A G A S C A RSTAT EME NT OF IFC’s

Held and DisbursedPortfol io

InMi l l ions o f U S Dollars

Committed Disbursed

IFC

Partic. LoanY Approva l Company

1997 AEF G HM

1995 AEF Karibotel

BFV-SocGen

1991 BNI

2005 BNI

Loan Equity Quasi

0.46 0.00 0.00

0.19 0.00 0.00

6.37 0.00 0.00

0.00 2.09 0.00

6.37 0.00 0.00

IF C

0.00 0.46

0.00 0.19

0.00 0.00

0.00 0.00

0.00 0.00

Equity Quasi

0.00 0.00

0.00 0.00

0.00 0.00

2.09 0.00

0.00 0.00

Partic.

0.00

0.00

0.00

0.00

0.00

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2001 Besalampy 0.02 0.00 0.00 0.00

2006 IDA-IFC PCG 0.01 0.00 0.00 0.00

Total pending commitment: 0.03 0.00 0.00 0.00



Annex 17: Country at a Glance


P O V E R T Y a n d S O C I A LSub-

Saharan Low-M adaga rcar Afr lca Incom e

2 0 0 7

GNlpercapita (Atlasmethod, US$) 320

ON1 (Atlas m ethod, US$ billlons) 6.3

Average annual growth, 2001.07

Population (4 2.6

Mo at recent e st imate ( la tea t year avai lable , 2 0 0 1 - 0 7 )

Poverty (% of populatio n below natlo nalpo vefty ine)Urban population (% of totalpopulation) 29

Population. m id-year (millions) 8 .7

Laborforce(%) 3.3

Life eqecta ncyat birth (pars) 59

600

952

782

2.5

2.6

3651

1298576

749

2.2

2.7

32

57

> e v e l opm e nt d i a m ond*

Life eqectancy

T

Gross

capita enrollmentprimary

1



Infant mortality(per I000 live births) 72

Chlldmalnutritlon (%ofchildrenunder5) 37

Access lo an improvedwtersource(%ofpopulation) 47Literacy(%ofpopulation age S+J

Gross primaryenroilment (%of school-agepopulation) 0 9

Male 142

Female 07

K EY E C O N O M I C R A T I O S a n d L O N G - T E R M T R E N D S

1987 1997

GD P (US$ billions) 2.6 3.5

Gross capital formation1GDP Q. 1 P.6

Eq ort s of goods and services/GDP 16.6 219

Gross domestic savings1GDP 4.2 4.7

Gross national savingsIGDP 4.4 7.3

Current account baiancelGD P 4. 6 -5.5Interest payments1GDP 4.0 2.6

Total debt1GDP 143.0 115.6

Total debt servicelexports 50.3 26.7

Present value of debtlGDPPresent value of debtleq orts

94

27

5859

94

99

66

2 0 0 6

5.5

24.6

29.7

0.6

16.0

-6.70.4

26.4

4.0

11537.6

65

29

8661

94

QO

69

2 0 0 7

7.3

29.224.7

9.9

113

- 0 . 5

1987.97 1997. 07 200 8 200 7 2007-11

(average annual gro Mh)GD P 0.9 3.1 4.9 6.5 6.1

GDP per capita -2.0 0.2 2.1 3.7 6.1

Eq or ts of goods and services 4.3 14 23.6 4.2 26.1

Access to improvedwatersource

-Madagascar

Lo wincome group

Trade

Capitalformation

Domestic ,

+savings

I

1

Indebtedness

I -Madagascar

Lowincome m u D

S T R U C T U R E o f t he E C O N O M Y

( % o f GDP)AgricultureIndustry

Services

Household final consumption expenditureGenera gov't final consumption eqenditure

Imports of goods and services

M anufactunng

(average annual gro Mh)AgricultureIndustry

Manufacturing

1987 1997

36.2 315

0 . 7 0 . 4

114 11350.1 55.0

66.7 67.5

9.1 7.6

22.5 30.0

1987.97 1997-07

19 2 00 6 2 5

01 2 5

2 0 0 6

27 5

5 3

0 4

57 2

17 6

6 6

40 9

2 0 0 8

2 2

2 7

2 7

2 0 0 7

26.5

6 0P.6

58.4

60.5

9.8

44.0

2 0 0 7

2.4

4.6

4.6

Growth of capi ta l and GDP (% ).3 M 05 (YI 07

-GCF -GDP IGrowth of export. and Imports (YO)50

25

0

Madagascar

P R I C E S a n d G O V E R N M E N T F I N A N C E

D o m e s t i c p r i c e s(%change)Consumer prices

ImplicitGDP deflator

G o v e r n m e n t F l n a n ce(%of GDP, includes current grants)Current revenue

Current budget balanceOverall sumlus/deficit

T R A D E

(US$ mi/l ionsjTotal e.qorts (fob)

CoffeeVanillaManufactures

1987

8 .9

23.0

8 . 0

6.7

17

1967

32 9

34

69

65

1997

4 5

7 3

118

0 9

-5 6

1997

507

e4

0

346

2 0 0 6

0 .6

113

P.0

0.6-9.4

2 0 0 6

96 2

51

46

90 5

2 0 0 7

0 3

9 5

119

0 4

-9 6

2 0 0 7

1097

34

30

1061

E x p o r t a n d I m p o r t l e v e l s ( U S $ mlll.)' " T I3.000



Total imports (cif)

FoodFuel and energyCapital goods

Evert price ndex 2OOO=WOj

import price ndex(2000=00j

Terms of trade (200O=WO)

B A L A N C E o f P A Y M E N T S

(US$ millions)Ekports of goods and servicesImports of goods and services

Resource balanceNet incomeNet current transfers

Current account balance

Financing tems (net)Changes in net reserves

M e m o :Reserves includinggold (US$ mili ionsj

Conve rsion rat e (DEC, io cal/US$)

40 9

52

55

0 2

94

89

0 6

1987

42 5

552

- a 7-149

141

-122

8 1

-6 9

25

20 . 6

E X T E R N A L D E B T a n d R E S O U R C E F L O W S1987

(US$ millions)Total debt outstandingand disbursed 3,666

IBRD 35

IDA 550

Total debt service 24 5

IBRD 4

IDA 6

Composition o f net resource flowsOfficial grants 66

Official creditors 27 3

Private creditors -15

3oreign direct investment (net nflows)Portfolio equity(net inflows) 0

World Bank programCommitments a8

Disbursements 93

Principal repayments 3

80 2

49

Il7

146

67

0 3

85

1997

77 4

1061

-266

-9 1

182

- 8 6

250-54

28 0

10 8 2

1997

4,099

3

12 P

2 0

4

8

566

2 8

1

14

0

777

0 0

14

1790

377

225

Il78 1

73

2 0 0 6

1646

2,256

-6 W

-60

214

-476

506

-32

532

2,142.3

2 0 0 0

1453

0

636

66

0

26

2,543

235

-3

230

0

0 6

l78

8

2.672

429

262

P 4

152

62

2007

1993

3,10

- {P O

-56

86

-966

1059

-71

602

1673 9

2 0 0 7

0

865

0

6

114

8 6

0

2,ow

l,ow

0I I1 02 03 04 06 OB 07

.Exports almports

C u r r e n t a c c o u n t b a l a n c e t o G D P ( YO )

G: 8 8

A . IBRD E - Bilateral

B . DA D . ther nultllaeral F . PrivateC-IM F G Short-terr

Annex 18: MAP

Madagascar: Irrigation and Watershed Management P roject





MAP SECTION



