World Bank Documentdocuments.worldbank.org/curated/en/954371468774256401/pdf/mul… · Moldova initiated a reform program as early as 1990 aimed at creating a market economy. In March

Document of

The World Bank

Report No. 15120-ND

STAFF APPRAISAL REPORT

REPUBLIC OF NOLDOVA

FIRST AGRICULTURE PROJECT

April 8, 1996

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CURRENCY EQUIVALENTS(as of November, 1995)

Currency Unit = LeiLei I = US$ 0.22US$1 = 4.50 Lei

WEIGHTS AND MEASURESMetric System

ha = hectarekg = kilogramton = metric ton

MOLDOVAN FISCAL YEAR

January I - December 31

ABBREVIATIONS AND ACRONYMS

ARD - Agricultural Research DepartmentDC - Direct Contracting

EAA - Enterprise Assistance AgencyEBRD - European Bank for Reconstruction and Development

ERR - Economic Rate of RetumEU (Tacis) - European Union Technical Assistance Progranm for the FSU

FAO - Food and Agriculture Organization of the United NationsFSU - former Soviet UnionGDP - Gross Domestic Product

GOM - Govemment of MoldovaICB - Intemational Competitive Bidding

IFAD - Intemational Fund for Agricultural DevelopmentIMF - Intemational Monetary Fund

IS - Intemational ShoppingIPM - Integrated Pest ManagementLIB - Limited Intemational Bidding

MAF - Ministry of Agriculture and FoodM&E - monitoring and evaluationNGO - non-govemmental organizationNIVO - National Institute of Viticulture and OenologyNPV - net present value

NS - National ShoppingPFI - Participating Financial Intermediary

PHRD - Policy and Human Resources Development GrantPMC - Project Management CommitteePPF - Project Preparation FacilityPPC - Project Preparation Committee

PSDP - Private Sector Development ProjectR & D - research and development

SAL - Structural Adjusment LoanSOE - State-owned EnterpriseSTF - Systemic Transformation Facility

GLOSSARY

Adsisio - a farners volunteer assistance (domestic) NGOApek Moldova - the state institution responsible for national water resource management

AcwaProjekt - the technical design institute of Apele MoldovaCodru - Research Institute for Fruit Production

kolkhoz - collective farmPorumbeni - Research Institute for Maize and Sorghum

Sekcisia - the Field Crops Research Institute

sovkhoz - state farmTevit - Veterinary and Livestock Research Institute

STAFF APPRAISAL REPORTREPUBLIC OF MOLDOVA

THE FIRST AGRICULTURE PROJECT

Table of Contents

pAge

LOAN AND PROJECT SUMMARY ........................................... i

1. THE AGRICULTURE SECTOR ............................................ I

A. The Macro-economy and Agriculture ............. ...................... 1B. Sector Overview ........................................... .. 2C. The "Agriculture Knowledge System" .. .................................. 4D. Land Reform and Farm Restructuring ............ ...................... 5E. Sector Institutions ............................................. 8

II. THE AGRICULTURAL INVESTMENT PROGRAM ........ .................... 10

A. GOM's Agriculture Investment Strategy . ............................... 10B. Country Assistance Strategy Context ............ ...................... 12C. The Agriculture Investment Program Concept ........ .................... 14D. Rationale for Bank Involvement . ..................................... 18E. Lessons from Past Bank Experience ............. ...................... 18

Ill. THE FIRST AGRICULTURE PROJECT . .................................... 20

A. Objectives .............................................. 20B. Project Description and Components ............ ...................... 20

Agro-technology Development and Transfer ....... ................... 20Institutional Strengthening . ...................................... 23Project Preparation and Policy Development ....... ................... 23Project Management ........................................... 24

C. Project Costs .............................................. 24D. Project Financing ............................................. 25

This project was identified by the Government, FAO Cooperative Program and the Bank; project preparationwas conducted by Bank and GOM counterparts. This report is based on an appraisal mission which visitedMoldova in April 1995, and subsequent post-appraisal visits during 1995. The appraisal mission consistedof Brian Berman (Task Manager), Camilla Brown (Project Assistant), Michael Cermea (Senior Advisor),Csaba Csaki (Senior Advisor), Florian Grohs (Economist), Oskar Honisch (Principal Agriculturalist), WillemZijp (Agriculture Extension Specialist), and Frederick Hasselback (consultant). The Division Chief isGeoffrey Fox, and the Deparment Director is Basil Kavalsky.

E. Procurement ................................................... 26F. Disbursement .................................................. 29G. Accounts and Audit ...................... ........................ 31H. Environmental Impact ........ ........... ......................... 31I. Gender and Family Issues .......................................... 31J. Participation ................................................... 32K. Rural Poverty ........................ .......................... 32

IV. PROJECT IMPLEMENTATION .......................................... 33

A. Introduction ................................................... 33B. Summary of Implementing Agencies .................................. 33C. Project Implementation Details ...................................... 34

Project Management ........................................... 34Agro-technology Development and Transfer Component ................. 34Institutional Strengthening Component .............................. 35Project Preparation and Policy Development Component ................. 35

D. Implementation Schedule .......................................... 36E. Reporting and Evaluation .......................................... 36F. Project Supervision .............................................. 37

V. BENEFITS AND RISKS ................................................ 38

A. Benefits and Justification .......................................... 38B. Project Sustainability and Risk ...................................... 44

VI. AGREEMENTS AND RECOMMENDATIONS ............ .. ................. 46

A. Agreements Reached During Negotiations .............................. 46B. Condition of Effectiveness ......................................... 47C. Condition of Disbursement ......................................... 47D. Recommendation ................................................ 47

LIST OF TABLES:

Table 2.1: Bank Assistance and Critical Elements to Strengthen the Rural Economy .... ..... 14Table 3.1: Estimated Project Costs Summary .................................... 25Table 3.2: Project Financing ................................................ 26Table 3.3: Project Procurement .............................................. 27Table 3.4: Disbursement Categories ........................................... 29Table 3.5: Estimated Bank Disbursements ...... ............................... 30Table 4.1: Project Implementation Responsibility Summary .......................... 33Table 4.2: MAF Oversight of Research Components ............................... 35Table 5.1: Expected Cost Recovery ........................................... 39Table 5.2: Projected Farm Income ............................................ 40Table 5.3: Project Objectives, Benefits, and Development Indicators .................... 42Table 5.4: "Feasibility" Analysis of R&D Expenditures ............................. 43Table 5.5: Sensitivity Test of "Feasibility" Analysis ................................ 44Table 5.6: Project Risks and Mitigations ....................................... 45

LIST OF BOXES:

Box 1.1: Environmental Impact of Agriculture .................................... 2Box 1.2: The Agriculture Research System ....................................... 5Box 1.3: Land Reform Statistics .............................................. 6Box 2.1: Agricultural Sector Policy Reforms .................................... 15Box 2.2: Complementary Assistance .......................................... 17Box 3.1: Strengthening Rural Finance ......................................... 22

ANNEXES - VOLUME I

o Annex I Implementation Scheduleso Annex 2 Terms of Reference for Project Managemento Annex 3 Environmental Data Sheeto Annex 4 Economic Analysiso Annex 5 Summary of Major Procurement Packages

ANNEXES - VOLUME II - PROJECT IMPLEMENTATION PLANS

o PIP I - The Viticulture Componento PIP 2 - The Horticulture Componento PIP 3 - The Integrated Pest Management Componento Attachment I - Detailed Cost Tables

Map Number - IBRD 24285R2

REPUBLIC OF MOLDOVA

FIRST AGRICULTURE PROJECT

Loan and Project Summary

Borrower: Republic of Moldova

Implementing Agency: Ministry of Agriculture and Food (MAF)

Beneficiaries: MAF; National Institute for Viticulture and Oenology (NIVO); ResearchInstitute of Fruit Production ("Codru't), Research Institute for Field Crops("Selectsia'); Research Institute for Maize and Sorgum ("Porumbeni");Veterinary and Livestock Research Institute ("TeviJ"); agro-industry managers;Fanners

Poverty Category: not applicable'

Amount: US$ 10 million [equivalent]

Loan Terms: Standard amortization terms, grace period and interest rate for LIBOR-basedUS$ denominated loans.

Commitment Fee: 0.75 % on undisbursed credit balances, beginning 60 days after signing, lessany waiver.

Financing Plan: see Schedule A

Economic Analysis: As the direct benefits from R&D (improved product quality and lowerproduction costs) could not be achieved without additional investments inimproved production and marketing of key crops, an "affordability" approachwas used. To achieve a 10% economic rate of return on research, the netpresent value (NPV) of export benefits directly attributable to researchinvestments need not be more than 8.6% of the NPV of the added value ofprojected incremental exports over the next 15 years -- an achievable level.

Map: IBRD 24285R2

Project ID Number: MD-PA-8556

1. Poverty groups are not directly targeted benficiaries under this Project. However most of the farmers are near orbelow te poverty line. The project will, in the short term, have indirect impact on farmers' productivity, while in the longerrun the benefits will be direct.

MOLDOVATHE FIRST AGRICULTURE PROJECT

I. THE AGRICULTURE SECTOR

A. The Macro-economy and Agriculture

1.1 Moldova, which gained independence from the formner Soviet Union (FSU) in 1991, liesin southeastern Europe sharing borders with Romania and the Ukraine. It is a small, densely settledcountry with a population of 4.4 million; slightly more than half of the population live in rural areas.Moldova initiated a reform program as early as 1990 aimed at creating a market economy. In March1993, Parliament adopted a comprehensive action program for the stabilization and recovery of theeconomy. Shortly thereafter, a new currency, the Lei, was introduced and supported with firm financialpolicies. Although progress has been hampered by the legacy of central planning practices, significantresults have been achieved under the macroeconomic stabilization program. Budget transfers to enterpriseswere cut to about 1% of public expenditure in 1993 from 21% in 1992, and the largest consumer subsidieswere eliminated in May 1994. Annual inflation fell from almost 2,000% in 1992 to 1% in the thirdquarter in 1995. The Gross Domestic Product (GDP) per capita fell over 50% between 1990 and 1993,and there was a further decline in 1994 of 22% to US$870. A turnaround, and a small but positivegrowth rate in GDP was recorded in 1995.

1.2 Moldova has followed a tight monetary policy since late 1993, supported by anInternational Monetary Fund (IMF) Systemic Transformation Facility (STF) and two stand-byarrangements. Although monetary policy changes have succeeded in sharply reducing inflation, they havenot been accompanied by equally far-reaching structural changes in the economy. Severe problems ofinter-enterprise arrears and illiquidity continue to constrain all commercial and industrial activity, includingagriculture. The combination of monetary policy, fiscal policy and administration, and enterprise behavioris not yet balanced adequately to provide strong support for sustained stabilization or growth of the realsectors of the economy. A deepening of the initiated structural changes, especially in the enterprise andtrade sectors, is needed.

1.3 Agriculture Sector. Between 1989 and 1993 Moldovan agriculture and its food industries'output declined 33%, due to a series of shocks.) Output fell an additional 26% in 1994, due to severedrought, inadequate financing of agricultural operations, and a decline in domestic demand and exportpossibilities. Favorable weather in 1995 helped to stabilize agricultural production, but at a relatively lowlevel.

1.4 Agriculture accounts for about 40% of Moldova's Net Material Product and employs onethird of the labor force. In addition, processing of agricultural products accounts for 40% of industrialoutput and 20% of industrial employment. Agricultural and food products accounted for over 50% ofMoldova's exports in the last years of the FSU. This output was heavily dependent on imported inputsof feedgrains and agricultural inputs. In turn, Moldova's exports were based almost entirely on thecentrally planned system of specialized production areas, and directed distribution, across the entire FSU.

I including: a large unfavorable adjustment in terms of trade; increase in input and energy prices to international levels;severe droughts in 1992 and in 1994; and the economic disruption associated with the break-up of the former Soviet Union (FSU).

2 Chapter I

1.5 Agriculture is likely to remain the dominant sector of the Moldovan economy and couldlead economic growth in the short-run. More than 50% of the population, directly or indirectly, dependon agriculture as a source of income. The country is densely populated and agricultural land is fannedrelatively intensively. Moldovan agriculture is characterized by a high proportion of viticulture andhorticulture production. These are typically high value and labor intensive crops and, once processed, arethe country's major exports. Fertile soils, a favorable climate, well-educated agricultural specialists, andan abundance of low-cost labor will form the basis for successful agriculture after the restructuring of thesector is completed.

B. Sector Overview 2

1.6 Moldova's agriculture is well favored with a moderate climate and excellent soils. Eightypercent of the soils are chernozems that rank among the most fertile in the world. Production isconstrained by erratic rainfall (drought frequency 6 to 7 years in 10) and low levels of groundwaterresources in the south of the country. Important products include wine, horticulture, grains, tobacco, andlivestock products (hogs and poultry). In part, the dominance of livestock (dependent on importedfeedgrains) is a remnant of former Soviet Union (FSU) central planning decisions, which placed anemphasis on Moldova's role as a supplier of both horticultural and livestock products to its pan-Unionfood supply system.

1.7 Since Independence in 1991, there has been an overall decline in sector output, as thesystems adjusts to real market prices, increasing export competition, and reduced domestic demand (seealso environment impact -- Box 1.1).

Box 1.1: Environmental Impact of Agriculture

During the period of the Soviet Union, fertilizers and pesticides were liberally applied with littleconcern for environmental impact. Groundwater resources became polluted both from agriculturalchemicals run-off and from the effluent of the large livestock complexes. Further, the agro-processing plants were not operated with environmentally appropriate waster disposal systems. Highlevels of pesticide residues were also reported. With the post-independence down-turn in theeconomy, the levels of application of agro-chemicals have been significantly reduced, and agro-chemical runoff is today not a significant pollution source. Thie livestock and agro-processingcomplexes have reduced their operating volumes, and consequently, pollution from these point-sources has declined.

However, this could quickly be reversed to the previous levels of pollution if there is a return to pastlevels of economic activity without the introduction of better agro-chemicals, and better controls onlevels and methods of application. Similarly, to prevent point-source pollution, the livestock andagro-processing complexes require investments in effluent and wastewater treatment as an integralpart of their restructuring and expansion programs.

2 This section based on "Moldova Agriculture Sector Review," (Rept. No. 1258 1-MD, Feb., 1995), with recent updates.

The Agriculture Sector 3

Livestock: Since 1991, the loss of export markets in the FSU, high feed prices, and reduceddomestic demand have severely impacted the livestock sector. Meat production decreased by40%, dairy production by 30%, and egg production by 46%, between 1991 and 1993. Livestockproduction continued to decline in 1994 as the drought worsened feed shortages, and has heldsteady in 1995 due to a static domestic market and low export prospects. Further downsizing canbe expected over time.

Horticulture: Fruit and vegetable production is important in Moldovan agriculture covering about10% of the arable land, but contributing to about 28% (18% and 10%, respectively), of Moldova'searnings from food exports to the FSU in 1993. Production of horticultural crops fluctuatesmainly due to drought, low productivity, poor irrigation systems, and unreliable marketingchannels, (e.g. vegetable production in 1993 was 39% lower than in 1986). Potential areas ofimprovement encompass the full range of activities in horticulture, including availability andchoice of plant varieties, crop management, post-harvest treatment, and processing and packagingof finished products.

Viticulture: Wine production also plays an important role in Moldovan agriculture with about 8%of the agricultural land under vineyards. Wine production represents one of the majorcomparative advantages of the country and has good medium-term development prospects.However, a majority of the wine products are of low quality and need to be improved in orderto be internationally competitive. The wine industry can be improved through increasing grapeyields and improving the quality of wine products, improved processing, adoption of standardizedpackaging and improved marketing.

1.8 The rural economy is presently experiencing significant de-monetization, with both thefanners and the processors being heavily indebted. There is a dominance of barter trade both for domesticand international transactions by the large agro-processing complexes (formerly state-owned, and nowprivatized but not effectively restructured or efficient). Some competition is now emerging as a result ofde-monopolization and privatization of the state-owned enterprises (SOEs) in agricultural trading andprocessing. Small and medium scale processors, and informal traders, are emerging.

1.9 Due to tight credit policies, concessional financing to primary production and processorshas been very limited in recent years. The Government (GOM) does not intend to provide concessionalfinancing in the future; rather, financing would become the responsibility of the banking sector from itsown, and mobilized, resources. During reform and restructuring of the financial sector, financial resourcesto agriculture, a perceived high risk sector, are expected to remain severely limited.

1.10 The consequent scarcity of working capital from the formal financial markets has resultedin crops not being harvested because the agro-processors could not purchase them. Some of this "surplus"found its way into informal fresh produce trading in neighboring countries' (predominantly in Ukraine andBelarus). The continued economic activity of the agricultural sector during the transition has been, inlarge part, a result of the emergence of the informal sector, based on the bartering of "surplus" freshproduce and processed produce (given as payment-in-kind for wages to enterprise workers, or as paymentfor the raw material supply from the farms). These goods were bartered for scarce essentials (fuel, agro-chemicals and spare parts) obtained from neighboring countries.

4 Chapter I

1.11 The Agriculture Sector Review' recommended for the medium term, that Moldova'sstrategy should emphasize:

* yield and efriciency enhancement, through public investment in agricultural research,education and extension;

* promotion of agricultural exports-led growth, through liberalized pricing and trade inagricultural inputs and products, improvement of product quality, development of newmarkets, marketing channels and marketing institutions; and

* sector structural reforms in production through rapid de-monopolization andprivatization of agro-processors and traders, with parallel farm restructuring, privatizationand land reform, the development of land markets and adequate rural (non-concessional)financial services, and the development of new sector institutions, both public and private.

1.12 The Role of New Technology: The comparative advantage of agriculture in Moldova liespredominantly in the production of high value crops, such as grapes, fruits, vegetables, some medicinaland aromatic plants, and in seed and planting material production. To support the production and improvethe export potential of high value crops, agricultural research needs to focus on the adaptation of foreigncrop varieties to the local climate and the drought risk; improved quality of food and agricultural products;mechanization adapted to the changing land tenure pattern; improved soil fertility practices and cropprotection (including integrated pest management (IPM)) to reduce both production costs and the negativeimpact of agro-chemicals residues on groundwater and food quality (Box 1.1); efficient and economicalirrigation; and improved technical and economic crop production and agri-business management.

1.13 To improve productivity and expand agricultural exports, agriculture would need to utilizenew production technologies appropriate for high value crops. The full range of improved technologiesare needed, e.g. high yielding seeds; integrated pest management; disease resistant new plant breeds;drought tolerance; energy-efficient smaller-scale farm mechanization; water-conserving irrigation; plastictunnels and greenhouses; etc., all adapted to Moldova's conditions. In addition, new technologies will beessential to ensure the transformation from extensive large-scale collectivized farming systems (nowcharacterized by excess under-utilized labor) to more cost-efficient smaller scale farning, on scarce landresources, with intensive land use, a focus on high value crops, and limited capital and labor (mostlyfamily) resources. Moldova's "agricultural knowledge system" -- agricultural research, education andextension -- will be critical to the success of this technology-facilitated transformation.

C. The "Agriculture Knowledge System"

1.14 The "agriculture knowledge system" consists of:* three universities teaching agricultural sciences, and a number of technical schools;* 18 agricultural research institutes under the Ministry of Agriculture and Food (MAF),

complemented by basic sciences research under the Moldova Academy of Sciences(Box 1.2); and

* MAF's regional network of agricultural extension staff.

3 op. ct.


Box 1.2: The Agriculture Research System

Ministry of Agriculture and FoodResearch Institutes: Experimental Stations:Viticulture and Oenology Vegetable oils*"Selectsia" -- Field Crops Irrigation*Vegetables*"Codu" - Fruits Academy of Science of Moldova'Porumbeni" -- Maize and Sorghum Agriculture-related Research Institutes:

Tobacco and Tobacco Products Biological Plant Protection"Tevit" Veterinary and Animal Breeding BotanyAgro-processing Ecology"Mecagro" -- Agricultural Mechanization GeneticsWater and Water Conservation Microbiology"Dimo" - Soil Conservation and Amelioration Zoology

') in Transnistia

1.15 The existing agricultural knowledge system has an unsustainable demand for publicresources. There are inherent problems with the multi-institutional and multi-tier approach inherited fromthe FSU. There is a significant lack of integration of research, education and extension, to the detrimentof farmers, educators, researchers and students. Its output is, by and large, not adapted to agricultureoperating in an open competitive economy. MAF recognizes the need to tackle these problems, but itdoes not have the resources to do this. A vision of the future needs of agriculture, the role of newtechnology and the knowledge system, has yet to emerge from the stakeholders. Without this vision, andan overall consensus around it, no rationalization of the system can commence.4 Nevertheless, even inthe absence of an overall strategy, immediate priority areas for public investment have been identified(relevant to whatever future form the knowledge system will take -- para 2.5) with the initial focus onresearch capabilities to introduce new technologies for key export crops, especially for viticulture andhorticulture.

D. Land Reform and Farm Restructuring

1.16 Land reform and restructuring of farms has proceeded relatively slowly (Box 1.3). Thefirst stage of the land reform aimed at the distribution of land for household plots (average size 0.3ha) tothe rural population. This first stage is substantially complete, although title documents have not beendistributed to all new owners. Agricultural land subject to privatization was to have been transferred inthe second stage of land reform, which began slowly in late 1992, accelerated in the summer of 1993, butwas suspended in November, 1994. The second phase of land reform was resumed in mid-1995 on thebasis of the Land Code as amended by Parliament in February, 1995.

4 Tchluical assistance under this project will facilitate the development (in a participatofy manner) of this vision,mndsubequenfly a rationalization, prioritization, and reorganization plan for the agricultural knowledge systemi, including the reswsystem (Chapwer 3).

6 Chapter I

Box 1.3: Land Reform Statistics

General Land Survey(January 1, 1995)

Land Holders Area

Category and Land Holder % ('000 ha) %

Agricultural Lands 806,614 100% 2,050 100%

including1.0 State ownership 1,199 n.s. 456 22%

2.0 Others 805,415 99.9% 1,594 78%of which:

2.1 Collective farms 549 n.s. 984 48%

2.2 Stock company farms 100 n.s. 190 9%

2.3 Cooperative farms 116 n.s. 78 4%

2.4 Individual farms * 42,968 5% 55 3%

2.5 Farmers' associations 241 n.s. 20 1%2.6 Household plots ** 761,429 94% 267 13%2.7 Other 12 n.s. I n.s.

* registered and non-registered 11 mission estimateSources: GOM statistics

Notes:

"Collective farms" are those sovkhozes and kolkhozes, not restructured, but where the state has no claim to the ownershipof the land."(Joint) Stock companies" are corporatized former sovkhozes and kolkhozes that have not undergone any significantadditional restructuring"Cooperatives" are privatized sub-sets of the former sovkhozes and kolkhozes where the land is an indivisible asset of aproduction cooperative, and not of the individual members of a cooperative."Individual farmers" and "Farmers' associations" are those individuals who exited from the collectives with individualland shares that have not been placed into the asset pool of a production entity other than that of the owner's -- theemergent "private farmers.""Household Plots" including those plots private individuals and those owned by members who ave not exited from theformer sovkhozes and kolkhozes.

1.17 This amendment included the decisions to:extend the circle of eligible persons for firee land entitlements, to employees of inter-farmand service enterprises and some workers in the rural social sector;


* limit the minimum size of land allowed to be taken out from a farm to the size of onecrop rotation field' at that specific farm; and

* to require only a "qualified farmer" certified by local authorities to manage any of thenewly formed farms.

1.18 These measures were justified by the legislators as a response to increasing tensions inrural areas among those who were not included in the list of beneficiaries of the original land reform, aswell as concerns by MAF and GOM regarding the fragmentation and improper use of agricultural landas a result of the implementation of the initial legislation. While the decision of the Parliament to modifythe land reform procedure is understandable, the amendments have had negative consequences for farmrestructuring. The amendment issued in February, 1995 has seriously compromised the rights ofindividuals to exit from a large-scale farm and to establish new private farms,6 and consequently thesechanges were not welcomed by the farming population.7 The early 1995 status of the land reform, justprior to the change in legislation, is shown in Box 1.3. "True" private farming is represented by categories2.4, 2.5 and 2.6 - only 16.7% of agricultural land area, and yet 99.75% of all land holders (including thesmall household plot holders'). As the freeing up of exit rights occurred only early in 1996 (para. 1.19),and is temporarily suspended from the beginning of April 1996 until the end of the 1996 harvest, thesestatistics remain a reasonable representation of the current position.

1.19 The Land Code introduced post-independence established a moratorium on selling any landreceived under privatization and land reform measures until 2001. The moratorium for urban land andrral housing land, as well as household plots and orchards, was lifted on January 1, 1995. This measurehas already created a limited land market in Moldova and is a progressive step forward. Selling of landshares inside the large-scale farning structures has recently become possible. At the beginning of 1996,the Prime Minister informed Parliament that the Cabinet has endorsed legislative reform for the rural landcode, as proposed by the State's President. This proposal will remove the moratorium on rural land sales(previously set at 2001), and permit immediate trading of rural land parcels. It is now the Cabinet's statedpolicy that farm land should be treated under law as any other tradable commodity. Very recently theConstitutional Court ruled certain provisions of the 1995 revision of the Land Code to be unconstitutional.The practical implications of this move are as yet unclear.

1.20 It is also not clear at this time: (a) the extent to which the proposed revisions to the landcode will permit a range of land reform and fann restructuring options (e.g. the exit of individual farmers,with personal title to identified land parcels and possession of other farm assets from their former

5 This is an FSU agronomic concept which defines the size of a field required to achieve a multiple crop rotation overseveral seasons, where the rotation is designed for agronomic productivity and fertility conservation. In the Moldovan context, thisapplied to annual cropped land, and would mean fields of between 30 and 100 ha, depending on location, soil fertility, and agro-climatic conditions. At an average allocation per family of 1.5 ha, of which over SOff (on average) would be in fruit orchards andvineyards, legal compliance requires group exit of between 60 and 200 individuals.

6 defined as non-collective farming, i.e., for the farmer's 'own account," on rented or personally owned land.

7 Systematic surveys, interviews and consultations with farmers and rural elites was carried out as a part of projectpreparation. The results of this survey are reflected in this section (se also Through Farmers' Eyes: Stud on Land Priw4tztonIn Moldova, Badina, 0. and S. Raddulescu; M. Cernea, ed. (forthcoming World Bank Staff Working Paper)).

£ household plots are on average, 0.35ha each

8 Chapter I

collectives, or newly formed smaller cooperatives); or (b) if Parliament will agree to the lifting of the ruralland sale moratorium, or be prepared to go even further in the necessary reforms and reverse its early1995 decisions that introduced restrictions on rural land reform and farm restructuring options.Consideration is also now being given by GOM to permitting the formation of rural service cooperatives:this will move the rural sector into a more flexible mode of operation and enable farmers to be able toobtain services which were previously the monopoly of the ex-sovkhozes and ex-kolkhozes.

1.21 Further progress with rural land reform and farm restructuring is critical to the overalleconomic growth of the agriculture sector, and the entire economy. The Bank has expressed its seriousconcerns to GOM, and has indicated that further changes to the Land Code and related legislation areadvisable to give investors confidence in the medium term sustainability of the agriculture sector. Donorshave expressed similar serious concerns. The Bank has indicated that investments in the agriculture sector,beyond this first proposed project, will be conditional on significant progress in rural land reform (Chapter2). To assist in progress to equitable land reform, funding for the development of enabling and relatedlegislation (e.g. laws related to the rural land market and land ownership registration and transfers, thelegal provisions for establishing service cooperatives, clarification of land ownership rights, etc.) wouldbe available under this Project (Chapter 3).

1.22 If a wider concept of rural land reform and farmn restructuring is embraced by Parliament,a farming sector based on a variety of farm sizes and management systems is expected to emerge inresponse to crop-specific technologies and social and economic considerations. Farm sizes would rangefrom large "corporate farms," to smaller partnerships, and also small-cropped single family farms. Thisdevelopment would also widen the range of efficiencies and technologies, from export-oriented, profit-maximizing farms to subsistence-oriented farms. This development will be dependent on individual skillsand preferences, capital resources, and the transfers of new technologies to the emerging farrners.Preventing a downward slide into subsistence of the smaller (family) farms, will require (aside from on-farm investments and access to rural services and finance) significant levels of entrepreneurshipdevelopment and improvements in the technical skills of the new farmers.

E. Sector Institutions

1.23 The sector is administered by the Ministry of Agriculture and Food (MAF), through itsregional and district offices. MAF, on behalf of GOM, continues, in the mode of a centrally plannedeconomy, to administer the sector's "production oversight" of primary and processed products, tradepromotion, rural land reform, as well as providing some (minimal) regulatory functions and coordinatingthe sector's research system (para. 1.14 et seq.).

1.24 The remnants of the centrally planned administration of the sector are represented by thecrop-specific "production" departments at headquarters (horticulture, viticulture, livestock, grains,agroprocessing, etc.), and MAF's regional offices. They have continued to see it as their mandate to"ensure production" of raw materials to support the large-scale agro-industrial complex. While thesecentral departments and regional offices have the technical capability of providing the core of anagricultural extension service, the concept of a "client-responsive service" to recently established privatefarmers, as well as restructured former collectives, has not yet evolved.


1.25 MAF maintains a Land Office, whose task in the FSU period was to define land use andcropping based on technical soil classifications, and to meet centrally planned production targetrequirements, while ensuring that "appropriate use" was made of each soil type (i.e. without any economiccriteria). This office is now charged with rural land reform and farm restructuring, but also views thisfunction within the old framework of "appropriate land use," rather than as the development of farmentrepreneurship.

1.26 Regulatory functions in MAF are not well developed, and those that exist are inappropriatefor a market economy. The legislative basis for a market economy regulatory regime is inadequate, asis MAF's technical capacity for quality control and testing to give credibility to any regulatory authority.This will be a significant constraint to product certification requirements for exports to the EU.

1.27 The agricultural statistics system inherited from the FSU, has effectively collapsed, andcannot provide reliable data on agricultural production, trade or other rural economic activity.Consequently, MAF does not have the data base on which to develop agricultural sector policy andanalyses. Agricultural policy analyses of the Agricultural Economics Research Institute9 are significantlyconstrained by this inadequacy of data.

1.28 The strength of the institutions in agriculture is the high level of agro-technical expertiseof the professional staff. For example, MAF's research institutes are well aware of the technologiesappropriate for competitive agriculture. Institutional strengthening is required to technically upgradefacilities, and to introduce new approaches to research management and include considerations ofcompetitiveness and financial viability (e.g. farm management and agricultural economics) into previouslyagro-technical decision making. This mix of technical strength and the need for a market re-orientationis typical for all the agricultural institutions.

1.29 GOM is questioning the appropriateness of the structure and functions of MAF for a ruralsector in transition. It is also concerned with achieving further public service downsizing, and increasingits cost-effectiveness. GOM has requested the Bank's assistance to mobilize donor assistance for a studyof the appropriate functions and structure of the overall agricultural administration, and the future role ofgovernment in the sector. These efforts to reconsider the role of MAF and plan for its new functions andstructure were initiated in early 1996.

9 one of the few institutes providing policy analyses of the sector, nowadays based on specially mounted sample survey

II. THE AGRICULTURE INVESTMENT PROGRAM

A. GOM's Agriculture Investment Strategy

2.1 To initiate and sustain agriculture-led growth, the basis for agriculture should shift overthe medium-term to reflect Moldova's comparative advantages -- specialized high-value horticulture andviticulture products.' Bulk commodity crops (e.g. grains, livestock products, and potatoes) wouldgenerally be reduced to supplying only the domestic market. This strategy presumes high productionefficiency, and reliable production. It will require new high yield seeds and planting materials, irrigationinvestments as safeguards against drought, and investments in research and development of otherproduction-intensifying technologies. Efficient production of high value crops can best be achieved bymaximizing individual incentives. This is achievable though a number of organizational means, includingsmaller scale farming ventures (family and limited partnerships), various forms of cooperation inmachinery services, marketing and credit, and the application of new production technologies.

2.2 This agricultural markets-led, but technology-determined, medium-term strategy requiresdevelopment, expansion and improvements in a set of critical inputs, where the absence of any one ofthem could jeopardize the entire strategy. These are:

* the sector and general policy environment encouraging individuals' on- and off-farm andoff-farm rural entrepreneurship

* technology development and transfer -- the agricultural knowledge system* land reform and farm restructuring* agro-enterprise development* rural finance* agricultural marketing (domestic and export) system* supporting rural infrastructure* the sector public administration and regulatory framework

Both GOM's sector policy reforms, and the planned Bank's general country assistance strategy and sector-investment program (paras 2.4 et seq.), are based on this medium terrn strategy, with the promotion of,and transformations in, all the above critical elements.

2.3 GOM and the Bank have agreed that the short- and medium-term focus for agriculturaldevelopment should be:

In the short term:* to achieve a rapid economic impact through increased export earnings and improved

production efficiency and product quality to meet target export market requirements;* to promote private ownership of rural land and to transform land into a "commodity"

much like any other input into agricultural production, and therefore to develop the ruralland title registration and transfer systems to promote rural land markets;

* to provide support for key export product improvements (wine and wine-grapes, fruit andvegetables);

* to reduce post-harvest losses and costs through improved on-farm storage and other post-harvest facilities to ensure quality maintenance; and

* to deepen the market liberalization reforms (e.g. following from the de-monopolizationand privatization pursued under the Structural Adjustment Loan (SAL)) to strengthen

A recently completed (Bank commissioned) comparative advantage study of Moldovan, Ukrainian and Belarus agriculturedemonstrates Moldovan comparative advantage in these products.

The Agriculture Sector Investment Program 11

private sector agro-processing, trading and financing, to ensure increased pricecompetition for inputs and produce.

In the medium term:* to support the deepening of rural land reform and farm restructuring;* to support rural enterprise development;* to deepen the competitive impact of the agro-processing privatization and restructuring;* to improve the provision of rural financial, and other farming and rural services;* to reduce risk in agricultural production (primarily drought) through the expansion and

modernization of the irrigation systems;2

* to strengthen human resources skills; and* to strengthen existing, and develop new agricultural and rural sector institutions (both

public and private).

2.4 Sector Institutions and Services: The agriculture sector's progress also requires atransformation in its institutions and the establishment of new public and private sector agriculturalinstitutions and services attuned to the market economy. This would also require support to improvepublic sector infrastructure and services:

* physical infrastructure (e.g. improvements in irrigation, rural roads, rural electrificationtelecommunications, and rural water supplies);

* agricultural technology (e.g prioritization and rationalization of the public-sectoragriculture research system, the development of private sector funding and participationin agriculture research);

* rural financial services (e.g. rural savings mobilization, rural lending and bankingservices, crop insurance, loan guarantee schemes, micro-credit, entrepreneurship financing,etc.);

* public information and knowledge services (e.g. agricultural extension, marketinformation, tertiary and technical education, agricultural research);

* policy, regulation and public administration (e.g. overall functions and staffing ofMAF; grains' strategic stocks policy;3 the wine sector development strategy; food qualitystandards and inspection; environment standards for agriculture and agro-processingactivities; land use, soil and water conservation; land ownership and long term lease laws;collateral laws, etc.); and

* other public services (e.g. the development of the rural land market with complementarygovernment rural services for rural land-title registration and transfer services; legalreforms particularly for a variety of farming-related associations,4 the commercial code,real estate law, and anti-trust law).

2 and with appropriate financial instruments e.g. crop insurance, loan guarantee schemes, etc.

3 lThis policy study was agreed with the Bank during the negotiations for the first SAL, as a complement to the reforns andprivatization of the state grain monopoly, "Cereale". It is now planned for 1996 with the assistance of FAO.

4 providing the legal foundations for a range of for-profit and not-for-profit associations for the purposes of mutualassistance, entrepreneurial activities, services, etc. [e.g. a revision of the (soviet) cooperatives law to permit service cooperatives(marketing, credit etc.), legislation to govem farming and other types of partnerships, etc.l

12 Chapter II

2.5 Support for the transformation of the Agricultural Knowledge System: with the keyrole of the research system in the technology-led strategy, there are a number of steps that would needto be followed to ensure the transformation of the research, education and extension systems correspondsto the needs of sector operations and opportunities in an open market economy. These four stages are:

i) initial "fire fighting" to preserve the basic research and intellectual assets against furtherdeterioration (i.e. the minimal budget funding currently provided by GOM);

ii) targeted high priority selected investments for economically critical export crops'research, which are clearly independent of the outcome of the conclusions of the reviewof the system (e.g. this first project's investments in strategic technology transfers forwine and horticulture are a part of this strategy);

iii) review of the system and detennination of priorities, amalgamation, integration, costsavings and the overall future agro-technology directions, and the correspondingdevelopment of the overall agricultural "knowledge system" (this would be supported, inpart, with technical assistance funded under this project); and

iv) implementation of and investments in, the rationalized knowledge system.

B. Country Assistance Strategy Context

2.6 The Bank's objective in its assistance program to Moldova is focused on support for therapid adjustment of the economy to the severe extemal shocks recently experienced, in order to promoterecovery to sustainable growth. Given, the small size of Moldova's domestic market and Moldova'sdependency on imported energy, the strategy to achieve economic growth must focus on sustainable exportdevelopment with necessary immediate improvements in efficiency (including reductions in energyconsumption, etc.) and quality. Moldova's principal exports are agricultural, requiring that this sector willnot only have to lead the export growth strategy, but also sustain growth in export earnings in themedium-term. To achieve this, future agricultural development will require increases in productivity andefficiency, re-orientation of production to meet new markets' demands, and acceleration of the post-privatization market-orientation and efficiency adjustments of the agro-enterprises, and in primaryproduction on the joint-stock and the privatized farms. This enterprise and farming adjustment may wellinvolve reductions in the labor force. New employment creation and an adequate social safety net for theunemployed are priorities to ensure a manageable transition.

2.7 Assistance to Agriculture: The Bank proposes, because of the centrality of agriculture toMoldova's economic progress, to support the sector with a series of three loans over the next three to fouryear period (paras 2.11 et seq.). The objective of the Bank's proposed agricultural investment programin Moldova is the strengthening of the rural economy through support for:

a major shift in sector efficiency through:(i) promotion of private property and related rural entrepreneurship through rural

land reform and farm restructuring;(ii) promotion of new on-farm production methods and systems, to complement rural

land reform and farm restructuring;(iii) improvement in post-privatization development of agro-enterprises, and expansion

of new entrants;(iv) the development and transfer of new technologies into the sector;


* the improvement in the quality of products from farms and agro-processors;

* promotion of non-farm rural entrepreneurship;

* the development of effective export marketing systems for Moldova's agriculturalproducts;

* the reform and strengthening of the rural finance delivery systems;

* the strengthening of the sector's human resources and institutions, particularly theagricultural knowledge system.

The proposed multi-loan agriculture investment program is designed to address these objectives in aflexible manner, to enable the Bank to: (i) respond to emerging needs of the sector, consistent with theimpact of the macro-economic reform program; and (ii) provide support for systematic sector reforms andcomplementary public sector investments with appropriate timing.

2.8 The first critical element is establishing the basis for rural entrepreneurship and risk taking.This requires ownership of private property. For the agriculture sector this implies a deep rural landreform and farm restructuring, with personal decision making and risk taking now taking the lead overcollective management of state property. The Bank has indicated to the Government that progress in ruralland reform is a critical element in any reform strategy for the macro-economy and the rural sector.Dialogue is continuous with GOM on land reformn policy. The Bank will not proceed with the next phaseof the proposed agricultural lending program (paras 2.11 et seq.) without a substantive progress in landreform, land ownership and farm restructuring. The Bank would utilize the proposed second StructuralAdjustment Loan, as well as policy studies financed under this project to assist GOM to advance thisreform.

2.9 The second critical element is the expansion of competitive production and processing.This will depend on the expansion of market-based financing of rural activities, including working capitaland investment funds for both farmers (seasonal requirements for inputs and on-farm investments), andfor agri-businesses (e.g for input suppliers, product trading, storage, and processing). The rural financialsystem will need to be reformed to deliver non-subsidized lending to a fast expanding client base of smallfarmer production, and non-state agro-processors and traders. Financial resources will requireaugmentation. This will be the focus of the proposed second loan to the Agriculture sector. This export-market led strategy also requires attention to marketing, systems and institutions, primarily in the privatesector, as well as public sector support for effective export market expansion.

2.10 The effective roles of markets and entrepreneurs in agriculture are still limited by anumber of factors. Price liberalization has not been a sufficient policy intervention, as in itself it has notresulted in market and competitive forces that provide efficient-pressures for sector restructuring. Residualstructural rigidities, both in the general economy and in the rural sectors, now need to be addressed. Thus,to achieve the overall objective of agricultural exports-led economic growth requires attention to a numberof critical areas, all of which are necessary, but not sufficient on their own to achieve the broadereconomic objectives. Table 2.1 sets out the critical areas and the elements of the agricultural sectorassistance strategy that would provide support to strengthening the rural economy as well as contributing

14 Chapter II

to agriculture-led export growth. This table shows the country assistance strategy context for this firstinvestment project in the agricultural sector (see also Complementary Donor Assistance-- Box 2.2).

Table 2.1: Bank Assistance and Critical Elementsto Strengthen the Rural Economy

Critical Areas Proposed Bank Assistance*

Sector and Trade Policies SAL 1, SAL 2Public Expenditure Review (ESW) * *

Public Investment Plan (ESW)

Agriculture Knowledge System First Agriculture Project

Primary Agriculture Production Agriculture Projects 1, 2 & 3

Private Property & Rural SAL 1, SAL 2Entrepreneurship Agriculture Projects I & 2

Land Cadastre Project

Agro-processing Development Pre-Export Guarantee FacilityPrivate Sector Development ProjectSecond Agriculture Project

Rural Finance Second Agriculture Project

Marketing Pre-Export Guarantee FacilityExport Promotion Project

the Bank's proposed future activities are in italics **) ESW = Economic and Sector Work

C. The Agriculture Investment Program Concept

2.11 This First Agricultural Project begins a proposed series of three Bank-supportedinvestmnents. The subsequent loans are under preparation and would commence implementation in the nextone to two years. Recognizing the agricultural sector policy reforns undertaken by GOM to date, theproposal to fund this first project nevertheless is in advance of further policy changes and the reforms thatthe Bank sees as necessary for sector progress (Box 2.1). The feasibility of implementation of thecomponents is neutral to land reform policy. Some components are designed to further advance generalsector policy development and reform. Initiating the Bank's agricultural sector investment program at thisstage of Moldova's sector transformation is designed to provide critical support and to encourage theprocess of further sector reform.

2.12 This strategy also recognizes that in Moldova, as a democracy, the necessary publicconsensus on some of the reform measures may be difficult to attain in the short run. Thus, it will beessential to ensure that the sector economic environment becomes conducive to both the political andeconomic risk-taking that some of these future reforms demand. The Bank's funding preconditions forthe proposed subsequent projects in the agriculture sector will be based on:

the evolution of GOM's sector policy reforms, in particular significaint progress on landreform, farm restructuring and the expansion of private rural land ownership bycultivators;


* the extent of implementation, and impact of sector reforms introduced under the first andsecond SALs;

* the completion of component preparation activities;* this first Project's implementation progress;* assessed GOM and sector absorptive capacity; and* the development of ownership by GOM, stakeholders and beneficiaries, for proposed

project components.

Box 2.1: Agricultural Sector Policy Reforms

Private Property

Modification of the Land Code to re-establish individual exit rights from the collectives, to reduce theconfiscatory features of the 1995 Land Code amendments, and a substantially increased flexibility infarm restructuring options.

Clarification in the Land Code of agricultural land ownership, lease provisions, and establishment oflessor and lessee rights.

New legal provisions to permit farmers a choice from a variety of legally recognized associations whichthey could utilize to achieve some economies of scale in farming-related services and production, andas alternatives to the present ex-collective structures.

Legal and regulatory clarification of the farm restructuring process to ensure equitable valuation anddistribution of land, farm assets, and debts, among the designated beneficiaries, with legal provision forappeal and arbitration by individual beneficiaries.

Clarification of the status of the ex-kolkhozes' and ex-sovkhozes' pension obligations to working andretired members, and former members.

Trade and Rural Entrepreneurship

Deepening of the impact of the liberalization initiated under the SAL (with the de-monopolization andprivatization of agricultural input supplies, the grain system, agricultural trade, and in agro-processing)with policies, for example, to ensure competition, to encourage the emergence of small- and medium-scale operators, etc.

Revisiting the export licensing and regulatory regijne to ensure full international trade liberalization.

Implemnentation of a market-oriented national grains policy.*

Deepening of the post-privatization de-monopolization of rural and agricultural services.

Policy measures to enforce agro-enterprise payment discipline, reduce inter-enterprise debt and speed-uppost-privatization financial restructuring.

The rural financing system would not be distorted though the granting of preferential credits to the largescale processors, ex-collective farms, and ex-state trading companies, nor the provision of otherfavorable positions to the agricultural sector (debt forgiveness, restrictions on the provisions of thebankruptcy code, etc.)

* lThis Policy framework will be developed during 1996 with the assistance of FAO.

16 Chapter II

2.13 Macro-economic and sector policy underpinning. Under the first SAL,and following the policy reform recommendations of the Bank's Agriculture Sector Review,5 GOM beganthe implementation of a number of agricultur,.-sector specific reforms. These reformns complement theAgriculture Investment Program. The reforms included the de-monopolization and privatization of themajor agricultural services state-owned enterprises (the state trading houses in grains and agro-chemicals),privatization of the agro-processing complexes, and the liberalization of the grain trade. The generalprovisions of the SAL that impact on the sector are: the removal of price and margin controls and exportlicensing; the reduction of the import tariffs; and the expansion of the industry privatization. The latteractivity had a direct positive impact on the farning sector through the privatization of the agro-processors,and on the agro-marketing outlets through the small-scale privatization program, by ensuring that theseenterprises, post-privatization, and the farming enterprises, improved their management. With the SAL-initiated sector policy reform as an underpinning, this first loan to the agriculture sector can concentrateon priority sector investments.

2.14 Once the markets and competition begin to operate and provide the incentive signals toproducers and processors, the basis for agriculture is expected to shift to reflect Moldova's comparativeadvantages in specific crops, i.e. into specialized, high-value horticulture and viticulture products as wellas of sugar.6 Bulk commodity crop volumes would generally be reduced to supplying only the domesticmarket. The large livestock industry has already undergone a substantial downsizing, and in the futurewill be reduced to domestic supplies with only limited regional exports.

2.15 In this context, the proposed First Agricultural Project concentrates on supportingagricultural research for key export commodities, both established and emerging, as well as the relatedresearch institutions' farner-outreach programs; promoting agro-enterprise restructuring and investmentplanning; and assisting GOM on sectoral strategic planning, analysis of sector reforms, and the preparationof further public investments for the sector. The choice of agricultural research as the first fundingpriority for the sector reflects both the critical nature of technology transfers and development to the futureof the sector, and also the necessity to commence there activities early in the process because of the longgestation times. Support for agro-processors post-privatization restructuring (financing as well as debtwork-out arrangements) would be available under the Private Sector Development Project (PSDP),'complemented by technical assistance for agro-enterprise management training funded under this project.

2.16 Future Sector Policy Development: However, because of the absence of significantprogress in land reform and farm restructuring, the investment components of this first loan were limitedto activities not dependent, in the short-term, on the success of land reformn policy or other needed sectorpolicy reforms (Box 2. 1). Even if the land reform were not to be adequate over the next five to ten years,the expected production and quality enhancing benefits of the first project would be realized on collectivefarms, albeit not to the same extent as in private fanning. As the economic returns (Chapter 5) are highwith minimum growth assumptions, there is a high confidence factor of adequate returns to the economyeven under this "inadequate land reform" scenario.

5 Report No. 12581-MD, February, 1995

6 see footnote 1, this Chapter

7 presented to the Board on February 8, 1996 (Report #14555-MD).


2.17 Nevertheless, to proceed beyond this first Project with the proposed second and thirdoperations under the planned Agriculture Investment Program, requires as a pre-condition further reformsand progress during the next twelve to eighteen month period. During the Agriculture Investment Programpreparation period, including during preparation of the second SAL, agreement would be sought on theseissues with GOM. Some components are being considered for incorporation in the reform program to besupported under the proposed second SAL. The development of policy and operational options for theseareas of reform would be supported through technical assistance in this first loan, and possibly alsothrough bilateral assistance.

2.18 GOM has requested that the proposed Second Agriculture Project focus on farmproduction support, rural entrepreneurship, farming services, and agro-processing development. This theGovemment proposes to achieve through a rural financing facility. The proposed Third AgriculturalProject would focus on selected rural water supply and irrigation schemes. The latter would reduce therisk of drought impact (occurring in varying degrees of severity 6-7 in every 10 years in southemMoldova), thereby stabilizing export and domestic food supplies. The preparation process for this loanwould establish a national water policy, and the related environment safeguards for the expansion of theirrigation system.

2.19 Complementary sectoral assistance activities: The Agriculture Investment Programn isdesigned to be integrated with other donor and multi-lateral institutions programs (Box 2.2), as well asthe Bank's lending progran in associated sectors (para 2.10). There is close coordination with theEU (Tacis), IEFAD, the Food and Agriculture Organization of the United Nations (FAO) and thebilateral donors.

Box 2.2: Complementary Assistance

The European Bank for Reconstruction and Development (EBRD) is active with complementaryinvestments in Moldova, including a Wine Export Promotion Project, and a credit line for industry deliveredthrough the banking sector. An investment in the food wholesale marketing system is under preparation.

EU (Tacis), in its agriculture sector support, has been active in the rationalization of the livestock sector;agricultural exports promotion, with a pilot program for agricultural extension and farmers' organizations, andwill provide technical assistance in their 1996 program for rural credit systems development, the seeds system,and domestic market information. EU (Tacis) has agreed to coordinate its agricultural technical assistance tocomplement the Bank's and EBRD's proposed rural sector lending programs.

The International Fund for Agriculture Development (IFAD) and the Food and AgriculturalOrganization of the United Nations (FAO): Moldova has recently applied to join IFAD and FAO. TheBank's efforts at donor coordination have resulted in IFAD's agreement to prepare a parallel rural creditproject complementary to the first Project, and FAO's agreement to provide both preparation assistance forthe future projects, and sector policy studies (e.g grain policy).

Bilateral Donors: contributors of technical assistance in agriculture are Belgium, Canada, France,Germany, Ireland, Israel, Japan, the Netherlands, the UK and the USA.** Much of this assistance has beencoordinated with the Bank's investment planning.

* either directly or through the Bank-administered national Consultant Trust Fundin particular through a US-based NGO, VOCA, whose field assistance to farming communitics, and technical assistance to

the research establishment, has provided a significant contribution to this project's preparation.

18 Chapter II

D. Rationale for Bank Involvement

2.20 This project, and the Agriculture Investment Program, are both consistent with the Bank'soverall assistance strategy for Moldova, and the sector development strategy recommended in theAgriculture Sector Review. This strategy foresees a transformed, privatized agricultural sector leadingfuture economic growth. This Project's focus on technology transfer (Chapter 3) takes a short-to-mediumterm view of the production transformation and the changes in competitiveness required to achieveagricultural export growth. Immediate financing needs for agro-processing enterprises to achieve theirspecific export targets would be financed under the PSDP. Farmers' on-farm investment requirements willbe funded through the IFAD-supported credit line financed in parallel to this Project, and the proposedsecond Agriculture Project.

2.21 At the 1995 Consultative Group meeting, both the Bank and other donors indicated astrong sensitivity to policy issues in the rural sector, in particular the early 1995 changes in land reformpolicy. Donor support for Moldova in general, and for rural sector activities, requires that both the Bank'sand GOM's actions are recognized as furthering the sector reforms, including land reforrn and farmrestructuring, and ensuring individuals' rights to equitable access to land and other farming assets.

2.22 Reforms implemented by GOM, and supported through the SAL, require deepening, andfurther support though sector-specific investments. Reform support would be provided through thisproject's Technical Assistance, as well as the proposed second SAL. Complementary investments throughthis first project in agriculture would be a method to bolster GOM's confidence that the agriculture sectorwill be able to withstand, and rebound from, the perceived shocks of rural land reform. Complementaryfuture investment support would include: improvement of public sector infrastructure - physical (e.g.irrigation); public information and services (e.g. agricultural extension, market information, land titles);and for public domain technologies (e.g. agricultural research, education and extension). The proposedAgriculture Investment Progran would help achieve this. GOM's complementary policy and strategydevelopment is strengthened through the Bank's continuing policy dialogue and through projectdevelopment, ownership and preparation of the agriculture investment program.

E. Lessons from Past Bank Experience

2.23 The Agriculture Investment Program would support project components where the Bankhas had many years of experience (e.g. research, agricultural education, agricultural extension, land reform,irrigation and rural infrastructure, rural financial institutions, etc.), as well as components where experienceis relatively recent (e.g. management of the agriculture sector's transition to a market economy, informalcredit systems, farm restructuring). The Bank's experience in the necessity to develop ownership withthe government and administration on the one hand, and to involve the beneficiaries - in this case farmers,and research and planning personnel -- on the other, has guided the design and the flexibility of theproposed approach. Legitimate stakeholder and Parliamentary concerns would need to be accommodated.Thus, the implementation program is designed to be able to respond flexibly to these realities in a

a op. cit.


democracy, and to be able to continue project implementation with flexibility under "second-best"economic policies that accommodate political reality.

2.24 Experience from the completed Drought Emergency Loan' and the Rehabilitation Loanshows that for clearly defined objectives, GOM can bring together the administrative forces for successfulimplementation within an agreed timetable. These projects also demonstrated the importance of TechnicalAssistance, especially to be able to manage procurement and disbursements in a manner satisfactory tothe Bank. This Technical Assistance has been maintained in the design of the projects, while at the sametime GOM is being urged to "institutionalize" these skills through both training of local experts, and theestablishment of a satisfactory employment structure to maintain their services post-training.

2.25 Recent experience from the first SAL and the Pre-Export Guarantee Facility, indicate thatboth Government and Bank efforts will need to focus on:

(a) ensuring in-depth implementation of reform and restructuring commitments in accordancewith agreed timetables;

(b) inter-Ministerial coordination and adequate information flows to all stakeholders oncritical decisions;

(c) ensuring up-front efforts to build consensus on critical issues and changes, especially thosethat result in significant shifts in centers of power and influence;

(d) ensuring timely Government decision-making on relatively minor, but neverthelessessential, procedural and administrative matters; and

(e) ensuring adequate local budget commitments and allocation of counterpart funds toProject accounts.

9 Implementation Completion Report, April 10, 1995.

HI. THE FIRST AGRICULTURE PROJECT

A. Objectives

3.1 Growth and sustained recovery of Moldova's economy will greatly depend on agriculturalexports. The Government of Moldova seeks, through utilizing this Project and the planned future projects,to strengthen the agriculture sector to promote agricultural exports, to increase agricultural incomes of therural population, and to strengthen sector institutions. Specifically, this first Project's objectives are to:

* upgrade and improve the effectiveness of key agricultural research programs on priority exportcrops and products;

* strengthen institutions in priority areas: the agricultural knowledge system; product qualityregulatory functions; management in the post-privatized agro-processing sector;

* develop capabilities to prepare sector investments and develop sector policy; and

* develop project management and implementation capacity for the agriculture investment program.

B. Project Description and Components

3.2 The proposed Project would comprise the components noted below. The individualcomponent details, including the financing plan, and the implementation, monitoring and evaluationarrangements, are provided in each of the Component Implementation Plans (CIPs).'

Agro-technology Development and Transfer (US $13.2 million)2

3.3 Viticulture Improvement (US$8.6 million): This sub-component would support theexisting research program to develop and distribute improved vine varieties in Moldova, and to improvewine-making. The component would concentrate on:

(i) Research and Development at the National Institute of Viticulture and Oenologv (NIVO).Finance critical imports for NIVO's ongoing research program for: clonal material fromabroad; equipment for the research laboratories; drip irrigation for planting materialresearch and elite planting material production; and modemization of the experimentalwine processing plant. Technical assistance would be financed to develop and introducea vinestock certification program, and to establish a nation-wide experimental network toevaluate the agronomic suitability of rootstocks and vinestocks.

wse Annexes - Volume 2.

2 Costs for each component shown in this section are Base Costs (i.e. without price and physical contingencies), andinclude investnent and incremental operating costs for each component, but excludes value added taxes on civil works andincremental operting costs.

The First Agriculture Project 21

(ii) Ouality Improvement of Vine Plants Produced in Nurseries. Financing of imports ofclonal planting materials; drip irrigation equipment for NIVO's vine nurseries on about300 hectares; drip irrigation for I ha of glasshouse production of reproductive materials,and on 8 production (on-farrn) nurseries.

(iii) Protection of Vines. Technical assistance to NIVO to improve plant protection (pest riskforecast system).

3.4 Horticulture Improvement (US$3.5 million): This component supports the ResearchInstitute for Fruit Production ("Codru') and the Research Institute for Maize and Sorghum ("Porumbeni'i)for their horticulture research programs, the production of elite planting material, and the establishmentof farming technology demonstrations on selected farms.

(i) Codru support: financing of the import of laboratory equipment and materials (for thevirology, genetics, and agronomy departments); demonstration equipment; computers andsoftware; publication of a Fruit Growers' Encyclopedia; and study tours.

(ii) Demonstration of modem production technologv: Technical assistance and import ofequipment for pilot demonstrations of modem production technology. This includesirrigation equipment for a demonstration on 200 ha; modem boom and air-blast sprayersfor fruit and horticultural production; 2000 hand-operated knapsack sprayers; andequipment for greenhouses.

(iii) Porumbeni support: financing of the import of equipment for modem seed potatotechnology on a pilot area; the import of seed potatoes; and demonstration of vegetableproduction under plasticulture.

3.5 Animal Breeding (US$0.4 million): The proposed Project component would promotebetter utilization of Artificial Insemination resources at the Veterinary and Animal Breeding ResearchInstitute ("Tevit') through the provision of modem laboratory, semen processing, and storage equipment.

3.6 Integrated Pest Management (IPM) (US$0.7 million): The proposed Project componentwould promote sustainable agricultural production by supporting IPM applications on Moldovan farms.

(i) Education and Extension of Sustainable Agriculture Methods. Financing for training andthe import of vehicles and equipment for a training center and pilot research farm that hasdeveloped sustainable farming methods utilizing IPM (administered by the Crops ResearchInstitute, Selectsia.)

(ii) Pest Forecasting Methods. Early Waming System, and Pesticide Residue Analysis.Modemization of the communications equipment and introduction of modem forecastingmethods (M4IF laboratories); and re-equipping of the pesticide residue laboratories withmodem analytical equipment (Department of Sanitation and Epidemiology, Ministry ofHealth).

22 Chapter III

Box 3.1 Strengthening Rural Finance

With the transformation of the farming system, the number of borrowers for on-farm credits isincreasing from the formerly 3,600 large cooperative complexes, to a potential client base of overone million private farmers. The banking system is not designed to service this number of newclients, and the small-loan portfolio management this will require. With the privatization of thebanking sector, the expansion of local resource mobilization by the banks, and the expecteddominance of agriculture in the national economy, a number of banks have indicated that they wishto develop their rural lending capacity. At the same time, the newly emerging independent farmerswill need assistance to develop their own borrowing capabilities.

Both the privatized large scale agro-processors and new smaller scale (some on-farm)agro-processing could be financed from the credit lines financed by EBRD and under the Bank'sPSD Project. Farning investment and seasonal credit resources will be augmented by a proposedIFAD rural credit line planned for delivery to GOM in parallel with this Project. IFAD proposes,in parallel to this Project, to finance a rural credit line of about $4 million, delivered through anIFAD-selected participating financial institution (PFI). IFAD has still to determine which PFI toutilize.

In keeping with IFAD's mandate of assisting the under-privileged of its member countries, the creditwould be directed to small farmers to enhance their income potential. These farmers would haveexited from former collectives either individually or in organized groups. Currently, these farmersare facing difficulties procuring inputs and credit, and appear relatively disadvantaged, havinglimited land, mechanical resources, and services from the formal agricultural services systems.

As collateral is a major issue, IFAD's proposed credit program would extend credit to farmers onajoint-and-several-liability basis, provided the farmers agree to come together in informal serviceorganizations that would arrange input supplies, tractor services and credit. This credit line willtherefore require that legislation be passed to permit the establishment of Service Cooperatives.

EU (Tacis) plans to finance technical assistance to strengthen the rural credit system, and thepotential beneficiaries capacities to access credit. Tacis' assistance will be: (a) to the IFAD-selectedPFI for capacity improvement and staff training in rural lending operations; (b) for assistance tofarmers' organizations with rural finance mobilization; and (c) to assess the PFI's computerizationrequirements for rural branches, village offices and central offices' credit control units, with possibleintroduction of FAO's "Microbanker" computerized system for rural banks.

The Government has requested that the second Bank project provide support for the furtherdevelopment of rural financial services; the financing of medium-term credit facilities for all ruraland agriculture-related entrepreneurship, including off-farm enterprises; and support for theestablishment of a rural loan guarantee fund.


Institutional Strengthening (US$1.0 million)

3.7 Studies and Training (US$0.4 million): The project would finance study trips abroad,and possibly visits by selected trainers as complements for the following two activities:

a) The Agriculture Knowledge Systems Study: With the transformation of the agriculturesector to operations under the open market, the re-orientation of research priorities hasbecome essential. The large multi-institute system inherited from the Soviet Union is notsuitable for the sector or the resources in Moldova. Issues of subject-matter priorities,even the methods of priority setting, the interaction with producers and the academiccommunity, growers' outreach programs, rational budget allocations, etc., have nowbecome priorities. Similarly, the tertiary agricultural education, technical education andthe extension service, need to be re-oriented to the market economy, to commercialproduction. At negotiations, Government assured the Bank that it would form a nationalcommittee that would study similar systems in relevant countries to provide an integratednational strategy for the agricultural knowledge system. Cost of travel and possibleexternal advisors would be covered under the loan. The Government duringimplementation of the study may wish the assistance of external advisors which would beselected under the Bank's Guidelines for Consulting Services (para. 6.1(a)).

b) Agro-industries Management and Staff Training: This technical assistance complementsthe investment and working capital credit line available to all of Moldova's privatizedindustry from the PSDP (see also Box 3.1 -- Strengthening Rural Finance). Thetechnical assistance would provide management and technical training, to qualifiedindividual managers and staff of agro-enterprises, through study trips and work experienceoverseas with companies utilizing relevant processing technologies, with similar products,and of relevant operational size. At Negotiations, the Government presented draftselection criteriafor training candidates (para. 6.1(b)).

3.8 Grains Regulatory Laboratories (US$0.6 million). With the de-monopolization andprivatization of the (state-owned) cereals-sector complex, MAF's regulatory control of grain imports andlocal grain processing (e.g. animal feeds, bread-flour and pastas) should be improved. This sub-component would finance the import of equipment to modernize and increase the capacity of the grainsregulatory laboratories recently transferred to MAF.

Project Preparation and Policy Development (US$0.3 million)

3.9 This component would finance sector policy analysis, and the preparation of the next twoproposed loans in the Bank's lending program for the sector. The major elements of the second project,from which the final selection would be made, are outlined in para. 2.18. The preparation of thecomponents for the second loan would be made through a consultative and participatory approach nowbeing instituted by GOM under the Project Preparation Committee (PPC -- Chapter 4). Each of theproject components would require both local and international technical inputs for final design, which thiswould be funded under this component.

24 Chapter III

3.10 For the third project -- the irrigation investments -- a PHRD grant application has beenapproved. The engineering design capacity of AcvaProjekt, the irrigation engineering institute under ApeleMoldova,3 would be enhanced with the provision of engineering computer workstations and peripheralk,and staff training on computer-aided design (US$0.1 million).

3.11 With the expected changes in land reform, a number of high priority policy aspects needto be addressed, and assistance with the following tasks would be funded under this component:

* development of the draft laws for Farm Restructuring, Service Cooperatives, Law onFarmland Collateral, Rural Land Policy, etc.;

* design of rural land title registration systems, in support of the proposed Land CadastreProject; and

* case studies of actual experience of privatized farms and restructured former collectivefarns, to assess lessons learned and best practices to be followed.

Project Management (US$0.67 million)

3.12 In preparation for the management of the proposed three investment projects, this Projectwould fund the establishment and strengthening of project management and project preparationcapabilities, and the operations of the Project Management Committee and the Project PreparationCommittee (PMC and PPC -- Chapter 4), over a period of four years, with loan financing for:

i) local staff and technical assistance for training of PMC staff in project management,accounting, auditing, etc.; and the PMC, PPC, MAF and implementing agencies' staff, inmonitoring and evaluation (particularly economic and development impact assessment ofthe Project), and participatory approaches to project preparation;

ii) the costs of the services of international consulting services for a Procurement Advisor(Chapter 4), to both support the Project's and other Bank projects' procurement,4 andprovide training in procurement and disbursement; and

iii) office equipment, suppliers and incremental operating costs for four years.

3.13 To ensure timely delivery of both policy reforms and project preparation for the overallBank funded Agriculture Investment Program, GOM requested to commence training activities, policystudies, and procurement packages finalization activities ahead of project effectiveness utilizing a ProjectPreparation Facility (PPF).

C. Project Costs

3.14 The total cost of the Project is US$18.5 million, of which the foreign exchange cost isestimated at US$11.8 million, or 64% of the total costs. The Ministry of Finance will recommend to theCabinet at the time of loan approval, to exempt project imports from import duties and value added taxes.

3 the agency responsible for the preparation of the irrigation project -- Chapter 4

4 At Negotiations GOM agreed that this project would finance the first year costs of this Advisor to assist all Bankprojects financed from this project, while the proposed Energy project and other subsequent projects would each cover one yearof costs of this common service in future years.


Local costs -- including civil works and incremental operating costs -- will not be exempt from valueadded taxes. The total cost of the Project (before value added taxes)' includes: US$14.3 million (76% oftotal costs) in incremental investments and US$2.6 million (14% of total costs) in incremental operatingand maintenance costs, of which US$1.8 million (10% of total costs) are price and physical contingencies.A summary of costs by component is presented in Table 3.1 below.

Table 3.1: Estimated Project Costs Summary

Lei mil. US$ mil % Foreign % Base

Local Foreign Total Local Foreign Total Exchange Cost

Agro-technology TransferViticulture 10.79 28.05 38.85 2.40 6.23 8.63 72% 52%

Horticulture 4.74 11.17 15.91 1.05 2.48 3.54 70% 21%Livestock 0.02 1.73 1.76 0.00 0.39 0.39 99% 2%

Integrated Pest Management 0.79 2.31 3.10 0.18 0.51 0.69 74% 4%Institutional Strengthening 1.28 3.18 4.46 0.28 0.71 0.99 71% 6%Policy and Project Preparation 0.23 1.14 1.37 0.05 0.25 0.31 83% 2%Project Management 1.05 1.97 3.02 0.23 0.44 0.67 63% 4%Value Added Taxes 6.51 6.51 1.45 1.45 0% 9%

BASE COST 25.41 49.55 74.96 5.65 11.01 16.66 66% 100%Physical Contingencies 1.44 2.54 3.98 0.32 0.57 0.88 64% 5%Price Contingencies 3.09 1.18 4.28 0.69 0.26 0.95 28% 6%

TOTAL COST 29.94 53.27 83.21 6.65 11.84 18.49 64% 111%

Totals may not sum due to rounding

D. Project Financing

3.15 The proposed financing of the Project (including contingencies) is shown in Table 3.2.The financing plan includes financing by the Government of investments (US$4.0 million) and byGovernment and the Institutes for all value added taxes (about US$1.7 million). Self-financing by theResearch Institutes would total about US$3.7 million, about 20% of project costs, for incrementaloperating costs and value added taxes. This would be sourced from sales of improved planting materials,and, for NIVO, sale of wine. In addition, in the outer years, these institutes would have the ability forfirther capital and operating cost recovery through the sale of project-funded improved products. Thisis estimated to recover about 30% to 40% of the capital investment costs (Table 5.1, para. 5.7). AtNegotiations, the Borrower agreed that, as a condition ofdisbursementfor the nurseries, NIVO and Codruwould have entered into cost recovery agreements with each of the wine and horticulture plant nurseriesbeing established under the project; and that these agreements would be satisfactory to the Bank (para.6.3(a)).

5 which are estimated to total about $1.7 million or about 90/c of total costs

26 Chapter III

Table 3.2: Project Financing(US$ million)

GOM % IBRD % Institutes % TOTAL %Goods and Materials 1.62 10 8.00 48 9.62 57Civil Works 2.01 12 0.80 2 2.80 17Technical Assistance:

Consultancies 0.80 5 0.80 5

Studies 0.22 1 0.22 1Training 0.69 4 0.69 4

Incremental Operating 0.38 2 0.29 2 1.99 12 2.66 16CostsSub-total before VAT 4.00 24 10.00 60 2.78 17 16.78 100Value Added Taxes* 0.83 5 0.87 5 1.70 10

TOTAL COST 4.83 29 10.00 60 3.66 22 18.49 110

Totals may not sum due to rounding* on Civil Works and Incremental Operating Costs

3.16 At Negotiations, GOM informed the Bank that it had selected the single currency [USdollar] variable rate option. An advance of US$500,000 has been provided to GOM from the PPF tocover the initial pre-effectiveness cost of technical assistance and procurement planning assistance for thePMC, as well as technical assistance to initiate some of the higher-priority studies, (which by their naturewill take a fairly long time to complete) for the project preparation for the proposed second project.

E. Procurement

3.17 All goods, works and services to be financed from the loan proceeds would be procuredby government agencies in accordance with the Bank's Guidelines for Procurement under IBRD Loansand IDA Credits (January 1995) (the "Guidelines"), including amendments as of the loan signing date,using the Bank standard bidding documents. Consulting Services would be procured in accordance withthe Guidelines for Use of Consultants by World Bank Borrowers and by the World Bank as ExecutingAgency (August 1981) (the "Consultants Guidelines"), including amendments as of the loan signing date.This was agreed at negotiations (para. 6.1(c)). Standard bidding documents include: InternationalCompetitive Bidding (ICB) for works, for goods, for computers6, and for textbooks.' The laws andregulations governing local procurement procedures and practices in Moldova are being reviewed by theBank in order to establish whether local procedures are acceptable for Bank-financed contracts. A Country

6 to be utilized for the printing of the Horticulture Encyclopedia

7 Regional standard documents


Procurement Assessment Report for Moldova will not be prepared since there is no local publicprocurement framework. However, the Bank is currently preparing a Procurement Strategy Note, whichwill be completed during the course of FY96. A "General Procurement Notice" containing informationabout bidding opportunities (for procurement on the basis of ICB) would be published in "DevelopmentBusiness" in accordance with paras. 2.7 and 2.8 of the Bank Guidelines for Procurement in about May1996. Procurement arrangements are summarized in Table 3.3 below. Major procurement packages areshown in Annex 5.

Table 3.3: Project Procurement(US$ '000)

InternationalCompetitive Otherb NBF TOTAL

Bidding

Goods and Materials 3,585 6,038b 9,623(2,981) (5,022) (8,003)

Civil Works 2,800c 2,800Technical Assistance:

Consultancies 798 798(798) (798)

Studies 220 220(220) (220)

Training 691 691(691) (691)

Incremental Operating Costs 287 2,367 2,655(287) (287)

Value Added Taxes 1,704 1,704TOTAL 3,585 8,035 6,872 18,491

(2,981) (7,018) (10,000)Figures in parenthesis represent Bank finningTotals may not sum due to roundingNBF = not for Bank flnancinga including contingenciesb including (in USS '000): LIB S3,393; IS S720; NS $65, and DC SI,860 (including $1,600 in genetic materials)c filly financed by GOM and the Institutcs

3.18 Equipment and Goods (US$9.6 million). As far as practicable, these would be packagedin such a manner that all packages would be large enough to attract international competition and at thesame time would contain packages suitable for attracting small manufacturers. An estimated US$4.29million equivalent of goods and equipment would be procured through International CompetitiveBidding (ICB). Moldovan manufacturers competing for the contracts for the supply of goods procuredunder ICB procedures would receive a preference in bid evaluation of 15 percent of the CIF price or the

28 Chapter III

prevailing custom duty applicable to non-exempt importers, whichever is less, provided they can proveto the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes morethan 30 percent of locally procured labor, raw materials, and components. Limited InternationalBidding (LIB) (US$3.39 million) would be used for packages of specialized equipment and goods' wherethere are a limited number of manufacturers that would be qualified with acceptable quality for researchpurposes. International Shopping (IS) (US$0.72 million), based on comparison of price quotationsobtained from at least three suppliers from two eligible countries, will be used for procurement ofspecialized equipment, with individual packages limited to a maximum of US$300,000 each. This willbe restricted to computer hardware, laboratory, and other specialized equipment. National Shopping (NS)($65,000) based on comparison of price quotations obtained from at least three suppliers, will be used forprocurement of computer accessories, and laboratory consumables estimated to cost less than US$20,000per package. Procurement of goods through Direct Contracting (DC) (US$1.86 million) would berestricted to computer software of a proprietary nature (US$90,000), laboratory equipment from originalsuppliers where standardization with existing equipment is essential (US$170,000), and clonal and geneticmaterials, where there would be only a number of acceptable sources of supply, but each for a particulartype of material (US$1.6 million in a number of packages).

3.19 Consultancy Services, Training and Studies (US$1.7 million): for consulting servicesfor project and policy planning studies, training for scientists and other staff, and for services to PMC,would be awarded in accordance with the Consultants Guidelines through short-listing procedures.Training is required in a number of recipient institutions, and management of the agro-processors, for verytechnical subjects, and thus will be mostly procured from individual specialists in their technical fields,or through sending the trainees on study tours. Each institution will be required, as a part of the projectinitiation procedures to be initiated at the project launch, to provide their training program, and thus thetraining specialists procurement schedule. These training programs would be submitted to the Bank forprior approval. Most of the training will be conducted within the first year of the project, as it is relatedto the utilization of goods and materials procured under the project.

3.20 Procurement Review. All contracts awarded through ICB, LIB and DC, and the contractsfor consultancy services valued in excess of US$100,000 for firms, and US$50,000 for individuals, wouldbe subject to prior Bank review. This limit would result in prior review of about 80 percent of totalprocurement. All other contracts would be subject to ex-post review during the supervision of the Projectin accordance with the Guidelines. Also, terms of reference for all technical assistance and consultancycontacts would be reviewed in advance by the Bank.

3.21 Procurement Plan and Monitoring. Procurement plans for major procurement packagesare presented in Annex 5. Procurement data would be collected and recorded by the PMC. The GeneralProcurement Notice would be published about July 1996. The Project Launch Workshop, includingattention to procurement, would be scheduled as close as is feasible to loan effectiveness. Under theProject Preparation Facility, preparation of final bidding documents, and the finalization of theprocurement plan would be undertaken by the Procurement Advisor, hired under the PPF to services theproject. Procurement training of the PMC staff will also be undertaken by the procurement advisor, underthe PPF funding. Agreement was reached at Negotiations that, every quarter the PMC would prepare,

' for experimental wine and horticulture production, and for experimental drip and sprinkler irrigation systems, requiringprecise, replicable, monitorable performance


and submit to the Bank quarterly (or as otherwise determined) progress reports on the procurement ofgoods and services under the Project (para. 6.1(d)).

F. Disbursement

3.22 The allocation of loan proceeds to various disbursements categories is shown in Table 3.4below:

Table 3.4: Disbursement Categories

Category US$ mil. Disbursement*

1.0 Goods and Materials:1.1 - for viticulture nurseries 2.0 100% foreign cost,1.2 - for orchards 0.7 100% ex-factory cost, and1.3 - all others 4.45 80% for other items procured locally

2.0 Technical Assistance:2.1 Consultants 0.4 100%2.2 Studies 0.2

2.3 Training 0.5

3.0 Incremental Project 0.25 100% of local costsManagement Costs

4.0 PPF Repayment 0.5

5.0 Unallocated 1.0

TOTAL 10.00

(*) assumes amounts claimed are without import duties or VAT

3.23 Disbursements will be made against standard Bank documentation. The minimum sizeof application for direct withdrawal from the Loan Account and for issuance of the Special Commitmentis 20% of the current amount of allocation to the Special Account. Expenditures for individual contractsunder US$150,000 for goods procured under IS, NS and DC' will be disbursed against Statements ofExpenditure certified by Ministry of Finance, on the basis of documentation provided by the PMC. ThePMC will ensure that all supporting documentation is adequately maintained and available for review atthe request of the Bank. Disbursements for all contracts over US$150,000' will be made against fullydocumented withdrawal applications.

9and for consultants expenditures, USS 100,000 for firms, and USS50,000 for individuals.

30 Chapter III

3.24 At Negotiations, agreement was reached on the terms and conditions for the establishmentand operation of a Special Account for the Project (para. 6.1(e)). To facilitate project implementation,the Borrower would establish a Special Account in one of the major foreign commercial banks on termsand conditions satisfactory to the Bank to cover the Bank's share of expenditures. The AuthorizedAllocation would be US$ 1,000,000, representing about four months of average expenditures made throughthe Special Account. During the early stages of the Project, the initial allocation to the Special Accountwould be limited to US$500,000. However, when the aggregate disbursements under the Loan havereached the level of US$4,000,000, the initial allocation may be increased up to the Authorized Allocationof US$1,000,000 by submitting the relevant Application for withdrawal. Applications for replenishmentof the Special Account would be submitted monthly or when one-third of the amount has been withdrawn,whichever occurs earlier. Documentation requirements for replenishment would follow the standard Bankprocedure, as described in the Disbursement Handbook (Chapter 6). Monthly bank statements of theSpecial Account which have been reconciled by the Borrower would accompany all replenishmentrequests.

3.25 The Project is expected to disburse over four years (Table 3.5). This disbursement doesnot follow a standard disbursement profile because Project funds are primarily expended on importedgoods and equipment, most of which would be procured early in the project period. Similarly, technicalassistance is intended mostly for project preparation and policy studies, necessary to prepare the secondand third projects. The technical assistance would therefore be expended mostly within the first twelvemonths of the Project. Only a small portion of the technical assistance to the agro-processors and thePMC assistance is expected to continue to be disbursed in the latter years. The estimated date for projectcompletion is June 2001.

Table 3.5: Estimated Disbursements(US$ millions)

Bank Fiscal Year: 1997 1998 1999 2000 TOTAL %

GOM 1.45 1.91 1.11 0.36 4.83 26%IBRD 3.00 3.95 2.30 0.75 10.00 54%Institutes 0.50 0.60 1.00 1.56 3.66 20%

Total 4.95 6.46 4.41 2.67 18.49 100%

IBRD 3.00 3.95 2.30 0.75Cumulative 3.00 6.95 9.25 10.00

as % 30% 70% 93% 100%


G. Accounts and Audit

3.26 Agreement was reached at negotiations that the Borrower's records and accounts of theProject, including the Special Account, for each fiscal year would be audited by independent auditorsacceptable to the Bank and furnished to the Bank within six months after the end of each year(para 6.1(f)). The audit reports would contain separate opinions on: (a) compliance by implementingagencies with relevant covenants of the Loan Agreement with the Bank; (b) the Statements ofExpenditures; and (c) the Special Account. The Bank-required audits would not cover either IFAD'sproposed loan, or possible donor funded activities, even if supervised by the Bank.

H. Environmental Impact

3.27 No significant negative environmental impacts are anticipated from this Project. TheProject was classified as category "B" because the Integrated Pest Management (IPM) component of theProject is potentially environmental sensitive and will require environmental review. The proposed IPMcomponent would improve and expand the use of biological means to control pests in agriculture. Theassistance to improve pest forecasting methods and to the planned training center for sustainableagricultural practices would lead to a reduction of the use of pesticides in Moldova. GOM would conductan ongoing environmental assessment of the impact of the IPM and pest forecasting programs under theproject, with reporting to the Bank and GOM's environmental agencies every six months, within theframework of normal periodic reporting on project implementation to be provided by the PMC to theBank.

1. Gender and Family Issues

3.28 The transition period has negatively affected a large part of the population. Accordingto a recent case study on Moldova,'" on average, female farm laborers receive lower wages than men.Women have equal access to land shares and even outnumber men as land share holders. Men, however,outnumber women as property share holders (e.g. they own more farm assets). This might be one of thereasons why women make up only a small percentage of private farm owners/operators and are morelikely to remain on the cooperative farms. Recently, access to social services on cooperative farms hasdeclined, which negatively affects women with families more than men.

3.29 The need for a specific loan component to address gender issues was evaluated duringproject preparation. It was not seen as necessary under this Project because the proposed investmentswould indirectly benefit men and women to the same extent. More than in other countries, men andwomen share an equal role in the rural sector in Moldova, including management responsibilities in largefarm organizations and agro-processing plants, as well as political leadership for rural municipalities.

10 Holt, Sharon: Gender and Property Rights: Women and Agrarian Reform in Russia and Moldova, (World Bank WorkingPaper, 1995).

32 Chapter I

J. Participation

3.30 The preparation of this Project involved stakeholders from beyond the staff of the researchinstitutes and other laboratories benefiting from the technology transfer. The implementation of the IPMcomponent, and the assistance to the farmers to access credit (from IFAD) would utilize local NGOs.Assessment of the impact and progress of land reform was undertaken utilizing in-depth social assessmentsurveys of farmers and rural administrators."

3.31 The preparation of the planned two future projects will be undertaken by GOM in aconsultative manner with a range of stakeholders (Chapter 4). Donor funded technical assistance for theseactivities will include the skills development for participatory planning.

K. Rural Poverty

3.32 This first Agriculture Project does not include components directly targeted at the poor.Therefore, it has not been classified as a program of targeted intervention even though several componentsof the Project would in the medium term benefit the rural poor. It supports the restructuring process ofagriculture by assisting the development of an integrated pest management strategy, and improving wine,fruit and horticulture production. Even though this Project concentrates mainly on research, pilotproduction technologies, and strengthening institutions in agriculture, it will help to reduce poverty in thelong run. Furthermore, the three planned agricultural projects should be seen as a consistent progranaimed at promoting growth in the rural economy through the development of agriculture: this wouldlargely benefit the rural poor through the generation of opportunities for higher producer incomes, andrural entrepreneurial opportunities.

3.33 The next two agricultural projects in the agricultural investment program could includefor example: support for land reform and farm restructuring; support for, and strengthening of ruralfinancial services; the development of small and medium scale rural entrepreneurship; the expansion andupgrading of agro-processing and improvement of agro-export marketing services; rural water supply andirrigation. All these components would benefit small farmers (most of whom at present are near or belowthe poverty line). The proposed IFAD credit project would be specifically targeted to provide directaccess for private farmers and farmers working on their household plots to small-scale credit. Thesefarners currently have no access to any credit resources to purchase farm inputs, small machinery orlivestock through the original channels exclusively geared to financing the large collective farms. Theproposed irrigation and rural water supply project would also promote income generation in drought pronerural areas, and this irrigation system is expected to benefit mostly smaller scale intensive family farming(those presently with high poverty risk).

Through Farmers' Eyes: Study on Land Privatization in Moldova, Badina, 0. and S. Raddulescu; M. Cernea, ed.(forthcoming World Bank Staff Working paper)

TV. PROJECT IMPLEMENTATION

A. Introduction

4.1 Sector policy development and investment planning, within the structure of theGovernment is handled at the level of the Deputy Prime Minister responsible for that sector. This ensuresthe necessary inter-ministerial coordination, consensus establishment across the government, and thestrategic dimension provided by the Cabinet of Ministers. GOM has therefore established a ProjectPlanning Committee (PPC -- para. 4.13) to manage the overall agriculture investment program to befunded by the proposed series of Bank loans. The PPC is under the Chairmanship of the Deputy PrimeMinister in charge of the agriculture sector.

4.2 The project's investment implementation has been designed to fit within the regularadministrative structure of the Government and its related institutions. A centralized project unit (theProject Management Committee -- PMC) has been established in MAF to provide administrative services,overall financial controls over loan proceeds, and for reporting to the Bank. The authority for theimplementation of project investments would be vested with a Vice Minister of Agriculture, with theDirector of the Agricultural Research Department (ARD) in MAF as Project Manager, working throughthe PMC to the implementing line agencies (para. 4.4).

B. Summary of Implementing Agencies

4.3 Table 4.1 presents a summary of major implementation responsibility, by operating units,for each component:

Table 4.1: Project Implementation Responsibility Summary

Component Implementation Responsibility

Agro-technology Development and TransferIntegrated Pest Management SelecrsiaViticulture Improvement National Institute for Viticulture and OenologyHorticulture Improvement Codru, PorumbeniLivestock Tevit

Institutional StrengtheningAgriculture Knowledge System Study Project Planning CommitteeAgro-industry TA Project Management CommitteeGrains Industry Quality Control Ministry of Agriculture and Food's Grains

Department

Project Preparation and Policy Development Project Planning Committee

Project Management Project Management Committee

34 Chapter IV

C. Project Implementation Details

Project Management

4.4 The Proiect Management Committee (PMC):' The project and its individual componentswould be carried out under the overall coordination and supervision of MAF. MAF's AgriculturalResearch Department (ARD) has been designated ex-officio Project Manager, and would be responsibleon behalf of GOM for implementing the investment components of the Project. The Project Managerwould be the principal day-to-day link between GOM and the Bank's project supervision. A ProjectManagement Committee (PMC) has been established under the chairmanship of a Vice Minister ofAgriculture, and with members: the Project Director, the heads of the Research Institutes (NIVO, Codru,Porumbeni, Tevit and Selectsia) and the President of Apele Moldova. Prior to Negotiations, the Borrowerappointed the members of PMC and the Director of the ARD as Project Manager.

4.5 The Project Manager would be assisted by: an agricultural economist to introduce andimplement project monitoring and evaluation (M&E) system and to provide the focus for any policy studycoordination requested by the Project Preparation Committee (PPC, para. 4.13); an accountant, aprocurement assistant; an administrative assistant, and a bilingual correspondence secretary. It is plannedthat the PMC would also be responsible for the implementation of the planned second and third Bankprojects in the agriculture sector. For procurement and disbursements, advisory services would becontracted to international consultants to provide a Procurement Advisor to the Project. The appointmentof the principle PMC staff 2 and the Procurement Advisor, with qualifications and terms of referenceagreed with the Bank would be a condition of effectiveness (para. 6.2(a)).

4.6 The PMC would also receive international technical assistance to set up the administrativeand accounting requirements within the MAF and its beneficiary agencies, to design the Project'sMonitoring & Evaluation (M&E), and to train the PMC and MAF staff in M&E. Through bilateralassistance facilitated by the Bank, technical assistance will be provided to design and train staff inparticipatory and consultative project preparation practices (paras 4.14 and 4.15).

Agro-technology Development and Transfer Component

4.7 The major items to be financed under the project -- the import of equipment for theresearch institutes -- support the ongoing work programs of the beneficiary research institutes (NIVO,Codru, Porumbeni, Tevit and Selectsia), all of which are legal sub-entities under MAF. Therefore, theexecution of these sub-components will be managed entirely by these Institutes in accordance with theirestablished research programs and coordinated with the Agriculture Research Department (ARD). ThePMC would provide the Institutes with procurement and disbursement services, and the PMC staff wouldcoordinate the Project's reporting requirements, and establish the economic impact M&E programs witheach Institute. This will be facilitated by the Institutes' membership on the PMC (para. 4.4). Theinstallation and operation of the pilot drip irrigation components in both NIVO and Codru, and on-farm,would be coordinated with, and, for irrigation engineering aspects, supervised by, Apele Moldova.

see TORs -- Annex 2.

2 the Economist/Monitoring and Evaluation specialist, the procurement assistant, and the accountant.

Project Implementation 35

4.8 For the Integrated Pest Management sub-components, the PMC would: (i) coordinate,through Selectsia, the project's support for field demonstration and training activities of the GOM'secologically sustainable farming program ("Moldagroeco"); and (ii) coordinate the laboratory and otherequipment supply for the benefiting laboratories in MAF and the Ministry of Health.

Institutional Strengthening Component

4.9 The Agricultural Knowledge System Study: GOM, through the PPC under the DeputyPrime Minister of Agriculture, would appoint a commission to examine the future strategy for theAgriculture Knowledge System, including travel to similar systems in transition, and the development oftheir strategy recommendations. At Negotiations, the appointment of this study team, and the time frame

for this study was agreed (para. 6.1(a)).

4.10 Agro-industries Management and Staff Training: this training program would beadministered by the PMC. At Negotiations, a draft of the selection criteria for candidates was presentedto the Bank by the Borrower (para 6.1 (b)).

4.11 Equipment for the Grains Laboratory would be procured by the PMC on the basis of thespecifications provided by MAF's Grains Department, and with prior approval by the Bank. Training inthe use of the equipment would be included in the equipment supply contracts, but training for themanagement and administration of laboratory testing for regulatory standards enforcement would befunded separately by the project.

Project Preparation and Policy Development Component

4.12 Following the dialogue between GOM and the Bank, a Project Preparation Committee(PPC) has been established to manage GOM's design input and decisions on the content of future Bank-funded projects for the sector. The PPC is headed by the Deputy Prime Minister responsible for theagriculture sector (para. 4.1). The PPC will be active in developing sector policy, determining projectinvestment requirements and recommending priorities to the Cabinet of Ministers for the agriculture sector.The PPC includes the Project Director, senior representatives of the Ministries of Agriculture, as well asthe Ministries of Finance and Economy, and the National Bank of Moldova. The Director General ofApele Moldova would be included for deliberations related to the proposed third project for the irrigationand rural water supply investment.

4.13 Project Preparation Teams. Detailed component investment plans for the next projectswould be prepared during the first 18 months of Project implementation. Each of these proposedcomponents has an interest group to be served. The responsible technical groups within the relevantministries, as well as beneficiaries' representatives, will be included in the team supervising and guidingthe technical preparation effort. The participants in these supervisory teams, and other participants, willbe determined at the time each preparation topic is selected by the PPC. The technical assistance to beprovided under this project for these activities will include the skills development for participatoryplanning for these teams.

4.14 The Participatory Process. Both for ongoing project implementation and for the planningof the Agriculture Investment Program, the MAF, through the PPC, will initiate a consultative andparticipatory process of project planning. The objective is to provide the PPC with a range of inputs,

36 Chapter IV

polling as wide a range of constituent's opinions as possible, and utilizing this consultative process tobuild an understanding and ownership for the various progrns at field level. This group of stakeholderswould consist of representatives of the various Producers', Processors' and Agricultural Traders'organizations, the Bankers' organization, agricultural academic and research organizations, rural and socialresearch organizations, and Parliamentarians active on agricultural and rural committees of Parliament.Technical assistance, to be provided under bilateral assistance in parallel to this project, and facilitated bythe Bank's own staff, would be provided to assist the PPC to establish the participatory and consultativenorms for the effective use of such consultative groups.

D. Implementation Schedule

4.15 The time-based implementation schedules for each of the Project components are providedin Annex 1. Project critical activities are "front-loaded" in the first year with: (a) imports of majorequipment packages for research; and (b) technical assistance for project preparation and institutionalstrengthening.

E. Reporting and Evaluation

4.16 The implementing line agencies responsible for various aspects of the Project wouldprepare quarterly reports covering progress in the physical implementation of the Project, the use ofProject funds and, where appropriate, the Project's impact. The format of these reports would be agreedwith the Bank's supervision missions. The reports would be consolidated by the PMC into quarterlyprogress reports to be submitted through the Ministry of Finance to the Bank (and relevant co-financiers)within two months of the end of each reporting period. These progress reports would also include animplementation plan and work program for the six months following the reporting period. The PMC'sfourth-quarter report would serve as the annual PMC progress report summarizing the achievement of oneyear.

4.17 Assurances were obtained at Negotiations that the Borrower would monitor and evaluate(M&E) the Project on an ongoing basis using performance indicators satisfactory to the Bank/, and thatthis M&E function would continue until Project disbursement completion; and that GOM would preparea mid-term review of the Project's performance by April 1, 1998 analyzing, among others, the results ofthe M&E up to end-December 1997, and would review this report and GOM's plan for futureimplementation taking into account the conclusions of the M&E analysis, with the Bank by June 30, 1998(para. 6.1(g)). This report would also include proposals for any necessary revisions to the ProjectImplementation Plans.

4.18 Upon completion of the Project, the Ministry of Finance, with the collaboration of thePMC, would prepare an Implementation Completion Report (ICR) with a scope satisfactory to the Bank,to be submitted to the Bank and co-financiers within six months after Project completion.

Chapter 5: Project Objectives and Development Indicators.

Project Implementation 37

F. Project Supervision

4.19 While there is, as yet, no experience with implementing investment projects in Moldova,there would not be more than the usual intensity for Bank supervision (about 18 staff weeks annually).Under the proposed program of loans, supervision, preparation and appraisal for the continuing programwould be effectively blended together. The supervision missions would use the Project Objectives andDevelopment Indicators (Table 5.3) to assess the attainment of project and development objectives. It isrecommended that Bank supervision include:

a) a Project-launch mission to establish, with the PMC, the operational, accounting and reportingprocedures for the Special Account;

b) supervision of the PPF, including Bank staff facilitation of the donor-funded participation andsocial assessment training by consultants;

c) semi-annual supervision missions, to review the status of Project implementation and assist withany issues that might arise. The first supervision mission would take place within three monthsof effectiveness;

d) an implementation review to be carried out within 12 months after loan effectiveness to determineany revisions that might be needed in the implementation plans; this implementation review wouldbe conducted in conjunction with a supervision mission;

e) desk reviews of the periodic environmental reviews of the IPM component;

f) a mid-term review, not later than end-June 1998, to be carried out in conjunction with asupervision mission, based on GOM's own mid-term review prepared by April 1998 reviewinginter alia M&E peTformance indicators as of end-December 1997; and

g) a completion review of implementation to be carried out within six months of the receipt of theICR from the Ministry of Finance.

V. BENEFITS AND RISKS

A. Benefits and Justification

5.1 The major benefits of the Project are:

(a) Economic:* increased efficiency of agricultural production through the application of

agricultural research results;* increased export earnings by enhanced quality of the major export products;* improved performance of agro-processing enterprises' management cadre; and* reduced negative environmental impact from pest management activities

(b) Institutional:* strengthened technology transfer between research and agricultural producers;* maintained and expanded human resources, intellectual property and capacity in

the research system;* plans for future rationalization of the agricultural research system;* plans for a national extension service; and* improved institutional capacity for sector policy determination, and consultation

with stakeholders.

5.2 The quantifiable benefits would become evident by: (i) increasing the efficiency ofagricultural production at the farm level; (ii) improving the quality, quantity and value of agriculturalproduct exports; and (iii) reducing the negative impacts of agricultural production on the environment (e.g.water conservation, improved crop protection and other on-farm environment practices).

5.3 Given the nature of research investments, calculating specific ERR's would be misleading,as their actual achievement demands further investments for primary production and product processing(para 5.10). The factors impeding a quantification of the potential benefits of the Project's R&Dinvestments are: the lack of reliable statistical data on agriculture; the uncertainty of the evolving farmingstructure; and the long-term nature of the benefits from investments in research. Official agriculturalstatistics are in disarray and it is difficult to obtain reliable information even on such basic informationas the quantity and value of wine exports. In addition, the existing farm structure, still consisting of largeun-restructured cooperative farms, is likely to change in the near future. At this point in time, it isuncertain what kind of private and cooperative farms will evolve in the future, making it difficult to selecttypical farm models representative of future farm structures with which to estimate the economic impactof new technologies at the farm level.

5.4 The economic justification of this Project is therefore based on experience with similarprojects in other regions, on a qualitative assessment of the expected outcome, and on a "reverse" analysis(the "feasibility analysis" -- paras 5.10 et seq.) to determine the level of benefits to be achieved thatwould justify the proposed level of incremental R&D investments.

5.5 Country and Agricultural Assistance Strategy. Horticulture and wine products generatearound 25% of all export earnings, and are expected to increase their share over the next decade. TheAgricultural Sector Review (1994) and the Moldova Country Report on Agricultural Trade and TradePolicies (1995) state that these two sectors have high comparative advantage and are key to theagricultural export-led growth strategy. Targeting project investments to key export crops fits with

Benefits and Risks 39

Moldova's demonstrated comparative advantage' and supports the country assistance strategy of promotingexport-lead growth from agriculture. The expected benefits from this project (i.e. improved productquality and research institutional strengthening) also directly contribute to export growth and thus toachieving the overall country and sector strategy objectives.

5.6 Public Sector. Agricultural research has been a public sector activity in the past and thepriority research to be funded in the future would remain a public good. Agricultural research in Moldovais going through a difficult transition period as the research institutions adapt to serving a privateagricultural sector. Also in the future, the majority of the results expected from publicly fundedagricultural research can be described as a collective good because they are available to all farmers andagro-enterprises, are generally not sold, and no interested party could be excluded from using the researchresults. Consequently, individual beneficiaries would be reluctant to contribute to the costs of suchresearch. In addition, the benefits of the expected research results are expected to provide profitableretums in the medium future. This reduces the incentives for agricultural farms and processing companiesin transition to invest in research because they are focussing on immediate profits. GOM would thereforecontinue to finance, with budget resources, key research institutions for applied research with a directimpact on agricultural production and general export efficiency.

5.7 Fiscal Impact and Cost Recovery. A part of the output of the research institutes -- vine,fruit products, and improved planting material (vinestocks, rootstocks, or fruit tree seedlings) -- would bedirectly sold by the institutes and the revenues would be used to recover capital and operating expensesof the nurseries. It is estimated (Table 5.1) that NIVO and Codru would be able to fully recover the costsfor the plantation and production of the base planting material for vineyards for fruit tree nurseriesthrough sales of improved planting material to farmers. Similarly, the capital costs of the wine and fruitprocessing experimental plants would be partially recovered through sale of product. In total, between30% and 40% of the project's investment costs are estimated to be recovered through sales by theinstitutes. The other investment sub-components do not allow for cost recovery because of the publicgood nature of these investments. The Project, through the agricultural knowledge system study, willdirectly contribute to GOM's analysis of future cost sharing for agriculture research with the private sector.

Table 5.1: Expected Cost Recovery

Component Investment Cost Expected Cost Recovery- Subcomponent (US$ mil.) (%)

NIVO:- Wine processing plant $2.0 50%- Rehabilitation of nurseries $3.0 100%

Codru- Experimental Production line $1.0 25%- Orchards/Nursery development $0.9 100%

see also footnote 1, Chapter 2

40 Chapter V

5.8 The with and without Project Comparison. Without the Project, the research instituteswould continue modest research programs focussed mainly on improving available techniques and cultivarsdeveloped in the FSU. Even though the research programs have been moderately successful in the past,importing foreign vine and fruit tree varieties, and introducing improved production, harvesting andprocessing techniques, would have a much higher pay-off than continuing to improve existing varietiesand techniques. The Project would provide these institutes with the necessary financial resources to:import successful European vine and fruit tree cultivars, and test and distribute them to farmers in thecountry; upgrade laboratory equipment; analyze westem production technologies; commence a scientificexchange program with foreign research institutes; and improve the training program to farmers. TheProject would enable the country's exports to meet the high quality standards of these products demandedby international markets. The project's contribution to better research facilities would have an additionalimportant benefit: the increased capability to retain the intellectual capital in the institutes -- reducing the"brain drain."

(a) Project ImRact on Farmers' Incomes. Ultimately, the benefits of the project-fundedresearch should be reflected in improved farmers' incomes. These benefits will not berealized without additional on-farm investments, the public efforts to transfer these newtechnologies to the farm (i.e research outreach and agricultural extension), and adequateproduction financing. A projection of the changes in yield and costs of production hasbeen made.2 The average farm size, if all eligible farmers were to receive theirproportionate share of the arable land in Moldova, would be 1.5 ha. A small-farm modelon this basis, with the average crop-field distributions between annual crops, perennialcrops, and pastures, shows increases in net income (Table 5.2), without assuming anyincreases in the farm-gate value of product due to improved quality. These assumptionsyield an annual average real growth in family income of 11% -- significantly higher thanaverage GDP per capita growth expectations. However, family farm income even afterincreasing production, would remain significantly below the average GDP per capita ofUS $870 in 1994.

Table 5.2: Projected Farm Income(1.5 ha family farm model)

(USS) without with Project % Increase % annualProject growth

Net Income* $367 $586 60% 11%

Income/la* $245 $391 60% 11%wixhout costing family labor

2 Annex 4


5.9 Benefits and Development Indicators. A large number of studies have consistently foundexceptionally high returns to publicly funded agricultural research. Despite recent increases in developingcountry public expenditures on agricultural research, studies suggest that rates of return for agriculturalresearch and smallholder extension continue to be well above those for other investments3. The qualitativebenefits of the Project investments in Viticulture, Horticulture, and Integrated Pest Management, aresummarized in Table 5.3 This table shows the link between the planned investments, the immediateobjective of the investment, and the expected benefits, and links it to monitoring indicators. Themonitoring indicators can be used to determine the long-term impact of the Project investment onagricultural output in key areas. Further, this table gives a qualitative estimation of the economic benefitsof the project.

(a) Viticulture Improvement. The major benefits of the viticulture improvement componentcan be grouped into yield enhancement, quality improvements, and reduction of losses, whichwould increase profits from wine production. Reductions in crop losses and in the cost of pestmanagement will be facilitated through use of pest forecasting models. It is estimated that byreplanting existing vineyards with commonly used European vine cultivars (e.g. Chardonnay orMerlot), yield enhancements (about I tlha) and quality improvements could be achieved whichwould, in turn, lead to higher export added values and volumes. The Project would supportapplied research and the establishment of a trial nursery to test internationally used vine cultivarsin order to adapt foreign grape varieties and vine clones to the regional soils and climate, andconsumer preferences in export markets. It thereby supports the development of a Moldovan"appelation controlee" system aimed at improving the quality of Moldovan wine and developinga distinctive taste -- important for international marketing.

(b) Horticulture Improvement. The major benefits of the horticulture improvementinvestments are yield enhancement, quality improvements, and reduction of production coststhrough improved water and energy saving technologies. Expected benefits of the demonstrationtechnologies in drip irrigation include yield increases, quality improvements, and considerablewater savings as compared to the presently used sprinkler irrigation. For example, yields ofirrigated apple orchards are estimated to be more than 50% higher than on non-irrigated orchards,and yields of tomatoes on drip irrigated fields are estimated to be at least 25% higher than underirrigation with sprinklers. Improved crop protection through the introduction of hand-carried(ultra-light volume) sprayers is estimated to reduce both pesticide application levels, and croplosses by up to 35% on private orchards. The use of plasticulture could increase the growingseason of fruits by one month in spring and about one month in fall, adding to the off-seasonsupply, increasing farmers incomes and lowering consumer food costs in this period.

(c) Integrated Pest Management. There are three major benefits to introducing integrated pestmanagement technologies: (i) improved product quality (horticulture and viticulture productquality is especially sensitive to correct pest management); (ii) reduced production costs; and (iii)the reduction of the amount of nitrates and pesticides in agricultural run-off, and the reduction inpesticide residues in the food.

3 compare Evenson and Westp]al, 1995; Handbook of Development Economics Vol III; and Birkhaeuser, Evenson, adFeder, 1991; EDCC 39 (1991), 607-650.

Table 5.3: Project Objectives, Benefits, and Development Indicators*

Component Immediate Objectives Beneflts Indicators

VWCULTURE IMPROVEMENT

* applied research * adaptation of vine cultivars to * improved yield and quality of * number of new cultivars registered in Moldova each* wine nurseries local conditions wine production year* expeimental wine * development of rootstock * improved quality and value of * area of vineyards replanted annually with improvedbottling plant multiplication capacity wine products cultivars* demonstration drip * improvements in wine quality * reduced production losses due to * export value of quality wineirrigation and processing pests * yield and production of wine* pest forecast model * reduction in pest infestations * retain high quality research staff * sample farm budget-based costs of production and

at the institute revenues* enterprise accounts from vine nurseries* farmgate and ex-factory prices

HORTICULTURE

* applied research * adaptation of fruit trees to local * improved yield and quality of * yield and production of fruits* demonstration drip & conditions horticulture production * export value of fruitssprinkler irrigation * testing of new production * increased water savings * number of new fruit trees registered* seed potato technologies and their adaptation * increased capacity for out-of- * area planted with improved fruit trees.mechanization to the local conditions season production * area of adoption of drip irrigation, and plasticulture.* plasticulture * retain high quality research staff * sample farm budget-based costs of production and

at the institute revenues* areas under plasticulture and volumes of out-of-season production* farmgate, domestic and ex-factory prices

INTEGRATED PEST MANAGEMENT

* on-farm demonstration * development and promotion of * reduced production losses from * improvement of water quality in pilot area.of [PM biological pest protection methods pests * numbers of farms using IPM methods.* pest forecasting * reduction of pests * improved product quality * sample farm budget-based costs of production and* residues testing * strengthened food quality * reduced crop production costs revenues

regulatory capacity * reduced water pollution by * quality testing results from food quality andpesticides and nitrates pesticide residues laboratories* reduced levels of pesticideresidues in food

* Component Objectives, Benfits ned Indicators do not necessaril match line-by-line


5.10 Economic Analysis.4 The quantifiable benefits directly attributable to investments inresearch (i.e. improved product quality and decreased production and processing costs) could not beisolated from benefits attributable to additional necessary investments benefits on- and off-farm. Therefore,a "feasibility" approach for research and development (R&D) investment was undertaken to answer: Toachieve an ERR of 10%, is the level of incremental exports' added value, assignable as direct benefitsfrom the incremental R&D expenditures, a reasonable assumption and a feasible attainment?

5.11 Incremental exports for wine and horticulture were projected to reflect both the impactof the Project's R&D investments as well as the overall impact of GOM's agricultural exports-leddevelopment strategy.5 The net present value (NPV -- at 10% discount rate) for the added value of theseexports was compared with the NPV of the project's research and development (R&D) investments (Table5.4). These results are interpreted as follows: for the project's R&D investmnents to earn the equivalentERR of 10%, the NPV of the incremental R&D investment should be equivalent to not more than 8.6%of the added value of the projected increased exports over the next 15 years. The wine and horticulturecomponents evaluated separately require 8.9% and 6.4% of future export added value earningsrespectively.

Table 5.4: "Feasibility" Analysis of R&D Expenditures

NP Vat 10% discount rate

Added Value of(US$ million) Project R&D Incremental

Expenditures* Exports %

(199 7-2010)(1) (2) (1) (2)

Wine 10.0 112.0 8.9

Fruit & Vegetables 4.9 75.7 6.4Integrated Pest Management 1.3 - n.a.

Total 16.2 187.8 8.6Table may not Pad due to rounding

including incremental capital investments and operating costs

5.12 Table 5.5 shows the range of equivalent levels of directly attributable benefits fromincremental R&D to justify the R&D expenditures of a range of desired ERR's. The Project wouldachieve an ERR of 25% if the added value of the incremental export revenues from wines and horticultureproducts that can be attributed to the Project activities would increase to 15%. Both as a proportion ofexport revenues, and in absolute value terms, this achievability is not an unreasonable assumption, giventhe projected growth rates for wine and horticulture exports.

4 Details of assumptions and the 15-year projections are provided in Annex 4

5 Amex 4

44 Chapter V

Table 5.5: Sensitivity Test of "Feasibility" Analysis

R&D expenditures as % of incremental export addedvalue to achieve ERR:

Economic Rate of Return: 10% 12% 15% 20% 25%

Wine R&D 8.9% 9.6% 10.8% 12.8% 15.1%Fruit & Vegetables R&D 6.4% 7.0% 7.0% 9.4% 11.2%Total R&D 8.6% 9.3% 10.4% 12.5% 14.8%

5.13 The Project is likely to produce benefits even if the planned land reform andsector reforms are slow to emerge (pam 5.15). The estimated level of benefits are achievablewithin the context of the projected necessary growth in agricultural exports required to underpinthe general economic recovery scenario. Even if the new technologies were transferred to therelatively less efficiency collective farms, given the relatively low levels of added value fromincremental exports required to provide an adequate return, these export projections areachievable.

B. Project Sustainability and Risk

5.14 Project support is directed to the viticulture and horticulture research institutes tasked withimproving the major agricultural export products of the country; two of the key institutes out of the about18 existing research institutes involved in agricultural research. GOM has already demonstrated itscommitment to continue to fund the applied research program in these institutes by providing aproportionately higher level of funding than to other research institutes and has committed itself tocontinuing this level of support. GOM has ensured the continuation of funding for the small EPMcomponent.

5.15 Identified risks, and the mitigating factors adopted under this project, or within the contextof the Bank's country assistance program, are shown in Table 5.5.


Table 5.6: Project Risks & Mitigations

Risk Proposed Mitigation

Slow progress with sector reforms in land As the Project focusses mainly on public goods, itsreform, post-privatization restructuring of impact is not tied to speed or depth of land reform.agro-industries, Implementation is neutral to land reform policy.

However, to achieve sectoral growth and maximizeand the usefulness of the public goods being financed,

land and other sector reforms will be necessary.slow emergence of rural and agricultural These reforms and the creation of an enablingservices entrepreneurship, and especially, in environment to spur adjustment towardsinternational trade in agricultural products. entrepreneurship, export competitiveness and

growth, are supported by ongoing and planned Bankprojects,4 the IMF and other donor's programs.

Climatic risk to agricultural production Applied research will be directed at selectingthrough frequent droughts in the southern, and drought and frost relevant varieties. In addition,early frost in the northern, parts of the demonstrations of new irrigation techniques arecountry. aimed at reducing drought risk.

Inadequate budget resources made available Agreements, confirmed at Negotiations, ensurefrom GOM budget for: (i) the research adequate funding commitments and institutionalinstitutions; and (ii) Project management. arrangements for the timely transfers of GOM

budget funds to the Project. Assistance to increasethe Research institutions' self-financing through saleof research products (improved varieties, etc.) willbe provided through the Project.

Slow adoption of new technologies and The Project strengthens extension activitiesadapted varieties from research institutions due organized directly through research institutes andto the slow pace of sector reforms. plans for the improved general extension service.

Market pressures from the open trade regime beingsupported by ongoing and planned Bank operationsare expected to provide sufficient incentives toproducers to seek cost efficient production.

4 SALs I and 11, Pre-Export Guarantee Facility, Private Sector Development Loan, Land Cadastre Project, ExportPromotion Project

VI. AGREEMENTS AND RECOMMENDATIONS

A. Agreements Reached During Negotiations

6.1 At Negotiations, the following agreements were reached:

a) that an Agriculture Knowledge System Study would be launched by the Borrower and wouldcommence before October 1996, under Terms of Reference agreed with the Bank, and withpossible external advisors selected in accordance with the Bank's Consultants Guidelines, tobe competed within twelve months, and that within three months after completion GOMwould present its conclusions for discussion with the Bank (paras. 3.7(a) and 4.9);

b) on draft selection criteria for agro-enterprise managers and staff to be trained under the project(paras. 3.7(b) and 4.10);

c) that all procurement would be carried out in accordance with the Bank's Guidelines forProcurement wnder IBRD Loans and IDA Credits (January, 1995), and Guidelines for Use ofConsultants by World Bank Borrowers and by the World Bank as Executing Agency (August,1981) (para. 3.17);

d) that every quarter the PMC would prepare, and submit to the Bank, quarterly (or as otherwisedeterTnined) progress reports on the procurement of goods and services under the Project(para. 3.21);

e) on the terms and conditions for the establishment and operation of the Special Account (para.3.24);

f) that the Borrower's records and accounts of the Project, including the Special Account, foreach fiscal year, would be audited by independent auditors acceptable to the Bank andfurnished to the Bank within six months after the end of each year. (para. 3.26); and

g) that the Borrower would monitor and evaluate (M&E) the Project on an ongoing basis usingperformance indicators satisfactory to the Bank,' and that this M&E function would continueuntil Project disbursement completion; and that GOM would prepare a mid-term review of theProject's performnance by April 1, 1998 analyzing, among others, the results of the M&E up toend-December 1997, and would review this report and GOM's plan for future implementationtaking into account the conclusions of the M&E analysis, with the Bank, by June 30, 1998(para. 4.17).

Chapter 5: Project Objectives and Development Indicators.

Agreements and Recommendations 47

B. Condition of Effectiveness

6.2 The following would be a condition of effectiveness:

a) the Borrower's appointment of the principle staff 2 of the PMC, and the Procurement Advisor,with qualifications and terms of reference agreed with the Bank (para. 4.5).

C. Condition of Disbursement

6.3 The following would be a condition of disbursement:

a) that NIVO and Codru would, respectively, have entered into cost recovery agreements with eachof the wine and horticulture plant nurseries, such nurseries being established under the project,and that these agreements are satisfactory to the Bank. (para. 3.15)

D. Recommendation

6.4 With the above agreements and conditions, the proposed Project would be suitable for aUS$10 million, single currency IBRD loan (US dollar denominated), payable with standard amortizationterms, grace period, and interest rate for single currency loans. The Borrower would be the Republic ofMoldova.

2 the Economist/Monitoring and Evaluation specialist, the procurement assistant, and the accountant.

MOLDOVAFIRST AGRICULTURE PROJECT

ANNEXES - VOLUME I

ANNEXES 1 - 5

April 8, 1996

Annex 1. Implementation Schedules

Annex 2. Terms of Reference for Project Management

Annex 3. Envfronmental Data Sheet

Annex 4. Economic Analysis

Annex 5. Summary of Major Procurement Packages


ANNEX 1

IMPLEMENTATION SCHEDULES

* Viticulture

* Horticulture

* Integrated Pest Management

* Institutional Strengthening

* Policy and Project Preparation

* Project Management

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Annex IHorticulturePage 1 of I

Implementatfon ScheduleHorticulture Component

Activity 1996 1997 1998 1_901 Q2 |3 Q4 Q2 Q3 04 Q1 Q2 Q3 Q4 01 Q2 03 04

Demonstration of Modem -- ItProduction Technology

Drip Irrigation DemonstradtonDeveloping Procurement Packages -- ___Bid Evaluation and Award __ ........... .... ..TSupply ._Site preparationInstallation .Operations

Crop Protection Equipment t__ ..i_ --- __.._.....-- ----l-- -Developing Procurement Packages_ .-.. .--Bid Evaluation and Award .Supply & Distribution --

OperationsSeed Potato Mechanization1Developing Procurement PackagesSrf frotato Mechanizafon~---- .. _J.. ...._._ ._...... ... .... ...... f._

Bid Evaluation and Award iSupply -- 1-- t -Operations .-.- ,.

Piasticuiture DemonstrationBid Evaluation and AwardSupplySite preparation-.------ - --- * -

Installation * -- -- 1 - --- * _ | __. ....... ~~~~~~.... ... .... ..... InstallationOperations

Support for Research Institute forFruit Production

Drip lrrigation - Nursery .-.-|-....--.--..--.1.--.- -- -.- - 4...........-.. I.-.. . ...

Bid Evaluation and Award _SUPp,AY ...... . L. ...... .... .. -; Site preparation ..... ..... .... ..... .........-t-- --------- ------ 4---

Installation -__-. 1l.... -!-|1--Operations

Virology & Genetics Training .... .. . . .. ..

Candidate Selection .. ...........Training ArrangementsStudy Tours

Equipment and Materills Supply ......_...... .. ... ..-..., .- - - 4Bid Evaluation and Award .....| .. ....... ....... ....Supply

Encyclopedia SadovodstvaBid Evaluation and AwardPrintng and DistributionAdvertising and Sales

Annex IIPM

Page I of I

Implementation ScheduleIntegrated Pest Management Component

Activity 1996 1997 1998 1999Q1 __ _Q4_ Q1 0_2_ _0_4_Ql_Q2I . 3 Q4lI Q21( Q 4

Moldagro * __ T -t .. t t .Developing Procurement Packages - .-.Bid Evalauation and Award [ -_ ,4Supply & Installation .... ..~.+.. .... i.-. ..--- 3- -E....... ...

-.----.. ~~~~~~~-.-. - a-~~~~.. .... .......-....... ..... . .

....... . ..... .......1 .......

Pesticides Residues Laboratory - . - - t - *;.

Developing Procurement Packages _ _ ._IBid Evalauation and Award ........Supply & Installation -.. ....... . ... ----................... ....... .....

------- ... .. .. ......... .... ... ...... . . ... ------ -------------------- --- ----------- ........

Pest Forecasting, Communications i Iand Scouting 4 - -. .andrScoudng ^ & _ _ _ l X j_ _ -- '-t--+........-----r--i'--.I.....................

Developing Procurement Packages _Bid Evalauation and Award -Supply & Installation 3 _ -_.

(*) These are onging activities: the project provides supplementary equipment and supplies

Annex 1Institutional Strengthening

Page 1 of 2

Impenmrnteon ScheduleIneftifhnal Strengthning

Activity 1996 1997 1 996 19990301 02 03 04 0 02 Q30 04 01 027 03 04 01 02 Q3 Q4

Grains R.gubutoy Laboratoy - 1 IDesign PhaseDeveloping Procurement PackagesBid Evalauation and AwardSupply & Installation - - - - - _Systems Training

WUln StrategyStuy ===Terms of Reference and Bid PackageConsultants pre-qualificationBid Package IssueBid Evaluabon and AwardCounterpart and Stakeholder Group selectionStudyGOM Consideration and Repory to Bank

Agriculure Reserch System Study = = = - -==-Termns of Reference and Bid Package _ - -_ _ - -

Consultants pre-qualificabonBid Package IssueBid Evaluation and AwardCounterpart and Stakeholder Group selecbonStudy - - - - -

GOM Consideration and Repory to Bank - - _I[Z

Natonal Extenson P_anTermns of Reference and Bid Package =Consulbnts pre-qualificationBid Package IssueBid Evaluabon and AwardCounterpart and Stakeholder Group selecbon IStudy _ ,GOM Consideration and Repory to Bank = -|

Annex IInstitutional Strengthening

Page 2 of 2

a plemeon Scheduehisfibuoena SvsngilmMhg

Ac:t 19K 1997 1998 1 990_l_Q2_ 03_ 04 01 Q2 _03 Q4 Q 0Q2 Q3 04 QI 02 Q3 04

Terms of Referene and Bid PackageConsubtnts proqualiicabion _Bid Padcage Isu= = _= = = = = _ _ _ _Bid Evaluation and AwardI ___Appointrnent CordinatDr_lCoordination and Firn Selection IAdvisor Servcesl

. = = ~- I**-) 1 1 1 1 1 1 I I I I I I

z - s X 1 1 1 1 1-] l l-l-i>4-~~~H jl I-- . ....--. -. ... -. .. .. ......

_. ... 1 i ....

. ... ............... ...... .... ..-' ...''1''''..-.-''..-

_... . .... ''

x ..... ......... .... .... ... ... ....... .... .... .... .. ........ .... .

0 it^ ̂ t | .

.... ...... ..... ... m.... ...... .... ....

.... ... .... . ... 8..... 0 Q

CY * e

.... ... ..... ....

.... ..i

1

_~ ~~~~~~~~ .*0 CL0 0~~~~~~Ia. -a.o.~D a

Annex IProect Management

Page 1 of I

Impementaon ScheduleProject Management

Activity 1996 1997 1998 1911 Q21 Q3 Q4 Q1 Q2 Q3 Q4 QIl Q2 Q3 Q4 Q1 Q21 Q3 Q4

Project Management CommitteeEstablishment IDirector appointment IStaff SelectionOperationsTraining Consultants Selection _ _ I I L.1 .. L -I .. I _ = =Staff Training =Annual Audit = - - -_ -

Other Technical Assistance

Procurement Advisory Service_ __ _ _Contract Completion Iz_Operations

PMC Equipment SupplyDeveloping Procurement PackagesNational Shopping I ISupply I I

Project Preparaton CommitteeEstablishment I

Training __Operations


ANNEX 2

TERMS OF REFERENCE

for

PROJECT MANAGEMENT

* Project Management Committee (PMC)

* PMC Staff

* Framework Contract: Procurement Advisory Services

* Project Accountant

* Economist: Monitoring and Evaluation Specialist

v Technical Assistance: Project Management (incl. Monitoring & Evaluation)


Terms of Reference for Project Management

Project Management Committee (PMC)

A. Objective

The project and its individual components would be carried out under the overall coordinationand supervision of the Ministry of Agriculture and Food (MAF). A Deputy Minister of theMAF would be designated ex-officio Project Director, and would be responsible on behalf ofthe Government of Moldova (GOM) for inplementing the project. In connection with theoverall coordination and supervision responsibilities of the MAF, a Project ManagementCommittee (PMC) would be established, consisting of the Project Director as Chairman, theheads of the Research Institutes benefiting from the project (NlVO, RIFP and NPO Seleksia),the heads of the relevant Departments of MAF, and the President of AKVAMoldova. ThePMC will meet regularly on a monthly basis to ensure that all project components and sub-components are implemented in accordance with the overall objectives of the project. Theday-to-day tasks of the PMC will be executed by fill-time Staff of the PMC (consisting of aProject Manager, an Economist:Monitoring and Evaluation Specialist, an accountant, anAdministrative Assistant, and a bilingual secretary) whose tasks are as described in Section2 below.

B. Tasks

The key tasks of the PMC would include the following:

(a) Facilitate inter-agency national and country level coordination on project relatedissues. If necessary, from time to time for a limited duration, form sub-Committees tohandle coordination and oversight, and the monitoring of the impact of specificcomponents of the project.

(b) Facilitate coordination, in the context of the project, with bilateral donors, EU(Tacis), IFAD, the World Bank and the Government, and assure that financialresources required from these sources are made available to the implementingagencies in a timely manner.

(c) Specifically, assure that budgetary resources from the Government's budget (both forinvestment and recurrent requirements) provide adequate levels of funding for thevarious project components.

(d) Regularly review project expenditures and costs to ensure that they are consistent withthe objectives of the project, and within justifiable limits.

(e) Periodically review the overall status of project implementation, and provide guidanceto resolve major issues that impede the progress of the project.

(f) Review the compliance of the project with the requirements of the Project Financiers,

ASNNEX 2Page 3 of 16

including those of the World Bank that cover procurement, accounting and audit,disbursement, and other covenants of the loan agreement.

(g) Regularly review the work of the PMC Staff, and as necessary, recommend ways forimproving its efficiency and effectiveness.

(h) Serve as a forum for cross-fertilization of innovative ideas with the aim of improvingproject delivery and targeting, and on certain issues for consulting with a broaderconstituency within the Government.

(i) Ensure that all implementing agencies and key stakeholders are informned of eachother's activities and concerns, and organize follow-up discussion to focus on mnajorissues affecting the project.

(j) Ensure that the PMC Staff, the associated Research Institutes, and departments in theMAF adequately meet the requirements of reporting to the World Bank.

C. Membership

The Project Management Committee will be chaired by the Minister of Agriculture and Food:

Chairperson: * Deputy Minister of the Ministry of Agriculture and FoodMembers: * Project Director, Director, Agriculture Research Department

* Head, National Institute for Viticulture and Oenology* Head, Research Institute for Fruit Production* Head, NPO Seleksia* Relevant Departments of MAF (Research, Viticulture,

Horticulture and Field Crops* President, AKVAUoldova

ANNEX 2Page 4 of 16

2. PMC Staff

A. Duties

Reporting to the Chairman of the PMC (the Project Director), and under the overallresponsibility of the Project Manager, the PMC performs the day-to-day tasks of the PMCand these tasks include:

(a) On behalf of the Ministry of Agriculture and Food, coordinate relations with the lineiniplementing agencies, the World Bank, IFAD, EU (Tacis) and other donors, and theMinistry of Finance (MOF).

(b) Coordinate, delegate, monitor and supervise procurement activities of the lineimplementing agencies responsible for the respective project components, and provideadministrative and operations support throughout the process as required througha contract with a Procurement Advisory Service (PAS). On procurement issues andprocesses, liaise with the Ministry of Finance, manage this contract with the PAS,facilitate and coordinate all relevant parties in a timely fashion, and ensure thatprocedural requirements and documentation are fulfilled satisfactorily. Ensure that allclearances and approvals for procurement, including those from the World Bank, aresought and obtained to avoid unnecessary delays.

(c) Monitor project implementation and expenditures, and prepare and submit loandisbursement applications to the World Bank and the Ministry of Finance inaccordance with prevailing procedures.

(d) Coordinate the preparation of quarterly reports covering progress in the physicalimplementation of the project and the use of project's funds, and submit these reportsto the Project Management Committee and the Ministry of Finance. The MOF willthen consolidate these quarterly reports into semi-annual progress reports to besubmitted to the World Bank. Every six months, these quarterly progress reports willalso include an implementation plan and work program for the next six monthsfollowing the reporting period.

(e) Facilitate World Bank supervision missions, and follow up the implementation ofrecommendations of the Bank supervision reports.

(f) Follow up all implementation aspects of the project components, taking intoconsideration various criteria and conditionalities already established in the ProjectImplementation Plans, including covenants of the loan agreement. With the lineimplementing agencies, prepare monitoring notes concerning problems and delays,and provide suggestions to remedy these problems through administrative, financial,technical, institutional or other measures.

(g) Prepare special reports, as necessary, for submission to the Project ManagementCommittee.

ANNEX 2Page 5 of 16

(h) Perform an overall project accounting and record keeping tasks for the lineimplementing agencies, and provide administrative, operations and logistical supportto these implementing agencies.

(i) Perform or commission other tasks as stipulated in the Loan Agreement (eg. annualaudits, mid-term reviews, monitoring and evaluation, and Project Completion Report),including the administration, accounting and other operational requirements, by takingthe following World Bank's guidelines into consideration: (i) Disbursement HandbookGuidelines; (ii) Procurement under IBRD Loans and IDA Credits (January 1995); (iii)Guidelines: Use of Consultants by World Bank Borrowers and by the World Bank asExecuting Agency (August 1981); and (iv) Guidelines: Financial Reporting andAuditing of Projects Financed by the World Bank (March 1982).

(j) Administer the Special Account, and ensure that reconciliations are performedregularly on a monthly basis, and replenishment applications prepared for submissionto the World Bank on a timely basis.

B. Staffing

The PMC Staff will comprise: a Project Manager, an Accountant, anEconomist:Monitoning and Evaluaion Specialist, an Adminisutrative Assistant and abilingual Secretaryfluent in Moldovan and English. The PMC Staff will work on a full-time basis. Depending on actual requirements, based on implementation experience, theconfiguration of the PMC Staff may be reviewed consequently.

The PMC would receive Technical Assistance (up to 12 person months), involving nationaland international consultants, to (i) set up the administrative and accounting systemrequirements of the project in the MAF and its beneficiary agencies, (ii) design a monitoringand evaluation system, and (iii) provide project management training.

C. Office Facilities and Requirements

The PMC Staff will be physically located in the Ministry of Agriculture and Food. The MAFwill provide adequate office space for the operational needs of the PMC Staff. The office ofthe PMC Staff will be furnished with (a) adequate office furniture including desks, chairs,filing cabinets, shelves, storage cabinets, and a set of meeting table and chairs; (b) officeequipment including 3 desktop computers and software, a network server and an internetlinkage, laser printers, a photocopier, 2 notebook computers and software, a fax machine andadequate telephones including cellular telephones; (c) a vehicle for official use; and (d)miscellaneous office supplies and equipment.

ANNEX 2Page 6 of 16

3. Framework Contract: Procurenent Advisory Services

A. Objective

The PMC Staff will oversee the overall procurement aspects of the project, and ensurecompliance of the project with all procurement requirements and conditionalities of all projectcomponents. In conjunction with this responsibility, the PMC Staff will seek professionalservices on procurement, through a contract for procurement advisory services (PAS), withthe objectives to: (a) provide comprehensive procurement advice, services and on-the-jobassistance to the implementing agencies of the various components of the project; and (b) trainnational staff, on procurement aspects covering applicable procedures, planning, scheduling,execution, management and monitoring.

B. Tasks of the PSU

Reporting to the Project Manager, the PAS wiU assume the day-to-day advisory responsibUityof all procurement related matters of the project. All procurement activities would be theresponsibility of the line implementing agencies, and supervised by the PMC, with full anddirect assistance from the PSU. The PAS will work with the PMC Staff and the relevant lineimplementing agencies, and will cover the following scope of work and responsibilities:

(a) Work with the PMC Staff, advise the implementing agencies under the Ministry ofAgriculture and Food, and liaise with the Ministry of Finance.

(b) Familiarize relevant staff of the implementing agencies with procurement requirementsof the project, including specific procurement requirements of World Bank fundedcomponents, as provided under the Bank's Guidelines for Procuremen under IBRDLoans and IDA Credits (January, 1995), and Guidelines for Use of Consultants byWorld Bank Borrowers and by the World Bank as Executing Agency (August,1981), and the use of the Bank's standard bidding documents.

(c) In accordance with the procurement requirements of project components and theirmethods of procurement, work directlv with the relevant implementing agencies andthe PMC aff to review detailed procurement plans and packages and determinerealistic schedules, taking into consideration all necessary steps.

(d) In connection with all procurement packages of the project, provide advice and directassistance in organizing and managing procurement activities, which use procurementmethods including: (i) International Competitive Bidding, Limited InternationalBidding, International Shopping, National Shopping, and Direct Contracting for theprocurement of goods and works; and (ii) where applicable, procurement ofConsultants for technical assistance, specific studies and supervision services.

(e) Together with the line implementing agencies, review the appropriateness of variousprocurement packages with respect to their methods of procurement, to ensure thatprocurement can be undertaken in the most efficient and cost effective manner inaccordance with the relevant guidelines applicable to the project.

ANNEX 2Page 7 of 16

(f) Provide guidance and intensive assistance in preparing and organizing the preparationof Bidding Documents, which may generally include: (i) invitation to bid; (ii)instructions to bidders; (iii) form of bid; (iv) form of contract; (v) conditions ofcontract including both special and general; (vi) specifications and drawings; (vii) listof goods or bill of quantities; (viii) delivery time or schedule of completion; and all ofthe necessary appendices and formats. Bidding documents for InternationalCompetitive Bidding shall be based on Standard Bidding Documents issued by theWorld Bank with minimum changes, acceptable to the Bank, as necessary to addresscountry and project specific issues.

(g) Assist the implementing agencies on various aspects of procurement relating tocontracts on civil works under the national laws and regulations, and providecomprehensive assistance in preparing and organizing the preparation of BiddingDocuments in relation to these civil works contracts.

(h) Provide advice and guidance as necessary in connection with the application ofprocedures and requirements related to bid opening, evaluation and award ofcontract. Particular attention may be paid to time allowance for preparation of bids,bid opening procedures, circumstances related to clarifications or alterations of bids,confidentiality, examination of bids, evaluation and comparison of bids, and applicabledomestic preferences.

(i) Establish a Procurement Monitoring system, to allow collection and recording ofprocurement data for: (i) timely information flow, submissions and approval of TORs,shortlists, and other review requirements; (ii) tracking all of the necessary and criticalprocurement actions and activities; (iii) prompt reporting of contract awardinformation by the Borrower to the Bank; (iv) comprehensive quarterly reports to theBank; and (v) revision of timing of procurement actions and critical paths, includingadvertising, bidding, contract award, and completion time for individual contracts.This Procurement Monitoring System will be maintained and kept up-to-date by thePSU. The PMC Staff and the implementing agencies will be trained by the PSU to usethis system.

(j) Specifically, develop contracting capacity at the Ministry of Agriculture and Food,paying particular attention to on-the-job transfer of knowledge, organizational andmanagement considerations, as well as the need to prepare for subsequent World Bankfunded projects.

(k) In relation to contracts, develop administrative and technical procedures for review ofcontract performance as an integral part of the approval process for justifying contractpayments.

(1) Together with the PMC Staff and the implementing agencies, develop a contractmanagement system to ensure that records and data are stored systematically, andcross-referenced with the accounts of the project. The system must allow safe-keeping of procurement documentation for easy retrieval and referencing, withadequate paper trails in accordance with generally accepted standards. The contract

ANNEX2Page 8 of 16

management system must also be designed to support disbursement, reporting, andaccounting requirements of the project.

(m) Assist the line implementing agencies and the PMC Staff in drawing up individualand specific job descriptions for administrative staff assigned for handlingprocurement related matters. Identify training requirements for the staff, andperform the necessary training through workshops and on-the-job applications. Asappropriate, provide relevant recommendations to the MAF in order to ensure thatproject procurement activities and their management are undertaken in an efficient,cost effective and timely manner.

(o) Train the PMC Staff on various aspects of World Bank procedures on disbursement,and familiarize them with all of the requirements on documentation for submissionwith disbursement applications, as well as the necessary records that must be kept bythe project to support these loan disbursement applications.

C. Timing

The PMC will arrange to have PAS services for 3 years to perform the above stated tasks,intially for the First Agriculture Project and subsequently also to include the Second andThird Agriculture Projects during the period of this framework contract. Depending on thereadiness of the PMC Staff, the PAS may be mobilized by as early as May 1996, to speed upprocurement preparation for the First Agriculture Project, with funding from the ProjectPreparation Facility (PPF) advances out of the Bank loan for this project.

ANNE£X 2Page 9 of 16

4. Project Accountant

A. Duties

Reporting to the PMC Project Manager, the primary responsibility of the ProjectAccountant will include the following:

(a) Perform day-to-day accounting tasks related to all aspects of the project accounts.

(b) Ensure that all line implementing agencies under the project conform with theaccounting and financial reporting requirements of the project.

(c) Work with the PSU to harmonize accounting requirements with both procurement andloan disbursement requirements.

(d) Prepare (a) loan disbursement applications; (b) monthly reconciliation of accounts ofall project components and their expenditures; (c) replenishment application for theSpecial Account; and (d) other financial documentation as necessary.

(e) Maintain all records and the necessary documentation related to and in support of loandisbursement applications, in the manner prescribed by the Bank and in compliancewith relevant covenants of the loan agreement.

(f) Prepare and manage Statements of Expenditures (SOEs), as required under the rulesof disbursement of the loan, in the manner acceptable to the Bank.

(g) Assist and work with the line implementing agencies in the preparation of projectcomponent budgets. Perform financial monitoring of project activities, and presentfinancial analysis as required.

(h) Cooperate with the external auditors on the annual audit of the project accounts.

B. Timing

The Project Accountant's position is for a minimum of 3 years or the duration of the project.

C. Technical Assistance

Technical Assistance from international and local consultants will be required for a period ofup to 6 person-months spread over the first 18 months of the project. It is expected that theProject Accountant of the PMC Staff and the line implementing agencies will be able tohandle the operations of the project accounts without further assistance. This technicalassistance will be primarily used by the project to: (a) set up the project accounts and their

ANNEY 2Page 10 of 16

procedures in accordance with the requirements of the project; and (b) work with the ProjectAccountant and the implementing agencies on the project accounts, including procedures forinternal auditing.

The scope of the technical assistance include:

(a) Based on the requirements of the project, including those outlined in the Bank'sGuidelines for Financial Reporting and Auditing of Projects Financed by the WorldBank (March. 1982), work with the Project Accountant and establish a system forproject accounts to cover the accounting needs of all Bank-financed projectcomponents.

(b) The project accounting system will take the following into consideration:

(1) Development of a chart of accounts, general ledgers and sub-ledgers, asappropriate and consistent with project budgetary and expenditure accounts.

(2) Documentation and requirements related to World Bank loan disbursements,and establishment of a system for preparing Statements of Expenditures(SOEs), taking into account the necessary records of transactions to be kept insupport of disbursement applications made on the basis of Statement ofExpenditures and other disbursement procedures.

(3) Cross-references and harmonization with contract management, files/recordsunder project administration.

(4) Reconciliation of accounts and supporting documentation related to eligibleexpenditures with respect to the Special Account of the project, and thenecessary requirements to support replenishment applications.

(5) Progress and financial reporting requirements as agreed between theGovernment of Moldova and the World Bank.

(6) Relevant covenants of the loan agreement, particularly those relating toprocurement, disbursement, accounts and audit.

(c) Based on the project accounting system, training sessions will be designed anddelivered to familiarize the accounting and administration staff of the project with thesystem. On-the-job training and assistance continue until such time that theaccounting operations of the project run satisfactorily. Interna audiag mechanlawwiU be incorporated into the training sessions.

(d) Integration of project accounts and budget accounting within each of the implementingagencies responsible for project components.

(e) Design of an audit trail, in accordance with generally accepted standards, in order tofacilitate internal and external audits.

ANNEX 2Page 11 of 16

(f) As appropriate, integration with national accounting requirements, provided allrequirements of the loan agreement are met.


5. Economist:Monitoring and Evaluation Specialist

A. Tasks

As part of the PMC Staff and reporting to the Project Manager, the Economist: Monitoringand Evaluation (M&E) Specialist is required to:

(a) Work with the Research Institutes and the relevant departments of MAF, andundertake various economic and financial analyses and evaluation relating to projectfunded activities including: (i) applied research and demonstration trials aimed atviticulture improvement; (ii) fruit production technology (including drip irrigation,crop protection, seed potato mechanization and plasticulture) and other potential areasfor improving horticulture production; and (iii) Integrated Pest Managementinitiatives.

(b) Liaise with appropriate ministries and departments, and develop environmentaleconomic impact assessment indicators in relation to: (i) various initiatives to controland reduce contamination of water resources; (ii) crop rotation and various weedcontrol methods; and (iii) various pest control and forecasting methods.

(c) Together with the respective implementing agencies, and based on the Projectimplementation Plans, develop a monitoring and evaluation (M&E) system for eachproject component, incorporating indicators for measuring project inputs, outputs,results and impacts (micro and macro) and the means for verifying and measuringthese indicators.

(d) Periodically, monitor and evaluate implementation progress of all project components,provide concise notes on possible measures for overcoming major issues that constrainproject implementation, for the attention of the Project Manager, PMC and therespective implementing agencies.

(e) Identify bottlenecks and systemic problems in implementation, and review theseconditions jointly with the relevant agencies to come up with measures and options forsolving these problems. Alert the Project Manager of major problems that require theattention of the Project Director and the Project Management Committee.

(f) Assist all implementing agencies, on financial, cost and economic analyses related totheir project components; and when appropriate also liaise with the ProcurementSpecialist of the PSU and the Project Accountant in the context of these analyses.

(g) Carry out field monitoring trips on a regular basis, in association with theimplementing agencies, and test out these M&E systems for further refinement asnecessary. Ensure that the M&E systems provide immediate feedback to allowcorrective measures to be introduced as early as possible.

(h) Perform other tasks on monitoring and evaluation as assigned by the Project Manager.


B. Timing and Qualiflcation

The position is for a minimum of 3 years or the duration of the project. The selected personmust possess a university degree in economics with special emphasis in either naturalresources, agriculture, environment or related fields, with at least 5 years of relevantexperience.


6. Technical Assistance: Project Management (including Monitoring & Evaluation)

A. Objectives

The objective of this consultancy is to train national project staff assigned by the Ministry ofAgriculture and its project beneficiary agencies, on relevant aspects of project managementand admninistration, including monitoring and evaluation.

B. Tasks

The tasks of the Project Management consultant include the following:

(a) Conduct a rapid training needs assessment, based on the management andadministration requirements of the project and its components.

(b) Design an appropriate training package, incorporating fundamental principles of (i)project management and (ii) monitoring and evaluation, including topics to cover thefollowing:

Project Managent

(i) applications of management principles to plan, organize, staff, control anddirect resources (including budgeting);

(ii) techniques commonly used in operational planning, including the applicationof critical path analysis and resource driven scheduling;

(iii) the use of computer software applications for project planning, management,and administration, including spreadsheet applications;

(iv) planning of actions and tasks for achieving project objectives, effecting resultsand organizing the necessary resources for carrying out the plan;

(v) communications, including techniques for effective presentations, meetingsand negotiations;

(vi) task management, including: division of tasks, organization of workarrangements, roles and functions of work-groups, special task forces,responsibility matrix, reporting channels, work delegation, and othermanagement functions and tools; various aspects of results-based managementshould be included.

(vii) project administration requirements, including: files and records management,contract management (procurement aspects covered under a separate terms ofreference), project accounts (a separate terms of reference to set up andmaintain these accounts), logistical and secretarial tasks;


(viii) other topics, as assessed to be necessary during training needs assessment, toensure the delivery of a comprehensive project management training.

Monitoring and Evaluation (M&E)

(i) The rationale, objectives, and principles of monitoring and evaluation, clearlydefining the differences between monitoring and evaluation.

(ii) Procedures, techniques and their applications, including project design andmanagement requirements that would facilitate these applications.

(iii) Data collection techniques, and project database requirements for M&E,covering conceptual aspects, actual and specific requirements for the project.

(iv) M&E system design, paying particular attention to:(a) the linkages between the goal, purpose, outputs and inputs of the

project components;(b) recognized problems and conditions, and analysis of capabilities and

vulnerabilities, which lead to a set of project inputs;(c) project activities leading to a set of outputs;(d) expected results, and anticipated enabling changes that would achieve

these results;(e) critical assumptions and necessary conditions for achieving expected

results, paying particular attention to possible reexamination of theseassumptions and conditions;

(f) qualitative and quantitative indicators and milestones for measuringdelivered inputs; outputs; enabling changes to produce results andimpacts as compared to the purposes of the project components; andthe means for verifying all of these indicators;

(v) M&E system design that includes actual application and on-the-job training onthe project, a series of field trials for refinement of the system, and sufficientintermittent technical assistance inputs to regularize M&E activities, with theaim of preparing the PMC Staff and the implementing agencies to fulfill theproject reporting requirements, including the Project Completion Report PCR,under the loan agreement.

(c) Train PMC Staff and project staff of the implementing agencies, through workshopsand on-the-job applications.

(d) Work specifically with the Economist: Monitoring and Evaluation Specialist, andassist in setting up an M&E system for the project, particularly in relation tomonitoring and evaluation of physical progress of project implementation, includingthe use of indicators for measuring inputs, outputs, results and impacts, progressmilestones, and means for verifying these indicators.

C. Timing


Consultant's services will be required for a period up to 6 person-months, and the trainingprogram is to be conducted in three stages: (a) training needs assessment; (b) design oftraining sessions; and (c) delivery of training. A combination of international and localconsultants are required for the delivery of the training program. This training program willbe delivered as soon as possible after (a) all PMC staff have been hired; and (b) accounts andprocurement systems are in place.

MOLDOVAFIRST AGRICULTURAL PROJECT

ANNEX 3

ENVIRONMENTAL DATA SHEET

ENVIRONMENTAL DATA SHEET FOR PROJECTSin the LBRD/IDA Lending Program

Country: MOLDOVA Project ID No: MD-PA-8556Project Name: Agriculture Project Total Project Cost: US $18.5mAppraisal Date: April, 1995Board Date: April, 1996 Task Manager: Brian BermanManaging Division: EC4NR Sector: AgricultureLending Instruments: SIL Status: LendingDate (est) for receipt of EA by Bank: N/AEA Category (A/BIC): B Date Assigned:

Date Sheet Prepared/Updated: January 25, 1996(Please do sot reave any items blank: use 'N/A or 'To be developed' when appropriate)

Mfajor Project Components: (presents description of project components)

(i) Agro-technology development and transfer (support to research institutes for wine and fruit production, and integratedpest management; (ii) Institutional Strengthening (Grain regulatory laboratories, agro-industry restructuring advisoryservices, research system rationalization, wine sector strategy, and national extension plan); (v) Project Preparation andPolicy Development; and (vi) Project Management.

Major Environmentel Issues: (describes major environmental issues identified or suspected in project)

No significant negative environrmental impacts are anticipated from the Project. The proposed project would stronglybenefit the environment by introducing and supporting integrated pest management and sustainable agriculturalpractices. The assistance to improve pest forecasting methods and to a projected training center for sustainableagricultural practices would lead to a reduction of the use of pesticides in Moldova.

Other Environmnenal Issues: (describes environmental issues of lesser scope associated with project)

N/A

Proposed Achons: (describes actions proposed to mitigate environmental issues described in project)

i) The project implementing agency will be asked to provide systematic monitoring and reporting on theenvironmental impact of the Integrated Pest Management program and the Pest Forecasting System.ii) Together with EMTEN, with funding under the Danube River Basin initiative, the project is initiating a study on thepossibilities of using biological pest control techniques in agriculture, to assess the current state of water quality and anyremedial action to reduce agricultural run-off, and the possibility of protecting valuable ecosystems from agricultural use.

Justification/Radenale for Environmenta Category: (reasons for environrmental category selected & explanation of any chanrges from initil clasification)

Category B status was chosen because of the overall beneficial impact of the project on the environment.

Status of Category A Environmental Assessment: (presents EA start-up date, EA first draft, and current status)

N/A

Remarks: (gives status of any olher environmentalstudies, lists local groupsaand local NGOs consulted, tells whether borrower has given pemrnissionto releue EA. ea)

During preparation and implementation, the Project has and will cooperate with Moldagroeco, an NGO promotingintegrated pest management in Moldovan agriculture.

Signed by: Signed by:

Gel hy Fox. Ch EC4NR Arand Seth, thief, Er r

mAc amienv3atakriigric.ea

Annex 4Page 1 of 8

MoldovaFirst Agriculture Project

Economic AnalysisViticulture and Horticulture Research and Development

andIntegrated Pest Management

Viticulture Improvement

The following model has been developed to provide reasonable projections over a period of 15 years(from 1996 to year 2010) of production, domestic consumption and exports of wine. Key variablesand assumptions of the model are as follows:

* The total area of vineyards in the country is estimated to be in the order of 160,000hectares. Ninety percent of this area produce grapes for wine production, and theremaining 10% of the area are cultivated for the production of table grapes.

Replanting of vineyards is assumed to be conducted in the future at a rate of 6.7% perannum of the vineyards for wine grapes, based on a life cycle of 15 years. It isestimated that replanting of vines for wine grapes would cover 9,600 ha/year(calculated at 6.7% x 90% x 160,000 ha).

* Adovtion Rate. It is expected improved varieties and cultivars adapted to the localagronomic conditions would be made available through the Project activities to NIVONIVO would then distribute these varieties to the farming sector. It is assumed that20% of the area replanted annually would be replanted with the improved varieties in1998, increasing to 35% in 1999, 50% in year 2000, 70% in year 200, levelling off at80% from year 2002 onwards.

- Yields of wine grapes per hectare are assumed to be 4.8 tons/ha on average forexisting vineyards. Improved varieties are expected to yield 2 tons/ha in the third yearyears after planting, 4.5 tons after 4 years, and 7 tons/ha after 5 years. Newlyreplanted areas with existing varieties are projected to yield 1.5 tons/ha after 3 years,3.2 tons/ha after 4 years, peaking at 5.5 tons/ha after 5 years. It is assumed that thegrape production of the first two years after planting would not be processed.

* Present extraction rates of wine from grapes are low, and estimated at 65%. It isexpected that with the introduction of improved equipment at the wineries, the averageextraction rate would improve to 67% in 1997, 70% in 1998, 73% in 1998, 75% in1999, levelling off at 80% from year 2000 onwards.

Domestic consumption of wine in Moldova is estimated to be at 30 liters per capita in1996, comparable to wine consumption in Rumania in the early 1980's. Domesticconsumption of wine is projected to grow reasonably at 1.5% per annum over the

Annex 4Page 2 of 8

period from 1996 to year 2010.

Wine exports to western markets. Wine production in excess of domestic consumptionis assumed to be exported to FSU countries and Western markets. Exports for westernmarkets are projected to amount to 150,000 hi in 1996; 250,000 hi in 1997; 300,000 hlin 1998 and 400,000 hl in year 2000. Bulk wine exports to Western markets will becompletely substituted with bottled wine from 1998. Export volumes to Westernmarkets are projected to grow at 10% per annum from year 2001 onwards. This rateof growth is considered conservative, given the potential for marketing Moldovan winein North America and some parts of Western Europe (United Kingdom, Germany andHolland).

* Wine Exports to FSU markets the remaining amount for exports (after exports toWestern markets), are projected to consist of bulk wine (42%), bottled wine (27%),and wine equivalents in the form of brandy and fortified spirits (31%).

* Export prices (FOB, Moldova) in constant 1995 terms are US $0.40/liter of bulk winefor Western markets, US $1.20/liter for bottled wine for Western markets. Theseprices for Western markets are based on market studies undertaken for the EBRDWine Export Promotion Project. Prices for FSU markets are considerably lowerbecause of different wine qualities and standards for bottling and packaging. For theFSU markets, bulk wine is priced at US $0.15/liter, bottled wine at US $0.55/liter,brandy and fortified spirits at US $0.19/liter of wine equivalent.

With progressive adoption of improved varieties in replanting, and gradual improvement in extractionrtes, wine production is expected to increase to 4.5 million hi in year 2001, 5.0 million hi in 2005and 5.8 million hi in 2010, after an initial decrease from about 4.2 million hi in 1996 to 4.0 million in1998. Using the level of exports in 1996 as a benchmark (total wine export in 1996 is projected atUS $83 million), the present value of the expected added values' of incremental wine exports for theperiod 1997 to 2010 discounted at 10% per year (including its equivalents in brandy and fortifiedspirits) is projected to reach US $112 million. In comparison, the present value of the incrementalresearch and development costs, as provided under the project for viticulture improvement, wouldamount to only US $4.2 million. This amount of incremental R&D costs represents no more than3.7% of the present value of the expected added values from increases in wine exports (Table 3).

1. Incremenal added value is calculated by applying a gradually improving added value from 25% in 1996 to about 43%in 2010, with a weighted average of 33%/, based on the projected sntm of incremental values of exports.

Annex 4Page 3 of 8

Table 1: Projected Exports and Domestic Consumption of Wine (million liters)

year 2000 year 2005 year 2010

Bottled wine (Western markets) 40 64 104

Bulk wine (FSU markets) 100 122 131

Bottled wine (FSU markets) 65 78 84

Brandy & fortified wine equivalents 74 90 97(FSU markets)

Domestic consumption 140 151 163

Horticulture Improvement

A similar model is developed for estimating future production and exports of fruit and berries, andvegetables. Key variables and assumptions of the model are as follows:

Fruit and Berries

Planted area of all types of fruit and berries is estimated at 229,000 ha, and projectedto be stable over the next 15 years. The average immature period of plantations isestimated at 4.5 years, and the overall average life cycle assumed to be 15 years. Theeffective productive area is therefore assumed to be around 160,000 ha in any givenyear, provided replanting is conducted regularly and on schedule.

For projection purposes no distinction is made on types of fruit and berries. Yields,production and export volumes are expressed as averages of all types combined.

Yields. The average yield/ha, in the case without incremental research anddevelopment activities (without Project), is projected at 5.5 tons/ha in 1996, andincreasing annually at a growth rate of 2% to reach 7.3 tons/ha by year 2010. Withincremental research and development (with Project), yields are expected to be higherthan the without Project yield by 2% in 1998, 5% in year 2000, 12% in year 2005,reaching 8.3 tons/ha in year 2010 or 15% higher than the without Project yield. Thisis a conservative yield assumption.

The projected incremental production. as a result of incremental research anddevelopment, is assumed to be available for exports. The quantities available forexports are categorized into fresh (25%) and canned/preserved (75%).

The average gross mgin of fruit production are calculated at US $50/ton for freshfiuit and berries and US $100/ton for canned products.

Annex 4Page 4 of 8

Vegetables

* Planted area of all types of vegetables, including area planted with tomato, is estimatedat 74,000 ha and assumed to be stable over the next 15 years.

* For projection purposes no distinction is made on types of vegetables. Yields,production and export volumes are expressed as averages of all types combined.

* The average yield/ha, in the case without incremental research and developmentactivities, is projected at 12 tons/ha in 1996, and increasing annually at a growth rateof 2% to reach 15.8 tons/ha by year 2010. With incremental research anddevelopment, yield is expected to be higher than that of the without-case by 2% in1998, 5% in year 2000, 12% in year 2005, reaching 18.2 tons/ha in year 2010 or 15%higher than that under the without-case.

* The projected incremental production. as a result of incremental research anddevelopment, is assumed to be available for exports. The quantities available forexports are categorized into fresh (40%) and canned (60%).

* The average gross marg2ins are calculated at US $40/ton for fresh vegetables and US$75/ton for canned products.

With incremental research and development, the incremental amounts of exports of fruits and berries,and vegetables are projected as follows:

Table 2: Incremental Production ('000 tons)

year 2000 year 2005 year 2010

Fresh fruit and berries 12 32 44

Canned/preserved fruit 36 95 131

Fresh vegetables 19 51 70

Canned/preserved vegetables 29 76 105

Added values on the projected increases in exports of fruit, berries and vegetables are calculated onthe basis of gross margins per ton of products. The net present value of these added values, over aperiod of 15 years from 1996 to 2010 and discounted at 10% per annum, amounts to US $76 million.In comparison, the present value of the incremental costs of research and development for horticulturalimprovement, as provided under the project, amounts to US $2 million. This incremental research anddevelopment cost represents only 2.7% of the expected added values gained from projected increasesin export earnings (Table 3).

xnn 4Page 5 of 8

Viticulture and Horticulture Improvementwith Integrated Pest Management

The projected added values of incremental exports of wine, fruit and vegetables are estimated toamount to US $188 million in present value terms at an annual discount rate of 10% over 15 years(1996 to 2010) (Table 3). In comparison, the present value of the overall incremental costs ofresearch and development, as provided under the project and including the costs of the IPMdevelopment, amounts to US $6.8 million. This incremental spending in research and development ismodest, representing only 3.6% of the present value of the expected added values from increases inexports. This means that the benefits that must be directly attributed to the R&D investments wouldonly need to amount to 3.6% of the added values of the expected increases in exports, in order for theR&D investments to yield an economic rate of return of 10%. For the ERR of the R&D investmentsto reach 15%, the associated benefits must amount to only 5% of the added values of the expectedincreases in exports. In the case when the ERR is 20%, the required benefits should be not more than6.7% of the added values on incremental exports (Table 4).

The introduction of integrated pest management through better forecasting and control of pestproblems, improved control on the use of pesticides, and the establishment of an early warning systemfor pest management, would reduce production losses through pests. The costs of these initiatives, asprovided under the project, are small compared to the benefits potentially gained from improved pestmanagement and control. The IPM initiatives under the project will not only benefit horticulture andviticulture, but also food crops and grain production. The additional costs for IPM developmentwould reduce risks of crop failures due to pest problems. For illustration purposes, a reduction inadded values of only 0.5% (a highly possible case for localized pest problems) would mean a loss inpresent value of benefits of US $1 million. Such a small loss in benefits has outweighed the costs ofIPM development by twofold.

Table 3: Affordability Analysis of R&D Expenditures

NPV at 10% discount rateAdded Value of

(US$ million) project R&D IncrementalExpenditures Exports %Expeditres (1997-2010)

(1) (2) (1)%(2)Wine $4.2 $112.0 3.7%Fruit & Vegetables $2.0 $75.7 2.7%Integrated Pest Management $0.6 n.a.Total $6.8 $187.8 3.6%

Table may not add due to rounding

Annex 4Page 6 of 8

Table 4: Sensitivity Test of "Affordability" Analysis

Discount Rate: 10% 12% 15% 20% 25%Wine R&D 3.7% 4.3% 5.1% 6.8% 8.60%Fruit & Vegetables R&D 2.7% 3.1% 3.7% 5.0% 6.40%Total R&D 3.60% 4.2% 5.0% 6.7% 8.5%

Annex 4Page 7 of 8

Farm Budget Models

Project Impact on Farmers' Incomes. Ultimately, the benefits of the project-funded researchshould be reflected in improved farmers' incomes. These benefits will not be realizedwithout additional on-farm investments, the public efforts to transfer these new technologiesto the farm (i.e research outreach and agricultural extension), and adequate productionfinancing. A projection of the changes in yield and costs of production has been made. Theaverage farm size, if all eligible farmers were to receive their proportionate share of thearable land in Moldova, would be 1.5 ha. A small-farm model on this basis, with theaverage crop-field distributions between annual crops, perennial crops, and pastures, showsincreases in net income (Table 5.2), without assuming any increases in the farm-gate value ofproduct due to improved quality. These assumptions yield an annual average real growth infamily income of 11 % -- significantly higher than average GDP per capita growthexpectations. However, family farm income even after increasing production, would remainsignificantly below the average GDP per capita of US $870 in 1994.

Assumptions:

- The cropping structure of the farm model was established by prorating an average year'snational cropping areas. The cropping might undergo some changes as time goes, becausefarmers will be guided by prevailing market opportunities.- The farm model size of 1.5 ha consists of 1.0 ha annual crops on arable land, 0.3 ha fruitsand grapes, and 0.2 ha of meadows and pastures. The size corresponds approximately thetypical land allocation of a smallholder farm.- The exchange rate of $ 1 to Lei 4.5 was used.- All production cost and producer prices are based on the mid-95 data collected by MAFstaff.- The fertilizer calculations are based on an average whole crop offtake of pure nutrients,discounted for the fertility of chernozems, replenished by remaining crop residues.- The fertilizer and pesticide prices are at, or close to, world market prices; themechanization prices are somewhat lower, accounting for the still relatively cheap energy andlabor cost.- Other technical data, like seed rates, mechanization hours, labor etc. are based oninformation from Moldova technicians, contained in my mission blocks, and on internationalliteraure data.


PRIVATE SMALLHOLDER FARM MODEL

Without Project With Project at Full Development

ha Net Inem. Labor Net Incm. Labor

Lei PD/ha PD/farm TH/ha TH/farm Lei PD/ha PD/farm TH/ha TH/farm

Wheat 0.5 86 14 7 13 7 86 15 8 13 7

Maize 0.25 158 18 5 15 4 158 20 5 15 4

Sunflower 0.13 26 12 2 12 2 26 13 2 12 2

Potatoes 0.08 566 54 4 35 3 992 70 6 46 4

Vegetables 0.04 389 51 2 30 1 576 85 3 70 3

Apples 0.15 255 52 8 20 3 429 68 10 28 4

Grapes 0.15 172 50 8 19 3 369 75 11 28 4

Pastures (p.m.) 0.2_

Total 1.5 1652 35 22 2635 45 27

Footnote:All prices are estimated and 1995PD means family labor in daysTH means machine operating hours


ANNEX 5

SUMMARY OF MAJOR PROCUREMENT PACKAGES

I

Procurement Major Package

Preparation of TenderAmount Procurement Tender Documenb Bids Contract Contract

Description (USS '000) Method Documents Issued Submitted Signed Compleltd

E nstd Goods

Farm Machinery I $550 [CB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97Farm Machinery 2 $550 ICB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97Farm MachInery 3 $500 [CB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97

Laboratory Equipment I $400 ICB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97Laboratory Equipment 2 $400 [CB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97Laboratory Equipment3 $150 IS April-June 96 Jul-96 Sep-96 Oct-96 Nov-96Laboratory Equipment 4 S180 IS April-June 96 Jul-96 Sep-96 Oct-96 Nov-96Laboratory Equipment - Artifical Inseminati $345 LIB April-June 96 Jul-96 Sep-96 Oct-96 Nov-96Laboratory Equipment MIs. $170 DC April-June 96 Jul-96 Aug-96 Sep-96 Oct-96

ComputersHardware S145 IS April-June 96 Jul-96 Sep-96 Oct-96 Nov-96Software $90 DC April-June 96 Jul-96 Aug-96 Sep-96 Oct-96Supplies $5 NS April-June 96 Jul-96 Aug-96 Sep-96 Oct-96

Networks S155 ICB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97

Irrigadton EquipmentPipes I $150 ICB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97Pipes 2 $150 ICB Jan-97 Feb-97 Apr-97 Jun-97 Aug-97

Drip & Sprinkler Systems S330 LIB April-June 96 Jul-96 Sep-96 Oct-96 Aug-97

Laboratory Chemicals 1 $400 ICB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97Laboratory Chemicals 2 $20 NS April-June 96 Jul-96 Aug-96 Sep-96 Oct-96Laboratory Chemkals 3 $20 NS Jan-97 Feb-97 Feb-97 Feb-97 Mar-97Laboratory Chemkals 4 $20 NS Jan-98 Feb-98 Feb-98 Feb-98 Mar-98

Vehicles (Vans and cars) $82 LIB April-June 96 Jul-96 Aug-96 Sep-96 Oct-96Vehicles (misibikes) $45 IS April-June 96 Jul-96 Aug-96 Sep-96 Oct-96

Oenology Equipment I $600 LIB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97Oenology Equlpment 2 $600 LIB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97Oenology Equipment 3 $600 LIB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97Fruit Procesing Line $836 LIB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97

Specialized EquIpment $200 IS April-June 96 Jul-96 Sep-96 Oct-96 Nov-96Genetic mterials S1,600 DC April-June 96 Jul-96 Aug-96 Sep-96 Oct-98Horticulture Encyclopedia $330 [CB April-June 96 Jul-96 Sep-96 Oct-96 Jan-97

Sub-Total: Equipment and Goods $9623

TIaEAamCosslatl

Project Preparation sad Policy Studies $220 (')PIU Staffing (Local consultants) $215 Individuals

P11: ProcuremetuServkes S220 Short-listing May-96 May-96 Jun-96 Jul-96 Jun-97Peat Risk Forecast Model S99 Short-listing April-June 96 Jul-96 Sep-96 Oct-96 Jul-97

PIU: Audit $44 Short-listing Oct-96 Nov-96 Dec-96 annual annualSub-total $798

StBak.:Agricultral Kawiledge System Study $220 na.

TlawAgro-Industrkes mangement study tours $220 na.

Grain Laboratory Study Tour $20 n.a.PIU Training $143 Individuals

ComputerTraining $12 IndividualsViticulture & Horticulture Training $297 Individuals

$691Sub-total - Technical Ausstance S1 709

lcremental PlU Operating Costs $287 n.a

TOTAL Bonk-financed Procurement $11,620me) ai hp

( ) * -X _,i peSs eans smrm *sn. uidwth psrddpatsr iuu on. psu-lEagis eaib pskp re ernedds

I


ANNEXES - VOLUME II

PROJECT IMPLEMENTATION PLANS

April 8, 1996

* CIP 1. The Viticulture Component

* CIP 2. The Horticulture Component

i CIP 3. The Integrated Pest Management Component

* Attachment 1. Detailed Cost Tables

I

CIP 1Page 1 of 5

COMPONENT IMPLEMENTATION PLANIMPROVING MOLDOVAN WINE PRODUCTION

I. THE VITICULTURE COMPONENT

A. COMPONENT OBJECTIVES

1. The broad objective of the wine production component of the Project is to improve the qualityof Moldovan wine in order to generate additional foreign exchange revenues from exports and increasethe profitability of the wine sector. The development of new export markets has become a major pre-condition to restoring economic growth and stability in Moldova. The component would in particular (a)support research and development of suitable grape varieties and vine clones adapted to the regional soiland climate and to consumer preferences in export markets; (b) improve the production of quality plantingmaterials in modernized nurseries and with improvements in plant protection; and (c) provide facilitiesto test new production methods and systems.

B. COMPONENT SCOPE

2. Wine and sparkling wine production plays an important role in Moldovan agriculture with around160,000 ha under vineyards. This accounts for 8% of agricultural land. Wine production represents oneof the major comparative advantages of the country and it has good medium-term export market prospects.However, a large part of the wine products are of relatively low quality for EU markets, and need to beimproved in order to produce wines of competitive quality, both in the EU and in the FSU, where in thelatter market, both EU and Eastern European wines (e.g Hungarian and Bulgarian) are now makinginroads into Moldova's traditional markets. As identified in the Moldova Agricultural Sector Review, thewine industry can be improved through increasing grape yields and improving the quality of wineproducts, improved processing, adoption of standardized packaging and improved marketing.

3. Most of the wineries have been privatized in the 1993-94 program. However, a number of wineriesproducing brandy and sparkling wines have not been privatized and the Government is still in the processof working out the details of an eventual privatization. A number of international wine companies havealready expressed interest in entering into joint-venture agreements with local wineries at a later stage.

4. This proposed component would concentrate on assisting the research efforts on improving winequality at both field the processing levels. Project interventions would support research and developmentof vine varieties adapted to the local climatic conditions, improvements with new vine nursery stocks, andwith experimental wine processing equipment. The Project could be complementary to an already existingproject, funded by EBRD, which focusing specifically on 4 commercial wineries, to promote thosewineries' exports, and on the provision of a new wine bottle production plant.

5. Wine varieties. Production of wine-based products in Moldova is equally divided betweensparkling wines, brandy, and still wines. Due to the changing market environment, new and improvedvine varieties will have to replace a large part of the varieties that have been introduced to the countryaccording to policies defined 30 years ago. Over the last years some wine producers have started tointroduce and plant more aromatic varieties in Moldova, such as Chardonnay and Cabernet Sauvignon.However, varieties of lesser wine quality still cover a large part of the area under vines. Developing

CIP IPage 2 of 5

quality dry wine (white and red) with individual character and adaption to the international market dependson the selection and planting of the right vine varieties. Efforts are already underway to introduce an"appellation controlee" system in Moldova. The legal framework for this system was established in 1992and a law governing viticulture practices was passed in 1994. Even though growing widely known andprestigious varieties is a good short-term strategy to increase profitability of wine production, it isnevertheless recommended to widen the varieties grown in and adapted to Moldova.

6. New and improved vine varieties are best introduced through the natural replacement of old vines.The average life cycle of vines in Moldova is 15 years, and approximately 6-7% of the country'svineyards should be replanted every year to maintain the present area under wine production. Some 9,000hectares of the total area under vines, of 143,000 ha, have to be replanted annually. Total current demandfor planting material is 22 million plants per year, at current plant density and mortality rates.

7. The quality of the vine planting stock from specialized nurseries has an overriding influence onthe success of planting to new vine varieties. Improving the production of the vine planting stock willenable the nurseries to produce higher quality plants that can be sold at lower costs than presentlypossible. Commercial success will crucially depend on selection of suitable and marketable varieties,optimal growing conditions in the vine nurseries, improved grafting of the vines and a wider variety ofrootstocks.

8. Rootstocks. Moldova is in the process of building up a certified rootstock production. Currentlyonly three rootstocks are commonly used in the country (101-14, 5BB, S04) and they are not best adaptedto the low rainfall areas in Moldova. Other rootstocks have been successfully used in other countriesunder similar climatic conditions. It is anticipated that they could be used with great success in Moldovaas well.

9. Production of grafted vines. Presently thirty farms operate workshops devoted to multiplying andproducing vine plants in nurseries in the field. All of these do not have their own rootstock mother vines,which are trained in the same way as normal grape vines. Methods of grafting vary from one workshopto the other and the grafting success rate is often as low as only 10%. The success of grafting could beincreased to 45% if grating techniques were improved in conjunction with the introduction of irrigationin the nursery fields.

10. Research and development of vine varieties. The National Institute of Viticulture and Oenology(NIVO) has in the past been responsible for adapted research to improve Moldovan wine production. Inthe future, NIVO will continue to be the major research agency but would need external support todevelop cloned and certified vine plants with excellent agronomic characteristics and healthiness. The newvine varieties, developed and adapted to the country's soils and climate, would then gradually replace allthe currently used plants. Under the existing circumstances it would be advisable to continue the clonaldevelopment at NIVO, and complement this with imported vegetative material. Improved clonal parentmaterial would have to be imported through a contract signed with a western wine research institute.

CIP IPage 3 of 5

C. COMPONENT DESCRIPTION

11. The component would support the development, production and distribution of improved vinevarieties in Moldova. It would provide the framework to coordinate and respond to the common interestsof the wine industry, including the wine research facilities, vine plant producers, winegrower andprocessors. The component would concentrate on (a) supporting research and development at the NationalInstitute of Viticulture and Oenology; (b) improving the quality of vine plants produced in nurseries; and(d) improving the experimental wine production facilities at NIVO.

12. With this component, the Project would support the development of a national wine developmentand improvement program which includes a vinestock certification program. The vinestock certificationprogram would consist of the following steps:

- Selection and development of initial material at NIVO based on the clones selected at theInstitute,

- Distribution of the base material from NIVO to approved nurseries,- Production of certified material in approved nurseries. The certified material would then

be sold to winegrower.

(a) Research and Development. Support to the National Institute of Viticulture and Oenology withfinancial and technical assistance to become the center of a national wine development and improvementnetwork. In particular the Bank would finance the import of clonal material from abroad, the re-equipment of the research laboratories; the development and introduction of a vinestock certificationprogram; the improvement of experimental wine production facilities; and the establishment of a nation-wide experimental network to evaluate the agronomic suitability of rootstocks and vinestocks.

(b) Vine plant production. The project component would support the improvement of the vinenurseries and grafting workshops. The component would finance modem irrigation equipment for the vinenurseries to be established on about 300 hectares, the modernization of equipment used in the 25 existinggrafting workshops, and foreign training for a grating and nursery specialist.

(c) Protection of vines. The project component would finance the purchase of pest risk forecastmodels and training for two specialists. The risk model would have environmental benefits as it reducesthe number of pesticide applications in vineyards and helps to reduce the costs of plant protection.

D. COMPONENT COSTS

13. The base cost of the viticulture research and development component is estimated at US $8.6million. Detailed cost descriptions can be found in Attachment I to this volume of the Annexes.

CIP IPage 4 of 5

II. IMPLEMENTATION ARRANGEMENTS

A. ORGANIZATIONS RESPONSIBLE FOR PROJECT COORDINATION

14. The Ministry of Agriculture and Food (MAF) will be responsible for overseeing the activities ofthe National Institute for Oenology and Viticulture. NIVO will coordinate and oversee the activities ofits own research and clonal selection program and the activities of the vine nurseries. An advisorycommittee, consisting of representatives of NIVO, nursery owners, wine producers and wine processorswill have advisory functions during development and implementation of the research activities.

B. ROLE OF THE WORLD BANK DURING SUPERVISION

15. The wine production component of the project would be supervised by Bank personnel inconjunction with consultants, as and when necessary. It is planned that about 10 staff-weeks of effortwould be needed for supervision, four weeks during start up year and three weeks in year two to yearthree.

III. IMPLEMENTATION PLAN

A. TIME-BOUND SCHEDULE

16. Detailed schedules for the implementation of this component are provided in Annex 1.

B. PROCUREMENT ARRANGEMENTS AND SCHEDULE

17. See Annex 5 of the main report.

IV. MONITORING AND EVALUATION

A. ACTIONS TO MONITOR DEVELOPMENT OBJECTIVES

18. Project monitoring indicators will be used to track progress on Moldovan wine productionthroughout the project cycle. These indicators will produce the necessary information for the ProjectCompletion Report.

CIEP1Page 5 of 5

B. PROJECT INDICATORS

19. The following indicators are used to monitor and evaluate progress during the implementation ofthe viticulture improvement component of the project.

(a) Institutional Indicators(i) Advisory Committee for the vinestock certification program will be established before

effectiveness.(ii) Coordination meetings are held on a regular basis among the members of the wine

advisory committee.

(b) Operational Indicators(i) x number vinestock nurseries are operating and producing 100% certified vinestocks.(ii) By mid-term review, 6% of all operating vineyards are replaced annually with certified

vinestocks from approved nurseries.(iii) After completion of Project implementation, GOM would develop a cost-recovery

mechanism to finance part of the research expenses through a tax on wine exports.

CIP 2Page 1 of 5

COMONENT IMPLEMENTATION PLANIMPROVING PRIMARY HORTICULTURE PRODUCTION

l: THE HORTICULTURE COMPONENT


1. The foremost component objective would be to improve the primary fruit and vegetable productionthrough: (a) improving the genetic resource base of fruit crops; (b) demonstrating new technology toincrease efficiency of production and quality of horticulture produce; and (c) preparing studies, for futureinvestment, in areas where there appears to be promising and justifiable potential.

B. COMPONENT SCOPE

2. The horticultural subsector in Moldova has a number of comparative advantages such as excellentsoils, favorable temperature and sunshine conditions, low labor cost, an agricultural tradition, and also welltrained, dedicated horticultural specialists and an experienced work force. There are 23 suitably locatedmajor fruit and vegetable canneries in the country, and a number of smaller processing plants on farms.In the past, the country was capable of successfully supplying a large part of the FSU with fresh andprocessed horticultural commodities, produced in excess of domestic requirements.

3. Horticultural crops occupy a prominent place in Moldova's land use, representing in 1994 about13% of the agricultural land, of which fruit crops about 10% (229,000 ha), and vegetables over 3%(74,000 ha). Together with the 164,000 ha of vineyards, these high value crops occupy over 20% ofagricultural land. Support to this important subsector has a potentially high pay-off and is expected tomake a significant contribution to the country's economy.


4. The component would concentrate on: (a) support to the Research Institute for Fruit Production("Codru"); (b) demonstrations of modem production technology in Codru for fruit, and in the ResearchInstitute for Maize and Sorghum ("Porumbeni") for potato; and (c) preparation of studies of future projectfundings (possibly including irrigation, glasshouse rehabilitation, and vegetable seed processing).

Strengthening Primary Production

5. Following extensive field visits to fruit and vegetable producing farms, Codruand Porunbeni, andextensive discussions with professionals in the Ministry of Agriculture and Food (MAF) and rayonhorticulture specialists, the mission identified several major constraints to improved horticulturalproduction in Moldova. In close cooperation with Moldovan professionals the mission developedproposals for project components that would assist in making a start to removing some of the mostpressing constraints, and in demonstrating some of the best technical and farm management approachesutilized on advanced farms in other countries.

2 CIP 2Page 2 of 5

6. Financing proposals include a set of support actions to Codru, demonstrations on moderntechnology in water-use efficient irrigation techniques, advanced technology in crop protection fitting intothe IPM system, modern techniques used in potato seed production for Porumbeni, and efficient and cost-effective technology of plasticulture.

7. The mission further identified the need for studies in areas where insufficient information isavailable for formulating discrete project components, but where there appears to be promising andjustifiable potential for investments. The studies, if considered to be priorities for the second projectfinancing, could include the horticulture aspects for inclusion in the National Irrigation Project FeasibilityStudy, a Review for Rehabilitation of the Glasshouse Production Subsector, and a Review forRehabilitation of the Vegetable Seed Processing Industry. All these interventions are aimed at arrestingthe recent decline and/or variability in production of fruits and vegetables, the decline in vegetable area,and at improving quality of the produce.

Support to the Research Institute for Fruit Production

8. Codru in Chisinau, with its main orientation on breeding, technology of seedling production andtechnology of fruit production, plays a crucial role in supporting the more than 200,000 ha of orchardsin the country. The institute is working with outdated equipment and the current financial situation doesnot even permit procurement of essential reagents urgently needed in the laboratory work. The projectwould support the institute in several ways in order to allow sustainability and small improvements of itsoperations, and publication of the wealth of scientific and applied work developed in recent years:

(i) financing of instrumentation and chemicals for the virology, genetics and agronomy departnents;

(ii) procurement of five computers with corresponding software;

(iii) financing of printing of the long completed, excellent, Fruit Growers Encyclopedia (EncyclopediaSadovodstva), in 3 volumes at 30,000 copies each;

(iv) Study visits of Moldovan scientists of 3 months each to reputable foreign institutes in virology,fruit tree genetics, and fruit production economics and farm management; and

(v) demonstration equipment for "Codru", in its own fields and on farmers' fields, in modernirrigation and crop protection technology, as further elaborated on below.

Demonstrations of Modem Production TechnoloRy

9. The component would finance the following crucial elements of modern technology fordemonstration and production purposes:

a) Irrigation: water use efficient irrigation equipment for about 200 ha in the form of drip and mini-sprinkler irrigation for vegetables, fruits and berries. The equipment would be placed onprivatized farms in two drought-prone districts (tentatively have selected the districts of Orhei andAneni-Noi) and in "Codru". It is proposed to place about 20 ha in "Codru" and some 90 ha eachin the two districts. The component would include technical assistance for installation, training

3 CIP Page 3 of 5

and commissioning of the equipment by the supplier. Additionally, 40 sets of tensiometers wouldbe procured (one set for 5 ha, and consisting of 3 tensiometers measuring soil moisture contentat about 20, 50 and 100 cm) to assist in introduction of proper irrigation agronomy, includingmore accurate timetables of water scheduling. Locally, the responsibility for placement, trainingand demonstrations of the equipment would rest with the MAF (the Principal Department of Fruitand Vegetable Production and Processing) and the irrigation water management organization ApeleMoldova;

b) Plant Protection:i) modem boom and air-blast sprayers for protection of vegetables and fruits from insectsand diseases. These sprayers would be placed in "Codru" and in privatized farms of the abovetwo districts not only for commercial crop protection, but also for demonstrations, training ofoperators and field days. The organization of demonstrations and training sessions would be theresponsibility of the Principal Department of Fruit and Vegetable Production and Processing, andthe Crop Protection Department of MAF, and the Rayon Crop Protection Stations (formers ofFertilitatea, now of MAF). The project would provide 10 boom sprayers with pressure stabilizersand exchangeable nozzles and 10 air-blast sprayers, including spare parts and training of operatorsby the supplier; and

ii) the crop protection problem for small farmers with their plots of limited size, wheretractors are uneconomic or cannot operate, is a particular issue since there are actually no handoperated sprayers available in Moldova. The mission proposes to finance under the project some2,000 modern hand-operated knapsack sprayers with sturdy containers, high quality pumps,adjustable booms and pressure stabilizers. The MAF, in cooperation with the Rayon CropProtection Stations, would arrange for field days and demonstrations of the imported sprayers inall 40 rayons.

SuDDort for Porumbeni

10. Potato Production Technoloev: potatoes are sometimes on the borderline between vegetables andfoodcrops. In Moldova, they are within the responsibility of the Principal Department of Fruitand Vegetable Production in MAF, although they are often referred to as the "second bread."Potato area declined from some 10,000 ha in the mid-80s to about 6,000 ha in 1993, mainly dueto difficulties in providing high quality seed, which is the single major constraint to higherproduction. In general, interest in growing and consuming potatoes is great. Although favorableconditions exist in the north of the country for local seed potato production, suitable technologyfor producing the seed is not available, and also a suitable germplasm base is missing. Theproposed project would assist in introducing modem seed potato technology on a pilot area ofabout 50 ha. The technology would be placed on a privatized farm and would consist of a chiselcultivator, a trailed 4-row potato planter with about a 2 ton container, a 4-row ridger, a 2-rowpotato combine harvester with 2-3 ton container, and a potato sorting line (3-4 sizes, approx. 6mt/ha). To provide a base for further multiplication, an initial 150 tons of foundation seedpotatoes of several varieties would be provided as well; and

4 CIP 2Page 4 of 5

1H. Vegetable Production Plasticulture Technology: the component would finance, on a demonstrationbasis, about 60 ha of equipment for low and walk-in plastic tunnels. The equipment would bedistributed to privatized farms in the northern, central and southern production zone at about 20ha in each zone. It would consists of plastic sheets and the necessary arches.

Potential Proiect Preparation Studies

12. A number of studies for horticulture could be included in the future project preparation. Thefollowing are the subjects that could be considered and their estimated costs.'

a) Irrigation. The Agricultural Sector Review carried out by the Bank in spring 1993 identified asone of the priority areas for investment a project for rehabilitation and extension of irrigated areas.A reconnaissance mission carried out in December 1994 established that priority investments arerequired for drought protection through completion of developments in nine irrigated perimeters.Substantial developments in these nine areas already started under FSU financing and in most ofthe areas construction has been completed to about 50-70%. Draft Terms of Reference for afeasibility study for a first phase project have been drawn up. The application of the proposedmodernized irrigation system to be designed under this feasibility study will need to take intoconsideration the special requirements of intensive fruit and vegetable cultivation, the use of watersaving technologies in orchards, and in-field, including irrigation in conjunction with vegetablecultivation under palatci tunnels and in greenhouses. Also of critical importance to the feasibilitystudy is the economics of production of fruit and vegetables under irrigation. The estimated costsof the fruit and vegetables cultivation study as input into the national irrigation plan is about$150,000.

b) Glasshouse Rehabilitation: Moldova disposes of about 88 ha of glasshouses which are believedto be highly energy-inefficient and are often in a dilapidated state. In order to regain its positionas off-season vegetable producer, the country needs to review the situation in glasshouses, prepareproposals for rehabilitation, and secure funds for implementation of the rehabilitation of, andpossibly expansion of, areas. A review of five personmonths by international experts is proposed,which is estimated to cost about US$75,000.

c) Vegetable Seed Processing. The Bank has been presented by the joint stock company Semintse(formnerly Sortsemovoshch) with a request for financing machinery for vegetable seed productionand processing which could well be in the area of US$6 to 8 million. The request was presentedwithout any justification, more detailed technical specifications, and without cost estimates. Sincethere is inadequate information about the company, its organization, management and financialposition, it is difficult under the given circumstances to respond to the request. It is proposed,therefore, to review the vegetable seed production in the country by international experts in thefield. The cost of the review is estimated at five personmonths and US$75,000.

1. The costs of the individual studies are not included in the overall cost table, or the cost table for thiscomponent: instead a lump-sum allocation for future project preparation costs has bene made in the overall projectcost estimate, to reflect the fact that the Government will make the final decision on which studies will be prioritizedfor the second project.

5 CIP 2Page 5 of 5

D. PROJECT COSTS

13. Detailed cost descriptions can be found in Attachment I to this volume of the Annexes.

E. FINANCING PLAN

14. The foreign exchange costs of this component excluding project preparation studies would befinanced 100% from the Bank loan, while import duties and VAT would be covered by GOM, and localcost (installation, local works and operating costs) would be born fully from the budgets of "Codru,""Porumbeni" and the private farms on which the demonstration plots will be installed. "Codru" and thefarms will achieve costs recovery of the investment and installation local costs from the increasedproduction of planting materials for sales, where these new nursery investments have been placed.

II. IMPLEMENTATION ARRANGEMENTSMONITORING AND EVALUATION

15. The project implementation schedule is shown in Annex I of the main report.

16. The project components would be implemented primarily by Codru and Porumbeni, in closecoordination, by the PMC, with the Department of Fruit and Vegetable Production and Processing, andthe Agricultural Research Department of MAF.2 The design, installation and operation of the dripirrigation component would be supervised from the technical point of view by Apele Moldova. At fieldlevel, the components would be implemented and managed by the respective beneficiaries, i.e. Codru,Porumbeni and the privatized farms on whose lands the nurseries would be located.

17. The departments of MAF under whose technical responsibility the allocation and supervision ofthese production oriented components and demonstrations would fall, would be required to monitor,evaluate and report on the technical and economic experience and results of the new technologies for atleast three years. The Project Management Committee will have on-staff a full time economist/specialistin M&E to assist these departments, Codru and Porumbeni to include the assessment of the economicimpact of these sub-components alongside the technical performance evaluation. MAF is perfectlycompetent to organize such technical performance monitoring and evaluations; it has demonstrated itsability in this respect with excellent results in the case of monitoring and evaluating the modern sugarbeettechnology imported under the Drought Emergency Recovery Project. The project's technical assistanceand staff will now add the economic impact dimension to the M&E.

18. Detailed performance indicators will be developed by the PMC's M&E specialist, and the initialoutline is shown in SAR Table 5.3.

2. "Codru" and the Departments of MAF are all members of the Project Management Committee (see SAR,Chapter 4).

j

CIP 3Page I of 5

COMPONENT IMPLEMENTATION PLANINTEGRATED PEST MANAGEMENT

I. THE INTEGRATED PEST MANAGEMENT COMPONENT


1. The broad objective of the Integrated Pest Management (IPM) component of the project is toplace crop production on a more economically and environmentally sound basis and support thedevelopment of a sustainable agriculture in Moldova. IPM is part of an Integrated Crop Managementapproach aimed at reducing the use of agrochemicals. The objective of an ideal IPM system is to useall biological and mechanical methods of pest control and to only use chemical pesticides as a lastresort.

2. Moldova already has developed a large number of biological pest control methods that allowthe reduction of the use of agrochemicals in farming. However, important Moldovan initiatives tofurther promote Integrated Pest Management need external financial and technical support toreorganize their research, development and marketing facilities during the transition to a market-basedagricultural economy. The component would support the development of Integrated Pest Managementmethods, educational programs and the dissemination of the technologies to the farmers, as well as thenecessary environmental control laboratories.

B. COMPONENT SCOPE

3. The introduction of better and more sustainable agricultural farming methods is a long-termprocess which crucially depends on the cooperation of different agents of change in order to have awide impact on agriculture and to be actually used on the farms. The project component wouldtherefore strengthen a number of already existing initiatives in research, education, extension andpesticide residue analysis, in order to jump-start the development of sustainable farming in Moldova.

4. Existing situation andfuture potential. At present, IPM activities are limited in Moldova.Most farms rely almost exclusively on broad spectrum pesticides, which are mainly insecticides andfungicides. Herbicide use is limited, because the large farms use farm workers to mechanically andmanually control weeds. In general, broad-spectrum pesticides are preferred by farmers, becausefarmers feel it is less costly to make one application that kills several pests at the same time, even ifthese pests are not threatening the crop. However, Moldova has a favorable environment to switch toIntegrated Pest Management, because of the pmsence of organizations already developing and testingIPM. For instance, several large farms are already using elements of IPM, but have not yet endorsedthe full concept.

5. Research and development of biocontrol methods. When the FSU dissolved, Moldova was leftwith several high-level agricultural research institutes, formerly responsible for agricultural research inthe whole FSU. Some of these institutes worked on plant protection and the Institute of BiologicalPlant Protection (IBPP) specifically concentrated research efforts on biological plant protection in the

CIP 3Page 2 of 5

FSU. The IBPP has developed a number of biological control methods that have been successfullyapplied in the FSU. These include the use of entomophages, parasite trichogramma, and sexpheromone to protect agricultural crops against certain pests. Five years ago, the IBPP was arguablyone of the world's largest producers of biological plant protection agents. Currently, the activities ofthe Institute have come to a near standstill because it lacks the funds to pay the recurrent expenditures.The changing economy forces IBPP' to reorganize and actively market their products in order toobtain the necessary funds to cover their operating expenditures. Moldova is fortunate to haveinherited this legacy, for these institutes can offer the technical expertise, biological supplies andleadership for establishing a national IPM network.

6. Extension and Training. GOM has established a nation wide program, MOLDAGROECO, todevelop and organize sustainable agriculture in Moldova. Participants includes a wide array ofscientists, govemment personnel, farm managers, and plant protection offtcers dedicated to supportingecologically sound, organic, biological, and other altemative cropping systems to minimize agriculturalchemical inputs. Under the MOLDAGROECO program, a pilot demonstration farm and a technicaltraining program on sustainable agriculture, targeted at young agriculturalists, have been established.The program organizes meetings between the various groups to coordinate activities on sustainableagriculture between different Moldovan institutions.

7. Pest Forecasting. Moldova has already established a country-wide pest forecasting systemwhich is managed by FERTILITATEA. It consists of 40 District Pest Control Stations across thecountry which report information to a forecasting center in Chisinau. The present forecasting systemis out-dated and relies on teletypes and clerks to process the data. This leads to delays of three to fourdays before the pest information is actually available on the farms. After privatization ofFERTILITATEA, the pest forecasting system is now be operated by the Ministry of Agriculture andFood (MAF).

o. Residue Control. At the moment, five laboratories under the management of the StateDepartment of Sanitation and Epidemiology are capable of analyzing pesticide residues in water, air,soils, and plant residues. The ability to analyze pesticide residues is paramount to any pestmanagement system in order to certify that foodstuff do not exceed the maximum residue limits inMoldova or any importing country. The laboratory equipment, though functional, is outdated andneeds to be modernized.


9. The Integrated Pest Management component of the project comprises several elements,including: 1) education and extension of sustainable agriculture; and 2) pest forecasting methods, anearly warning system, and pesticide residue analysis.

[I It was planned to support IBPP through this loan after implementing the necessary management changes atIBPP. However, these changes have not been undertaken so far. Future projects might therefore support IBPP.

CIP 3Page 3 of 5

10. Extension and training center for sustainable agriculture: The Project would equip the pilotresearch farm in Beltsi and the agricultural training center, supporting the MOLDAGROECOprogram, in Tsaul, with farm, office, and laboratory equipment to initiate a training program forfarmers on methods of sustainable agriculture. The research farm currently uses large tractors andmachinery which are not suitable for demonstrations of sustainable farming methods in smaller, privatefarms. Minibikes would be used by the extension specialists to scout fields and visit farms. Thelaboratory equipment would be used for demonstration purposes.

11. Early warning systems and pesticide residue analysis laboratories: The Project wouldimprove the work of the pest forecasting unit by modernizing the communications equipment at the 40District Crop Protection Stations in order to ensure timely and accurate warnings of developing pests.The stations would be equipped with dataloggers to record, store and transmit a number of parametersfor risk assessments of developing pests to the central forecasting unit in Chisinau. The unit wouldreceive technical assistance to process the information and prepare the warnings of developing pests tofarmers. The project would further re-equip two pesticide residue laboratories with modern analyticalequipment to improve the capacity and accuracy of testing for contaminations with pesticides. Thesepesticide residue laboratories, located in Dondusheni and in Cagul, are managed by the Ministry ofHealth's State Department of Sanitation and Epidemiology. The pesticide residue labs would routinelyperform about 5000 analysis annually per year to test for all kinds of environmental contaminants,especially pesticides.

D. COMPONENT COSTS

12. The base cost of the Integrated Pest Management component is estimated at $0.7 million.Detailed cost descriptions can be found in Tables 1-4 of Attachment I to this volume of the Annexes.

E. FINANCING PLAN

13. The foreign exchange costs of this component would be financed 100% from the Bank loan,while local costs, e.g. operation and maintenance of the equipment and facilities would be coveredthrough MAF.

II. IMPLEMENTATION ARRANGEMENTS

A. ORGANIZATIONS RESPONSIBLE FOR COMPONENT COORDINATION

14. The Project Management Committee, through the Department for Crop Protection andSelectsia would coordinate the activities of the implementing agencies: (a) Selectsia for theMoldagroeco program; (b) the State Department of Sanitation and Epidemiology of the Ministry ofHealth; and (c) the Ministry of Agriculture and Food's pest forecasting unit. The PMC staff wouldcoordinate procurement of the laboratory and other equipment for this component on the behalf of thebenefitting laboratories in MAF and the Ministry of Health.

CIP 3Page 4 of 5

B. RESPONSIBILITIES OF THE IMPLEMENTING AGENCY

15. The MAF will be responsible for coordinating the Integrated Pest Management activities of theMoldagroeco program through: (i) "Selectsia"; and (ii) the MAF Department of Crop Protection, thepesticide residue laboratories, and the pest forecasting unit.

D. ROLE OF THE WORLD BANK DURING SUPERVISION

16. The Integrated Pest Management component of the project would be supervised by Bankpersonnel. It is planned that about 10 staff-weeks of effort would be needed for supervision, fourweeks during start up year and three weeks each in year two and year three.

m. IMPLEMENTATION PLAN

A. TIME-BOUND SCHEDULE

17. Detailed schedules for the three year implementation period of this component are provided inAnnex 1 to the main report.

B. PROCUREMENT ARRANGEMENTS AND SCHEDULE

18. Equipment for this component has been packaged with equipment requirements for othercomponents - See Annex 5.

IV. MONITORING AND EVALUATION

A. ACTIONS TO MONITOR DEVELOPMENT OBJECTIVES

19. Project monitoring indicators will be used to track progress on Integrated Pest Managementthroughout the project cycle . These indicators will produce the necessary information for the projectevaluation.

Page 5 of 5

B. COMPONENT INDICATORS

20. The following indicators are proposed to be used to monitor and evaluate progress during theimplementation of the Integrated Pest Management component of the project they are also described inthe SAR in Table 5.3:

(a) Institutional Indicators:

(i) Coordination meetings are held on a regular basis among the members of theIntegrated Pest Management committee.

(b) Operational Indicators:

(i) x number of farms agree to introduce IPM on their farms and cooperate with theMoldagroeco programn; and

(ii) pesticide residue laboratories undertake routine random sampling of Moldovanagricultural products on pesticide residues and publish results.


ATTACHMENT 1

DETAILED COST TABLES

MoldovaAgriculture Development I Project

Table 101. Education & Extension of Sustainable Agriculture - SelectsiaDetailed Coats

(US$)

Oanstitips Unit Base Costrnit 1997 1999 i 2000 Total COAt 1997 1ilt 1999 2000fl TZtal

X. Investnt CostsA. Macbinary and Equipmat

Tractor, 4WD, Skw, front loader Unit 1 - - - 1 52 52.0 - - - 52.0Forage harvester w/ maize head Unit 1 - - - 1 11.5 11.5 - - - 11.5Ray mower/windrower Unit 1 - - - 1 7 7.0 - - - 7.0Dump wagon hydraulic, 30 cu a Unit 1 - - - 1 4.1 4.1 - - - 4.1Hay baler, round, 700 kg Unit 1 - - - 1 22 22.0 - - - 22.0Disc, tandem, 3.2. Unit I - - - 1 3.4 3.4 - - - 3.4Spader/digger, 1.9m Unit 1 - - - 1 6.6 6.6 - - - 6.6Scraper blade, 2.1 m Unit 1 - - - 1 0.6 0.6 - - - 0.6Tooth harrow, 0 m Set 1 - - - 1 6.5 6.5 - - - 6.5Rotary hoe, 8 m Set 1 - - - 1 8 8.0 - - - 8.0Sprayer, 600 1 /a Unit 1 - - - 1 2.4 2.4 - - - 2.4Aerway machine, 3 m Unit 1 - - - 1 4.7 4.7 - - - 4.7Minimum tillage grain drill, 3 m Unit 1 - - - 1 8.5 8.5 - - - 8.5Back hoe, rubber tires, 41WD, 45kw Unit 1 - - - 1 39 39.0 - - - 39.0Spare parts Set 360 _ - 360

Total Investnt Costs 212.3 - - - 212.3I. Recurrent Costs

A. Operations & Maintenance Ls 12.0 12.0 12.0 12.0 4a.0Total Recurrent Costs 120 12A0 12L0 12 L0 4S.0

Total 224.3 12.0 12.0 12.0 260.3

\a 9m boom, diaphr. pump, spray monitor, auto boom control.

Wed Apr 03 14:01:57 1996

1-1 Edt' -ation & Extension of Sustainable Agriculture - Selectsia


Table 102. Pesticide Residue analysis, State Dept. of Sanitation & Epidemiology. MOMDetailed Costs

(US$)

Quantities Unit Base CostUnit '997 1998 1999 2000 Total Cost 1997 199 1999 2000 Total

I. Investet CostsA. Equipment and Supplies

1. Laboratory gquipentPesticide standards Standard 8 8 8 - 24 1 8.0 8.0 8.0 - 24.0Chemical Reagents Set 1 1 1 - 3 9 9.0 9.0 9.0 - 27.0Personal computers and supplies Ls 4 - - - 4 4 160.0 - - -16.0

Subtotal Laboratory Equipment 33.0 17.0 17.0 - 67.0B. Vehicles

Automobiles /a Unit 3 - - - 3 10 .J - - - 30.0Total Investmnt Costs 63.0 17.0 17.0 - 97.0II. Recurrent Costs

A. Operations & Maintenance Ls 4.5 4.5 4.5.S 4.5 18. 0Total Recurrent Costs 4.5 _._5_ 4.5 4.5 18.0

Total 67.5 21.5 21.5 4.5 115.0

\a Minivans for sample collection.

Wed Apr 03 14:02:00 1996

2-1 Pesticide Residue analysis, State Dept. of Sanitation & Epidemiology, MOM


Table 103. Early Warning System NPO Codru, Porumbeni, SelectsiaDetailed Coats

(US$)

Onuantities Unit Base CostUnit 1997 1998 1999 2000 Total Cost 19l7 199A 1999 2000 Total

I. Investment CostsA. Rquipmnt end Supplies

Dataloggers /a Unit 30 - - - 30 0.6 18.0 - - - 18.0

Computers /b Unit 10 - - - 10 4 40.0 - - - 40.0Supplies /c Month 12 12 12 - 36 0.4 _4 8J 4.8 4. 8 - 14A4

Total Investent Costa 62.8 4.8 4.8 - 72.4

II. Recurrent CostsA. Operations & Maintenance Ls 6.3 6.3 __6.J 3.63 25.1

Total Recurrent Costs __6i 3 6.3 _6_3 6L3 25L1Total 69.1 11.1 11.1 6.3 97.5

\a with leaf wetness, hi/lo temps, rainfall, etc. battery operated.\b PCs for dataloggers, modem, standard software, printers\c Supplies, parts, local travel, field demonstrations & foreign meetings.

Wed Apr 03 14:02:04 1996

3-1 Sarly Warning System NPO Codru, Porumbeni, Selectsia


Table 104. Communications and Peat Scouting ItemsDetailed Costs

(US$)

Quantities Unit Base Cost0niL 1997 1211 1999 2000 Total Cost 1997 l99 199 2000 Total

I Invest t Cost.A. Equipment and Supplies

Microscope /a Unit 10 10 - 20 1.3 13.0 13.0 - - 26.0Minibikes Unit 10 10 - - 20 2.2 22.0 22.0 - - 44.0Technical Supplies /b Month 10 10 10 10 40 3 30.0 30.0 30.0 30.0 120.0

Total Inyastunt Coats 65.0 65.0 30.0 30.0 190.0II. Recurrent Costs

A. Operations & Maintenance La 6.S 6. 5 65 6 5.26&0Total Recurrent Costs 6.5 6.5 6.5 6.5 2610

Total 71.5 71.5 36.5 36.5 216.0

\a Zoom, stereoscopic, built-in illulminator for incident light.\b Supplies, parts, local travel, field demonstrations and foreign meetings.

Wed Apr 03 14:02:07 1996

4-1 Communications and Pest scouting Items


Table 105. Research and Dent. at Nat'l Institute of Viticulture & OenologyDetailed Costs

(US$)

Onanrit,isig Unit Base CostVUni 1997 A2I8 ASfl - 2000 Tctal Cogst AL2 &1L9 1°°° 2000 Tct-l

I. Inv-es - t CostsA. Plantation of 100 ha of high quality, virus-free clones of vineyards

Land Preparation Ha 50 50 - - 100 0.42 21.0 21.0 - 42.0Imported genetic material Ha 50 50 - - 100 5 250.0 250.0 - - 500.0Planting and inputs Ha 50 50 - - 100 0.32 16.0 16.0 - - 32.0Care for seedlings Ha 50 100 100 - 250 0.21 10.5 21.0 21.0 - 52.5Trellising Ha 75 75 - - 150 2 150.0 150.0 - - 300.0Trellising Ha 25 25 25 25 100 2 __Q_ Q 50.0 5.0 5. 5.0 20.0QSubtotal Plantation of 100 ha of high quality, virus-free clones of vineyards 497.5 508.0 71.0 50.0 1,126.5B. Experisantal wine Bottling and Conditioning Plant1. Autq tic Bottling Line for Still Wines /a

Bottle washing line Unit 0.5 0.5 - - 1 45 22.5 22.5 - - 45.0Bottle filling line (sterile bottling) Unit 0.5 0.5 - - 1 67 33.5 33.5 - - 67.0Bottle corking machine Unit 0.5 0.5 - - 1 18 9.0 9.0 - - 18.0Complete labelling equipment Unit 0.5 0.5 - - 1 95 47.5 47.5 - - 95.0Bottle wrapping equipment Unit 0.5 0.5 - - 1 20 10.0 10.0 - - 20.0Thermoplastic capping equipment Unit 0.5 0.5 - 1 30 15.0 15.0 - 30.0Equipment for automatic placing bottles in crates Unit 0.5 0.5 - - 1 66 33.0 33.0 - - 66.0Electric forklifts Unit 1 1 - - 2 10 10.0 10.0 - - 20.0Ancillary equipment Set 0.5 0.5 - - 1 66 -3.0 33.0 - _ 66.0

Subtotal Automatic Bottling Line for Still Wines 213.5 213.5 - - 427.02. Complete Bottlins Line for Sparkling Wines lb

Bottle washing line Unit 0.5 0.5 - - 1 45 22.5 22.5 - - 45.0Bottle filling line (sterile bottling) Unit 0.5 0.5 - - 1 165 82.5 82.5 - - 165.0Bottle foiling equipment Unit 0.5 0.5 - - 1 40 20.0 20.0 - - 40.0Complete labelling Unit 0.5 0.5 - - 1 96 48.0 48.0 - - 96.0Bottle wrapping equipment Unit 0.5 0.5 - - 1 31 15.5 15.5 - - 31.0Equipment for automatic filling of bottles into crates Unit 0.5 0.5 - - 1 50 25.0 25.0 - - 50.0Ancillary equipment /c Unit 0.5 0.5 - - 1 73 .. 3..I.5 - 73.0

Subtotal Complete Bottline Line for Sparkling Wines 250.0 250.0 - - 500.03. Ancillary EquipymntGrape presses (3 t/hr) Unit 1 1 - - 2 65 65.0 65.0 - - 130.0Pasteurizer (500 dal/hr) Unit 1 1 - - 2 20 20.0 20.0 - - 40.0Cooler Unit 1 1 - - 2 20 20.0 20.0 - - 40.0Crusher wl pumps, raw juice Unit 1 1 - - 2 28 28.0 28.0 - - 56.0Lamelle filters (40x40 cm) Unit 1 1 - - 2 11 11.0 11.0 - - 22.0Piston pumps (5 t/hr) Unit 2.5 2.5 - - 5 5 12.5 12.5 - - 25.0Centrifugal pumps (5 t/hr) Unit 2.5 2.5 - - 5 5 12.5 12.5 - - 25.0Rotary pumps for raw juice, w/ hopper (5 s/hr) Unit 1 1 - - 2 28 28.0 28.0 - - 56.0Spare parts La 65.0 65.0 - - 130.0Site preparation and installation costs Ls 1.0L .175.0 _ - 350O0Subtotal Ancillary Equipment .0 437. 0 --A3_ 874.0Subtotal Experimental Wine Bottling and Conditioning Plant 900.5 900.5 - - 1,801.0C. Training

Genetics /d Manmonth 15 15 15 - 45 3 45.0 45.0 45.0 - 135.0D. Scientific Laboratory EquipmentAtomic absorption spectrometer Unit 1 - - - 1 100 100.0 - - - 100.0Liquid chromatograph Unit 1 - - - 1 60 60.0 - - - 60.0Gas chromatograph /e Unit 1 - - - 1 30 30.0 - - - 30.0Spectrophotometer Unit 1 - - - 1 50 50.0 - - - 50.0Automatic titrator Unit 2 - - - 2 10 20.0 - - - 20.0lonometer Unit 2 - - - 2 4 8.0 - - - 8.0Aminoacid analyzer Unit 1 - - - 1 40 40.0 - - - 40.0Flane photometer Unit 1 - - - 1 8 8.0 - - - 8.0Refractometer Unit 1 - _ 1 15 15.0 - 15.0Fluorescent Spectrometer Unit 1 - - - 1 40 40.0 - - - 40.0Microscope Unit 2 - - 2 8 16.0 - 16.0Balances Unit 2 - - 2 4 8.0 - _ _ 8.0Balances Unit 2 - - 2 8 16.0 - - - 16.0Imidometer Unit 1 - - 1 8 8.0 - - 8.0Bioreactor Unit I - - 1 30 30.0 - - 30.0Thermostate (automatic) Unit 2 - - 2 1 2.0 - - 2.0Drying oven Unit 1 - - _ 1 2 2.0 - - 2.0Spectrophotometer (Russian) Unit 1 - _ 1 1 1.0 - _ 1.0Field refractometer Unit 1 - - - 1 1 1.0 - - 1.0Cold chamber +10 to -40 dgr. C Unit 1 - - - 1 10 10.0 - - - 10.0Centrifuge with cooling Unit 1 - - - 1 1 1.0 - - - 1.0Portable instruments for field evaluation of leaves Unit 1 - - - 1 1S 15.0 - - 15.0

5-1 Research nd Devt. at Nat'l Institute of Viticulture O Oenology

Portable instruments for field evaluation photosynthesis Unit 1 - _ 1 1S 15.0 - 15.0Luxometer (Russian) Unit 1 - - - 1 1 1.0 - - - 1.0Meteostation Unit 1 - - - 1 35 35.0 - - - 35.0Chemicals and disposables /f Ls 50.0 50.0 50.0 - 150.0Site preparation and installation Ls 35 O - - - 35

Subtotal Scientific Laboratory Equipm-nt 617.0 50.0 50.0 - 717.0N. Completion of Institute's Genetic Bank ig

1. Imported genetic materials Ha 8 8 - - 16 6.25 50.0 50.0 - - 100.02. Chemicals and disposables Ha 5 5 S 15 3 15.0 lS O 15 - A

Subtotal Completion of Institute's Genetic Bank 65.0 65.0 15.0 - 145.0F. Trial Nurseries and Experimental Vineyard Plots

Complete equipment for trial nursery workshop Unit I - - - 1 20 20.0 - - - 20.0Grape seedling planter Unit 1 - - - 1 20 20.0 - - - 20.0Vineyard tractor & full set of equipment Unit 4 - - - 4 25 100.0 - - - 100.0Vineyard sprayers Unit S - - - 5 12 60.0 - - - 60.0Grape harvester (trailed) Unit 1 - - 1 20 20.0 - - - 20.0Fertilizer spreader Unit 2 - - - 2 5 10.0 - - - 10.0Chemicals and disposables TH 2,000 4,000 4,000 - 10,000 0.01 20.0 40A 0 40L0 -------- 100 0

Subtotal Trial Nurseries and Experimental Vineyard Plots 250.0 40.0 40.0 - 330.0G. REstablishment of Drip Irrigation /h

Drip irrigation in nursery Ha 5 5 - 10 6.5 32.5 32.5 - 65.0Full drip irrigation upgrade greenhouse Ha - 1 - 1 42 - 420 .... - __420

Subtotal Establishment of Drip Irrigation 32.5 74.5 - - 107.0N. Computerization of Research Network

1. Computer SystemsLan server /i Set 1 - - - 1 25 25.0 - - - 25.0Lan workstation /j Unit I - - - 1 53 53.0 - - - 53.0Site preparation and installation costs Set 2.5L0 - - - 25 0

Subtotal Computer Systems 103 .0 - - - 103. 02. Supplemental technology equipment/supplies

Zoom FaxModem VFPV32bis, MNP-S, 4-42bis, internal Unit 1 - - - 1 0.9 0.9 - - - 0.9FaxModem Hayes-compatible external 14.4K/MNP-5 Unit 1 - 1 0.4 0.4 - - - 0.4FX-1OOOR dot matrix printer (Latin/Cryllic) Unit 1 - 1 7.5 7.5 - - - 7.5Smart-UPS 600 va (5sOWt) Unit 1 - 1 0.7 0.7 - - - 0.7LaserJet 4L, 600 dpi + RET, A4, lMB t MET Unit 1 - 1 3.2 3.2 - 3 2

Subtotal Supplemental technology equipment/supplies 12.7 - 12.73. Supplemental LAN components /k Unit 25 - - 25 0.5 12.5 - 12.54. Accessories

250 MB casette for type backup Set 1 1 1 1 4 1 1.0 1.0 1.0 1.0 4.0Diskettes 1.44 MB/3.5' HD Set 1 1 1 1 4 0.8 0.8 0 .8 0.8 0 .8 3. 2Diskettes 1.2MB/5.25 HD Set 1 1 1 1 4 0.8 0.8 0.8 0.8 0.8 3.2Ribbons for dot matrix printer Set 1 1 1 1 4 0.3 0.3 0.3 0.3 0.3 1.2Cleaning diskettes 3.5" Set 1 1 1 1 4 0.1 0.1 0.1 0.1 0.1 0.4Cleaning diskettes 5.25" Set 1 1 1 1 4 0.1 0.1 0.1 0.1 0.1 0.4Monitor filters Set 1 1 1 1 4 0.2 0.2 0.2 0.2 0.2 0.8Toner cartridge for LaserJet printer Set 1 1 1 1 4 0.4 0.4 0.4 0.4 0.4 1.6Mouse pad Set 3 - - - 3 0.002 0.0 - - - 0.0Disk box 3.5" (40 diskettes) Set 1 1 1 1 4 0.5 0.5 0.5 0.5 0.5 2.0Disk box 5.25" (100 diskettes) Set 1 1 1 1 4 0.5 .S 05 OS O S .05S 2.0

Subtotal Accessories 4.7 4.7 4.7 4.7 18.85. Software

MS DOS 6.2 Unit 1 - - - 1 0.1 0.1 - - - 0.1MS Windows, latest version (Russian) Unit 1 1 0.1 0.1 - 0.1Novell NetWare version 3.11, 10 users (Russian) Unit 1 - 1 1.4 1.4 - 1.4Lotus 123, version 4.0 for Windows (Russian) Unit 1 - 1 0.1 0.1 - - 0.1Lotus cetMail Platf. Pack (Russian) Unit 1 - - - 1 0.4 0.4 - - - 0.4Lotus 123 Freelance 2.0 for Windows Unit 1 - - - 1 0.4 0.4 - - - 0.4Corel DRAW v. 4.0 Unit 1 - 1 0.6 0.6 - - - 0.6Corel ArtShow 4 (or latest) Unit I - - - 1 0.1 0.1 - - - 0.1Corel Ventura publisher v. 4.2 Unit 1 - - - 1 0.3 0.3 - - - 0.3SU Fontpack Lite (Russian True-Type fonts) 1 of 5) Unit 1 - - - 1 0.1 0.1 - - - 0.1Type fonts 1 of S Unit 1 1 0.1 0.1 - - 0.1Tiger vs. 1.5 (for ScanJet) Unit 1 - 1 0.1 0.1 - - 0.1Corel DRAW v. 4.0 (Russific.kit) Unit 1 - 1 0.1 0.1 - - 0.1Corel Vent. Publ. v. 4.2 (Russific.kit) Unit 1 - 1 0.1 0.1 - 0.1FontLab v. 2.5 for Windows Unit 1 - - - 1 0.4 0.4 - - 0.4Applied software Set 1 - - - 1 29 29.0 - - - 29.0Training of scientist users Ls 10.0 - - - 10 0

Subtotal Software 4 3 . 4 . 43 4Subtotal Computerization of Research Network 176.3 4.7 4.7 4.7 190.4I. Vineyard Pest Forecasting

Risk model Unit 1 - - - 1 84 84.0 - - - 84.0Training Manmonth 2 - - - 2 3 6 -i0 _.0 -

Subtotal Vineyard Poet Forecasting 90.0 - - - 90.0J. Rebahilitation of Viticulture Nurseries /1

1. Nursery 1Reconstruction of workshop Ls - 50.0 - - 50.0

5-2 Reser-h nd Devt. at Nat'l Institute of Viticulture & Oenology

Reconstruction of heating system Set - 30.0 - - 30.0Drilling artesian well Set - 20.0 - - 20.0Construction seedling storage Set - 20.0 - - 20.0Rehabilitation of transformation system Set - 1 - - 1 20 - 20.0 - - 20.0Modernization technology for graft program. La -s..2 ------ -

Subtotal Nursery 1 - 170.0 - - 170.02. Nursery 2

Reconstruction of workshop Ls - 20.0 - - 20.0Rehabilitation of irrigation system Ls 40.0 40.0Modernization technology for graft program Ls - 25.0 - - 25.0Establishment of rootstock nursery Ls - 60.0 - - 60.0Establishment of graft nursery Ls _- 6g ------ - 60-0

Subtotal Nursery 2 - 205 0 - - 205 03. Nursery 3

Reconstruction of workshop Ls 50s0 - - - 50.0Rehabilitation of irrigation system Ls 70.0 70.0Modernization technology for graft program Ls 20.0 - - - 20.0Establishment rootstock nursery Ls 60.0 - - - 60. 0Establishment of graft nursery Ls 60.0 - 60.0Vineyard tractors Unit 2 - - - 2 25 50.0 - - - 50.0Vineyard cultivation equipment Ls 15 I0 - _ 15 0

Subtotal Nursery 3 325.0 - - - 325.04. Nursery 4

Reconstruction of workshop Ls - 30.0 - - 30.0Rehabilitation of irrigation system Ls - 70.0 - - 70.0Modernization technology for graft program Ls 20.0 - - 20.0Establishment rootstock nursery Ls - 30.0 - - 30.0Establishment of graft nursery Ls - 30.0 - 30.0Vineyard tractors Unit - 1 - - 1 25 - 25.0 - - 25.0Vineyard cultivation equipment Ls 1 0 0 100

Subtotal Nursery 4 215.0 215.05. Nursery 5

Reconstruction of workshop Ls - 25.0 25.0Reconstruction of heating system Ls - 35.0 - - 35.0Rehabilitation of irrigation system Ls 35.0 35.0Modern, tech. for graft program Ls 15.0 - 15.0Establishment rootstock nursery Ls - 45.0 - - 45.0Establishment of graft nursery Ls - 9 --2--- 0- - 7s.

Subtotal Nursery 5 - 180.0 - - 180.06. Nursery 6

Reconstruction of workshop Ls - - 10.0 - 10.0Rehabilitation of irrigation system Ls - - 60.0 - 60.0Reconstruction of pond Ls - - 10.0 - 10.0Modern. tech. for graft program Ls 20.0 - 20.0Establishment rootstock nursery Ls 60.0 - 60.0Establishment of graft nursery Ls - - 45.0 - 45.0Vineyard tractors Unit - - 1 1 25 - - 25.0 - 25.0Vineyard cultivation equipment Ls _ _ - 10- - 1010

Subtotal Nursery 6 - - 240.0 - 240.07. Nursery 7

Reconstruction of workshop Ls - - 50.0 - 50.0Rehabilitation of irrigation system Ls - - 40.0 - 40.0Reconstruction of pond Ls - - 20.0 - 20.0Modernization technology for graft program Ls 20.0 - 20.0Establishment rootstock nursery La - - 30.0 - 30.0Establishment of graft nursery Ls - - 300 - 300

Subtotal Nursery 7 - - 190.0 - 190.08. Nursery 8

Reconstruction of workshop Ls 35.0 35.0Rehabilitation of irrigation system Ls 40.0 40.0Reconstruction of pond Ls - - 20.0 - 20.0Modern. tech. for graft program Ls 20.0 - 20.0Establishment rootstock nursery Ls - - 60.0 - 60.0Establishment of graft nursery Ls _ - 15.0 _15

Subtotal Nursery 8 - - 190.0 - 190.09. Genetic Materials for Nurseries Ls ---- 330.0 3J30 IL0 310.0& 990 O

Subtotal ehabilitation of Viticulture Nurseries i325 .0 1100J 0 950 30 2 02 705LZ 0Total Investment Costs 2,998 .8 2,787.7 1,175.7 384 .7 7,346.9II. Recurrent Costs

A. Operations & MaintenanceScientific Laboratory Equipment Ls 61.7 61.7 61.7 61.7 246.8Trial Nurseries & Vineyard Plots Ls 25.0 25.0 25.0 25.0 100.0Vineyard Pest Forecasting Ls 9.0 9.0 9.0 9.0 36.0Viticulture nurseries operations /m Ls _ 0A p 30 0 300 0 300fl 0 900 20.

Total Recurrent Costs 95t7 395a7 395.7 395.7 1 2828Total 3,094 5 3,183 4 1,571 4 780 4 8,629 7

5-3 Research a-d Devt. at Nat'l Institute of Viticulture & oenology

\a 3,000 bottles/hr.\b 3,000 bottles/hr.\c Pumps, transporters, cooling, pasteurizing, filters, etc.\d Growing and processing, technology, biometrics, agric. economics, market research, viticulture farm management.\e With flame ionization selection detector.\f Reagents, spares.\g On about 16 ha. Based on 1,000 Th/tractor/yr and $10/th.\h On 10 ha of viticulture nursery of 1 ha of viticulture greenhouse. Costs include design, all equiment, freight and insurance, on-site installation supervision, and periodic

on-site technical and agronomic support during the first season.\i Intel Pentium 486 DX/100 Mhz, Cache 256 KB external, 32 bit interface, 32 MB RAM, HDD STI2400N, 2100MB, 10ma, SVGA card, SVGA 14" monitor (1024 KB video RAM, .39), CD-ROM, 600

MB, SCSI, internal, Dual floppy, 3.55,5.25, Jumbo 3.5", 250 MB drive.\j Intel 486DX/66, Cache 256 KB external, 32 bit interface, 32 MB RAM, 70ns, 210 MB IDE disk driver, 3.5" 1.44 MB 5.25" 1.2 MB hi.d. FDD, XVGA card, SVGA monitor (1024 kb RAM) 14",

2 serial/l parallel interface board, standard 101 keyboard Cyrillic.\k Intelligent bhub (about 25 connections)\l Location of Nurseries: l-JSC Velen, rayon Vulcanesti; 2-Agric. cooperative Peresecina, rayon Orhei; 3-Agrofirma Vornitsheni, rayon Strasheni; 4-Agric. Enterprise Butucel, rayon

Strasheni; 5-JSC Mugurel, village Kozhushna, rayon Strasheni; 6-Agrofirm Gura.\m Operating costs only for first year as remaining years are covered by sales revenues.

Wed Apr 03 14:02:32 1996

-4 Rs-arch Pa d D-lvt At Katl Tnhtiit:te of VitiulMture & Oenoloov


Table 106. Demonstrations of Modern Production TechnologyDetailed Costs

(US$)

Duantities Unit Base CostUnit 1997 1998 1999 2000 AX Ttta C 997 1998 1999 2000 Total

I. Investment CostsA. Demonstration of Modern Production Technology

1. Drip Irrig Demonstration - JSC Nistru. rayon OrheiDrip irrigation in fruit orchard Ha 45 46 - - 91 4.1 184.5 188.6 - - 373.1External delivery pipe Pipe 1 - - - 1 39 39.0 - - -39.0

Subtotal Drip Irrig Demonstration - JSC Nistru, rayon Orhei 223.5 188.6 - - 412.12. Drip Irrig Demonstration - JSC Besarabia distr. Aneni-Noi

Drip irrigation in fruit orchard Ha 45 45 - - 90 3.3 148.5 148.5 - - 297.0External delivery pipe Pipe 1 - - - 1 48 48.0 - - 48.0

Subtotal Drip Irrig Demonstration - JSC Besarabia distr. Aneni-Noi 196.5 148.5 - - 345.03. Crop Protection Equipment

Air blast sprayer for orchards Unit 10 - _ 10 20 200.0 - - -200.0

Total Investment Costs 620.0 337.1 - - 957.1II. Recurrent Costs

A. Operations & Maintenance /a Ls - - -Total Recurrent Costs - - -

Total 620.0 337.1 - - 957.1

\a Covered by revenues from nurseries

Wed Apr 03 14:02:34 1996

6-1 fl-onstrations of Modern Production Technology


Table 107. Support to Research Institute for Fruit ProductionDetailed Costs

(US$)

Ouantities Unit Base CostUnit 1997 1998 1999 200n Total Cost 1997 1998 1999 2000 Total

I. Investment CostsA. Support to Research Institute

1. Drip Irrigation in Nursery (Equipment) Ha 17 - - _ 17 3 51.0 - _ _ 51.02. Delivery, site preparation and installation Ha 17 - - - 17 0.6 10.2 - - - 10.23. Training

Virology, genetics, etc. Manmonth 15 15 15 - 45 3 45.0 45.0 45.0 - 135.04. Equipment, Materials and Supplies

Imported genetic materials Set 1 - - - 1 100 100.0 - - - 100.0Chemical reagents Ls 5.0 5.0 5.0 - 15.0Spare parts Ls 10.0 10.0 5.0 - 25.0Computers and software Set 4.0 - - - 4.0Publications Set 100.0 100.0 100.0 - 300.0Delivery, site preparation and installation Ls 24 0 - _ 24-0

Subtotal Equipment. Materials and Supplies 243.0 115.0 110.0 - 468.05. Laboratory Equipment Ls 196.0 - - - 196.06. Chemicals Ls 80.0 50.0 45.0 - 175.07. Delivery, site preparation and installation Ls 35.0 - - - 35.08. Experimental Production Line

Experimental production line Ls 500.0 280.0 - - 780.0Site preparation and installation Ls _145_.0 - - - 14.

Subtotal Experimental Production Line 6450Ai 280.0 - - 92.0Total Investment Costs 1,305.2 490.0 200.0 - 1,995.2II. Recurrent Costs

A. Operations & Maintenance Ls 25.0 25.0 .2L...2.0 100Q0Total Recurrent Costs .25 0 25.0 25.0 25.0 100.0

Total 1,330 .2 515.0 225 .0 25.0 2,095.2

Wed Apr 03 14:02:39 1996

7-1 Sunr rt to Research Institute for Fruit Production


Table 108. Vegetable Propogation - PorumbeniDetailed Costs

(USS)

Duantities Unit Baae CostUnit 19 i 19999 2000 Toal CCot 1997 1998 1999 2000 Total

I. Inves-tment CostsA. Seed Potato Mechanization

Mounted reversable plough (3 furr., 90 cm) Unit 1 - 1 10 10.0 - - - 10.0Mounted heavy cultivator, 3-4m Unit 1 - - - 1 10 10.0 - - - 10.0Mounted offset disc, 3m Unit 1 - - - 1 8 8.0 - - - 8.0Mounted ridger, 4 rows Unit 1 - - - 1 6 6.0 - - - 6.0Mounted fertilizer spreader, 1500 1 Unit 1 - 1 5 5.0 - - - 5.0Fully automatic planter, 4r., 3 pt. hitch Unit 1 - - - 1 14 14.0 - .0Harvester, 2 rows Unit 1I 1 85 85.0 - - - 85.0Sorting line, 4 sizes, 6 t/h Unit 1 - - - 1 15 15.0 - - 15.0Spare parts Set 1 - - - 1 30 30.0 30 - 30.0Certified seed T 150 - - - 150 0.7 2&L.Q - .... -20.

Subtotal Seed Potato Mechanization 288.0 - - 288.0B. Plasticulture

Plastic mulches, low tunnels, walk-in tunnels /a Ha 60 - - - 60 2.5 150.0 - _ - 15.QTotal Investment Costa 438.0 438.0II. Recurrent Costs

A. Operations and maintenance LS - .0.~s 1.0n nss 5.Total Recurrent Cost 4 15.0 15.0 15.0 483.0

Total 436.0 15.0 15.0 15.0 483.0

\a About 20 ha each for North, Central and south Moldova.

Wed Apr 03 14:02:43 1996

8-1 Vegetable Propogation - Porumbeni


Table 109. Livestock Breeding - TevitDetailed Costs

(US$)

Ouantities Unit Race CostUnit 1997 1998 1999 2000 Total rost 1997 1998 1999 2000 Total

I. Investment CostsA. Artificial Insemination Equipment ls 3 0 - - - 3D0

Total Investment Costs 300.0 - - - 300.0II. Recurrent Costs

A. Operation and Maintenance Ls - 30.0 30.0 30-0 90.0Total Recurrent Costs - 30.0 30.0 30 . 90.0

Total 300.0 30.0 30.0 30.0 390.0

Wed Apr 03 14:02:47 1996

9-1 Livestock Breeding - Tevit


Table 201. Institutional StrengtheningDetailed Costs

(US$)

Ouantities Unit Base CostUnit 1997 19H 1 Total Cost 199 fl8 1otal

I. Invest-ent CostsA. TA And Studies

1. Training and Technical Assistance /a Ls 200.0 200.0 - - 400.0B. MA Grains Regulatory Labs

1. Office EquipmentPhotocopier Unit 1 - - - 1 2 2.0 - - - 2.0Telephone Answering system with fax Unit 1 - - - 1 1 1.0 - - - 1.0Personal Computer (pentium) Unit 1 - 1 2 2.0 _ _ 2.0Printer Unit 1 - - - 1 1 1.0 - - - 1.0LIMS software La 30.0 - - -30-0

Subtotal Office Equipment 36.0 - - - 36.02. Laboratory Equipment

Kjeldahl nitrogen, protein analyzer /b Unit 1 - - - 1 30 30.0 - - - 30.0Grinding Mill: Cyclotec, Cemotec Quick Unit 2 - - 2 10 20.0 - - - 20.0Multi-sample Digestion System /c Unit 1 - - 1 10 10.0 - - - 10.0Solvent Extraction System for fat Soxtec System HT 6 Unit 1 - - - 1 20 20.0 - - - 20.0Near Infrared Transmittance /d Unit 1 - - 1 40 40.0 - - - 40.0Electronic Analytical Balance /e Unit 2 - _ 2 5 10.0 - - - 10.0Analyzer falling number /f Unit 2 - - - 2 20 40.0 - - - 40.0Instant measurement moisture /g Unit 1 - 1 10 10.0 - - 10.0Fiber analyzing system Unit 25.0 - - - 25.0Amino acid analyzer Unit 1 - - - 1 85 85.0 - - - 85.0Atomic absorption spectrometer Unit 1 - - 1 30 30.0 - 30.

Subtotal Laboratory Equipment 320.0 - - - 320.03. Study Tour

Airline tickets Ls 8.0 - - - 8.0Subsistence expenses /h Ls 6.0 - - - 6.0Tour organization La 4.0 - - - 40

Subtotal Study Tour .O - _ - .0Subtotal MAP Grains Regulatory Labs 374.0 - - -374.0

Total Investment Costs 574.0 200.0 - - 774.0II. Recurrent Costs

A. Operations & Maintenance Ls 31.0 62.0 62.0 62.0 217.OTotal Recurrent Costs 31.0 62.0 62.0 62.0 217.0

Total 605.0 262.0 62.0 62.0 991.0

\a For agricultural research, extension and education study tours and agro-enterprise management training.\b Kjeltec Auto 1030, combined with digestion system 20 forming the Kjeltec Auto System II\c for semi-micro Kjeldahl or for wet descructions\d Infratec whole grain analyzer infratec-1226\e 0-50g, readability 0.01S\f Falling number 1500\g In whole grains, feed... Moisture systems.\h Including local transport

Wed Apr 03 14:02:51 1996

10-1 Institutional Strengthening


Table 301. Policy Planning & Project PreparationDetailed Costs

(US$)

Ouantities Unit Base Costunit 1997 1998 1999 2000 Ttal Cost 1997 199AliS_ 2000 Total

I. Investment CostsA. Project Preparation Months 13 - - - 13 15 195.0 - - - 195.0B. Acva Projekt

Personal computers Unit 8 - 8 4 32.0 - - - 32.0Jet plotters Unit 2 - - - 2 6 12.0 - - - 12.0Digitizer Unit 2 - 2 3 6.0 - - - 6.0Novel network Unit 2 - - - 2 3 6.0 - - - 6.0Software Set 2 - - - 2 22A l - - - 44.0

Subtotal Acva Projekt 1000 - - -100 0Total Investment Costs 295.0 - - - 295.011. Recurrent Costs

A. Operating Costs for Akva Projekt Ls 1.0 3.0 310 3.0 10A 0Total Recurrent Costs 1..W 3Li0 3. _3- 1

Total 296.0 3.0 3.0 3.0 305.0

Wed Apr 03 14:02:56 1996

11-l Policy Planning & Project Preparation


Table 401. Project ManagementDetailed Cost.

(US$)

ouantities Unit Base CostUnit 1997 1998 1999 2000 Total Cogt 1997 1998 19_ 2000 Total

I. Invest mnt CostsA. Technical Assistance

Procurement Services /a Contract 1 - - - 1 200 200.0 - - - 200.0Training Months 6 2.7 - - 8.7 15 90.0 40.5 - - 130.5Annual Audit, other TA Ls 10.0 10.0 10.0 10.0 40.0

Subtotal Technical Assistance 300.0 50.5 10.0 10.0 370.5B. affice Equipment

Photocopier Unit 1 - - - 1 6 6.0 - - - 6.0Fax Unit 1 - - - 1 3 3.0 - - - 3.0LaserJet printer Unit 2 - - - 2 4 8.0 - - - 8.0Computer and software Unit 5 - - - 5 3 15.0 - - - 15.0Portable computers Unit 2 - - - 2 6 12.0 - - - 12.0Misc. small equipment Ls 3.0 3.0 - - 6.0Furniture /b UnitAutomobiles Unit 2 - - - 2 15 30.0 - - 30.0

Subtotal Office Equipment 77.0 30 -8.0Total Investment Costs 377.0 53.5 10.0 10.0 450.5II. Recurrent Costs

A. Local Staff /c Months 60 60 60 60 240 0.5 30.0 30.0 30.0 30.0 120.0B. Office O&M /d Ls 20.0 20.0 20.0 20.0 80.0C. Computer supplies Ls 5.0.. s.0._ 5.0 5.0 20.0

Total Recurrent Costs 55.o 55.0 55.o 55.0 220kOTotal 432.0 108.5 65.0 65.0 670.5

\a Second and third years of this contract will be funded from the Energy and other Bank loans. This TA will service all Bank projects in Moldova.\b Supplied from MAF's surplus stocks.\c Manager, Economist/M&E Specialist, Accountant, Administrative Assistance, Bilingual Secretary.\d Telecommunications, Paper, Local Transport, Energy, etc.

Wed Apr 03 14:03:00 1996

12-1 Project Management

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