Cambodia: Climate Resilient Rice Commercialization Sector Development Program

Sovereign Project | 44321-013

Summary

The Climate Resilient Rice Commercialization Sector Development Program (SDP) is proposed to support and accelerate the efficient and effective implementation of the Strategy on Agriculture and Water (SAW) and the Policy on the Promotion of Paddy Production and Rice Export (the Rice Policy). It will address food security and rice commercialization by prioritizing: (i) strengthening the rice value chain; (ii) improving the legal and regulatory framework in agricultural land management; (iii) improving access to credit by paddy producers and rice millers/exporters; and (iv) enhancing paddy production and productivity through improved irrigation water use efficiency, establishment of paddy post-harvesting facilities, and paddy crop insurance pilots. The SDP will (i) address major strategic thrusts of the 2011 2013 Country Partnership Strategy, and sector strategies and roadmap; and (ii) complement the on-going sector initiatives by emphasizing the commercialization aspects of rice.

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Project Name Climate Resilient Rice Commercialization Sector Development Program
Project Number 44321-013
Country Cambodia
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Grant 0349-CAM: Climate Resilient Rice Commercialization Sector Development Program
Global Agri and Food Security Program US$ 14.60 million
Grant 0350-CAM: Climate Resilient Rice Commercialization Sector Development Program
Strategic Climate Fund US$ 4.50 million
Loan 3006-CAM: Climate Resilient Rice Commercialization Sector Development Program
Asian Development Fund US$ 24.00 million
Loan 3007-CAM: Climate Resilient Rice Commercialization Sector Development Program
Asian Development Fund US$ 31.00 million
Loan 8271-CAM: Climate Resilient Rice Commercialization Sector Development Program
Strategic Climate Fund US$ 5.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Partnerships
Private sector development
Sector / Subsector

Agriculture, natural resources and rural development - Agricultural policy, institutional and capacity development - Agricultural production - Irrigation

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The Climate Resilient Rice Commercialization Sector Development Program (SDP) is proposed to support and accelerate the efficient and effective implementation of the Strategy on Agriculture and Water (SAW) and the Policy on the Promotion of Paddy Production and Rice Export (the Rice Policy). It will address food security and rice commercialization by prioritizing: (i) strengthening the rice value chain; (ii) improving the legal and regulatory framework in agricultural land management; (iii) improving access to credit by paddy producers and rice millers/exporters; and (iv) enhancing paddy production and productivity through improved irrigation water use efficiency, establishment of paddy post-harvesting facilities, and paddy crop insurance pilots. The SDP will (i) address major strategic thrusts of the 2011 2013 Country Partnership Strategy, and sector strategies and roadmap; and (ii) complement the on-going sector initiatives by emphasizing the commercialization aspects of rice.
Project Rationale and Linkage to Country/Regional Strategy

Development Context. During the last decade, Cambodia has achieved impressive economic growth with gross domestic products (GDP) averaging 10% per annum during the 2004-2010 period. Despite its declining GDP share from 46% in the 1990's to 34% in 2010, agriculture remains an important sector in the national economy. It is an important source of livelihood for 85% of the population. Paddy production covers 84% of cultivated land and contributes about 38% of agricultural value added or 13% of the national GDP in 2010. Paddy production has been crucial in creating employment and reducing the national poverty rate from 47% in 1993 to 30% in 2010. The Royal Government of Cambodia (RGC) set the annual GDP growth target of 7% and poverty reduction rate of 1% per annum from 2009 onwards. Given its significant share in the national GDP, rice continues to play a crucial role in enhancing macro-economic stability, food security, and poverty reduction. However, to achieve economic growth on a broader and sustainable basis, substantial constraints in rice value chain need to be removed.

Key binding constraints in rice commercialization observed include: (i) production is largely traditional and unorganized; (ii) value chains are weak and fragmented; (iii) agro-industry small and medium-sized enterprises (SME) are under-developed; (iv) intra- and inter-sector connectivity is limited particularly with energy, finance and transport constraining production and market access; and (v) domestic marketing standards are low and rice trading with regional and global markets is limited. These constraints are due largely to the lack of an enabling legal and/or regulatory environment for strengthening market linkages, productivity enhancement, organized production, and sustainable access to finance, among others. In terms of natural resources, while Cambodia is endowed with ample land and water resources favorable for paddy and other crop production, use efficiency of these resources is suboptimal due to limited capacity in agricultural land management and underinvestment in increasing total factor productivity. Therefore, it is critical for agricultural land to be managed efficiently and effectively by practicing sound agricultural land use zoning, soil productivity potential mapping, water use/irrigation efficiency management, and environmental and climate change risk/vulnerability mapping and management.

Innovative Features. The SDP is among the first initiatives in Southeast Asia that contemplates rice commercialization and simultaneously addresses resilience of its underlying agro-ecological system. As a matter of fact, the evolution and development of a commercial rice value chain will create pressure on natural resources which may cause degradation of the soil, loss of biodiversity or soil and/or water pollution. The SDP's interventions will increase resilience by promoting sound agricultural land use zoning, soil productivity potential mapping, water use/irrigation efficiency management, and environmental and climate change risk/vulnerability mapping. In this regard, the SDP, if implemented successfully, will be a role model for climate resilient cropping practices for rice in response to growing global food demand. Moreover, although the primary focus of the SDP will be on rice commercialization, the enabling legal, regulatory and institutional conditions put in place for rice will also create favorable conditions for the commercialization of other agricultural commodities. This will enable Cambodia to promote agricultural diversification and economic growth on a broader and sustainable basis.

Justifications for Adopting the SDP Modality. The proposed interventions include a policy reform component, an investment component, and an associated technical assistance. The SDP modality is preferred and proposed for the following reasons. Commercialization of rice that addresses resilience of its underlying agro-ecological system will entail adjustments in legal framework and relevant regulations coupled with institutional strengthening of relevant actors. While this is necessary, it will not be sufficient to unlock the potential of supply chain actors including private sector investors and individual households. Therefore, policy and regulatory reforms will have to be accompanied by well sequenced/timed investments that enhance factor productivity. In this regard, adopting the sector development program modality for the proposed interventions is not only desirable, but necessary. Moreover, the RGC is firmly committed to rice commercialization to enhance economic growth and food security. Significant adjustment costs are associated with its implementation.

Impact Increased Net Incomes of Stakeholders along the Rice Value Chain
Project Outcome
Description of Outcome Enhanced Production of Quality Rice in Cambodia while preserving the natural resource base
Progress Toward Outcome An Inception Mission was fielded to review the progress of the policy compliance requirements for the second tranche of the program loan. ADB undertook comprehensive discussions with the Ministry of Economy and Finance (MEF); Ministry of Agriculture, Forestry and Fisheries (MAFF); Ministry of Water Resources and Meteorology (MOWRAM); Ministry of Land Management, Urban Planning, and Construction (MLMUPC); Ministry of Industry and Handicrafts [MIH, formerly Ministry of Industry, Mine and Energy (MIME)]; and representatives from the provinces of Battambang, Kampong Thom, and Prey Veng on the detailed implementation arrangements including organizational structures, roles and responsibilities, detailed implementation plans, financing arrangements, disbursement arrangements, procurement of goods, works and services, consulting services, and other pertinent sections of the program administration manual (PAM). Coordination between the program implementation consultant (PIC), the program management office (PMO), national implementation offices (NIOs), and provincial implementation offices (PIOs) is being managed and efforts are being made to finalize the overall and annual work program, as well as an updated projection of anticipated contract awards and disbursements.
Implementation Progress
Description of Project Outputs

A Conducive Legal and Regulatory Environment Established to Facilitate Rice Commercialization

Agricultural Land-use Zoning Improved

Climate Resilient Rice Value Chain Infrastructure Developed

Enhanced Rice Value Chain Support Services to Improve Quality of Cambodian Rice

Weather-indexed Crop Insurance (WICI) Piloted

Efficient Program Management and Implementation

Status of Implementation Progress (Outputs, Activities, and Issues)

Issues on Policy and the Seed Industry require clarification on the mechanisms by which foundation seed is multiplied through to certified commercial seed available to farmers. General agreement has been reached on a Seed Policy but further work is required to bring this to formal approval. Although the Seed Law was passed in 2008, more work is required to implement a comprehensive regulatory framework on a Seed Certification Scheme.

The Project is making progress in the identification and selection of 90 target communes to undergo CLUP/AEA activities and preparing the associated methodology and guidelines. The project has also developed an interactive website incorporating details of the 30 sub-project sites, which will later be linked to rice ecosystem mapping.

The RGC has issued the Declaration of Land Policy, focusing on three key elements of land issue which shall be promoted comprehensively through land management, land administration, and land distribution. According to the report, some of the policy framework and sub decrees have been issued and others are being prepared.

The Law on Agricultural Cooperatives was adopted in May 2013. This will need revisions to include special provisions for women in cooperatives. The Project has met with MAFF's Department of Agro-Industry on contract farming and formulation of policy.

The methodology and guidelines to be applied in identifying and selecting the 90 target communes to undergo CLUP/AEA activities are being prepared.

Civil works have not yet been initiated.

Procurement for paddy drying facilities have not yet been initiated.

A review of land leveling practices in Cambodia is currently being undertaken. Discussions have been held with the Department of Agricultural Engineering on arranging field demonstrations.

The Project's performance monitoring system is being developed.

Baseline studies will be incorporated in Feasibility Studies to be prepared for the 30 subprojects. To date, only the FS of the three representative subprojects have been completed.

The reporting requirement communicated to the Government includes a section relating to progress of gender actions.

Geographical Location
Safeguard Categories
Environment B
Involuntary Resettlement B
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects An environmental assessment was conducted for policy and project interventions during preparation. Policy interventions focus on improving agricultural practices (chemicals and fertilizer application), land-use zoning (to avoid environmentally sensitive areas), watershed protection, and water management in irrigation systems, all of which will improve the investment decision making and are likely to contribute to sustainable increase in rice production. An initial environmental examination was conducted for three representative subprojects to identify potential impacts, appropriate mitigation measures and monitoring mechanisms. These confirmed that proposed investments are not likely to cause significant adverse environmental impacts. Pre-screening of subprojects against environmental criteria also minimized the risk for negative environmental impact. Subprojects will follow environmental assessment procedures stipulated in the environmental assessment and review framework.
Involuntary Resettlement Limited involuntary resettlement is foreseen under Rice-SDP because of the screening of subprojects completed during preparation and only minor resettlement impacts are anticipated and this can be mitigated accordingly. Rehabilitation of irrigation systems will not cause significant resettlement impacts because works will be along existing rights of way and will mainly require, if any, the acquisition of minor amounts of land from persons living in existing canal rights of way and minor compensation for trees, crops or possibly small part of structures. The development of paddy drying and storage facilities will require the purchase of land on the open market using the principle of willing buyer and willing seller. There may be small land donations from the community for canal rehabilitation depending on subproject design requirements. All related transactions and consultation will be recorded accordingly. Issues related to compensation of previous canal rehabilitation (if any) shall be addressed by the government before subprojects can commence implementation. Interventions directed at other areas of the value chain involve mainly capacity building and raise no resettlement issues. Rice-SDP is assessed as Category B for resettlement. The Government has prepared a resettlement framework, to be endorsed by the Inter-ministerial Resettlement Committee. All costs related to resettlement and land purchase will be financed by the Government.
Indigenous Peoples Based on commune data-base information, supported by socio-economic survey in the target provinces, there were no indigenous peoples living in the subproject areas. In some beneficiary villages, there are Cham and Lao households. They have been living in Cambodia for several generations and are well mainstreamed into Cambodian society, undertaking the same livelihood pursuits and living amongst their Khmer neighbors. The communities and local authorities have confirmed that there are no indigenous peoples and no negative impact of the subproject investments on ethnic groups. Rice-SDP is assessed as Category C for Indigenous Peoples.
Stakeholder Communication, Participation, and Consultation
During Project Design A comprehensive participatory socioeconomic and gender role survey was conducted in 27 villages, involving 243 households.
During Project Implementation

Community consultations will continue throughout detailed design. During construction, poor households will actively participate and benefit by providing wage labor. Bidding documents will request contractors to pursue such participation where possible.

Communities will participate in operating and maintaining completed infrastructure by providing labor.

Avenues for civil society participation include (i) participation in consultations throughout implementation cycle, (ii) working with farmer's cooperatives, and (iii) potential engagement as external monitoring agencies. Consultation covers local community leaders, civil society, and local peoples' organizations. The participation of civil society will be ensured by a number of means, including service contracts between Rice-SDP implementing agencies and nongovernment organizations for monitoring and evaluation and appropriate engagement as representatives of the beneficiaries.

Business Opportunities
Consulting Services

The PPTA will require 42 person months of international consultants and 53 person months of national consultant. ADB will engage, on an individual basis, four international consultants for a total of 13 person-months and four national consultants for a total of 12.0 person-months. The remaining international consultants (29 person months) and national consultants (41 person months) will be engaged through a firm, or association of firms. The ADB will engage all the consultants in accordance with ADB's Guidelines on the Use of Consultants (2010, as amended from time to time).

Consulting services for implementation will be determined on the basis of the project design.

Procurement Procurement packages will be determined on the basis of the project design.
Responsible ADB Officer Raza Mahmood Farrukh
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Environment, Natural Resources & Agriculture Division, SERD
Executing Agencies
Ministry of Economy and FinanceP_THIRONG@HOTMAIL.COMStreet 92, Sangkat Wat Phnom
Khan Daun Penh, Phnom Penh City
Cambodia
Timetable
Concept Clearance 31 Oct 2011
Fact Finding 13 Aug 2012 to 30 Aug 2012
MRM 15 Feb 2013
Approval 27 Jun 2013
Last Review Mission -
Last PDS Update 31 Mar 2015

Grant 0349-CAM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
27 Jun 2013 26 Aug 2013 13 Nov 2013 31 Mar 2020 - -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 14.60 Cumulative Contract Awards
ADB 0.00 27 Jun 2013 0.00 0.75 5%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 14.60 27 Jun 2013 0.00 0.24 2%

Grant 0350-CAM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
27 Jun 2013 26 Aug 2013 13 Nov 2013 31 Mar 2020 - -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 4.50 Cumulative Contract Awards
ADB 0.00 27 Jun 2013 0.00 1.84 41%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 4.50 27 Jun 2013 0.00 0.07 2%

Loan 3006-CAM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
27 Jun 2013 26 Aug 2013 13 Nov 2013 30 Jun 2017 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 24.00 Cumulative Contract Awards
ADB 24.00 27 Jun 2013 12.30 0.00 53%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 27 Jun 2013 12.30 0.00 53%

Loan 3007-CAM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
27 Jun 2013 26 Aug 2013 13 Nov 2013 31 Mar 2020 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 39.33 Cumulative Contract Awards
ADB 31.00 27 Jun 2013 3.30 0.00 11%
Counterpart 8.33 Cumulative Disbursements
Cofinancing 0.00 27 Jun 2013 0.87 0.00 3%

Loan 8271-CAM

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
27 Jun 2013 26 Aug 2013 13 Nov 2013 31 Mar 2020 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 5.00 Cumulative Contract Awards
ADB 0.00 27 Jun 2013 0.00 0.00 0%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 5.00 27 Jun 2013 0.00 0.00 0%

Evaluation Documents

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