Poverty Reduction in the Central Highlands Project in Dak Nong, Dak Lak, Gia Lai, Kon Tum, Quang Ngai & Quang Nam CONSOLIDATED FEASIBILITY STUDY REPORT [CENTRAL LEVEL]

Project Overview Project name: Poverty Reduction in the Central Highlands Project CHPovin Dak Nong, Dak Lak,Gia Lai, Kon Tum,Quang Nam and Quang Ngai Donor:World Bank Implementing age

Ministry of Planning and Investment World Bank

Poverty Reduction in the Central Highlands Project

in Dak Nong, Dak Lak, Gia Lai, Kon Tum, Quang Ngai & Quang Nam

CONSOLIDATED FEASIBILITY STUDY REPORT

[CENTRAL LEVEL]

August, 2013

(The draft for consultation only, please do not quote)

The Central level Feasibility Study Report is based on the following:

1 Legal documents: (i) Decree 131/2009/ND-CP on managing projects receiving official development assistance (and relevant circulars of MPI, MoF); (ii) Decision 48/2008/QD-TTg issued together with General Guidelines on preparing feasibility studies for projects receiving official development assistance (ODA) from the Group of 5 Banks (Asia Development Bank – ADB, French Development Agency – AFD, Japan Bank for International Cooperation – JBIC, German Development Bank – KfW, World Bank (WB);

2 Results from fieldwork undertaken by the consultant (the first fieldtrip in July-August, 2012; the second fieldtrip in January, 2013); consultation process was conducted with the participation of provincial PCs’ representatives, leaders of relevant sectoral agencies at provincial level, representatives of PMUs of certain projects in the Project area, leaders of Project districts, representatives of relevant sectoral agencies at district level, leaders of communes and commune-level public officials, and representatives from villages and groups of beneficiaries in the Project area;

3 Results from consultation workshops at central and provincial levels about the content and development of the report from June, 2012 up till August 2013; meetings with WB Mission in September 2012, March 2013, and June 2013;

4 Guidelines on Development of the Feasibility Study Report prepared by WB consultant to support the process of preparing the Feasibility Study Reports;

5 Draft Feasibility Study Reports of the Project provinces

6 Feasibility study reports of other projects with similar or highly-related characteristics in scale and design (such as NMPRP-2)

Table of Contents

Introduction 9

Project Overview 11

Chapter 1: Project Overview 12

I Project background 12

A National context 12

B Central Highlands context 13

II Policy framework of the Project 13

A National policy framework 13

B Policy frameworks of Project provinces 15

III Target areas and beneficiaries of the Project 16

IV Poverty reduction policies and programs in the Project are 25

Chapter 2: Project Description 28

I Overall project description 28

A Project objectives 28

B Main challenges and intervention strategy 28

C Project components 29

II Component 1: Commune and village infrastructure development 30

A Component description 30

B Implementation arrangements 31

C Implementation plan 33

III Component 2: Sustainable Livelihoods Development 34

A Overview of Component 2 34

B Sub-component 2.1 –Self-reliance and income diversification 38

C Sub-component 2.2 – Market Linkages Initiative 40

D Implementation Plan 44

IV Component 3: District Level Connective Infrastructure Development, Capacity Building and Communication 47

A Sub-component 3.1: District connective infrastructure development 47

B Sub-component 3.2: Capacity building 48

C.Sub-Component 3.3: Communication and knowledge sharing 51

D Implementation plan 53

V.Component 4: Project Management 53

A Component objectives 53

B.Main project management activities 53

VI Total investment funding and disbursement plan 57

A Total investment 57

B Funding Allocation 57

C.Disbursement plan 59

Chapter 3: Project Management and Operation 61

I Legal basis of the Project 61

II Project implementation and management arrangements 61

III Project implementation Plan 68

IV Financial Management 70

V Procurement Management 73

VI Transparency and Anti-corruption 76

Chapter 4: Project Monitoring and Impact Evaluation 77

I Project results framework 77

II Monitoring and evaluation system 78

III Assurance of social safeguards 81

V Assurance of environmental safeguards 86

VI Resettlement action plan 88

VII Project efficiency assessment 89

VIII Project sustainability 91

Conclusion 94

Tables

Table 1.1: Total population of Project provinces and districts in 2011 18

Table 1.2: Demographic characteristics of households 21

Table 1.3: Rate of outstanding debt until 1/7/2011 (%) 24

Table 1 4: Programs/projects in the Project area 25

Table 2.1: Summary of commune/village level infrastructure projects in the first 18 months 34

Table 2.2: List of livelihood activities in the months in the project area 46

Table 2.3 District level connective infrastructure projects planned for the first 18 months 48

Table 2.4: Training duration in the first 18 months 50

Table 2.5: Training curriculum for the first 18 months 50

Table 2.6: Total funding allocated to 6 provinces in the Project area 57

Table 2 7: Allocation of 85% of the loan by project components and provinces (USD) 58

Table 2.8: Allocation of 85% of loan and counterpart fund in the cycle of the project (Currency: USD) 59

Table 3.1: Summary of the Project Implementation Plan 69

Table 3.2: Steps on developing a Financial Plan from commune to central levels 71

Table 3.3: Procurement thresholds for consulting services, purchasing of goods, and construction 75

Table 4.1: Project results framework 77

Table 4.2: Periodic reports and authorities/agencies in charge 79

Table 4.3: Environmental management policies for each type of environmental risk of the Project 88

Table 4.4: Financial efficiency of livelihood models 89

Table 4.5: Investment efficiency of transportation construction (Unit: VND and %) 90

Figures

Figure 1.1: Project area by type of land and province 17

Figure 1.2: Ethnic group distribution in the Project area 18

Figure 1.3: Income per capita in 2010 at current prices (thousand VND/person/month) 19

Figure 1.4: Poverty rate in the Project area (%) 19

Figure 1.5: Rural poverty rate of the provinces and of the Project area (%) 20

Figure 1.6: Poverty rate by ethnic group and gender of household head 20

Figure 1.7: Ownership of motorbikes, TV and mobile phones (%) 22

Figure 1.8: Annual crop land distribution (m2) 22

Figure 1.9: Perennial crop land distribution (m2) 23

Figure 1.10: Forest land distribution (m2) 23

Figure 1.11: Access to national power grid, clean water sources and hygienic latrines (%) 24

Figure 2.1: Inter-relation and supplement among Project components 30

Figure 2.2: Commune classification by livelihood potential 35

Figure 2.3: Supports from stakeholders for market linkages LEGs 41

Figure 2.4: Estimated financial ratios and production cycles 45

Figure 3.1: Project management structure from Central to local levels 62

Figure 3.2: Central Project Coordination Board organisational structure 63

Figure 3.3: Provincial PMU chart 64

Figure 3.4: District PMU chart 65

Figure 3.5: CDB chart 66

Figure 4.1: M&E Framework 78

Figure 4.2: The highly vulnerable beneficiaries in the Project area 82

Abbreviation

TAB Technical Assistance Board (TAB)

Introduction

1 Vietnam has achieved remarkable progress in poverty reduction and economic growth, which has also received international recognition over the past two decades Rapid and stable economic growth is an important prerequisite for poverty reduction and improvement in living standards This is, however, only a necessary condition More important is the strong commitment of the Vietnamese Government to socio-economic development and allocation of growth outcomes to ensure equality of opportunity for people from all social classes to truly benefit from economic growth Since the Reform

or “Doi Moi”, Vietnam’s poverty rate has decreased from nearly 58% in 1992 to 11% in 2010 Along with the increase in income, people’s access to health care and education services has been improved greatly; spiritual and cultural lives have been enriched even in rural and remote areas Critical achievements in socio-economic development have lifted Vietnam from the group of least developed countries to a middle-income country group since 2010

challenges The poverty rate remains relatively high in difficult areas, especially in rural and mountainous localities Poverty reduction is slowing down and the gap between rich and poor families

is widening, so is between rural and urban areas The poverty rate is also particularly high among ethnic minorities (EMs) While the national poverty rate in 2010 is 11%, the average poverty rate of the EMs is almost 48% (and that of the Kinh ethnic group is only 7.5%) Although agriculture is not the key pillar of economic growth, it plays a very important role in rural economic development and it is the livelihood of almost all poor households However, excluding a number of important agricultural exports, most of the agricultural exports are still in forms of raw products with unstable supply sources, low quality and value added, making them hardly sustainable to escape from poverty However, unless Vietnam moves on from its current export strategy focusing on raw, low quality and cheap agricultural products, it would be difficult ensure sustainable poverty reduction

3 The Central Highlands (CH) is a politically and geographically special area of Vietnam with

an excellent potential for development of high-value perennial crops As a “destination” of the developing-new-economy program of the 1980s, the CH has welcomed an influx of Kinh and EM migrants from the Northern mountainous area There are now about 74% of CH ethnic minorities living below the poverty line Along with the North-Western region, the CH is one of the poorest areas of Vietnam and the poverty rate is especially high for the EMs The CH has the most alarming proportion

of children suffering from malnutrition in height for age and weight for age in the country The area also has the lowest rate of primary school enrolment, and less than half of the children at lower-secondary school age enrolling in lower secondary schools This happens in the context of the CH experiencing a growth rate that is double the national average (nearly 12%) over the last 10 years, resulting in the CH having the greatest income disparity in comparison with other regions across the country Therefore, improving living standards of CH minorities over the coming years is one of the top priorities in socio-economic development of the CH

4 Improving lives of the poor and promoting socio-economic development for CH minorities have been the priorities of Vietnam’s government and international donors for many years Given its high poverty rate and concentration of EMs, the CH is a critical target area of P135-II, national target programs (on poverty reduction, water and sanitation, education, etc.), Program 30A, and, most recently, the national target program on Building New Countryside The CH has also received a lot of support from international donors such as ADB (in poverty reduction for a number of provinces and forestry development), WB (rural transportation, rural finance, and rural energy), and many other international organizations In spite of that, the region has only been receiving around 4% of total ODA over the past two decades High and persistent poverty rate, especially among indigenous EMs, continues to be a challenge for socio-economic development of the CH

5 In this context, the continuity of large-scale policies, projects/programs promoting CH’s poor socio-economic development, especially for EMs, is critical Accordingly, since 2010, MPI has held technical discussions with WB on the possibility of a large-scale poverty reduction program to help to improve lives of CH ethnic people, to awaken and realize effectively the potential of the region This proposal has gained support from WB given that it aligns with WB’s commitments and strategies

pro-On this basis, following the recommendation of MPI, the Prime Minister has approved the Project priority list according to the Decree 1440/TTg-HTQT dated September 18th 2012

6 This Feasibility Study Report is developed in the above-mentioned context It proposes a fundamental design of the Project and proves its feasibility This report has 4 main parts Chapter 1 analyses the general background of the Project and the expected Project area to highlight its urgency

as well as to identify the general context to design project activities in a manner that is suitable for the conditions of the Project area Chapter 2 provides a detailed description of components, mutual relations among components/sub-components and funding allocation Issues related to the design of implementation arangements and project management are presented in Chapter 3 Chapter 4 provides mainly an assessment of social and environmental impacts of the Project, based on which an environmental and social safegards are proposed In parallel, Chapter 4 also provides an analysis on financial and economic efficiency of planned Project activities

Project Overview

Project name: Poverty Reduction in the Central Highlands Project (CHPov)(in Dak Nong, Dak Lak,Gia

Lai, Kon Tum,Quang Nam and Quang Ngai)

Donor:World Bank

Implementing agency: Ministry of Planning and Investment

Project Development Objective (PDO): To increase livelihood opportunities to sustainably improve

living standards of poor households and communities in 26 districts of 06 provinces in the Project area

Project duration: The expected implementation period is 5 years (2014- 2018)

Project area: 130 communes in 26 districts of 6 provinces, specifically:

Dak Nong: 4 districts – Dak Glong, Dak Song, Krong No, Tuy Duc

Dak Lak: 5 districts – Buon Don, Ea Sup, Krong Bong, Lak, M' Dak

Gia Lai: 5 districts – K Bang, Kong Chro, Krong Pa, Mang Yang, Ia Pa

Kon Tum: 6 districts – Ngọc Hoi, Dak Glei, Sa Thầy, Kon Ray, Kon Plong, Tu Mo Rong

Quang Ngai: 3 districts – Son Ha, Son Tay, Ba To

Quang Nam: 3 districts – Nam Giang, Phuoc Sơn, Nam Tra My

Estimated Project budget: The CHPov in the 6 provinces has the total estimated funding of USD

168.2 million; of which USD 150 million (around 89.2%) is from the ODAfund, and USD 18.2 million

(12.3%) is counterpart fund of the Vietnamese Government

Project components and their estimated funding allocation: the Project components and their

estimated funding allocation are as follows:

Funding allocation

Component 1 Commune and village infrastructure development 30%

Component 3 Connective infrastructure development, capacity building and

communication

30%

Note: 15% of unallocated funding will be allocated after the first 18 months of Project implementation based on the principle of

giving priority to effective activities, and localities that are active and implement Project activities effectively

Chapter 1: Project Overview

I Project background

A National context

aspects of socio-economic life Nationwide sustainable GDP growth and poverty reduction have

been recognized as the consequence of market oriented development policies which helped to create opportunities for the poor Economic reform has also contributed to the promotion of private sector development, resulting in fast and continuous GDP growth (8.08% in 1993, 7.08% in 2002 and 6.78%

in 2010, GSO over the years), forming a stepping stone for poverty reduction Access to basic education and healthcare services has also been significantly improved in comparison with other countries at a similar stage of development Rapid economic development together with direct intervention through programs and policies to alleviate poverty, have improved living standards, especially for ethnic minorities Over the past two decades, the poverty rate has been falling continuously from 58% in 1993 to 28.9% in 2002, and 14.2% in 20101 This remarkable achievement

in poverty reduction has placed Vietnam in the first place among poor countries which have been very successful with regards to economic development and poverty reduction over the past few years

vary by beneficiary groups and by areas Recent data indicate that the overall poverty reduction is slowing down and the income gap is increasing at a faster rate at the household level between the rural and urban areas as well as between different economic areas of the country Although the average national poverty rate is 14.2%, the disparity between urban and rural poverty is quite large (6.9% and 17.4% respectively, 2010 data) Poverty has a tendency to be “clustered” in “pockets of poverty” – usually remote areas with especially difficult socio-economic conditions Typical examples would include 62 poorest districts under the 30A Program, or close to 2,000 especially difficult communes in Program 135-II, 2006-2010 With such a “cluster” of the poor in “pockets of poverty”, poverty reduction efforts in Vietnam in the coming years will be difficult and much more costly compared to the poverty reduction achievements of Vietnam over the past two decades

poverty rate among Kinh and Chinese ethnic groups is only 7.5%, almost 48% of the ethnic minority people live below the poverty line in 2010 Although ethnic minorities only accounts for almost 15% of the total population, they make up almost 53% of the poor in Vietnam The poverty sticking to the ethnic minority groups is also reflected in other measurements Although the education level has been improved, according to the 2010 Vietnam Household Living Standards Survey (VHLSS 2010), 44% of ethnic minority household heads have not completed primary education (the equivalent rate for the Kinh is only 25%), and 9% of ethnic minority household heads have completed high school or higher (the equivalent for the Kinh is 24%) (MOET data) Ethnic minority labourers are working in the agricultural sector; or having low skilled employment In fact, 84% of ethnic minority workers say that their main employment is in agriculture, while this is the case for only 46% of the Kinh and Chinese ethnic group Improvements in nutrition are also heterogeneous among different ethnic groups In

2010, around 37% of ethnic minority children under the age of five suffered from malnutrition, compared to 22% among the Kinh ethnic group Therefore, unless living standards of the ethnic minority group are improved significantly in the coming years, poverty among the ethnic minorities shall continue to be a big challenge in the future

reduction: efforts Poverty reduction policies, strategies and programs in general and specific

interventions to improve living standards of ethnic minorities have been top priorities of the

1

Since poverty data in this section are at the national level, the Report uses data from the Vietnam Household Living Standard s Survey (VHLSS over the years) The poverty line used in this Report is the one by GSO and WB (calculated based household expenditure) instead of the official poverty line used in the annual poor household review (calculated based on household

Vietnamese Government Before 2010, when Vietnam became a middle income country, there were many poverty reduction programs/projects of various size and approaches Up to the end of 2010, also being the last year in the cycle ofthe 2010-2020 Socio-economic Development Strategy and the 2006-

2010 Socio-economic Development Plan, many poverty reduction programs/projects ended Since then, with the support from development partners, the Government of Vietnam continues to build a system of poverty reduction programs/projects for a new phase (see details in section II.A below) These new poverty reduction programs/projects reflect a strong determination of the Vietnamese Government to continue the path of promoting growth and reducing poverty, just as it has been doing for over twenty years

B Central Highlands context

around 73.6% of the ethnic minorities from the Central Highlands live under the poverty line, and the Central Highlands is one of the two areas with the highest poverty rate in Vietnam (22.2%) – see Annex 1 for further details The prevalence of children suffering from malnutrition in height for age and weight for age in the Central Highlands is also at the alarming level (over 40% and 20% respectively), compared to the national rate at 29.3% and 17.5%3 respectively; the rate of primary school entrance is lowest in the country (95.98% compared to the national of 97.5%)4 and only less than half of the number of children at the secondary school age attend secondary school Many ethnic minority households participate in irregular jobs or get by multiple jobs but still do not earn enough to cover basic needs It is particularly worrying that the poverty phenomenon among the ethnic minorities from the Central Highlands takes place given the region’s economic growth is almost twice as high as the national average over the past two decades (at 12%, GSO) Furthermore, there are also many economic sectors in the Central Highlands which report a strong growth (tourism, mining, industrial crops – especially coffee, rubber and pepper) This indicates that although economic development in the Central Highlands has helped to reduce the average poverty rate, EMs have failed to benefit from the opportunities presented by the economic growth to escape from poverty and improve living standards

geographical regions with the highest concentration of EMs; they are also the regions with the most difficult socio-economic conditions However, in contrast to the North West – where numerous poverty reduction programs/projects have been present over the past two decades, the CH has not attracted

as many poverty reduction programs/projects According to the data of MPI, the CH, as of 2012, has only attracted USD 193 million from ODA and has only disbursed around USD 73 million (while the North West alone has attracted USD 2.3 billion from ODA funds) The amount of ODA funds allocated

to the CH accounts for only 4% of total ODA funding for Vietnam between 1993 and 2010 In this context, the Government of Vietnam has been taking efforts to promote economic growth and reduce poverty in the CH by focusing on attracting funds for socio-economic development of the region The process of developing a special mechanism for the region has being developed at the central level Given that, the CHPov Project is expected to be an important source of support for the poverty reduction process of Project districts, known as the most difficult districts in the CH The suitability of

the regional context as well as the current policy framework are analysed in the next section

II Policy framework of the Project

A National policy framework

13 At the national level, the main policy framework directly relevant to Project development includes a number of the following key programs/project5:

Ministry of Education and Training, figures in 2010

5 There are many other programs/projects besides key programs/projects listed in this section According to recent estimated by MOLISA, there are currently over 100 different poverty reduction programs/policies/projects, from small to large scale, in Vietnam When compared to 2009 estimates by UNDP, the increase is almost by 35% Therefore, it should be noted that in

 Economic Development Strategy for 2011-2020 (together with the 5-year Economic Development Plan for 2011-2015), which states6:

Socio-“Economic development should be in harmony with cultural development, social progress and equality,

as well as continuous improvement in standards of living Socio-economic development should always protect and improve the environment and actively respond to climate change”

Regarding livelihood issues, the Strategy states:

“To create tight connections and harmonize the interests of producers, processors and consumers, between application of technology and organized production, between agricultural development and building a new countryside To revolutionize agribusiness [ ], ensure a fair distribution of benefits for each stage, from production to consumption [ ] Based on regional planning, to redistribute crops, animals, harvesting seasons and seedlings based on market demand and so as to reduce losses from natural disasters, diseases [ ] To advance the application of science and modern technology in production, processing, storage [ ], to rapidly increase the value added per unit of cultivated land”

Regarding mountainous areas and areas with difficult socio-economic conditions, the Strategy states:

“To develop rural transport and ensure communes are accessible by car throughout four seasons and increasingly so for villages and hamlets To promote sustainable poverty reduction, to raise income, and to continuously improve the quality of life of the ethnic minority community To reform the organizational structure of forestry and agriculture state owned enterprises”

 Sustainable Development Strategy of Vietnam 2011-2020 makes a clear point of view on sustainable agriculture and rural development7:

“To restructure the agricultural sector [ ], to promote the strengths of each region; to promote efficient production of quality agricultural products; to link production to both local and international markets to improve resource use efficiency (land, water, forests, labour and capital); to increase income per hectare of cultivated land, per labour day; to improve the lives of farmers; sustainable development of arts and crafts villages To push forward for the application of scientific and technological advancements in production, processing and storage [ ] To revise agriculture, forestry and fisheries planning for each economic zone and in-between economic zones towards sustainable development, linking production to markets, and linking sources of raw materials to manufacturing”

 Resolution 80/NQ-CP laying out a direction for Sustainable Poverty Reduction, 2011-20208

Resolution 80 targets the poor, poor households in the country currently residing in poor districts, communes, especially difficult villages, as well as ethnic and mountainous areas According to the Resolution 80, the poverty reduction goal for the next 10 years is to raise the average income of poor households by 3.5 times; and national poverty rate to fall at a rate of 2%/year (with the exception for poor districts and communes, for which the target is 4%/year) based on the official poverty line of each period

In order to meet the above goal, the Resolution 80 states that poverty reduction programs shall continue to implement general poverty reduction support policies, such as support with production, vocational training, job creation, education, healthcare, nutrition, housing, legal advice Special policies on poverty reduction shall be revised by Ministries and sectors to be included into their regular policy database to ensure that the necessary supports are designed consistently, meeting the needs of the poor Resources from poverty reduction policies, programs as well as national target programs and ODA projects shall be mobilized and invested in the poorest localities of the country in order to facilitate the process of poverty alleviation in those areas

 National Target Program (NTP) on Sustainable Poverty Reduction, 2012-20159:

The overall objective of the Program: “To improve and gradually increase standards of living of the poor, with priority for poor ethnic minorities and the poor living in poor districts, border communes, safety zone communes, especially difficult communes, villages, coastal areas and islands; to close the gap in living standards between urban and rural areas, between regions, ethnicities and resident

groups”

With the total Program budget of VND 27,509 billion, of which the budget of the central government accounts for almost 75% of the total funding, the Program consists of four main Projects:

addition to programs/policies introduced in this section, such as the poverty reduction policy framework to which the CHPov Project will contribute to, there are still a lot of other programs/projects of smaller size and scale

6As stated in a Document of the 11th Party Congress released with dispatch 362-CV/VPTU dated 17/03/2011

7 According to Decision 432/QD-TTg dated 12/4/2012

8 According to Resolution 30/NQ-CP dated 19/5/2011

Project 1: Provision of support with infrastructure investment in poor districts, extremely difficult communes, coastal areas and islands following the Decree 30A up to 2015;

Project 2: Provision of support with infrastructure investment in extremely difficult communes, border

communes, safety zone communes and extremely difficult villages and hamlets (including mostly extremely difficult communes, villages, hamlets as targeted by the 135-II Program);

Project 3: Rolling out effective and suitable poverty reduction models in order to enhance production

and business capabilities and to diversify income sources for poor people, and households; to enable the poor to access policies, market resources towards expansion of production and services and

increasing incomes

Project 4: Capacity building in poverty reduction, communication and monitoring and evaluation of

Program implementation

 National Target Program (NTP) on building the New Countryside, 2012-202010:

The NTP covers the entirety of socio-economic development issues of rural Vietnam in the next 10 years As the program is of special importance in terms of socio-economic development, it is under direct supervision of the Politburo, the Government, with the participation of most Ministries/sectors of Vietnam With such NTP characteristics and scope, the international donor community is driving their efforts to provide development support to Vietnam in the coming years to promote the implementation

of the Program

As part of this Project, component 2 “Socio-economic infrastructure development”; component 3

“Restructuring, economic development, income increase”, component 4 “Poverty reduction and social security”, component 5 “Transformation and development of effective rural production methods” (out of

11 components of the New Countryside Program) are the focus of the Project’s support The CHPov will actively support in the NTP implementation in the Project area

 Decree 30A on Speedy and Sustainable Poverty Reduction for 62 Extremely Difficult Districts has the following overall objective11:

To create more rapid improvements in spiritual and material lives of poor, ethnic minority people in the poor districts [ ] To support agricultural, forestry production in a sustainable and commodity oriented manner, and to effectively exploit local advantages To construct socio-economic infrastructure relevant

to particular features of each district; to shift economic structure and business modalities according to the planning; to develop a national – cultural stable rural society; to improve the educational level of people, to protect the biological environment”

Decree 30A targets 62 poorest districts of the country with the poverty rate of over 50% On 05/02/2013, the Prime Minister issued Decision 293/QD-TTg on target based support from the state budget for 23 districts with a high household poverty rate to apply the infrastructure investment policy and mechanism as stated in Resolution 30A (as such, it is often called ‘Program 30B’) (Project districts that are part of Programs 30A and 30B are detailed in Table 1.4 below)

B Policy frameworks of Project provinces

for 2011-2015 of 6 Project provinces and policies of Provincial Committees, provincial People’s Councils and People’s Committees regarding the implementation of the national policy framework (listed above)12 Review of provincial SEDPs has shown that many subject matters are directly related

to the key interventions of the CHPov Project13 Specifically:

2010 and to eliminate poverty by 2020 [ ] To industrialize and modernize agriculture and the countryside To develop market-oriented agricultural production, to diversify products using high-end technology that meets consumer demand and supplies raw materials to the processing industry and to

13

Based on the national Socio-economic Development Strategy for 2011-2020 and the 5-year SEDP for 2011-2015, the provinces develop their 5 year SEDP

increase both quantity and quality of exported goods [ ] To continue to change crop and livestock

distribution to increase revenue per hectare of agricultural land.”

the poverty level in ethnic minority areas to the average level of the province [ ] To follow oriented agricultural development, linking planning with intensive production areas, focusing on drought resistant crops requiring little water to ensure adequate supply for the processing industry and exports [ ] To promote application and transfer of technology in production [ ] To strengthen agricultural extension and veterinary services To prioritize and increase investment in irrigation and to build more dams to ensure water availability for agricultural production and to increase the land use

market-factor”

17 Gia Lai: “To continue to develop agriculture and forestry, including expansion of the scale and enhancing the quality of crops and animals To develop processing industries, services and export effectively and sustainably for them to become the engines of economic growth [ ] To incorporate and implement effectively national target programs, projects supporting the poor and to bring in more resources for poverty reduction To organize campaigns to change the mindset, production habits and practices of the ethnic minorities so that the indigenous ethnic minorities could escape from poverty and enter a legitimate pathway to prosperity To strengthen agricultural and forestry extension services

to support production and job creation.”

sustainable agriculture, with target beneficiaries being farmers, the low income class and the most disadvantaged [ ] To exploit and to use resources well; to promote industrialization and modernization to maintain high and sustainable economic growth given a suitable structure To significantly improve quality of labour and living standards; to be determined to develop Kon Tum to

be a stable province and out of poverty by 2015.”

system in order to ensure that by 2020, 100% of roads to communes are asphalt roads, 20-30% of roads to villages and hamlets are reinforced [ ] To implement effectively social security policies, especially poverty reduction and job creation [ ] to assist with production, stabilize lives of the poor, ethnic minorities and areas that are difficult and affected by disasters To reduce the poverty rate, as

measured by the National standard, to below 15% of the total household population.”

resulting in high productivity, quality, effectiveness and competitiveness To develop intensive production models linking production with processing, consumption and production models suitable for the ethnic minorities [ ] To incorporate and implement effectively national target programs and projects supporting the poor and to bring in more resources for poverty reduction To organize campaigns to change the mindset, production habits and practices of the ethnic minorities so that the indigenous ethnic minorities could escape from poverty and enter a legitimate pathway to prosperity

To strengthen agricultural and forestry extension services to support with production and job creation.”

currently benefiting from some poverty reduction programs and projects of the Government and/or development partners Details about these programs and projects are presented in the section below

III Target areas and beneficiaries of the Project

guidelines by the Ministry of Planning and Investment – MPI (Dispatch No 10284/BKH&DT-KTDP&LT dated 11/12/2012 and Dispatch No 10462/BKH&DT-KTDP&LT dated 17/12/2012) Accordingly, the selection method of target areas and beneficiaries is based on local poverty rate with priority given to the vulnerable groups The selection process follows 3 steps: (i) selection of Project districts (ii) selection of Project communes within the districts and (iii) selection of beneficiaries On the basis of the selection method, 130 from a total of 256 communes of 26 districts in 6 provinces have been selected as the beneficiaries of the Project For details about the selection methodology and criteria for identifying beneficiaries, maps and a list of benefiting districts and communes, see Annex 2

23 Natural conditions of the Project area: The Project area consists of 130 communes in 26

districts including 4 Central Highland provinces namely Dak Nong, Dak Lak, Gia Lai, Kon Tum and 2 adjacent provinces Quang Ngai and Quang Nam in the South Central Coast

24 The Project area in the Central Highlands The Project area consists of several adjacent

highlands, up to 500-1500m above the sea level, such as Kon Tum, Kon Plong, Kon Ha Nung, Pleiku, M’Drak, Buon Ma Thuot, Mo Long, Lam Vien and Di Linh All of these highlands are adjacent to the East by a high and big mountain Nam Truong Son Located in the tropical savannah, the climate in the Central Highlands is divided into two seasons: the rainy season from May to October and the dry season from November to April, in which March and April are the hottest and driest months of the year The climate characteristics play an important role in the selection of livelihood in the Project area.Notably, while the Central Highlands is famous for its potential of high-value industrial crops (such as coffee, pepper, ruber and cashew ), the Project districts basically are not located in the area

of flavourable weather condition and land for such potential development, compared with other districts

25 The Project area in Quang Nam and Quang Ngai Quang Nam, bordered by the Central

Highlands to the North, is a coastal province belonging to the key economic development zone of Central Vietnam and a relatively complex terrain, with mountainous area accounting for 72% of the total natural area The three districts that were selected as the Project area (namely Nam Giang, Phuoc Son and Nam Tra My) are amongst the poorest districts of Quang Nam (also of the country).Quang Ngai Province borders the east of Central Highlands with a relatively complex terrain The total natural area is 5,152.7 km2 with the coast spanning 129 km Similar to the Central Highlands, the climate in Quang Nam and Quang Ngai consists of two distinct seasons, rainy and dry However, the provinces are also under the influence of the North’s cold winter season Rainfall is heavier in the mountains than in the plains and 80% of the annual rainfall falls from September to December As the rainy season coincides with the hurricane season, hurricanes in the Central Vietnam usually cause landslides and flash floods in midland districts and flooding in the riverside areas

26 presents details about land types in 26 districts in the Project area It is evident that the majority of land in the Project area for all 6 provinces is forest land The Project districts of Dak Nong have the lowest proportion of the forest land equals to 50% of total land, while the highest proportion is 77% in Kon Tum However, most of the forest land belongs to the protection forest area, special-purpose forest and nature reserve area Productive forest land only accounts for a small proportion (approximately 18% of the total forest land) and belongs to many state-owned one-member limited liability companies (formerly state-run forest stations) The fact that parts of the forest land is rocky soil and emaciated soil also make it difficult to cultivate Thus, the proportion of productive forest land that

is in possession of individual households is quite low (no official data).The Figure 1.1 shows that the total area of agricultural land fluctuates heavily among the provinces; in Dak Nong it accounts for 42% while in Quang Nam only 4%

Figure 1.1: Project area by type of land and province

Source: Compiled from data provided by 6 Provincial Project Preparation Committees of the CHPov Project

demographic characteristics of 6 provinces and Project districts Overall, Project provinces are characterized by a relatively low population density compared to the national average as the total area

is relatively large while the population is small According to the Statistical Yearbook for 2011,

Dak Nong Dak Lak Gia Lai Kon Tum Quang Ngai Quang Nam

Agricultural land Forest land Special use land Residential land Unused land

population density in the Central Highlands is 97 people/km while the country-wide population density

is 265 people/km2 Even Dak Lak, which has the highest population density in the Central Highlands,

is half as densely populated as the entire country overall In particular, Kon Tum has the lowest population density at 47 people/km2 In the Project area, the population density is even lower than the relevant national average The Table 1.1 shows that the Project area in Quang Ngai has the highest population density with 62 people/km2 and the lowest is in the Project area in Quang Nam with only 19 people/km2 There is a notably high proportion of people of working agein the Project provinces

Table 1.1: Total population of Project provinces and districts in 2011

population (people)

% age population

working-Total population (people)

% age population

working-Total population (people)

% age population

working-Dak Nong 510,570 63% 78 209,869 49% 47 Dak Lak 1,771,844 65% 132 327,642 58% 47

Quang Nam 1,435,629 62% 137 71,904 53% 19

Source: Six Provincial level CHPov Project Preparation Committees and Statistical Yearbook 2011, GSO

end of 1970s, there were only 15 indigenous ethnic groups After 30 years, the number of ethnic groups currently living in the Central Highlands is 41 different groups (based on the Viet Nam Agricultural Census, 2011; many sources claim that the number is 44-48 different groups) It is the result of two waves of migration into the Central Highlands The first wave was the result of the New Economic Policy encouraged by the Government during the 1980s and early 1990s with the aim of bringing people from the Northern Mountains to the Central Highlands and exploiting this area’s rich potential The second wave of migration is usually called “spontaneous migration” which has taken place from the end of the 1990s until now The abundance of land and favourable conditions for perennial crops are the main motivators for the wave of spontaneous migration.In 26 Project districts alone, there are 41 ethnic groups, with ethnic minorities accounting for 60% of the population, and Kinh group 40% (see Figure 1.2)14

Figure 1.2: Ethnic group distribution in the Project area

Source: Calculations based on the Viet Nam Agricultural Census, 201115

14

Details of project districts/communes statistics on ethnic minority composition may vary, thus combining all 26 project distr icts statistics encounters with certain difficulties due to ununiformation Therefore, Vietnam Agricultural Census 2011 (abbreviated for Viet Nam Rural, Agriculture and Fishery Census) is applied to provide a comprehensive picture of the ethnic minorities in the project areas Note, Ede, M’Nong, Xo Dang, Jarai, Ba Na, H’re, and Co Tu are the largest indigenous ethnic groups There are a lot of other ethnic groups but only account for modest proportion; thus they are grouped in “other ethnic groups”

15

Vietnam Agricultural Census (abbreviated for Viet Nam Rural, Agriculture and Fishery Census) 2011 is the main database

Kinh, 40

Êde, 03 M'Nông, 05 Jarai, 07

29 Mean income in the Project area The information on income and income sources of

households from Project areas is presented in Figure 1.3 Overall, income per capita in the Central Highlands, the North Central Region and the Central Coast is only equal to 70-80% of the country average The lowest income per capita in the Central Highlands is recorded for Kon Tum, with an average income of VND 947 thousand/month, equivalent to 87% of the Central Highlands average and 68% of the national average Compared to the average in the Project area, income per capita in Quang Nam and Quang Ngai is even lower, VND 935 and VND 909 thousand/month respectively Income sources also vary among the provinces and regions The Central Highlands hasa highest proportion income from agriculture and forestry, especially in Dak Nong, where it accounts for 63% of the total income Whereas income coming from salaries, non-agriculture has a higher proportion of total income in Quang Nam, Quang Ngai, and Kon Tum

Figure 1.3: Income per capita in 2010 at current prices (thousand VND/person/month)

Source: Calculations based on the Viet Nam Agricultural Census, 2011

Project provinces is relatively high, almost double the national rate (Figure 1.4) According to the poverty line proposed by MOLISA, the national poverty rate in 2011 has fallen to 12.6% but the poverty rate in the Project provinces remains to be above 20% The highest poverty incidence is in Kon Tum (28.9%), followed by Dak Nong (26.5%) and Gia Lai (24.5%) However, this is only the poverty rate for the provinces overall, that is it includes areas with high incomes, such as towns and cities and industrial clusters Furthermore, the poverty rate in difficult districts in the Project area is much higher (see below for more information)

Figure 1.4: Poverty rate in the Project area (%)

Source: Statistical Yearbook, 2011

Note: The poverty rates in Figure 1.4 are provincal average

units, methodology and time of calculation, the comparison between provinces cannot be given Secondly, VHLSS was also considered during the analysis, however, VHLSS does not have much information at provincial level and thus, the data is unreliable Vietnam Agricultural Census 2011 provides the full on-demand data analysis as well as reliable data at provincial level while maintaining the representativeness More importantly, the data can be used to compare between provinces in the Project area However, it should be noted that data from the Vietnam Agricultural Census only provides information about the rural area and do not have much information about the urban area Therefore, the analysis here will concentrate on the rural areas of the Project provinces/districts

Dak Nong Dak Lak Gia Lai Kon Tum Quang Ngai Quang Nam

Salaries Agriculture, forestry and fisheries Non agriculture, forestry and fishery Other sources

DAK NONG DAK LAK GIA LAI KON TUM QUANG NGAI QUANG NAM

31 Poverty rate in 26 Project districts 26 Project districts have an average poverty rate in the

rural area of 45% at least 2.5 times higher than the country-wide average for rural areas (17.4%)16 The Project districts at Quang Nam, Quang Ngai have the highest average poverty rate (78% and 56%); whereas, the Project districts at Gia Lai and Kon Tum have the average poverty rate of 50% The Project districts at Dak Nong and Dak Lak have the average poverty rate significantly lower in comparision with other districts in the Project areas Compared to the Project provinces, the poverty rate in the Project districts is higher from 1.5 to 2.7 times Quang Nam and Quang Ngai are two provinces with the highest difference between Project districts and the average in the Project provinces In the remaining provinces, the difference in poverty rate is not as large as in Quang Nam and Quang Ngai, the difference is still significant

Figure 1.5: Rural poverty rate of the provinces and of the Project area 17 (%)

Source: Calculations based on the Viet Nam Agricultural Census, 2011

that there is a big gap in living standards between ethnic groups Generally, the poverty rate of Kinh households in the Project areas is only 22% (equivalent to 0.5 of the average rural poverty rate in 26 Project districts); meanwhile, all other ethnic minorities have poverty rates higher than the average rural poverty rate in the Project area In particular, most of the ethnic minorities have a poverty rate of more than 55% (except E De group which has a poverty rate approximately equal to the average rural poverty rate in the Project area) Female headed households (the matriarchal ethnic groups are mainly indigenous ethnic minorities in the Central Highlands) has a poverty rate 12 percentage points higher than male headed households

Figure 1.6: Poverty rate by ethnic group and gender of household head

Source: Calculations based on the Viet Nam Agricultural Census, 2011

the beneficiaries of the Project have several characteristics which can be reflected by other indicators

16 Calculated based on the new Poverty line according to Directive no 1752/CT-TTg dated 21/09/2010 by the Prime Minister, where a poor household is one which earns on average less than 400,000 VND/person/month for rural areas and below 500,000 VND/person/month for urban areas A near poor household is one with an average income ranging from 401,000 VND

to 520,000 VND/person/month for rural areas and from 501,000 to 650,000 VND/person/month for urban areas

Quảng Nam Quảng Ngãi Kon Tum Gia Lai Đăk Lăk Đăk Nông

Project areas All 6 provinces

such as demography, asset and land ownership, main livelihoods, access to basic household utilities and access to credit as follows

34 Demographic characteristics Table 1.2 belowdescribes the demographic characteristics of

the beneficiaries in the Project area Although the average number of tenants (person/household) has seen a decreasing trend over the past decade18, the number remains to be high in the Project area, with 4.3 people/household compared to the national average of 3.8919 Generally, the proportion of working population is higher than the proportion of working-age population Such gap becomes more prevalent among vulnerable groups, such as poor, ethnic minority households and female headed households Notably, female headed households are the fewest (3.4 people/household) but have the highest proportion of people working This indicates that the high rate of participation in livelihood activities among these groups is more so because of difficult living conditions as opposed to the advantage of having more working labour Table 1.2 also provides data on the highest educational attainment of the household head Accordingly, almost 94% of the households in the Project area are uneducated and unskilled labour Only 5% of households finished vocational training college; the proportion of household heads that finished university/college or above is only 1.4%

Table 1.2: Demographic characteristics of households

Average number of household members (people)

Percentage of working-age population/

household (%)

Percentage

of working population/

household (%)

The highest educational attainment of the household head (%)

Uneducated

or no certificate

Vocational training college

University/ college or above

Other ethnic minorities 4.5 58.3 61.5 95.8 3.6 0.6

Gender of household head

35 Asset ownership There is a difference in asset ownership between the poor and non-poor,

between male headed households and female headed households, between indigenous ethnic groups and Kinh ethnic group in the Project area Figure 1.7 reports the level of valuable asset ownership such as motorbike, TV and mobile phone The proportion of households owning motorbike, TV and mobile phone in the indigenous ethnic groups is 66%, 66% and 55% respectively while the corresponding number for Kinh ethnic group ranges from 90 to 91% The proportion of households owning those assets is also particularly lower among the female headed households and the poor with the average of 60%

Figure 1.7: Ownership of motorbikes, TV and mobile phones (%)

Source: Calculations based on the Viet Nam Agricultural Census, 2011

36 Farmland ownership status Land is considered to be the most important tangible asset as it

is critical to households’ livelihoods In the Project area, income from agriculture is still the main source

of income (accounts for 60% of total household income – according to VHLSS 2010 database) as farmland still remains the most critical asset to households’ livelihoods.Regarding annual crop land, Figure 1.8 that there is no substantial difference in annual crop land by poverty (basically, the land area is equally distributed between the poor/ near poor group and the non-poor group) However, there is a significant difference in term of annual farmland ownership by ethnic group Except for H’re,

all other ethnic groups have their land ownership much higher than Kinh households Regarding perennial crop land, the ownership status is completely different There is a major difference in terms

of perennial crop land ownership between poor and non-poor households According to Vietnam Agricultural Census 2011, the non-poor group possesses on average 3.2 times higher of perennial crop land area than the poor group Similarly, there is also a difference by ethnic group as Kinh, M’Nong and E De households have an overwhelming advantage of possessing perennial crop land compared to other ethnic groups (see Figure 1.9) It is an important factor needed to be taken into account in order to choose the right households’ livelihoods that can support the Project Note that, land area in Quang Nam and Quang Ngai provinces is much more limited compared to other provinces, especially perennial crop land It will become a disadvantage in choosing the livelihoods for the Project districts in these two provinces

Figure 1.8: Annual crop land distribution (m2)

Source: Calculations based on the Viet Nam Agricultural Census, 2011

6 provinces

Project area Poor

Motorbike Television Mobile phone

Figure 1.9: Perennial crop land distribution (m2)

Source: Calculations based on the Viet Nam Agricultural Census, 2011

Figure 1.10: Forest land distribution (m2)

Source: Calculations based on the Viet Nam Agricultural Census, 2011

37 Figure 1.10 shows a picture of the forest land ownership status On average, in 26 Project districts, the forest land area currently used by the beneficiaries is around 0.34 ha.21 However, it is not equally distributed among Project provinces While in Quang Ngai, the average area is 0.9 ha/household, the figure in Dak Nong is only 0.025 ha This figure in Quang Nam and Kon Tum is nearly 0.4 ha/household on average; whereas the corresponding figure in Dak Lak and Gia Lai is approximately 0.1 ha/household Regarding the usage of forest land, although the Government is trying to promote land assignment to households and individuals, there are many possible obstacles to its progress One possible obstacle is the difference in the rate of progress between different provinces As the result, there is difference in current in-use land area in different provinces This difference will have an important role in planning the livelihoods in the Project area as if there is no significant change in the progress of land assignment, the agro-forestry livelihood development plan will not have much effect in Dak Nong, Dak Lak and Gia Lai, where the forest land area allocated to households is limited

38 Access to basic household utilities Access to the power grid, clean water sources and usage

of hygienic latrines are important indicators in assessing the households’ living standards In those aspects, poor households, ethnic minorities’ households have much more limited access compared to non-poor households The greatest difference is in the usage of hygienic latrines (Figure 1.11) Note that, the usage of hygienic latrines is currently limited for the beneficiaries in the Project area; even for the non-poor households, only 34% have access to the hygienic latrines Meanwhile, although there is difference by income, the access to the power grid and clean water sources is already at an

acceptable level In term of access to power grid, even 90% of the poor households have started using electricity while the corresponding figures for near poor and non-poor groups are around 95% On the other hand, the analysis result shows that only 59% of poor households have access to clean water sources while the corresponding figure for non-poor group is 85% The result suggests that improving the poor households’ access to clean water sources is important factors in order to improve the households’ living standards in the Project area

Figure 1.11: Access to national power grid, clean water sources and hygienic latrines (%)

Source: Calculations based on the Viet Nam Agricultural Census, 2011

39 Access to credit Table 1.3 shows the proportion of households in the Project area that have

access to credit from VBSP, Agribank and other commercial banks The analysis result shows that almost a third of the Project beneficiaries have outstanding debt from VBSP up to 1/7/2011 (when Vietnam Agriculture Census 2011 was conducted) while the corresponding figures for Agribank and other commercial banks is 47% and 33% respectively The access to the Employment Support Fund remain to be very limited, except for E De ethnic group with 22% of which have had access to the Employment Support Fund Most notably, the proportion of poor households having outstanding debt from banks up to that point is also higher than that of non-poor households For the loan from VBSP, over 36% are poor households while only 28% are non-poor households; the corresponding figures from Agribank are 52% and over 40% respectively; from other commercial banks are 44% and 20% respectively It partly reflects the possibility of poor household in accessing to the loans from VBSP and Agribank possitively.However it can not be concluded that the proportion of poor households having debts from commercial banks is high (about 44% - meanwhiles this proportion of non-poor households is 20%) As the Vietnam Agriculture Census 2011 did not supply any other information on accessing credit funds

Table 1.3: Rate of outstanding debt until 1/7/2011 (%)

VBSP Agribank

Other commercial banks

Employment Support Fund

Safe water Hygienic

Quảng Ngãi

Kon Tum

Gia Lai Đăk Lăk

Đăk Nông

Power grid Safe water Hygienic latrines

Co Tu 14.9 29.8 29.8 0.0

Other ethnic minorities 30.0 42.6 32.2 5.1

Gender of household head

Note: Calculations are based on a sample of 2580 22 observations from 26 Project districts

Source: Calculations based on the Viet Nam Agricultural Census, 2011

IV Poverty reduction policies and programs in the Project are

high poverty rate, difficult socio-economic conditions, Project districts/communes have been receiving support from many poverty reduction, infrastructure and livelihood development programs/projects A summary of main programs/projects (see details in Annex 4), with many features similar to the design

of the CHPov Project, is presented in the table below According to the overall results, 68% of the Project communes are 135-II communes; 27% are 30A communces; 31% is 30B communes Regarding using ODA fund, 46% of the Project communes are FLITCH communes; 31% are IFAD and ACP communes (see details in Annex 3)

Table 1.4: Programs/projects in the Project area

Province/

district

District level Program/project 135-II communes (or 135-II villages) Dak Nong

Dak Song 3EM (3) Dak N'Rung, Dak Hoa, Truong Xuan

Dak Glong 3EM, FLITCH (3) Dak R'Mang, Dak Som, Dak P'lao

Tuy Duc 3EM, FLITCH (1) Quang Tam

Dak Lak

Ea Sup ACP (3) CuKBang, YaToMot, IaLop

Krong Bong ACP, FLITCH (4) Ea Trul, Cu Pui, Cu Dram, Yang Mao

Lak ACP, FLITCH, SA (4) Dak Phoi, Krong No, Nam Ka, Ea Rbin

M' Dak ACP, FLITCH (1) Eatrang

Gia Lai

K’Bang TNSP, FLITCH, ACP, 30B (5) KonPne, Dak Roong, Son Lang, Krong, Lo Ku

Kong Chro TNSP, 30B (3) Dak Po Pho, Dak Tpang, Chu Krey

Krong Pa TNSP, FLITCH, 30B (5) IarMok, Ia Dreh, Krong Nang, Chu Ngọc, Dat Baang

Mang Yang ACP (3) Lo Pang, Kon Chieng, Dak Troi

Ia Pa TNSP, ACP, FLITCH, 30B (2) Ia Tul, Ia Kdam

Kon Tum

Dak Glei FLITCH, 30B (5) Xop, Dak Man, Dak Nhoong, Dak Kroong, Dak Long

Kon Plong FLITCH, 30A (5) Mang Canh, Dak Tang, Mang But, Dak Ring, Ngoc Tem

22Sample for questionnaire 4_ “Questionnaire on rural household economic characteristics”

Province/

district

District level Program/project 135-II communes (or 135-II villages)

Kon Ray 30B (4) Dak To Re, Dak To Lung, Dak Koi, Dak Pne

Ngoc Hoi (4) Dak Ang, Dak Duc, Dak Nong, Sa Loong

Sa Thay 30B (5) Ya Xier, Ya Ly, Ya Tang, Rờ Koi, Mo Ray

Tu Mo Rong FLITCH, 30A (5) Tu Mo Rong, Van Xuoi, Dak Na, Dak Sao, Dak Ro Ong

Quang Ngai

Ba To WB3, 30A (3) Ba Trang, Ba Le, Ba Kham

Son Ha 30A (4) Son Nham, Son Cao, Son Linh, Son Ky

Quang Nam

Nam Giang 30B (4) TaBhing, Cha Val, Dac Pre, Dac Pring

Nam Tra My 30A (5) Tra Mai, Tra Nam, Tra Don, Tra Van, Tra Vinh

Phuoc Son 30A (4) Phuoc Chanh, Phuoc Kim, Phuoc Loc, Phuoc Thanh

Source: Compiled from various sources

Note:

- The New Countryside Program is implemented in all districts/communes Hence this Program is not included in the above table

- “ACP” is the Agriculture Competitiveness Project

- “3EM” is the Economic Empowerment of Ethnic Minorities in Poor Communes of Dak Nong Province project funded by the International Fund for Agricultural Development (IFAD)

- “FLICTH” is the Forest for Livelihood Improvement in the Central Highlands project funded by the Asian Development Bank

- “TNSP” is the Tam Nong Support Project funded by IFAD in Gia Lai

- “135-II” is the 135-II Program in especially difficult communes/villages/hamlets

- “SA” is the Success Alliance project for the support of cocoa development in the Central Highlands

- “30A” is Decree 30A on Speedy and Sustainable Poverty Reduction for the 61 Extremely Difficult Districts (now it is 62 poor districts)

- WB3 is the Forest Sector Development project funded by the World Bank in Quang Ngai

- “30B” is based on Decision 293/QD-TTg on target based support from the state budget for 23 districts with a high household poverty rate eligible to receive infrastructure investment support mechanism and policy under Resolution 30A

- In case of P135-II communes in Quang Ngai, there is also support from ISP, Implementation Support Program to Program 135-II in Quang Ngai funded by AusAid

there are programs/projects offering comprehensive support in terms of infrastructure, livelihoods, and capacity building, like P135-II, 3EM, TNSP, ISP; there are also programs/projects focusing mostly on infrastructure, such as 30A, 30B; and the remaining programs/projects focus on supporting livelihood development, such as FLITCH, WB3, ACP and SA It should be noted that most of these programs/projects encourage decentralization, empowering local governments to become investment owners, and implementation of participatory socio-economic development planning Therefore, the presence of such programs/projects in target communes/districts of the CHPov Project presents three issues to be considered with regards to cooperation and experience sharing:

42 First, the capacity of local government officers, especially those participating in the

implementation of these programs/projects, has been strengthened to a certain extent through trainings as well as through direct execution of program/project activities Program 135-II is an example, with an agenda to empower communes as investment owners, district/commune level government staff have received extensive training on procurement management, monitoring and planning However, from the survey conducted in the Project area, it can be seen that the capacity of some staff has been improved but it is still does not meet the requirements of activities under the CHPov Project A majority of trained officers under other past programs/projects have transferred elsewhere, especially after the elections for the People’s Council in 2011 In this case, the Project shall first make use of these officers by giving them a priority to join Project management units; and second, select potential officers to conduct capacity building

43 Second, there are many programs/projects in the area that focus on livelihood development,

such as ACP, 3EM, TNSP, WB3, FLITCH, and SA In order to avoid overlapping in terms of location and beneficiaries, to ensure that the resources are utilized effectively, coordination, sharing of information and implementation plans between the CHPov Project and other programs/projects in

targeted districts/communes is necessary To be able to conduct sharing of information and plans as well as to strengthen cooperation, a mechanism for regular evaluation and information sharing between the other programs/projects and the CHPov Project at all levels (from central to provincial/district) is required During the process of cooperation, there is a possibility that many programs/projects are focusing on supporting a set of similar livelihoods Then, it would be necessary

to ensure that there is no overlapping in terms of beneficiaries In parallel, means and ways of support should be consistent to a certain extent to avoid any complexities for the local staff when implementing the activities

44 Third, there are many programs/projects in the area that focus on supporting infrastructure

development, especially 30A, 30B, 3EM, TNSP and P135-II It should be noted that all Project districts/communes are currently implementing the New Countryside Program This would be an important mechanism to promote infrastructure development in the Project area although resource mobilization from this Program should still be considered carefully However, it is important to note that while the investment needed for infrastructure is large, the budget allocated for infrastructure for each program/project is limited to a small to medium scale As such, unless there is cooperation during the planning process and a solution to integrate these funds, the funds may end up being scattered into many small scale projects and not being used effectively to resolve important infrastructure bottlenecks

Chapter 2: Project Description

I Overall project description

A Project objectives

households and communities in 26 districts of 06 provinces in the Project area

support production, improve living conditions and create jobs in infrastructure construction, (ii) to strengthen food security and nutrition; to diversify market based livelihoods; and to develop livelihoods linked to markets by cooperating with businesses to improve incomes sustainably; (iii) to improve the condition of connective infrastructure at district level, including both economic and social infrastructure,

to promote production, strengthen access to public services; in parallel, to enhance the capacity of officers; to promote communication and awareness raising, and (iv) to ensure that management, monitoring and evaluation of the effectiveness of Project activities are in line with the Project design

B Main challenges and intervention strategy

area, based on survey results and other secondary sources, indicates that there are 03 main challenges, including (i) poor infrastructure, (ii) limited and poor market based livelihoods, limited market linkages and (iii) limited capacity of grassroot state officers For each of these challenges, the Project proposes appropriate interventions

48 Poor infrastructures in the Project area are considered by relevant stakeholders as the

largest physical barrier

 Regarding productive hardware infrastructure: the greatest challenge lies in limitations of transport linking communes and villages, and linking production areas to residential areas and markets Besides, limitations in access to irrigation water are an important “bottleneck” in production development in the Project area

 Regarding social infrastructure in the Project area, generally, it is still poor Although the majority of Project communes already have commune health stations, primary schools, lower secondary schools; many villages already have schools, but generally, facilities are still lacking and under poor conditions Access to clean water is also a challenge for many areas, especially in the dry season In addition, access to the job market and market information by the people from the Project area remains to be very limited

49 Infrastructure “bottlenecks” are physical barriers to livelihood activities and daily lives of the people in the Project area Consequently, the Project focuses on improving commune and village level infrastructure (Component 1) and improving district level connective infrastructure (Sub-component 3.1) with priority given to projects that support livelihood development and gradual improvement of people’s daily lives During the process of implementing these interventions, the Project sets to encourage local labour to participate in constructing infrastructure works, especially community-led procurement to create incomes for the people in the Project area

50 Livelihood development in the Project area is still very poor Compared to non-Project

districts, generally, livelihood development in the Project area is significantly more limited There are many aspects which hinder livelihood development in the Project area, including (i) Poor infrastructure leading to high transport costs, limited trading, lack of access to irrigation (as mentioned above), (ii) Divide terrain, unpredictable climate, lack of land for centralised production lead to small scale agricultural production, resulting in high transport costs, (iii) Input supply and services (seedlings, agricultural equipment, extension services, veterinary services) is poor, hence agricultural livelihood activities face high risks and are inefficient, (iv) Output markets for agricultural products are limited, mostly depend on traders so people are disadvantaged in price negotiations and trading conditions, etc, (v) Access to new production techniques remains to be limited, mainly maintaining old agricultural

practices resulting in low output yield and quality, and (vi) Assess to market information is limited so

[farmers] cannot actively avoid or mitigate negative impacts of market risks

51 Under such conditions, the Project proposes three main interventions for livelihood development, including, food security and nutrition, livelihood diversification (focusing mostly on improving some of the existing livelihoods in the Project area, directing them towards local market and niche markets), and development of market oriented livelihoods (through cooperation to promote partnerships among the Project, businesses, suppliers, service providers, and farmer groups The Project provides financial and technical support for farmers through farmer groups established on a voluntarily by households, ensuring that the participation of poor and near-poor households, women reaches the rate required by the Project The Project has a strategy to ensure that the agricultural sector (including agricultural line agencies and the agricultural extension system) is fully involved in technical support for livelihood activities of the Project

52 Limited capacity of grassroot state officers Still low and unevenly distributed capacity of state

officers, especially at commune level, poses a big implementation barrier not only for the Project but also for other poverty reduction programs/projects in the Project area This has been observed through the conclusions of large poverty reduction programs like 135-II Program and 30A Program The result

of work with departments/sectors, authorities at all levels has also confirmed this difficulty Many interviewed commune officers during the survey for the Feasibility Study said in order to have enough investment owner capacity, they highly need capacity building

53 In this case, the Project sets out to focus on capacity building for project management officers at all levels, especially at commune level, with an aim to ensure that 100% of communes have the required capacity to be a investment owner Furthermore, in order to support grassroot PMUs in implementing well their management function, the Project will prepare a Project Implementation Manual (PIM) as soon as the Project commences for capacity building purpose; in parallel, the Project will use central level full-time officers in charge of capacity building to provide technical support for the grassroot levels

C Project components

and village infrastructure development, (ii) Component 2: Sustainable livelihoods development, (iii) Component 3: District connective infrastructure development; capacity building and communication, and (iv) Component 4: Project management

 Component 1 includes two sub-components Specifically (i) Sub-component 1.1: Commune and village infrastructure development; and (ii) Sub-component 1.2: Operation and maintenance

 Component 2 has two sub-components: (i) Sub-component 2.1 – Self-reliance and income diversification, and (ii) THP 2.2 - Market linkages initiative

 Component 3 includes three sub-components Specifically (i) Sub-component 3.1: Connective infrastructure development; (ii) Sub-component 3.2: Capacity building, and (iii) Sub-component 3.3 Communication and Knowledge Sharing

other in order to promote the process towards achieving the PDO of the Project Specifically:

 Improvement of commune and village infrastructure (Component 1) is supported by some of the connective infrastructure at district level under Component 3 (Sub-component 3.1) to strengthen the conditions to access productive and social infrastructure in the Project area;

 Improvement of infrastructure helps to reduce transport costs, increases trading; effectively enabling the people to better access to input suppliers, access markets at lower costs, consequently promoting livelihood activities (under Component 2) From the second year of the Project cycle onwards, infrastructure selections must originate from the demand to support development of livelihood activities already implemented in the previous year

 Capacity building is an important aspect The Project pays attention to capacity building for state officers and beneficiaries Regarding state officers, the Project designs capacity building training activities for officers of PMUs at all levels (Sub-component 3.2) For the capacity

building for the beneficiary households, the Project encourages farmer-to-farmer extension and FFS training method as well as diversifying service providers for farmer groups to select the most relevant for them

many objectives First, to disseminate information to beneficiaries; to encourage change into

new ways of thinking and working in relation to livelihood activities Second, to strengthen discussion and experience sharing with other programs/projects Third, to strengthen dissemination of information on the Project to businesses to promote cooperation between businesses and farmers in the Project area based on a partnership model developed by the Project

56 Supportive inter-relations among the Components and Sub-components are described in Figure 2.1 below Activities to directly promote livelihood diversification and improvement for

beneficiaries are presented in dark circles and activities which promote livelihoods of the people

indirectly (by strengthening infrastructure, capacity building at all levels .) are presented in white

circles

Figure 2.1: Inter-relation and supplement among Project components

II Component 1: Commune and village infrastructure development

A Component description

57 The total funding from the WB allocated to Component 1 is over USD 47.7 million, and no

counterpart funding is required from the communes23 The general objective of this Component is investment in commune and village level infrastructure to serve livelihoods, promote production, increase incomes and improve lives of local people Investment in Componet 1 is aiming to promote

creation of local jobs in the Project area, transport time and costs will be reduced while the total area

23

In case requirements for compensation and site clearance arise, funding from the local budget will

Increasing income, improving quality of life for the people

Ensuring food security to actively develop market oriented livelihoods Increasing values of

existing livelihoods

Developing new potential market- oriented livelihoods

Training to enhance production knowledge

Awareness raising to adopt new production practices Attracting

investment in agriculture and forest production and processing

Integrating other resources in the area

Training PMU staff at all levels

Improving linkages between communes in the district

Improvements

of infrastructures for projects communes and districts

of irrigated arable land will increase, effectively contributing towards production development and improve people’s access to basic public utilities and services

58 The Project targets to promote communes as ‘investment owners’ of all Sub-projects of this Component This decentralisation process is conducted step by step, based on the capacity of each commune PPMU will assign communes that meet the criteria set by CPO to be the investment owners right from the first year of the Project For communes that do not sufficiently meet the criteria, they would be subject to capacity building so as these communes could pursue the role of investment owners no later than 18 months after the Project starts Criteria for comunne investment owners are specified in PIM (developed by CPO) and applied to all Project provinces,

59 The Project’s policy is to minimize investing in infrastructure projects requiring resettlement, land clearance, or land acquisition The Project also aims at minimizing impact of infrastructure construction on environment Nevertheless, in case such event may happens, the Project will apply the Resettlement Policy Framework (RPF), Environmental and Social Management Framework (ESMF) with specific guidances on process and procedures to handle this matter These two critical policy frameworks have been developed under the chairmanship of PPU and disseminated widely for consultation with all of project provinces, districts/communes

60 The Component consists of two Sub-components: (i) Sub-component 1.1 Commune and village infrastructure development; and (ii) Sub-component 1.2 Operation and Maintenance The details of these two sub-components are described below

of this sub-component is to focus on supporting investment in construction of infrastructure that serves directly or indirectly livelihood development and meets the basic everyday needs of the local people Therefore, this Sub-component is designed so that priority support activities align with livelihood development activities and take basic local needs as the basis The infrastructure selection process will be organised with the participation of direct beneficiaries and the community living in the area where the infrastructure work will be constructed

of infrastructure projects supported by the Project can be well maintained, Sub-component 1.2 aims to identify a mechanism and a budget for operation and maintenance for projects that require regular maintenance and small repairs The Sub-component is designed based on the following principles: (i) operation and maintenance task is assigned to communityfor management and implementation, (ii) only small scale and simple repairs and renovations are carried out, (iii) identify the demand for repairs and maintenance of invested infrastructure, which would be included in the Annual Work Plan and Budget, (iv) the budget for operation and maintenance amounts to 6.5% of the total funding allocated

to Component 1

B Implementation arrangements

63 Support activities under Sub-component 1.1 are implemented through two procurement methods: (i) community participation in procurement, and (ii) shopping procurement The selection of

procedures24.Meanwhile, procurement procedure and implementation of sub-projects must follow the current regulations on submission and approval of procurement plans, bid evaluation results and selection of bidder of the Vietnamese Government as detailed in Procurement Law and implementation guidelines issued by the Government and Government agencies, especially Decision 393/QĐ-BTC dated 1/3/2013 on Regulation to implement shopping procurement of goods, and selection of consultants for the projects under the Ministry of Finance using WB’s funding

create jobs for local labour, as well as to increase the sense of ‘ownership’ among the community towards constructed infrastructure works This procurement method has already been used in many poverty reduction programs/projects in Vietnam, including NMPRP-2 Project provinces during the

24

Guidelines: Procurement of Goods, Works, and Non-Consulting Services under IBRD Loans and IDA Credits & Grants (5/2004, revised on 10/2006 and 2011) and Guidelines: Selection and Employment of Consultants under IBRD Loans & IDA Credits & Grants by World Bank Borrowers (5/2004 and revised on 10/2006 and 2011)

process of preparing the FS have had the chance to see the NMPRP-2 model and highly value its effectiveness Such form of community procurement is applied to projects that meet two criteria: (i) the total investment amount is not too large (should not exceed VND 300 million/project); (ii) has simple technical requirements so the community can do it on its own

65 Implementation of community procurement in the Project area will face certain challenges

First, the majority of the communes in the Project area do not have experience in implementing such

procurement method for infrastructure projects so CDB officers will initially face many difficulties when

providing implementation guidelines to community groups Second, community groups need guidance

and support on procedures, especially on construction techniques, payments for effective implementation of infrastructure project under this procurement method To overcome these challenges, the Project will implement capacity building activities in Sub-component 3.2 to support commune officers in management and implementation of community procurement The Project will also issue detailed guideline and procedure for community groups to implement the community

procurement as stipulated Also, the Project will support the process of establishing Construction CIG

to participate and implement in community procurement works

procurement, shopping procurement will be applicable as stipulated by the WB and the Government of Vietnam As the investment scale and the scope of sub-projects under Sub-component 1.1 are not too large (under VND 1 billion in the 18-month Plan), shopping procurement is regarded feasible For projects applying this procurement method, the communes will carry out the procedures for procurement announcement and tender evaluation as per the current practice The process of selecting contractors meets the requirements for implementing sub-projects in terms of competitiveness, fairness, transparency and economic efficiency

67 In order to ensure one of the objectives of Component 1, which is ‘the commune has a project and the people have paid work’, the Project encourages contractors to fully utilise local labour Regarding this issue, survey results from the Project area indicate that many construction contractors wish to use local labour to save labour costs However, it may be difficult for contracting firms to utilise

local labour Firstly, due to lack of proper training, local labour can only be employed to carry out simple tasks (such as site preparation, mortar preparation Secondly, a lot of local labourers,

especially ethnic minority youth, prefer day-work, salaries paid right after finishing work, and lack of commitment to work over-time, on weekends when needed Therefore, the use of labour from other places may cost higher, but they have been trained and worked with contracting firms before, thus they can better stastify technical requirements and construction schedule These difficulties along with considerable small package value may not create sufficient incentives for contractors to do training and utilise local labour for any works that require certain level of high skills With such consideration, regarding projects under shopping procurement, the strategy to encourage job creation for local labour

is ensured as follows:

68 Requirement to employ local unskilled labour: In the bidding package, the contractor

prepares a plan, which clearly states the number of unskilled labour days (implementation of simple tasks, which do not require technical skills or expertise, such as transporting soil and stones, preparing the site etc) For such works, contractors must ensure that at least 80% of unskilled labour are local people

69 Requirement to train local labour in construction: As the training capacity of local contractors

remains to be limited, as well as due to the lack of a specific mechanism to encourage contractors to train and improve the skills of local labour, during the initial phase, the Project will pilot a construction training model for local groups of workers on the scale of 1 district per province Accordingly, provincial PMU will select 1-2 pilot Project districts The provincial PMU and CDB will help establishing 05 Construction CIGs There will be 10-20 members including young labourers in the project communes and one self-elected leader and one deputy leader in each CIG Consequently, district PMU will cooperate with either a capable construction contractor or with the district Vocational Training Centre

to organise technical construction trainings Forms of training include ‘on-site demonstration’ directly at the construction site and basic construction skills After training completion, district PMU will notify CDBs so that they can plan to work with contractors on employing trained local labour when construction projects under shopping procurement are erected Besides, the Project encourages these construction groups to participate in Project infrastructure works under community procurement After

18 months, the Project will evaluate this pilot model Consequently, lessons learnt will be drawn and

the effectiveness and suitability of this training model will be evaluated for scaling up during the remaining time of the Project

to ensure the effectiveness and success of this Component Capacity building is conducted under the overall direction of the provincial PMU, with district PMU and technical units at commune level as coordinators The Project gives priority to (i) capacity building training for investment owners at the commune level (see Component 3.2) in the first year of Project implementation; (ii) districts strengthen their technical support for communes to fulfil their function as investment owners (see Component 4)

scale and simple works supported by the Project The demand for small repairs will be identified and consolidated into annual plans Activities under Sub-component 1.2 apply the community procurement

method The project encourages villages where there is Project infrastructure to establish O&M (Operation & Maintenance) CIGs to monitor and discover areas needing repairs, in parallel, they will

be repairing infrastructure through community procurement These Groups will receive technical support from the Project to carry out the above mentioned repairs and maintenance In this respect, experience from the Rural Transport Project 3 also funded by the WB in terms of establishing O&M CIGs including female members may be considered as a reference model for the provinces while implementing Sub-component 1.2 The O&M CIGs model will be piloted before considering scaling up

As such, the pilot districts that have been selected to conduct training for Construction CIGs (as of above) will continue to pilot O&M CIGs model In that particular districts, district PMU and CDB will also support establish at least 05 O&M CIGs of 10-20 members/each These CIGs will then receive trainnings on basic O&M skills from the Project These CIGs will act as the key force to implement community procurement when any requirement for O&M incurred and recorded in the plan This model will be piloted from the middle of the second year of the project cycle and will be re-evaluated in the middle of the third year to consider scaling up

C Implementation plan

the status quo and demand for infrastructure development at Project commune/village levels; (iii) New Rural Development Plans of Project communes; (iv) proposals and preferences of the people (reflected in recommendations submitted to commune authorities and directly shared with the team of consultants preparing the Feasibility Study); (v) guidelines in Dispatch 10284/BKHDT-KTDP&LT dated 11/12/2012, Dispatch 10462/BKHDT-KTDP&LT dated 17/12/2012 and Dispatch 3144/BKHDT-KTDP&LT dated 15/05/2013

73 Feasibility of the 18-month plan: In order to ensure the feasibility of Sub-component 1.1

priorities during the first 18 months, the Project sets out the following binding criteria: (i) Community procurement should be applied to sub-projects with the total investment and bidding value of no greater than VND 300 million The investment limit applied for sub-projects subject to shopping procurement should not exceed VND 1 billion (ii) In the first 18 months, the proportion of sub-projects subject to community procurement should not be below 40% of the number of investment projects under Sub-component 1.1

74 List of sub-projects for the 18-month plan: Accordingly, the infrastructure projects expected to

be invested in the first 18 months of the Project are presented in Table 2.1 below It should be noted that the content of the 18 month plan is proposed by the localities, it reflects that they are proactive and ready for this Component However, once the Project is officially approved, the planning process will be carried out once again Hence, proposals in the current 18 month plan may be put under consideration and revised to be consistent with the actual situation The list of the sub-projects in the 18-month plan statisfy the two criteria above on investment limit and minimum rates of community procurement (in specific: 109/228 sub-projects, accounts for 47%) Details of the proposed sub-projects in the 18-moth plan is presented in Appendix 1

75 Note on the 18-month plan: According to consultation with project provinces/districts/

communes during the development of Feasibility Study at central level, these sub-projects in the month plan are assumed to have no particular requirements for site clearance, land acquisiton and resettlement Also, these sub-projects are anticipated to have no significant damages to the

18-environment These issues have already been affirmed in a number of relevant documents from PPC sent to PPU

Table 2.1: Summary of commune/village level infrastructure projects in the first 18 months

76 The post 18 month plan will be developed based on (i) evaluation outcomes of activities

carried out in the first 18 months, and (ii) the annual participatory planning process of the Project for the beneficiaries to propose infrastructure projects that they need and which match Project priorities

77 Performance evaluation is carried out in the first 18 months: The Project will hire a consultant

to carry out an independent evaluation of the implementation outcomes of support activities under this Sub-component in order to draw lessons learnt for later implementation In particular, the Project strategy is to scale up the community procurement method so the focus would be to review projects which apply this method if they prove to be effective and beneficial during the first 18 months of implementation In the later stage of the Project, the rate at which community procurement is applied should reach above 40%

78 Post 18 month selection method for infrastructure projects: The selection of priority

infrastructure projects to be invested under Sub-component 1.1 will be carried out based on a method which ensures full community participation, especially vulnerable groups Regarding infrastructure projects, investment priority will be identified through the annual planning process of the Project The planning process consists of 08 implementation steps which are described in detail in Component 4 With such a process, beneficiaries will participate in village participatory meetings to discuss and identify investment priorities Regarding O&M activities under Sub-component 1.2, identification of required repairs will be determined by O&M groups (in pilot communes), or by the community reports Based on that, the CDB will consolidate all the reports into an annual O&M plan and include in the implementation plan of Component 1

III Component 2: Sustainable Livelihoods Development

A Overview of Component 2

overall objective of this Component is to enhance food security and nutrition, diversify livelihoods, and develop market linkages in order to generate sustainable income for local people This Component, like any other component of the Project, is designed on the basis of the community driven development (CDD) approach As such, the design of this Component ensures openness and flexibility; and livelihoods supported by the Project come from the needs and characteristics of beneficiary groups

(i) Sub-component 2.1 Self-reliance and income diversification; and (ii) Sub-component 2.2 Market linkages initiatives Sub-component 2.1 basically includes activities to strengthen food security and nutrition (such crops as rice, maize, home gardening, and small livestock raising); to diversify income for beneficiaries through the improvement and promotion of current local livelihoods targeting at small

No Province Number of projects Total investment

market segments Sub-component 2.2 focuses on market linkages initiatives for a number of livelihood activities with potentially significant markets, with the possibility of strengthening partnership between farmers and businesses

(availability of roads for easy transportation, proximity to the district’s hub), and (ii) livelihood potential (availability of arable land and irrigation water sources ), the 130 communes of the Project can be classified into three categories Type 1 comprises of 52 communes which are difficult to access, have limited fertile farming land, and are mainly the poorest ones among those included in the Project For these communes, activities under sub-component 2.1 can be identified as priority support of the Project Type 3 includes 16 communes (accounting for 12%) which are considered to have easy access and good livelihood potential, these are usually the most better-off communes among all For these, activities under sub-component 2.2 can be identified as priority support of the Project Type 2 covers 62 communes, with medium accessibility and livelihood potential It is rather difficult to assess and identify whether priority support for these communes would fall under Sub-component 1 or 2 Instead, the identification of livelihood activities for support needs to be considered carefully to ensure feasibility and sustainability of support This commune classfication provides a reference basis to select the most appropriate livelihood activities for each commune Figure 2.2 below demonstrated classification of commune based on the above criteria Details list of 3 types of communes can be found in Annex 6

Figure 2.2: Commune classification by livelihood potential

through support activities for livelihood enhancement groups – LEGs LEGs are formed by households within the Project’s area on a voluntary basis Each LEG will have around 10-20 households.There are

03 types of LEGs, which are: (i) food security LEG; (ii) income diversification LEG; and (iii) market linkages LEG 01 leader and 01 deputy leader (not of the same family) who are active, reputable and experienced in production activities will be elected in each LEG to manage the group All livelihood activities proposed by LEGs that not included in the negative list will be considered by the Project for support, on the basis of their feasibility, effectiveness and sustainability In principle, the negative list includes tobacco and tobacco related products, alcohol and alcohol related products, and some other products which have negative impacts on the society and environment (details will be provided in PIM) Income diversification LEGs are established on a voluntary basis Information about the Project’s supports for these activities will be widely disseminated to local people in all villages of communes covered by the Project Livelihoods supports to diversify income will be discussed in village meetings with the participation of local people There will be 10-20 households in each LEG Composition of LEG are regulated as of below:

 Food security LEG: all members are wome, in which at least 75% are poor and near poor (in which the near poor are not over 25%) and at least 50% are ethnic minorities;

 Livelihood diversification LEG: at least 75% are poor and near poor (in which the near poor are not over 25%) and at least 50% are ethnic minorities;

 Market linkages LEG: at least 50% are poor and near poor; at least 50% are ethnic minorities

83 Besides their distinct characteristics, all three types of LEGs mentioned above follow some

common operation and organization principles First, once income has been generated, members of a

LEG can voluntarily contribute a certain amount of money; contribution to set up the group’s Revolving Fund is depended on the prior agreement in the group (which is estimated when developing the proposal for the sub-projects) This RF will be put in a bank saving account as selected by the LEG Group leaders and deputies will be trained on how to record and keep track of contributions and interest amounts, as well as to keep records of spending Savings withdrawals can only be done with both signatures of the group leader and the deputy Contribution and maintaining RF is only based on

a voluntary basic amongst LEG However, RF is a critical determinant for the Project to consider

further support to LEGs (more details are provided in each sub-component) Second, LEGs will hold at

least one group meeting a month for implementation update and experience sharing For livelihoods with relatively long implementation periods (such as hybrid acacias, coca trees, litsea crop ), meetings will be convened at important milestones in the implementation process of these activities Frequency and timing of meetings should also be clearly specified in the group charters and in the sub-project livelihood proposals

groups encouraged and supported by the Government of Vietnam through Decree 151/2007/NĐ-CP and its guiding Circular 04/2008/TT-BKH of the Ministry of Planning and Investment Accordingly, besides granting legal status to cooperative groups, certain supports for the model have also been institutionalized, especially support in the forms of education25 Given such context, the Project’s strategy in this regard will include two points First, the Project encourages the establishment of LEGs

in accordance with provisions and guidance of Decree 151 and Circular 04 to gain a better legal status, as well as to be qualified for the Government’s preferential treatment Second, LEGs set up

and operating with support from the Project will be oriented to be converted into the model of Decree

151 after the group members have been trained for better capacity, have implemented livelihood activities of the LEGs and are familiarized with the group working style The Project particularly encourages the conversion into the cooperative group model of Decree 151 at the end of the Project’s

duration in order to increase sustainability of LEGs supported by the Project

85 Proposals of livelihood sub-projects To implement livelihood activities of this category,

livelihood diversification LEGs will need to make sub-project livelihood proposals As these are not as essential as activities in the food security package, sub-project livelihood proposals will have to prove their high feasibility and effectiveness Agricultural officers, agricultural extension officers and CFs will support the process of making sub-project livelihood proposals Once completed, proposals will be submitted by CDBs to districts for approval Detailed guidance for the drafting and approving of sub-project livelihood proposal is provided in PIM Basically, the sub-project proposals must include the followings:

 Rationale;

 Objectives;

 Specific activities;

 Capacity building plans;

 Potential risks and risk mitigation solutions;

 Estimated investment for all proposed activities with clear identification of what are contributions from LEG members and what are proposed to the Project for the support;

 A set of performance indicators for evaluating the success of LEG activities;

 Commitment to set aside income generated from livelihood activities to contribute to a LEG’s Revolving Fund and usage plan;

 Other contents (in accordance with each type of LEG)

25

In accordance with Circular 04, support will be provided in line with Circular 66/2006/TT-BTC dated 17 July 2006 of Ministry

of Finance guiding the implementation of Decree 88/2005/NĐ-CP dated 11 July 2005 of the Government on financial support

86 Technical Assistance for LEGs Technical assistance for livelihoods is a key determinant of

the outputs of Component 2 Technical assistance will be provided in an appropriate manner

depending on particular features of each and every livelihood activity Nevertheless, the Project sets general principles for technical assistance to LEGs First, the Project encourages LEGs to take the lead in indentifying and negotiating with service providers Second, when appropriate and possible,

agricultural extension from farmer to farmer is encouraged This type of agricultural extension has been proved to be highly effective in reality, especially among the poor, ethnic minorities with little

education Third, when appropriate and possible, FFS is encouraged to ensure the provision of

technical knowledge going hand in hand with practising, or ‘real demonstration’, in each and every

growth stage of a particular crop/livestock Fourth, the whole agricultural system (including all

agencies in the vertical hierarchy of agriculture and rural development, and the agricultural extension system at all levels) will play an important role in the provision of technical assistance The roles of the agriculture system in the project’s provinces will be institutionalized via a Decision of the Chairman of the Provincial People’s Committee, mandating agricultural agencies to cooperate and implement

related activities within the framework of the Project Fifth, the Project encourages diversification of

service providers In particular, the Project promotes information exchanges and cooperation with

universities and research institutions in the Project’s coverage or adjacent areas, with businesses capable of providing technical assistance, and with other stakeholders capable of providing the type of

technical assistance required for LEGs Sixth, the Project develops human resources at all levels to be capable of providing technical assistance for the implementation of livelihood activities; at the same

time the Project establishes a Technical Assistance Group in an appropriate manner to actively

provide support for districts and provinces within the Project’s coverage Lastly, in case of having several LEGs with the same demand of implementing one particular livelihood activity, PMU at all

levels, especially at district level, will hold an important coordination role to ensure that all LEG will

receive capacity building training, and inputs purchase at the most reasonable and economical

 First withdrawal: Once the approval decision of the sub-project livelihood proposal and the

LEG establishment decision have been issued, a LEG is able to withdraw up to 15% of the total approved funding to carry out capacity building activities as specified in the approved proposals Service providers for these training services or detailed planning consultancy services are identified by LEGs themselves The Project will recommend a list of capacity building providers to LEGs for their own choice and decision At the same time, the Project encourages LEGs to invite lead farmers with good production achievements to share knowledge and experience At completion of training activities, CFs will evaluate the acquisition of technical skills by LEGs members Only when CFs have certified that LEG members have fully participated in all training sessions and acquired necessary skills and practices to conduct the livelihood activities proposed, can LEGs be entitled to further disbursements

 Following withdrawals: After having certified by CFs, LEGs are allowed to request CDBs for

additional withdrawal of funding Timing and amount of each withdrawal should be mentioned clearly in the sub-project proposals but there should not be more than 02 withdrawals In order

to ensure the best value of money, LEGs will buy input materials for the group as a whole to gain better bargaining power, save transportation costs, and thus cut down input expenses

 Management of the cash withdrawal: if the LEG under consideration is established in

accordance with the Decree 151, the withdrawal from the account of CDB will then be deposited to the RF account of the LEG The money could then be withdrawn to pay for services when the request is signed by both the chairperson and vice chairperson of the LEG For other LEGs, to minimize the risk of holding cash by LEG members, the funding for LEGs will be kept in the account of the CDB The CBD staff will do the payment procedures for the suppliers, services providers as instructed by the LEGs

88 Dynamics of LEGs in the Project cycle The Project’s support strategy encourages switches among different types of LEGs to diversify and enhance incomes for farmers Two following

types of switches are encouraged First is the shift towards another livelihood with enhanced market

linkages The ideal shift expected for a food security LEG includes two steps, that are: (i) Step 1: after successful implementation of proposed activities, member households’ food security has been well ensured, a conversion into income diversification LEG is encouraged to produce some livelihood products with moderate market linkages; and (ii) Step 2: following successful implementation of the above mentioned switch, the group can move into a market linkages LEG In reality, any type of switch

of livelihoods towards enhanced market linkages similar to the above mentioned switches is

encouraged Second is the shift from some less complicated livelihoods towards more complicated

cultivation and (thus) better income generation from livelihoods An example of this type of switch is a LEG after successfully implementing the goat raising model, now considers moving to breeding cow raising The pre-condition for this switch is evidence of success of current activities and its proof of adequate capacity for new livelihood activities The group will have to submit a new sub-project proposal for such a switch (detailed guidance is provided for in PIM) to the commune’s CDBs to be further submitted to the district for examination and approval

adhered to a number of safeguard policies as regulated by the WB and the Government of Vietnam In particular:

90 Pest management Project supports for agricultural livelihoods will involve the use of

pesticide, herbicide, and fertilizer Content and details of the use of such chemicals will vary from each livelihood model proposed by LEG From the WB, Operational Policies 4.09 on pest management will

be applied in this Project From the Government of Vietnam, only chemicals updated annually by MARD are allowed to use During the development of sub-projects for livelihood activities, LEG should identify training requirements on integrated pest management (IPM) to effectively ensure pest management

91 Forestry management The Project livelihood interventions are carries out in the forest areas

and the beneficiaries are resided in the community living near the forest and having livelihood activities associated with the forest During the consultation to develop this Feasibility Study, there was no particular forestry livelihoods activity proposed Also, no forestry livelihoods activity is proposed in the 18-month plan of Sub-component 2 (as below) However, as this Project is applying CDD approach, forestry livelihood activities can be proposed by beneficiaries during the development of annual working plan Therefore, it is possible to have proposal related to forestry livelihood activities

As a result, activities under Component 2 may be subject for modification under the regulations of the

WB and the Government of Vietnam for forestry management and development From the WB, OP 4.36 will be applied for the proposed forestry livelihood supports From the Government of Vietnam, Law on Forestry Protection and Development (and other related legal documents) will be applied for the proposed forestry livelihood supports However, there has been no proposal of forestry livelihood supports by the time this Feasibility Study is conducted; hence OP 4.36 has yet been applied and reflected in the livelihood analysis

B Sub-component 2.1 –Self-reliance and income diversification

a total funding of nearly USD 25 million This sub-component seeks (i) to reduce hunger and improve nutrition for poor households; and (ii) to promote income diversification through the improvement of current local livelihood activities, including those with certain market potential (as analyzed below) This component is expected to benefit at least 75% of household beneficiaries in the Project’s coverage, over 80% of poor and near-poor households; and over 80% of ethnic minority households LEGs in Sub-component 2.1 are food security LEGs and income diversification LEGs

poor and near-poor households, and those without food security Households can select one or more than one activity in the food security livelihood package, which includes: (i) rice crop; (ii) hybrid maize; (iii) home gardening (planting vegetables and some others food crops); and (iv) livestock raising For the purpose of enhancing sustainable food security, the Project encourages LEGs to combine more than one activity of the food security package Those selecting livestock raising need to have plans to

cooperate with at least another LEG involved in plantation of crops of the food security livelihood package mentioned above

livelihood package, participants are mainly women As a result, these activities will be led by women’s unions at different levels In this approach, the Project will work with women’s sub-unions at communes to identify active women who are capable of connecting/mobilizing women in villages Those women will then be trained by the Project with more LEG campaigning and organizational skills

in order to act as main actors of food security LEGs to implement activities of the food security package Food security LEGs will then be established for groups of about 10-20 women with the leaders and deputies trained as above At least 75% of LEGs’ members have to be poor and near poor households (in which near poor households cannot represent more than 25%) and at least 50%

of them have to be ethnic minority households Once established, groups will develop their own project livelihood proposals Agricultural and agricultural extension officers of communes and CF will support LEGs in developing these proposals to be submitted to the district level for examination and approval in line with procedures provided in PIM

sub-95 Nutrition support in the sub-component 2.1 Besides supporting LEGs to carry out food

security activities, the Project will also organize training courses to provide knowledge about daily nutrition in order to promote nutrition awareness change The audience for this type of training is the member of food security LEG and other women in the villages who are not the LEG members but are

in the productive age that are interested in this training This type of activities will be coordinated by the local Women’s Union The Project will explore for possible collaboration with the National Target Programme on Health (Sub-project 3 on reproductive health care and improvement of nutrition for children) in the project areas According to the initial discussion with the Programme National Steering Committee, the Sub-project’s activities have been implemented in most of the project communes The main activities include the provision of nutrition training and vitamin A for children less than 60 months; capacity building for communal healthcare staff (at the commune healthcare centre) and community nutrition facilitators to disseminate information and practices on nutrition for villagers In addition to activities coordinated by the WU, the Project will cooperate with the National Target Programme on Health (within the framework of Sub-project 3) in order to enhance supporting activities for nutrition improvements

96 Supporting timeframe for food security LEGs The Project will support fully for LEG of which

proposals are approved for at least 2 years and combined at least two food security livelihoods Starting from year 3 and onwards, the Project will only provide supports for LEGs which have contributed to RF; support amount from the Project is not exceeding the value of the RF (including both the principal and interest amounts at the time of determining support values of the Project) and is relevant to the approved proposal of sub-projects for year 3 If, after 02 years, LEGs are unable to generate any savings, the Project will only consider providing technical assistance (through technical training) given that LEGs have suitable proposals From the fourth year, the Project will only provide technical assistance to promote sustainability of activities

Sub-component 2.1 seeks to support beneficiaries to improve different livelihoods currently existing in the Project’s area and have rooms for improvements These are livelihood activities that farmers are relatively familiar with, that are currently small-scaled but have the potential of improvement for further income generation for local people These are also activities with potential market linkages with certain market niches, but are still mainly consumed in the local markets or through private traders; the potential for developing market linkages at commercial level sustainably is still abudant These activities have not yet received attention and attracted investment from businesses in the Project’s coverage or surrounding areas, as a result, the possibility of developing production partnership with businesses is still limited or subject to further study For these activities, strategic interventions of the Project are basically to support local people “to better implement their current or used-to-be livelihood activities” in order to diversify household income By the time the FS is developed, there are quite a few options of livelihoods that can be put into this category, such as amomum, litsea (as specialized crops or rotational crops with cassava), boerhavia diffusa, calamus armarus, livestock raising activities

of cows and buffalos, goats

98 Sales plan of outputs for livelihood diversification LEGs LEG’s outputs are mainly for local/niche markets or sold through private traders (for example, litsea is a raw material for incense

production, amomum as an ingredient in traditional medicine, Japanese sweet potato as an ingredient for some special confectionery ) Livelihood diversification LEGs should indentify clearly sales plan of outputs in the proposal It is regulated by the Project that LEGs sale outputs in groups The Project encourages the model of LEGs with members who are business households or can act as buying agents to support other members of LEGs with market knowledge and information, and at the same time to act as buyers themselves If the sales plans target private traders who are not LEGs members, LEGs need to clearly identify specific potential buyers to establish trading relationship between the groups and those private traders Agreement on sale plans in groups with private traders will help limiting the risk of price squeezing, as often happens when people sell product by individual

99 Duration of Project’s supports for livelihood diversification LEGs All livelihood diversification

LEGs will receive full support from the Project in accordance with the approved livelihood sub-projects proposals The duration of Project’s supports for livelihood diversification LEGs as of follows: (i) For livelihood models with payback periods of less than one year, the Project will use a support mechanism similar to that used for livelihoods under the food security package (financial support is provided for a maximum period of the first two years; support for the third year will correspond to the value of RF; and only technical assistance will be provided in the fourth year) (ii) For livelihood models with payback periods of more than one year, the scale of supports by the Project will squeeze in parallel with increasing contributions from LEGs year by year as follows:

 Year 1: the Project supports 90%, LEG contributes 10%

 Year 2: the Project supports 80%, LEG contributes 20%

 Year 3: the Project supports 65%, LEG contributes 35%

 Year 4: the Project supports 50%, LEG contributes 50%

C Sub-component 2.2 – Market Linkages Initiative

100 Sub-component 2.2 – Market linkages initiative With a total funding of approximately

USD 10 million, this Sub-component sets a target of promoting sustainable development of oriented agricultural livelihood activities for income improvement for households in the Project’s area The approach of this Sub-component is through the development of partnership between businesses and groups of farmers organized into market linkages LEGs to produce products meeting requirements of businesses Businesses here can be state owned enterprises, domestic private companies, foreign invested firms, business households having business registrations, or some other appropriate agents – hereinafter referred to as “businesses”

market-101 Demand-driven approach Different from food security LEGs and livelihood diversification

LEGs, the approach to market linkages LEGs will purely be a demand-driven approach Accordingly,

the Project will identify livelihoods with promising market potentials, suitable for the special characteristics of the Project’s area and that of beneficiaries The Project will also help finding business partners who engaging in buying, producing and processing products The Project will also work with suppliers of inputs and service providers for these livelihoods so that a Partnership Plan can

be built among all these actors With these approach, the Project will act as the connector to promote discussion, negotiation and agreement conclusion on partnership between related stakeholders Figure 2.3 below presented the model of partnership between the Project, businesses, suppliers, service providers and market linkages LEGs In particular:

 The Project: The Project supports the identification of activities with potentials of market

linkages development; working with enterprises and other related stakeholders to build up trading relationship For LEGs, the Project supports group formation and set-up of group Charter; supports the drafting and approval of sub-project proposals On the basis of the approval of the sub-projects, the Project provides funding and technical assistance during the operation of LEGs; and other supports as needed during implementation Especially, PMU at all levels will play an important role of connecting market linkages LEGs with enterprises and other related stakeholders in partnership

 Businesses: Businesses are buyers of products of LEGs at the end of each cycle of

production, at the same time, are the one who determine requirements in terms of quality, specification and volume of production The Project encourages businesses to provide