Document of

The World Bank

Report No:

PROJECT BRIEF

ON A

PROPOSED GRANT FROM THE

GLOBAL ENVIRONMENT FACILITY TRUST FUND

IN THE AMOUNT OF usD7 MILLION

TO THE

China, Thailand, Vietnam, Fao

FOR A

Livestock Waste Management in East Asia Project

February 17, 2005

CURRENCY EQUIVALENTS

(Exchange Rate Effective {Date})

FISCAL YEAR

ABBREVIATIONS AND ACRONYMS

East Asia And Pacific

Livestock Waste Management in East Asia Project

Contents

Page

1. STRATEGIC CONTEXT AND RATIONALE

   1. Country and sector issues

The proposed Project addresses one of the most significant and rapidly growing sources of land-based pollution of the South China Sea – environmentally unsustainable intensive and geographically-concentrated livestock production in China, Thailand and Vietnam.

The South China Sea¹ is a locally, regionally and globally significant body of water surrounded by countries that are experiencing rapid population and economic growth and facing major and similar environmental challenges. This bio-geographic region is one of the world’s most biologically diverse shallow-water marine areas. However, this biological richness is seriously threatened by two major environmental problems - over-fishing and land-based anthropogenic pollution. Without wide-scale preventive action, livestock production would become the single most important source of organic and chemical pollution of the main catchments draining into this international water.

A recent World Bank report² reveals that land-based run-off and other inland discharges are currently estimated to contribute 44 percent of pollution to the South China Sea and the chemical oxygen demand (COD) from untreated piggery waste alone in the coastal regions of Central-south, South-west and East China accounted for 28 percent of current urban-plus-industrial COD loads in 1996 which is projected to rise to as much as 90 percent by 2010. The following table presents a summary of a study conducted in the framework of the Project preparation.

The East Asia region is the world’s biggest livestock production area dominant in pig and poultry with China, Thailand, and Vietnam alone accounting for 52 percent of all pigs and 28 percent of all chickens in the world in 2001. The shares of East Asia in world livestock production would continue to grow fast over the next decades fuelled by a growing population, rising incomes and urbanization. This, coupled with economic, technological, and political evolution, is causing significant change in the scope and the structure of the livestock industry. In particular, very intensive forms of livestock production are appearing rapidly and driving much of the sector’s development. Large-scale industrial production accounts for about 80 percent of the total production increase in livestock products in Asia since 1990. In the future, most livestock production, especially of pigs and poultry are projected to come from large-scale industrial production with vast majority of these intensive production farms located around major urban centers in the participating countries that lie in or close to the coastal regions of the South China Sea.

Concentrated livestock production, also a major threat to human health, as evidenced by the recent SARS and Bird Flu outbreaks, causes significant local, regional and global environmental damage, particularly to freshwater and marine aquatic systems. Current waste management practice in these areas is predominately direct or indirect discharge through streams and rivers into the South China Sea. The main sector issues are:

(1) Lack of technical solutions to address and deal with the problem of nutrient imbalance - In all three countries, limited government support for basic livestock waste management investments persists. Moreover, these investments address only the immediate impacts or symptoms of the problem as perceived at the local level and do not even begin to seriously address the problem of nutrient imbalance. Without new initiatives and technical solutions, countervailing tendencies to concentrated livestock production would be too weak to overcome the incentives driving it. Consequently, the imbalance between the level of nutrient inputs and absorptive capacity of the land would worsen progressively with rapidly growing industrial livestock production.

(2) Lack of policy instruments for industrial livestock production specific management and mechanism for law enforcement and coordination among government agencies - All three participating countries have national level environmental policies with supporting standards. In each, the components dealing with livestock waste management are very recent and general with little effective enforcement. The agencies charged with enforcement lack the resources committed to properly monitor and enforce the regulations.

2. Rationale for Bank involvement

The Project is fully consistent with GEF International Waters Focal Area Strategic Priorities, in particular with IW-1 catalyzing financial resource mobilization for implementation of reforms and stressing reduction measures through agreed Trans-boundary Diagnostic Analysis and Strategic Action Plans and IW-3 innovative demonstration of removing the barriers to sustainable industrial livestock management.

The Project is fully consistent with GEF OP10 Contaminant-based Operational Program. Specifically, the Project would (a) demonstrate how to address land-based pollution (paragraph 10.2); (b) position the GEF to play a catalytic role in demonstrating ways to overcome barriers to best practice in limiting contamination of international waters (paragraph 10.5); (c) address a threat that is imminent, of high priority, and on which neighboring countries want to take collaborative action (paragraph 10.5); (d) stress pollution prevention over remediation (paragraph 10.7); (e) leverage private investment (paragraph 10.9); (f) involve close cooperation with other GEF agencies (paragraph 10.9); and (g) be replicated regionally and globally (paragraph 10.11).

The Project will also contribute to objective of the GEF Focal Areas of climate change, OP2 Costal, Marine, and Freshwater Ecosystems, and OP14 Draft Elements of an Operational Program for Reducing and Eliminating Releases of Persistent Organic Pollutants into the Environment.

The Project is also consistent with the proposed objectives and potential eligibility criteria of a possible GEF/World Bank Strategic Partnership for a Land-based Pollution Fund for the Large Marine Ecosystems of East Asia that is under development to further scale-up this program. The objective of this Partnership would be to demonstrate and encourage replication of innovative, more cost-effective ways to reduce land-based pollution of the large marine ecosystems of East Asia and to stimulate private investment in such measures. The Partnership is expected to focus on both wastewater treatment and one or two regional and/or national projects to reduce agricultural pollution

3. Higher level objectives to which the Project contributes

The Project is consistent with the goal of the World Bank’s Country Assistance Strategies (CAS) in China, Thailand and Vietnam reflecting the need for rapid economic growth that is environmentally sustainable.

In China, the CAS (25141-CN, December 19, 2002) aims at assisting the government in poverty reduction and supporting investments in environmentally sustainable agricultural and livestock development. As reflected in the CAS, protecting the environment is an overarching objective for support by the World Bank to sustain rural income growth while maintaining the natural resource base. This proposed Project would contribute towards these specific CAS goals by promoting investment on selected livestock farms in an environmentally sustainable manner to protect environment around the farms and towards the South China Sea.

In Thailand, the CAS (25077-TH, January 22, 2003) aims at, as one of the World Bank’s implementation support, supporting the government by complementing its development partnership at the country level with work on regional and global public goods. The World Bank is already actively involved in a number of regional initiatives and would strengthen its support for these programs in the coming years. The World Bank would also help share Thailand's development experience through cooperation with other countries in the region. This proposed Project would contribute towards these CAS goals by promoting an integrated regional approach in Project preparation, implementation and sharing of experience.

In Vietnam, the CAS (27659-VN, February 19, 2004) sets out three broad objectives (a) high growth through a transition to a market economy; (b) an equitable, socially inclusive and sustainable pattern of growth; and (c) adoption of a modern public administration, legal and governance system. The proposed Project is in line with these broad objectives by introducing a legal framework into the livestock production sector to promote an environmentally sustainable growth.

The Project’s regional approach will maximize its contribution to the two regional GEF Action Programs by ensuring that (a) the region’s three most important countries, in terms of livestock production and waste pollution, are all involved; (b) their common interest in protecting ecosystems of the South China Sea is emphasized; (c) important cross-country synergies are promoted; and (d) experience from the project demonstration could be replicated throughout the region.

The proposed Project would demonstrate the technically, agronomically, geographically, economically, and institutionally workable solutions to protect the environment under tremendously different political and social situations and conditions. All three Project participating countries have recognized the negative effects of industrial livestock production on the environment and endorsed the proposed Project as a means to tackle these issues and as a national priority for GEF support.

2. PROJECT DESCRIPTION

   1. Lending instrument

The proposed Project would be a full size stand-alone GEF grant financed Project

2. [If Applicable] Program objective and Phases

Not applicable.

3. Project development objective and key indicators

1. Project Development Objective

The Project’s development objective is to reduce the major negative environmental and health impacts of rapidly increasing concentrated livestock production on the open waters of and thus on the people of south-east Asia. Its global environment objective is to reduce livestock induced, land-based pollution and environmental degradation of the South China Sea and Gulf of Thailand.

2. Key Indicators of Project Performance

Achievement of the Project development objective would be monitored by the following key performance indicators (see also Annex 3, Results Framework and Monitoring):

1. Reduced livestock production related emissions of pollutants in surface water systems of project area including nitrates, phosphates, BOD, COD and E. coli;.

2. The number and size of confined livestock producers within the demonstration areas preparing and adopting pollution control practices demonstrated through the project;

3. Improved spatial distribution planning for livestock production facilities (to better match waste production and land absorption capacity);

4. Local and national adoption and enforcement of suitable policies and regulations for addressing livestock waste management-related pollution;

5. Reduced human health risk as a result of minimized transmission potential of pathogens, antibiotics and virus from fish to human being;

6. Increased public awareness and regional exchange of information on pollution threats and health problems from livestock waste as shown in government and World Bank policy documents.

4. Project components (see Annex 4 for a detailed description and Annex 5 for a detailed cost breakdown)

On-the-ground demonstrations of innovative, cost-effective livestock waste management techniques by private livestock producers and implementation of a replication action plan for them will be the project’s principal outputs, as agreed at pipeline entry. Reflecting this emphasis, nearly 60 percent of total project cost is budgeted for livestock waste management technology demonstration activities.

The project design is tailored to fit the specific livestock rearing conditions in the three participating countries, particularly the different average size of pig farms, which are its main target. In Thailand and China, large sized industrial pig farms are dominant, while in Vietnam, pig farms are typically small scale, involving confined household-based production that is concentrated in particular villages. This structure of Vietnamese rural society requires that the project’s demonstration activities be conducted on a communal (village) rather than individual farm basis. The targeted project demonstration farms are all located within the concentrated livestock production jurisdictions bordering South China Sea and Gulf of Thailand.

The proposed Project takes a comprehensive approach to integrate technological solutions, regulatory enforcement, capacity building, and regional synergy for achievement of the Project objectives. The Project would be integrated into the Governments’ mainstream programs and based on existing institutional mechanisms. The project will support activities under the following four project components to be implemented over a period of five years with focus on on-the-ground demonstration, policy development and regulatory enforcement.

Component 1: Livestock Waste Management Technology Demonstration (US$13.6 million)

This component would finance consultant services, training, goods and civil works related to the development and construction of cost-effective and replicable livestock waste management systems and facilities and the implementation of effective waste management approaches in areas with a high concentration of intensive pig farms. Its goal is to demonstrate technically, geographically, economically and institutionally workable solutions to reduce regionally-critical livestock waste pollution caused by industrial livestock production under the different political and social situations of the participating countries. The livestock waste management strategies promoted under this component will focus on reducing excess nutrients (nitrates and phosphates in particular) and human health risks. The methods to be used would include (a) reducing, through better feeding practices, the volume of nutrients emission; (b) getting the nutrients back into the crop cycle; (c) processing and packaging the nutrients for export to other areas for crop use; (d) converting the nutrients to plant-available forms; (e) destroying the nutrients; and (f) taking measures to minimize potential transmission of pathogens, antibiotics and their resistance strains from livestock to human being. Specific activities of the component would include: selection of demonstration farms and villages, technical design, and implementation.

The demonstration activities would be supported by training and extension to provide (a) farmers with the essential skills and technical support needed to improve their on-farm manure management practices and (b) capacity building. Activities would be specified in the detailed master capacity building development plan to be prepared by each participating country. This component would comprise two subcomponents i.e. Technology Demonstration, and Training and Extension.

Component 2: Policy and Regulatory Development (US$4.8 million)

This component would finance consultant services, training and goods to support setting up a policy and regulatory framework for environmentally sustainable development of livestock production in each country that will induce further policy reforms and encourage farmers to adopt improved manure management practices. This will be achieved through: (a) the development of a replication strategy; (b) the review and revision of existing regulations; (c) the commitment to master planning of livestock production (at national and provincial levels) to direct the geographic focus of future intensive livestock production; (d) the development and introduction of codes of practice or best waste management practices; and (e) the development and introduction of livestock waste recycling and discharge standards. Specific policy packages will be tested in sub-national jurisdictions and testing experience will feed back into the policy and regulatory development subcomponent. Code of Practices or Best Management Practices will be tested in synergy with Livestock Waste Management Technology Demonstration component, which will promote cost-effective and replicable technical options. This component will also support awareness raising activities, focusing on policy measures and environment and public health issues associated with inadequate manure management. This will focus the attention of national and local governments on livestock waste policy and regulatory enforcement and facilitate further assistance with this challenge from the World Bank and other donors. This component would comprise three subcomponents i.e. Policy and Regulatory Development, Policy Testing, and Awareness Raising.

Component 3: Project Management and Monitoring (US$4.1 million)

This component would finance consultant services, training, office equipment and incremental operating costs to support efficient project management by supporting the establishment of a national Project Management Office (PMO) in each participating country as the secretariat of and reporting directly to the respective National Steering Committee. The PMO, comprising a Project manager supported by competent staff, based on existing administrative structure and physically located within the main implementing agency of each participating country, would be responsible for day to day Project administration. Replication potential of alternative livestock waste management technologies as related to farm scale, affordability, operational capacity, material availability, and compatibility to the waste handling methods of the local farm communities would be assessed to achieve widespread replication of the tested manure management practices throughout the three participating countries

The component would also support effective Project monitoring and evaluation of the social, economic, environmental, human health risks and other changes brought about by the Project, and the dissemination of Project outcomes within respective participating country. Monitoring on human health risks associated with the project will focus on measures taken to minimize potential transmission of pathogens, antibiotics and their resistance strains from livestock to human being. Specific activities would be detailed in Project monitoring and evaluation plans to be finalized at appraisal. This component would comprise two subcomponents i.e. Project Management, Project Monitoring and Evaluation.

Component 4: Regional Support Services (US$1.5 million)

This component would finance consultant services, training, workshop, office equipment and incremental operating costs to provide (a) capacity building support to strengthen the participating countries’ institutional capacity in Project implementation and (b) regional coordination and facilitation support to ensure regional coordination and achieve cross-country synergies, and regional replication.

This component would respond to the participating countries’ need for an easily accessible source of support for capacity building including support for (a) decision tools development, (b) evaluation of Project activities and outcomes, and (c) development of training modules and packages. This component would focus on regional coordination, facilitation amongst the three participating countries and the dissemination of Project outcomes, decision support tools, technical guidelines and standards within the three participating countries and to other countries bordering the South China Sea. This component would comprise two subcomponents i.e. Capacity Building Support, and Coordination and Facilitation Support.

5. Lessons learned and reflected in the project design

Key lessons learned from the World Bank’s rural environmental and livestock operations, LEAD’s³ earlier AWI pilot studies in China, Thailand and Vietnam, and the government programs and reflected in the proposed Project design include the following:

1. Lack of livestock waste management-specific policy instruments, weak law enforcement and coordination between concerned government agencies and existence of sometimes counter-productive policies are the key weaknesses in policy framework.

2. Lack of effective analytical tools, appropriate technical solutions and coordinated inter-agency approaches are the major lessons in addressing the worsening livestock waste management issue.

3. Strong government commitment in compliance, enforcement, incentives and early involvement of key stakeholders including local administrations, communities, farmers’ organizations in Project preparation are critical to ensure ownership, sustainability and successful Project implementation.

4. Mitigation measures to reduce nutrient load must yield tangible benefits for key stakeholders, specifically local communities and farmers to ensure adoption and replicability.

5. Effective monitoring and evaluation plans should be developed and applied to assess Project impact.

6. Capacity building of Project implementing agencies and regulatory institutions through training, technical assistance and specialized support is the key to ensure efficient and effective Project implementation.

6. Alternatives considered and reasons for rejection

In designing the Project, the following alternative approaches were considered as possible methods to abate and prevent pollution from livestock production but rejected as unfeasible.

Exclusively regulation-based approach (forced regulations). Regulatory measures could comprise (a) capping or reducing of farm animal numbers; and (b) forced relocation or closing down of existing farms. These measures may potentially run into major economic, social and political problems in all three countries. Widespread capping or reducing of animal numbers is likely to choke the industry as well as reduce the incentive for investment in livestock farming. Forced relocation or closing down of existing farms are rarely successful and acceptable options despite a few cases of large modern farms established in Thailand where redirection to more suitable areas was achieved. Such control measures should be reserved only for the most serious problem cases and be used only as a last resort.

Exclusively technology-based approach (on-farm treatment of all effluents). Understanding that all participating countries currently do not use land application of livestock wastes as the primary disposal practice implies that treatment, to some acceptable standard, would be required. However in general, stipulation of universal on-farm treatment of livestock wastes is neither necessary nor always practical as a measure when land application is used for the ultimate disposal of livestock wastes. For small farms, the cost of suitable technology and/or lack of available land may make treatment a limited option. Where such farms are well dispersed across watersheds, their individual contributions to the overall pollution load may be quite limited. However, where such farms are clustered together, communal treatment facilities may be an option.

Approach to involve all littoral countries bordering South China Sea. This approach was rejected based mainly on the fact of limited GEF grant available for the Project. Involving all riparian countries bordering South China Sea (also Cambodia, Malaysia and The Philippines) in the Project would likely result in (a) increased complexity of regional coordination; and (b) diminished interest of countries due to much smaller average GEF grant allocation to each participating country.

3. IMPLEMENTATION

   1. Partnership arrangements (if applicable)

N/A.

2. Institutional and implementation arrangements

Regional Coordination Group (RCG). The Project implementation would be coordinated and facilitated by a RCG which would consist of representatives of each participating country (also members of their respective National Steering Committee) and FAO. RCG’s principal role is to (a) ensure a continuing exchange of information on livestock waste management issues; (b) coordinate Project implementation among the countries, (c) ensure the inclusion of the issue of manure management on the political and budgetary agenda within respective country, (d) facilitate the gradual adoption of common policies thereon between the partners, and (e) coordinate implementation of the Regional Support Service component. RCG would meet normally twice a year.

National Steering Committee (NSC). A NSC has been formed by each participating country with members from key government ministries (agriculture, environment, public health etc.), academies within each country involved in livestock waste management at national level with overall responsibility for Project preparation and implementation in respective country. Its principal functions would be to (a) review and approve Project annual work plans and budgets in their respective countries, (b) provide guidance on national policies and priorities related to livestock waste management to be followed and help resolve related issues, and (c) integrate activities of various agencies involved in the Project and ensure an inter-agency coordinated approach to Project implementation. To provide immediate guidance to Guangdong PMO, a Project Leading Group has been established at Guangdong provincial level.

National Project Management Office. A national Project Management Office would be established as the secretariat of and reporting directly to respective National Steering Committee. The PMO would be responsible for day to day Project administration. Its staff composition, specific responsibilities, financial budgets and physical location would be decided by respective NSC and acceptable to the World Bank. To facilitate Project preparation and implementation in Guangdong province, a PMO at provincial Department of Agriculture would be set up.

Local Institutional Arrangement. Project management structure below the national level varies from one country to another and is described in detail in Annex 6. Local governments would make practical institutional arrangements involving various government agencies for preparation and implementation of respective Project activities. With guidance and support from national PMOs (provincial PMO in Guangdong) and training, local level agencies would take the primary responsibility for Project implementation within their jurisdictions.

Stakeholder Involvement. All key stakeholders have been involved in Project preparation and will be continuously involved in project implementation. Stakeholder participation plans are under preparation by the participating countries and will specify the participation and consultation mechanisms tailored to facilitate the stakeholder involvement especially the private sector. The private sector will be responsible for implementation on the demonstration farms and villages.

Implementation Arrangements for Regional Support Services Component. FAO/LEAD would be responsible for implementation of the Regional Support Services component. A Regional Facilitation Office would be set up prior to Project effectiveness and located in FAO’s Regional Office in Bangkok of Thailand. This Office would consist of a full-time FAO staff serving as the Regional Project Coordinator supported by short-term consultants as needed. Its main functions would be to (a) prepare an annual work program to be reviewed and approved by the RCG; (b) manage the Project activities as agreed with the World Bank; and (c) serve as the secretariat of the RCG.

A detailed description of the Project institutional and implementation arrangement is presented in Annex 6 and included in PIPs.

3. Monitoring and evaluation of outcomes/results

A draft M&E Plan has been prepared by each participating country and included in country - specific Project Implementation Plans. These draft M&E Plans have been reviewed by the World Bank, which provided detailed comments and recommendations. The M&E Plans will be finalized at project appraisal. The task team will make sure that process indicators, stress reduction indicators and environmental status indicators relevant to International Waters Projects are included in the finalized M&E Plans.

The M&E Plans will specify the details of the scope of and activities for monitoring and evaluation. The scope will include (i) nitrate, phosphates and BOD, COD and E. coli discharge at the end of the pipe of the individual farms or community, and at critical downstream locations; (ii) number of standing pig population covered by farms adopting sound livestock waste management systems; and (iii) extent of awareness and regional exchange of information on pollution threats and health problems from livestock waste. The activities will include: (i) progress monitoring, which will include monitoring of the status of project implementation progress indicators; (ii) livestock waste management system monitoring, which will include, at farm and community level, the monitoring of system efficiency and the effect of the project manure management interventions on public and animal health; (iii) environmental monitoring, which will include monitoring of the major physical, chemical, and biological characteristics of unit processes, or surface and ground water measurement (where applicable) within project areas (micro-watersheds) and at the end-of-pipe on demonstration farms; (iv) project impact monitoring, which will include monitoring of the implementation of stakeholder participation plans, annual social impact review and public consultation, impact on human health, and long-term project impact; and (v) other monitoring of additional parameters required for achieving project objectives. Annex B provides the details.

Specific plans for monitoring the long-term project impact will be developed during project implementation and finalized at project completion. This may include (i) a World Bank post completion evaluation mission to visit the participating countries within 3-5 years upon project completion, (ii) a follow-up study by FAO/LEAD in the participating countries for project impact evaluation, (iii) defining and development of tools to measure leveraged investment, and (iv) continuous dissemination of project impact results through an internet portal on “livestock waste management in East Asia” to be established during the project implementation based in FAO/LEAD.

4. Sustainability and Replicability

4.1 Sustainability

The project is designed to be sustainable in several respects. To the extent possible, the project will rely on technologies that are cost-effective, replicable and environmentally sustainable. For technologies such as improved feed efficiency or fertilization techniques that lower production cost, sustainability would be inherent. The project would ensure that manure treatment systems promoted under the project would have sufficiently low operation and maintenance costs to be financially sustainable by livestock producers.

To a large extent, the project’s long-term sustainability would be ensured through strengthening of regulatory frameworks for the livestock sector. While there are risks of insufficient enforcement when these affect profitable economic activities, the project would attempt to mitigate such risks in several ways: (i) Sustainable solutions to ensure the private sector’s willingness to invest in livestock waste management technologies would be sought through increased stakeholder participation in the decision-making process, including favorable pricing policies for livestock waste management systems’ outputs such as bio-gas, electricity and organic fertilizer; (ii) Raising of public awareness would encourage local communities to seek more consistent enforcement of environmentally-friendly solutions; and (iii) Strengthening of public institutions and systematic monitoring of livestock development policies, including their environmental impact, would lead to improvements in each country’s capacity for sustainable livestock development, as well as benefits for the global environment. The project’s monitoring and evaluation plans will ensure that its environmental and social benefits are adequately measured, valued and disseminated which would further promote its sustainability. The governments of the participating countries have provided assurances about the priority nature of this project and their commitment to ensure adequate government support, including financial resources for sustainability beyond the successful completion of this project.

4.2 Replicability

The project may yield only limited direct impact on water quality of the South China Sea, since the selected demonstration areas represent negligible fractions of the total pollution load. Consequently it has been designed to maximize replicability beyond its immediate impact area. A noticeable pollution reduction in the South China Sea catchment areas therefore can be achieved through the replication of the demonstrated livestock waste management practices throughout the participating countries and in other countries bordering the South China Sea. Specific project activities for replication of improved livestock waste management approaches would be (i) preparation and implementation of a replication strategy; (ii) specialized training, cross-visits and study tours for interested farmers, local officials, decision makers etc.; (iii) engaging farmers groups, local communities, NGOs, government agencies and other stakeholders; (iv) support for local pressure through public-awareness building; and (v) dissemination of demonstration results through targeted workshops and development of internet portal for in-country as well as regional replication.

The aim of the project’s replication strategy, is eventual integration of the project’s successful demonstrations into each country’s overall livestock waste management strategy and their scaling up. During this process, opportunities for integrating livestock waste management activities in future World Bank and other donor investments would be sought. Through the regional dissemination activities, which would target primarily the three participating countries but eventually also other riparian countries draining into the South China Sea, other countries in the region could benefit from the knowledge and experience gained under the project. The project would also intend to provide valuable experiences beyond the East Asia region. Close cooperation with other international livestock management projects and assistance agencies would ensure that a successful project approach can be replicated in other regions that face similar environmental problems from industrial livestock production. The project would ensure that all aspects of its design and implementation are well documented and easily publicly available to support dissemination and replication efforts.

5. Critical risks and possible controversial aspects

The proposed Project deals with challenging environmental issues in the countries of the East Asia region. No controversy was envisaged. Potential risks may include:

1. Inadequate collaboration among key agencies. Agricultural and environmental ministries in the countries involved have sometimes non-compatible interests and are not accustomed to working together;

2. Lack of participation and weak support of local populations and civil society as well as a weak partnership with the private sector;

3. Failure in coordination among participating countries due to ineffective regional coordination arrangement, lack of country ownership, failure to observe commitment etc.;

4. Operational failure risk resulting from (a) inadequate financial incentives for the private sector to invest in waste management systems; (b) inadequate political will and human resources to enforce nutrient management regulations; (c) lack of local community and farmers support for maintaining communal systems; (d) operational and management support not available or inadequately accessible, (e) counterpart funding contributions not available on time;

5. Technical failure occurring as a result of (a) inappropriate choice of technology and system, (b) design, equipment, or material failure, and (c) farm expansion; and

6. The potential transmission of pathogens, antibiotics and their resistance strains from livestock to human being under the Project. To minimize this risk, the following measures have been agreed that all participating farms will (a) treat all pig manure through aerobic or anaerobic process including composting, covered lagoon, anaerobic digester etc. before they are used on cropland, in fish pond, or marketed; (b) reduce use of antibiotics; (c) not rear any ducks on the same farms to minimize risk of forming new strain of influenza virus since human flu virus and a duck virus are very similar. It is expected that such potential transmission incidence, not a result of the project, will be greatly reduced through implementation of these measures.

1. Loan/credit conditions and covenants

The Regional Coordination Group, Regional Facilitation Office, and National Project Management Offices are established by Project Effectiveness;

Project management organizations, including Regional Coordination Group, Regional Facilitation Office, National Steering Committee, National Expert Group, National Project Management Office, Guangdong Project Leading Group, Guangdong Provincial Project Management Office, are maintained throughout the Project implementation period with composition and staffing acceptable to the World Bank.

4. APPRAISAL SUMMARY

   1. Economic and financial analyses

Range of analysis. Although nearly 60 percent of the Project’s total cost represents on-farm investments for demonstration of improved livestock waste management technologies, the main Project benefits are environmental, health and institutional. Consequently, the appropriate economic analysis is a cost-effectiveness analysis to determine whether the Project could achieve its development objective at the least economic cost. A second important aspect relates to the financial attractiveness to Project participants of technologies and other approaches to be promoted under the Project. This is covered by a financial cost-benefit analysis.

Economic analysis. The cost-effectiveness analysis examines potential alternative technical solutions for reducing fluxes of selected critical nutrients (N, P, BOD and COD) from livestock waste into the target environment and estimates the unit cost of their removal from the chain. The analysis confirms that, in terms of reducing the flow of critical pollutants to the South China Sea, the range of technical solutions to be promoted under the Project is cost-effective.

Financial Analysis. The financial analyses for all participating countries find that Level 1 (meeting minimal domestic requirements) types of manure management are affordable (or even profitable) for all livestock production units. However, the Level 2 (long-term domestic and regional benefit) types of investments, required by specialized pig producers lacking the opportunity for efficient manure recycling, represent an additional cost of production, which may consume a substantial share of producers’ normal profit. In the short run, therefore, investing in improved manure management may not be seen as a benefit by the producer but as an additional cost of production. The most efficient producers can absorb this cost, and over time an increasing number of producers can be expected to achieve the productivity gains needed to make such technology affordable. In the short term, some financial incentives would be needed to help early adopters of such technology. In the long run, production costs would be reduced through other productivity improvements and by shifting farms away from towns to areas where land for recycling and other factors of production such as labor, energy and clean water may be less costly.

2. Technical

Technical design of the Project focused on introducing technical solutions to address and deal with the key issue of nutrient imbalance in livestock production. The design, reflected in the Livestock Waste Management Technology Demonstration component was based on (a) the cost-effectiveness of proposed technologies to the waste handling methods of pig farms; (b) the expected environmental performance of the proposed technologies relative to the nutrient management objectives of this Project; and (c) the replication potential relative to the financial, material, and labor skill availability in the participating countries.

The Project would introduce a package of technology options for each selected demonstration farm and village to consider. These manure management technologies are in wide use in the world including European and North American countries and have been proved to be effective. Locally, technologies have also been developed with missing monitoring data for evaluation of their environmental, agronomic and economic effectiveness. The actual technologies to be used would be tailored to fit specific conditions of each selected demonstration farm and village. They would be closely monitored in order to produce, by mid-term of the Project, a set of best manure management practices.

3. Fiduciary

Financial Management. In each of the three countries, a financial management assessment was conducted to determine whether the financial management capacity will be able to meet the requirements of BP/OP 10.02. The assessments concluded that the proposed implementing agencies in each country and for the Project’s regional support services component have the ability to satisfactorily manage the accounting and disbursement of the Project and to meet the minimum financial management requirements of the World Bank. The Financial Management Action Plan (cf. Annex 7) addressed weaknesses in and the actions to be taken of the financial management arrangements. Each implementing agency will maintain the financial accounts and records and issue financial management reports for the project activities for which they are responsible. Semi-annual financial monitoring reports and annual financial statements will be submitted to the World Bank by each country and by the FAO for the Regional Support Services Component of the Project. The annual financial statements will be audited by auditors acceptable to the World Bank and the audit reports will be submitted to the World Bank within 6 months of the end of the fiscal year for each country and the FAO.

Procurement Capacity. Separate procurement capacity assessment was carried out by the Bank's procurement specialist for respective country subproject. These capacity assessments revealed that the capacity of China-PMO is generally adequate since it had both qualified procurement staff and good experience with World Bank procurement, while that of Thailand-PMO and Vietnam-PMO is relatively weak. Accordingly, the procurement risk rating for China subproject is moderate and for Thailand's and Vietnam's subprojects is high. The overall procurement risk of the Project is rated high which will be reviewed at Project appraisal. Specific recommended actions to build up PMO procurement capacity are summarized in Annex 8.

Procurement Arrangements. Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement Under IBRD Loans and IDA Credits” dated May 2004; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, and the provisions stipulated in the Legal Agreements. General procurement arrangements for the Project are provided in Annex 8 and the details would be agreed between the clients and the World Bank Project team in the Procurement Plans. The Procurement Plan will be updated at least annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity. Draft procurement plans for the initial period of the Project are included in respective PIP.

4. Social

Field level surveys were conducted in the selected demonstration sites during Project preparation. The social assessment team collected relevant data, reviewed reports and provided extensive inputs to the Project preparation and design. Target groups were disaggregated based on gender, economic class and ethnicity. Nature and quality of the interactions between various target group constituencies and local agencies that regulate, support and influence the engagement of the primary beneficiary groups in livestock production and manure management were analyzed. Detailed assessment findings are presented in Annex 10.

The extent to which negative impacts cause social conflict varies between the countries and different demonstration sites. In Thailand, farmers stressed opportunities for reducing pig diseases and social conflicts with neighbors while in Guangdong and Vietnam, social conflict related to livestock pollution was not seen as a major issue. It is essential that training and capacity building efforts are recognizant of the diversity within the target groups with respect to their ability to absorb and apply training and capacity building messages and interventions.

5. Environment

The EAs and the EMPs have been carried out respectively in all three countries. During Project preparation, national procedures and the World Bank’s safeguard policies were diligently followed. The EA documents, EMPs and EA Summary have been prepared, incorporating the World Bank’s comments during Project preparation, and found to be satisfactory.

Potential Impacts. The Project is designed to reduce nutrient loading, mainly nitrates, phosphates, BOD and COD, that are polluting the international waters and causing significant environmental and social impact including increased eutrophication, fish kills, destruction of natural mangrove and coral reefs ecosystems of the coastal zone of South China Sea and the Gulf of Thailand. It would also decrease the incidence of water-borne and zoonotic diseases, not only within the livestock raising communities, but also for other water users living downstream of the livestock raising areas. The overall impacts of the Project are expected to be both significant and positive. The majority of identified negative impacts are believed to be short-term and reversible.

Mitigation measures. Mitigation measures are specified in EAs focusing on control on construction practice, control on dust, noise and odors, and appropriate construction site management. Major mitigation measures would include environmental monitoring plans, institutional arrangements, training, and related cost estimates.

6. Safeguard policies

Triggered safeguard policies by the Project include (a) Environmental Assessment; (b) Involuntary Resettlement; and (c) Indigenous Peoples. The Project was classified as a Category B Project based on the Task Team’s environmental screening and stakeholders discussions.

OP4.01 Environmental Assessment. The EAs were carried out for the Project. No major critical negative environmental impacts of the Project are foreseen. Since the Project is aiming to reduce nutrient loading also other pollutants that are present in livestock manure, and to improve the environmental condition of the livestock producing communities and downstream water users, it should not have any significant and/or long-lasting negative environmental impacts. Potential impact on human health risks has been assessed and specific measures to minimize the potential transmission of pathogens, antibiotics and their resistance strains will be taken by all participating farms. The proposed EMP for each country has fully considered potential Project impacts on natural and social environment and has proposed a detailed plan to ensure that positive environmental impacts are further enhanced and the negative impacts are kept to minimum.

OP4.12 Involuntary Resettlement. Respective Resettlement Policy Framework (RPF) has been developed and approved by respective participating country (expected by January 31, 2005) that complies with the requirements of the World Bank’s OP 4.12 Involuntary Resettlement. Based on the task team’s visits to the selected Project sites, no land acquisition is foreseen at these sites. Thus, preparation of a RP is not required for the first phase of Project implementation. However, specific RP is required from respective countries in subsequent phases of Project implementation when situations change necessitating the process. Respective RPFs will apply.

OD4.20 Indigenous Peoples. A Strategy for Ethnic Minority Development (SEMD) plan has been developed and approved by respective participating country (expected by January 31, 2005) that complies with the requirements of the World Bank’s OD 4.20 Indigenous Peoples. The social assessment carried out in three countries confirmed that the selected demonstration sites in three countries do not involve any indigenous peoples. Thus, preparation of an Ethnic Minority Development Plan (EMDP) is not required for the first phase of Project implementation. However, specific EMDP is required from respective countries in subsequent phases of Project implementation when situations change necessitating the process. Respective SEMDs will apply.

7. Policy Exceptions and Readiness

This Project complies with all applicable World Bank policies. Demonstration farms and villages for the first year’s implementation have been selected. Engineering design documents for the first year’s activities are being completed prior to effectiveness. The Project procurement documents for the first year’s activities are being completed prior to effectiveness. The draft Project Implementation Plans have been appraised and found to be realistic and of satisfactory quality which will be finalized at Negotiations.

Annex 1: Country and Sector or Program Background

East Asia And Pacific: Livestock Waste Management in East Asia Project

A. REGIONAL BACKGROUND

The South China Sea is a locally, regionally and globally significant body of water surrounded by countries that are experiencing rapid population and economic growth and facing major and similar environmental challenges. This bio-geographic region is one of the world’s most biologically diverse shallow-water marine areas. Of the three major near-shore marine habitat types - coral reefs, mangroves and sea grasses – the South China Sea has 45 mangrove species out of a global total of 51, almost all the 70 currently-recognized coral genera, and 20 of 50 known sea grass species, as well as several endangered shellfish species. However, this biological richness is seriously threatened by two major environmental problems - over-fishing and land-based anthropogenic pollution. Pollution run-off and inland discharges to the South China Sea are estimated to contribute 44 percent of marine pollution, followed by atmospheric depositions (34 percent) and marine transportation (12 percent). Land-based pollution reaches marine ecosystems by three main routes: rivers, drains and direct discharge. It is severely degrading seawater and sediment quality (e.g. causing “red tides”), and severely damaging marine habitats (including coral reefs, mangroves and sea grasses).

Estimated Nitrogen and Phosphorus Fluxes and Their Main Inland Sources

* For Guangdong province only.

The UNEP/GEF program for Reversing Environmental Degradation Trends in the South China Sea and Gulf of Thailand estimates that agricultural wastes are the second largest land-based source of marine pollution (after human sewage). The GEF/UNDP/IMO Regional Program for Environmental Management of the East Asian Seas has also identified agriculture, and particularly livestock production, as a major source of land-based pollution of its target ecosystems.

Livestock production is such a major source of land-based pollution in East (including South East) Asia because the region is the world’s most important livestock production area. South East Asia is particularly dominant in the pig and poultry sectors, which are the two biggest livestock-based sources of water (and other) pollution. Today, East Asia accounts for considerably more than half of the world’s stock of pigs and more than one third of the world’s stock of poultry. In 2001, China, Thailand, and Vietnam alone accounted for 52 percent of all pigs and 28 percent of all chicken in the world.

These shares of East Asia in world livestock production are rising fast⁴. Fuelled by a growing population, rising incomes and urbanization, demand for livestock products in the region is growing at an extremely high rate and will skyrocket over the next decades. This rise in demand, coupled with economic, technological, and political evolution, is causing significant change in the scope and the structure of the livestock industry. In particular, very intensive forms of livestock production are appearing rapidly and driving much of the sector’s development. In fact, large-scale, industrial production accounts for roughly 80 percent of the total production increase in livestock products in Asia since 1990. In the future, most livestock production, especially of pigs and poultry, is expected to come not from traditional production systems that have characterized the region for centuries, but from large-scale industrial production.

The vast majority of these intensive production pig farms are located around the major urban centers that lie in or close to the coastal regions of the (East and) South China Sea (cf. Map 1). The reason for this geographic concentration of production is that it is advantageous for the farms to be close to the consumer and feed input market, given that, in most countries, infrastructure (including roads, cold chains, marketing and handling facilities) is still under development.

Map 1: Estimated pig densities in Asia (1998 to 2000)

D
ue to the high animal concentration and the insufficient agricultural land destined to the production of feed within these peri-urban areas, most feed inputs are brought from elsewhere. Considering that a large proportion of the nutrients contained in feed are not retained in the animal’s body but excreted in urine and manure, the result is an excessive concentration of nitrogen and phosphorus compounds in the periphery of the urban areas, which results in significant water, land, and air pollution. An initial estimate indicates that 26 percent of the total area in East Asia suffers from significant nutrient surpluses which emanate mainly from agricultural sources.

Preliminary estimations of nutrient mass balances in the region, which include manure and chemical fertilizers as source of nutrients and crops as the main nutrient sink, have been made for a coastal band of 50 km from the South China Sea (cf. Map 2). These estimates indicate Nitrogen and Phosphorus overloads on the coastal land, with hotspots in the Mekong delta (7.2 and 3.1 tons per square kilometers receptively), the Mouth of the Red River (6.3 and 4.0 tons per square kilometers receptively) and the whole Chinese coast of the South China Sea (3.1 and 2.4 tons per square kilometers respectively). Currently, animal manure is estimated to account for 47 percent of the phosphorus supply and 16 percent of the nitrogen supply. With the dramatic expected increase in demand for meat and milk, this share will continue to grow.

M
ap 2: Estimated P₂O₅ mass balance for agricultural land in Asia (1998 – 2000)

Source of both maps 1 and 2: Bioresource Technology Volume 96, Issue 2, January 2005 by Pierre Gerber, Pius Chilonda, Gianluca Franceschini, Harald Menzi.

A World Bank analysis for the coastal regions of Central South, South West, and East China showed that the COD from untreated piggery waste alone accounted for about 28 percent of the current urban plus-industrial COD loads already in 1996. However, this share is estimated to rise to 90 percent in 2010. In greenhouse gas emissions, livestock contributes about 20 percent of the global methane emission and 10 percent of global N₂O (nitrous oxide, a much more aggressive greenhouse gas) emission.

LEAD is providing financial and technical assistance to China, Thailand, and Vietnam to help them begin to address this problem by carrying out AWI studies in these countries during 2001 to 2003. The results clearly indicate the magnitude of the environmental degradation that industrialized livestock production is causing to freshwater ecosystems and to the seas of South and East Asia. However, the studies in all three countries also show that the countries lack effective tools and institutions to address this problem. The measures being introduced mainly seek to mitigate the symptoms (end of pipe pollution), but do not address the underlying cause of excessive concentration of livestock production. Despite an increasing awareness of the issue at the local and political level, technical solutions and policy instruments are still to be developed and implemented.

B. COUNTRY BACKGROUND

In all three countries, national level environmental policies with supporting standards are in place. The components dealing with livestock pollution are recent (within the last 5 years), tend to be rather arbitrary and are not yet effectively enforced in general. China and Vietnam are in the process of revising major parts of the national legislation.

The agencies charged with enforcement (EPB in Guangdong, PCD in Thailand and EPA in Vietnam) lack the resources committed to properly monitor and enforce the regulations. Currently, PCD in Thailand has10 staff for some 60,000 farms and EPA in Vietnam has 22 stations. Guangdong provincial EPB has equally limited resources to undertake extensive monitoring. In Thailand, farmers can refuse access to PCD monitors necessitating a court order to gain access.

Provincial regulations in China and Vietnam are somewhat stricter than the national regulations and possibly more realistic in terms of enforcement. In Thailand, although, provincial and local authorities are permitted to develop their own environmental management plans under the Enhancement and Conservation of National Environmental Quality Act of 1992 (ECNEQA), none appears to have yet done so for livestock operations. In all provincial and sub-provincial jurisdictions in the region, monitoring and resources designated for these activities are far from adequate. Local level enforcement is compromised by a combination of weak enforcement capacity; overriding importance assigned to short term economic and employment issues; and the influence of entrenched commercial interests that conflict with good environmental management.

Concern and complaints are mainly focused on odor rather than on water pollution. There is a common lack of widespread awareness and comprehension of the scale and consequences of pollution. In all three countries, there is a general preference for targeting enforcement of regulations on medium sized and large producers but to exempt small producers. Farmers are generally focused on commercial and production interests and are less responsive to environmental concerns. The countries’ key polices and programs to address environmental degradation from livestock production on which this proposed Project would build are:

CHINA

The Government of China is in the process of establishing guidelines for limiting the impact of the intensive livestock production on the environment. The Government intends to use a combination of command and control regulations and other economic instruments to get producers to reduce the amount of pollution coming from livestock. In 1996, the Ministry of Agriculture introduced a regulation requiring that all new large-scale livestock farms establish environmental facilities and storage facilities for manure. The Ministry has also presented a draft for national standards (how much) for pollution from livestock production and drafted a detailed regulation (how to do and size of fine) to implement the standards. In 1998, the State Environmental Protection Agency (SEPA) set up a facility to evaluate pollution from livestock production. In 1999, a rural division of SEPA was established with the objective to focus on environmental pollution. A new regulation by SEPA on "Discharge Standard of Pollutants from Livestock and Poultry Breeding" became effective on January 1, 2003.

The “Political Consultative Conference” has appealed to the provincial government to take action against pollution from agriculture. In May 2001, the Government established environmental management regulations affecting the livestock industry, and in January 2002 it established pollutant emission standards with regard to the breeding industry. In addition, a Government program on renewable energy promotes the formulation of biogas from livestock waste. In their next ten-year plan, the Ministry of Agriculture plans to construct around 300 demonstration bio-gas projects which will be based on the local specific requirement on environment and factors like availability of crop field, farming system, and climate etc.

THAILAND

The Government of Thailand is in the process of establishing regulations to reduce the negative impact of livestock production on the environment. Currently, there are five types of plans: (a) the National Economic and Social Development Plans; (b) the Enhancement and Conservation of National Environmental Quality Act; (c) the Policy and Plan for National Environmental Quality Preservation and Promotion; (d) the Environmental Quality Management Action Plan; and (e) the Energy Conservation Promotion Act. In the 9^th National Economic and Social Development Plan, provisions were added that required the use of zoning for animal production, the registration of animal and other farms, and the education of farmers on livestock waste management.

Based on the water pollution in Tha Chin River, the PCD of the Ministry of Natural Resource and Environment listed pig farms in February 2001 as a point-source pollution that needs to be regulated. PCD defines pig farms into 3 categories: group A (pig farms with more than 5,000 SPP), group B (pig farms with 500-5,000 SPP) and group C (pig farms with 50-500 SPP). The waste water standard differs by group. A grace period of 1 year was applied and the above standards will be enforced from February 2002. As of February 2002 only pig farms group A and group B are being enforced and monitored. As for group C and small-scale pig farms, these regulations will not be enforced but be used only as guideline for promotional incentives.

Aside from the PCD’s control of wastewater from pig farms, the Department of Livestock Development (DLD) of the Ministry of Agriculture and Cooperatives established farm standard in 1999 for the pig, poultry and cattle farms. These farm standards are voluntary and hence they are rarely observed by the farm owners except the poultry farmers with products for export. These farm standards have had no impact on the practices of pig farms with products for domestic market only.

VIETNAM

In Vietnam, the issue of animal waste has received serious attention by senior policy makers. While few policies at the national level are directed specific to agriculture and the regulations are based on industrial pollutants, there are a number of regulations at the provincial level that are currently being implemented. For instance, Long An province has implemented regulations to relocate large-scale livestock farms and slaughter houses out of the urban areas. In July 2000, Dong Nai province also developed regulations to protect the environment from livestock production activities. These regulations define the size (small, medium and large) of the livestock farm and the regulation on treating dead animal, animal waste, introduction for waste water treatment methods. Binh Duong province has developed a master plan that identifies specialization areas for livestock production. Newly established large scale livestock farms are required to have an appropriate waste treatment system. In Ho Chi Minh City, the state-owned pig farms are in the process of relocation.

C. SECTOR BACKGROUND IN EACH COUNTRY

CHINA

National Policy Framework

National environmental policy is expressed through the Law of Environmental Protection (1989). National regulations relating specifically to livestock management are discussed below under the heading of Environmental Protection.

Promotion of Livestock Development. Prior to the mid-1990s, when large livestock farms were normally state- or collectively-owned and located in suburbs of large cities, subsidization of large pig farms was a very popular policy tool. The main goal was to ensure the survival of the inefficient production system and to provide the urban population with sufficient meat, milk and eggs. This was seen as crucial for social and political stability during times of food shortage. This practice has since been discontinued and the industry operates on a free market basis.

Environmental Protection. The national regulations relating specifically to the management of livestock manure have only been promulgated in the very recent past. They consist of: Decree of Control and Management of Pollution by Livestock Production (SEPA Decree 9-May 2001); Discharge Standards of Pollutants for Livestock and Poultry Breeding (GB18596-2001); Decree on collection and Use of Waste Discharge Fees (1 July 2003); Decree on Fee standards for Waste Discharge (Decree 31); Decree on Use of Waste Discharge Fees (Decree 17). Decree No, 9 has several weaknesses including the fact that it applies only to operations with relatively large scale operations (more than 500 SPP or 15,000 broilers or 20;000 layers or 100 dairy cows or 200 beef cattle). It is currently being revised on behalf of the State Council as a new Regulation for Protection from and Control of Pollution from Livestock Production. The revision of the discharge standards is desirable with a focus on nutrient loading into water bodies rather than simply concentrations of contaminants.

Enforcement. While China has made great strides recently in framing environmental policies relative to intensive livestock operations, enforcement and therefore compliance has yet to catch up with the regulations. In practice, given the great variety of climatic, geological and other environmental conditions across the country it might be more appropriate to have general statements of intent at national level with more specific regulations at provincial level. Although the use of manure as a source of soil nutrients is generally popular with Chinese farmers, it should be noted that chemical fertilizer is exempted from the value added tax. This helps keep the price of chemical fertilizer at an artificially low level and makes it more competitive with manure with its relatively lower nutrient content and higher labor requirement for spreading. Pelleted compound fertilizer containing both artificially produced nutrients and manure components would also be tax exempted and might be an attractive alternative to chemical fertilizer.

Provincial Policies

Guangdong Province has been under considerable pressure to regulate land use and pollution resulting from land based activities in the Pearl River Delta. This originates from concerns over the level of pollutants in the river and also specifically over the issue of Hong Kong’s water supply. As a result, a number of regulations have been passed by the Provincial People’s Congress, which include: (a) Regulation on Agricultural Environmental Protection (June 1998); (b) Pearl River Water Quality Protection Regulation (January 1999); (c) Han River Water Quality Protection Regulation (March 2001); (d) Eastern (Dong) River Water Quality Protection Regulation (May 2002). There are also provincial regulations such as the “Reform on the Prevention and control of Pollution by Livestock in the Pearl River Valley”, prepared by the Department of Agriculture (April 3, 2003). Many of the existing and non-compliant operations existed prior to the promulgation of these regulations and there is no clear timetable for closing them down, although some progress is being made in this direction in specific problem areas. The Environmental Protection and Energy Station within the Department of Agriculture provides some technical assistance in the siting and design of production facilities. The problems of pollution stem primarily from: (a) incorrect selection of production sites; and (b) insufficient availability of both land and water. The Environmental Protection and Energy Station estimates that only about 50 percent of manure can be applied on the land in Guangdong due to the location of production sites and natural climatic conditions.

Substantial expenditures are being made by GEF and the World Bank into the implementation of the Comprehensive Plan for Improving Pearl River Water Quality (November 2003). The Pearl River Water Resources Commission, on which both Hong Kong Environmental Protection Department and Guangzhou EPB are represented, would prepare water resources control plans under terms of the 2002 Water Law. Guangdong’s strategic plan for wastewater management in the Pearl River Delta is the ‘Pearl River Cleanup Campaign’, which sets out phased targets for improvements in water quality in river reaches in the Province and urban areas; proportion of domestic and industrial wastewater to be treated; and investments for environmental protection. Additionally, point source pollution from urban and industrial wastes is addressed under a parallel World Bank/GEF-financed Guangdong Pearl River Delta Urban Environment Project.

Major policy measures with respect to livestock include: (a) relocation of livestock farms from densely inhabited areas and areas protected as drinking water sources; (b) strict control of the existing scale of livestock farms (in principle no new livestock farms will be approved in the Pearl River Delta); (c) encouraging livestock farms to move to hilly areas and to promote efficient water use; (d) requiring existing livestock farms to undertake EAs within a specified time; and (e) any new livestock farms must undertake EAs before construction. Agricultural taxes are to be abolished by the end of 2005, which should assist farmers to invest more in manure management.

THAILAND

National Policy Framework

No specific policies are applied to the promotion of the pig industry. Rather, its development has been driven primarily by market forces and the strength of the Thai feed and meat processing industry.

The Enhancement and Conservation of National Environmental Quality Act of 1992 is supported by series of standards such as Surface Water Quality Standards; Effluent Standards for Pig Farms; Coastal Water Quality Standards; Ground Water Standards and Industrial Effluent Standards. The Department of Water Resources is studying 25 watersheds to explore the possibility of establishing a zoning system. The National Environment Board has been established to monitor and control the implantation of the ECNEQA at the national level.

DLD has farm and slaughterhouse certification procedures, which are administered by the Bureau of Livestock Standards and Certification. The certification focuses mainly on operational considerations (feeding practices, health protocols, animal management, worker welfare and training), and does not include any environmental standards. For slaughter houses to be certified, they must meet the standards of the ECNEQA. It seems that farms are exempted, at least for the time being. Slaughter houses also have to meet ISO standards. Supermarkets will only accept meat from certified slaughter houses, although there is still a substantial informal market. PCD is developing centralized manure treatment centers under Prime Minister’s directive. They intend to start in Nakorn Pathom province in 2005 followed by Ratchaburi province in 2006.

For conversion of biogas to electricity, National Science Development Agency will provide subsidized loans through participating banks for the cost of the installation investment. National Science Development Agency rather than banks does the financial feasibility analysis. Preference is given to the UASB design of digester designed by the University of Chang Mai. For generation exceeding 1 Mw, energy has to be sold to Electricity Generating Authority of Thailand while energy is sold to Provincial Electrical Authorities for generation below 1 Mw. The Energy Conservation Promotion Fund also promotes biogas production. It provides subsidies of 40 percent for small producers (50-500 SPP) and 20 percent for medium to large sized producers (>500 SPP). Funding goes from the Ministry of Energy to Chang Mai University, which provides the technical supervision. Small farmers generally install fixed dome systems and larger operations install high upflow anaerobic sludge blanket systems.

Provincial Practices

In Thailand, no provincial or local environmental management plans consisting of long-term environmental policies and plans and annual Provincial Environmental Quality Management Action Plans have been developed. Public participation is important to this process and a framework for action plans has been establishment which includes consideration of water quality, air quality, solid waste, and hazardous waste. A Sub-Committee for Provincial Environmental Quality Management is to be established under the Committee for Provincial Development to advise on environmental management.

All provinces have to prepare land use plans within 3 years. Approvals for new enterprises at Tambon level, are required to refer back to the national level policies on health and environment. These are generally inadequately applied and considered only in context of business licenses with little or no technical input. There are incidences of conflict of interest with elected Tambon level officials also being major land holders and pig producers.

VIETNAM

National Policy Framework

The environmental impacts of livestock operation in Vietnam are mainly regulated under the Law on Environmental Protection (LEP, December 27, 1993). The newly promulgated Decree 67 (January 2004) on wastewater releases will impose fines on non-complying polluters and may have an immediate impact on larger livestock operations. The planned expansion of the pig industry from the present 23 million animals to 30 million by the year 2010 underscores the importance of revising the Law on Environmental Protection and enforcing Decree 67. Effective local statutes regulating the livestock operations are generally lacking. The principal government agencies responsible for regulating the sub-sector are the Animal Husbandry Section within the Ministry of Agriculture and Rural Development (MARD) the Department of Land Use and Environment within the Ministry of Natural Resources and Environment (MONRE). The Vietnam Environmental Protection Agency, working under the direction of MONRE, is likely also to have a role. The capacity of these agencies to effectively regulate the livestock sub-sector is inadequate in general. However, the role of agriculture and particularly livestock production is yet to be well appreciated. The document “State of the Environment Vietnam 2001” (UNEP, 2001)⁵ makes no mention of livestock waste as a pollution source. Much greater concern is voiced about effluents from specialized industrial (handicraft) villages housing paper manufacturing and other polluting industries.

National Policies

Promotion of Livestock Development. There have been a number of decrees and resolution of the central government since 1991 aimed at promoting agriculture including: (a) Decision 125/CT (April 18, 1991) and (b) Decision 225/QD-Ttg (December 10, 1999) on breed improvement of livestock, field crops and forest crops; (c) Resolution 03/2000/NQ-CP (February 2, 2000) on farm development; (d) Decision 166/2001/QD-Ttg (October 26, 2001) on pig production for export; and (e) Resolution 09/2000/NQ-CP (June 15, 2000) on economic restructuring and consumption of agricultural products. Resolution (c) is designed to drive the transition from small scale household based livestock production (primarily pigs) to larger scale commercial production, while resolution (e) provides a framework for zoning export oriented, high quality pig production towards areas with suitable environmental and hygiene conditions. In parallel, there have been favorable fiscal policies (Decision No 24/2000/ND-CP, July 31, 2000) to promote foreign and local investment in the livestock industry.

Environmental Protection. MONRE is primarily responsible for administering the laws relating to pollution by livestock farms. This is done primarily through the Law on Environmental Protection. In support of this is a Decree guiding implementation of the law (Decree No. 175-CP, 1994). The LEP is now being revised and the revised law is expected to be adopted in mid-2005. The law makes no concrete reference to livestock waste pollution but has stipulations on prevention of pollution in general. Other important and relevant policy documents include (a) National Strategy for Environmental Protection to 2010 with Vision to 2020 – signed by Prime Minister on December 2, 2003; (b) Agenda 21 for Vietnam – Sustainable Development Strategy for the 21^st Century (this forms an umbrella for all other legislation); (c) Comprehensive Poverty Reduction and Growth Strategy; (d) Strategy for Social Development (Project until 2010). An ordinance on Veterinary Medicine (February 3, 1993) issued by MARD governs such things as the disposal of dead animals and measures to control the spread of pathogens. Under this ordinance, the application of untreated manure to crops is not permitted.

Overall policies for environmental protection are in place but there is a general lack of appreciation of the contribution of livestock to pollution of aquatic systems and little or no enforcement compounded by inadequate monitoring capacity (22 monitoring stations throughout the country currently, planning to increase to 50 by 2010). Relocation of heavily polluting industries is possible under Decision 64/2003/QD-TTg on the treatment of seriously polluting units. This, however, may not apply to agriculture sector.

Provincial Policies

The only two provinces in Vietnam with legislation targeted specifically at reducing the impact of livestock on the environment are Dong Nai and Tien Giang.

Dong Nai province placed livestock farms under Decision 1981/QD.CT.UBT (July 25, 2000) of the Chairman of People’s Committee on “Regulation of Livestock Production Activities to Protect the Environment” in three categories: small (<100 SPP); medium (100-2000 SPP); and large (>2000 SPP). All farms have to conform to provincial land-use planning codes which include separation distances (>50m, >300m and >500m for small, medium and large farms respectively) from schools, residential areas, and other institutions. Medium and large farms must be located more than 300m from water sources and more than 500m from water pumping stations. Farms should also be large enough to have land for waste storage and treatment.

Ha Tay province has a General Law on the Environment (promulgated in 1997), but none dealing specifically with livestock production. Nevertheless, large (>500 SPP) and medium sized (>200 SPP) pig farms are required (under Decree 175, Circular 490) to submit EAs and to report quarterly (large farms) or semi annually (medium farms).

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

East Asia And Pacific: Livestock Waste Management in East Asia Project

The Project preparation incorporated experience and lessons learned from many other international and national initiatives and programs already existing or underway in the countries around the South China Sea and maintains close coordination with them. Major related projects and programs include the following:

1. Global Program of Action for the Protection of the Marine Environment from Land-based Activities (by GEF). This Global Program is a source of conceptual and practical guidance for devising and implementing sustained action to prevent, reduce, control and/or eliminate marine degradation from land-based activities.

2. Reversing Degradation Trends in the South China Sea and Gulf of Thailand Project (by UNEP). This GEF project, implemented by UNEP, aims to develop regionally coordinated programs of action designed to reverse environmental degradation particularly in the area of coastal habitat degradation and loss, halt land-based pollution and address the issue of fisheries over-exploitation.

3. Partnerships for the Environmental Protection and Management of the East Asian Seas Project (by IMO/UNDP). This is a GEF financed project executed by International Maritime Organization (IMO) and implemented by UNDP. It focuses on building partnerships within and among governments of the region, as well as across public and private sectors of the economy. The goal is to reduce or remove barriers to effective environmental management, including inadequate or inappropriate policies, disparate institutional and technical capabilities and limited investment in environmental facilities and services.

4. Mekong River Basin Water Utilization Project (by World Bank). This is a GEF financed project implemented by the World Bank.. It will assist the Mekong River Commission in promoting and improving sustainable water management in the Mekong River Basin, and to protect the environment, aquatic life, and the ecological balance of the basin.

5. Guangdong Pearl River Delta Urban Environment Project (by World Bank). This is a project financed by the World Bank and GEF. It will assist the government in addressing the environmental problems of the Pearl River Delta and the South China Sea, through the improvement and rationalization of environmental service delivery based on a regional planning approach.

6. Global People, Land Management, and Environmental Change Project (by UNEP). This project will develop sustainable and participatory approaches to biodiversity conservation within agricultural systems.

7. AWI Pilot Projects (by LEAD). The objective of these pilot projects is to provide local institutions and decision-makers in China, Thailand and Vietnam with tools in order to insure the sustainability of livestock development. Main activities included (a) environmental impact assessment, (b) analysis of nutrient chains and manure market opportunities, (c) identification and selection of on-farm manure management, (d) spatial analysis and planning, and (e) policy dialogue.

8. Poultry Emergency Recovery Project in Vietnam (by World Bank). This project will support the short and medium-term actions to be undertaken by the Government to strengthen its veterinary surveillance and diagnostic infrastructure in order to avoid, or at least minimize, a recurrence of Avian Influenza that would further damage the poultry sub-sector.

9. Poland Rural Environmental Protection Project (by World Bank). The project’s long-term goal is to demonstrate effective mechanisms for improving environmental practices in agriculture by reducing nutrients entering the Baltic Sea from agriculture in Poland. The project has been designed specifically to provide a model activity, which can be replicated at other locations in Poland, the Baltic Sea region and Central and Eastern Europe. The project also supports Poland's move towards compliance with its national policies, European Union (EU) directives and international agreements. The project was completed in 2002.

10. Sustainable, Sanitary and Efficient Management of Animal Manure for Plant Nutrition Program. The pre-project phase, in collaboration between multiple Danish agricultural research institutes and the Vietnamese National Institute of Soils and Fertilizers, aims at developing a research and training program. The overall objective of the full program, as the outcome of the pre-project to be submitted to DANIDA for funding in March 2005, is to develop efficient and sanitary safe recycling of animal manure for the purpose of developing sustainable agriculture in Vietnam.

Annex 3: Results Framework and Monitoring

East Asia And Pacific: Livestock Waste Management in East Asia Project

Results Framework

Arrangements for Results Monitoring

Annex 4: Detailed Project Description

East Asia And Pacific: Livestock Waste Management in East Asia Project

The proposed Project would consist of four components. This design takes into consideration the specific local conditions of each country while maintaining coherence of the Project objective, Project composition, criteria for selection of demonstration areas, and regional learning from experiences and coordination.

1. Livestock Waste Management Technology Demonstration Component (US$13.6 million)

1.1 COMPONENT STRATEGY

LEAD’s AWI Projects have shown that as pig production moves towards larger, specialized, confined production in peri-urban areas, the increased amounts of manure are often improperly discharged leading to surface water and other environmental problems. As these modern production practices were developed (or adapted from countries where pig production has intensified earlier, i.e. Western Europe and North America), many of the pollution control practices are unknown to the vast majority of farmers and extension officers using or promoting these production practices. Therefore, there are important needs for the following to be addressed by this component:

• identifying and adapting existing manure management practices or new ones;

• validating and demonstrating the agricultural, environmental and economic performances of these technologies;

• fostering technology transfer and sustained positive change in the application of pig manure management practices among a wide constituency of farmers;

• training and capacity building of farmers and extension workers.

Demonstration areas

The project design is tailored to fit the specific livestock rearing conditions in the three participating countries, particularly the different average size of pig farms, which are its main target. In Thailand and China, large sized industrial pig farms are dominant, while in Vietnam, pig farms are typically small scale, involving confined household-based production that is concentrated in particular villages. This structure of Vietnamese rural society requires that the project’s demonstration activities be conducted on a communal (village) rather than individual farm basis. The targeted project demonstration farms are all located within the concentrated livestock production jurisdictions bordering South China Sea and Gulf of Thailand.

The selection will be made according to selection criteria agreed with the Bank, which would be updated periodically during project implementation as needed and included in the Project Implementation Plan (PIP) of each country. Key criteria require the farms or villages to be selected should (1) be large sized pig farms in China and Thailand or villages with large number of confined household-based pig farms in Vietnam; (2) be willing to participate with co-financing commitment; (3) be located in an area where pig production is the dominant cause of water pollution; (4) be located in an area where the trend is increasing or steady in pig production; (5) be located in an area ideally representing a single geographical catchment area or a micro watershed draining to a single surface stream; (vi) be located within the identified concentrated livestock production jurisdictions. They would be selected on a yearly basis to allow the process of improved planning to adjust for changes and incorporate lessons learned from demonstrations in earlier years of Project implementation. A first set of demonstration farms and villages has been selected and agreed by the World Bank for further preparation and the first year’s implementation once the Project is approved.

This component is primarily based on local stakeholder involvement and interaction. The benefit of manure management technology must be both real and demonstrable to justify the efforts and cost of implementation. The demonstrated technologies will deal with current environmental issues but shall also fit into future production patterns. Demonstration will be implemented both in (a) traditional pig production areas, where livestock is currently responsible for water pollution that has to be mitigated, and (b) in future production areas, where high growth rates of the production will most probably lead to water pollution if manure management practices are not improved. As such, this should ensure:

• engagement of farmers in the selection of technologies to be demonstrated;

• offering of a “selection of technical options” to farmers;

• training of farmers in the operation and maintenance of the technologies and in the assessment of successfulness;

• coordination between technology demonstration with the provision of locally and nationally developed “guidance and policy” to enable farmers to adopt relevant technologies over the long-term.

Manure management strategies

Comparatively, livestock wastes are typically 10-100 times stronger in biodegradable organics than untreated sewage. This is an important factor recognizing that reducing biodegradable organic material is the first step in developing cost effective waste management strategies that mitigate water pollution. As a first step, pre-treatment processes, such as solids separation, are often used to remove large particles that contain about 20 percent of the biodegradable fraction. These are followed by primary treatment processes that can utilize anaerobic or aerobic processes where each process results in a different cost and operating structure. Due to cost impacts, anaerobic processes are typically used for liquid and slurry wastes and aerobic processes such as composting are used for solid wastes. Additional steps referred to as secondary and tertiary treatment processes are added when additional nutrient removal, such as nitrogen is desired.

Conventional nitrogen removal processes are based on the combination of nitrification (aerobic oxidation of ammonia into nitrate) and denitrification (anoxic conversion of nitrate into de-nitrogen gas). Phosphate removal is realized either by sedimentation, chemical precipitation, or by phosphate incorporation into biomass. These processes are frequently used to reduce the nutrient content of urban waste waters before their release into surface waters and have been introduced in the framework of livestock production with limited success due to significant operational costs. However, nutrient removal is often indicated as the only potential option for farms when the nutrient availability exceeds that of crop available uptake.

Nutrient recycling covers a range of options where the basic objective is to use the nutrients present in the manure for other growing activities, such as cropping and fish farming. Treatment can make manure recycling and use easier, more effective and less environmentally offensive. The AWI projects have illustrated the interest of recycling where local conditions are adapted, both from economic and environmental perspectives. Recycling of treated manure is a basic principle of component 1.

Component goal

The goal of this Component is to demonstrate technically, geographically, economically and institutionally workable solutions to reduce regionally-critical livestock waste pollution caused by industrial livestock production under the different political and social situations of the participating countries. The livestock waste management strategies promoted under this component will focus on reducing excess nutrients, in particular nitrates and phosphates.

1.2 ACTIVITY DESCRIPTION

Subcomponent 1: Technology demonstration (US$12.5 million)

The manure management strategies considered under this Project are selected according to the expected ultimate fate of the manure and include methods that either (a) get the nutrients back into the crop cycle; or (b) process and package the nutrients up for export to other areas for crop use; or (c) convert the nutrients for plant available forms; or (d) destroy the nutrients. The demonstration areas already selected for PY1 are as follows.

Guangdong Province of China

The selected Project jurisdiction is Boluo County. The county, situated northeast of the city of Guangzhou, has a rapidly-growing pig population as farms are relocating inland from the lower Pearl River delta. The Project is strongly supported at county and province levels as pollution from pig production is affecting the quality of a raw water intake on the East River for delivery to Hong Kong, which generates significant revenues for the province. Urgent remedial action has been mandated by the central and provincial authorities, making Boluo County an ideal first demonstration area. Eight farms in Yuanzhou town have been selected as the first group of farms for further preparation.

Thailand

Provinces of Ratchaburi and Chonburi are selected as Project jurisdictions. Ratchaburi (west of Bangkok) is the leading pig production province in Thailand, with a still dynamic growth. Chonburi (east of Bangkok) is the second highest pig producing province in Thailand, with a concentration of farms with poor livestock waste management. The Project has very strong support from both Provincial Governors as well as from district officials. Six farms (four in Ratchaburi and two in Chonburi) have been selected as the first group of farms for further preparation.

Vietnam

Provinces Dong Nai and Ha Tay are selected as Project jurisdictions. Dong Nai province is located in the South of Vietnam, northeast of Ho Chi Minh City. Livestock production around is very developed while agricultural land in this area is very limited. Animal density is 120 pigs and 315 poultries per hectare of agricultural land, in a heavily polluted peri-urban environment. Ha Tay province, located in the North of Vietnam, south of Hanoi, is adjacent to the Red River. About 60 percent of households raising pig produce compost while about 10 percent collect solid manure to market it fresh and untreated. It is estimated that nearly 80 percent of solid manures are used as fertilizer for crops and fish ponds or sold and over 80 percent of the liquid effluents are released directly to surface water.

Common activities

1. Selection of farms or villages

• Selection of farms according to eligibility criteria and selection criteria agreed by the World Bank;

• Design of financial incentives scheme (eligible investments, level of funding, etc.);

• Preparation of contract procedures with farmers and with companies;

• Financial estimation.

2. Preparation

• Preparation of farm assessment documentation;

• Preparation of brief information sheet for distribution to farmers;

• Launch of workshop and meetings;

• Initial farm contacts (via local representatives if appropriate);

• Program of visits to farmers;

• Assessing local potential for manure recycling;

• Drawing up plans for monitoring strategy;

• Preparing farm dossiers.

3. Choosing of technologies

• Agreement on targets and constraints - both in terms of which pollution parameters (such as phosphorous, nitrogen, COD, BOD₅) and what percentage level of abatement is required;

• Subdividing and grouping farms on the basis of general circumstances;

• Assigning manure management package to the various groups;

4. Designing and contractual implementation

• Carrying out audit of crop system (where relevant);

• Establishing demonstration plots for manure use on crops. Decide what gaps of knowledge must be filled to produce reliable recommendations for manure and effluent use on crops;

• Preparation of implementation report for each farm to include required general information, geographical and statistical data, total cost estimate and cost sharing plan;

• Preparing a cost estimate;

5. Construction and commissioning

• Drawing up construction schedule;

• Allocating construction work;

• Progress monitoring.

6. Technical support and evaluation

• Nominating contact person;

• Preparing operation guide - one for each farm/farm group;

• Assemble and training of a monitoring team;

• Arranging for the analysis of samples taken and the collation of all data collected;

• Carrying out monitoring of farm sites;

• Assessment of crop production with manure;

• Evaluation of manure treatment techniques. Objectively compare experiences of different farms with the purpose to establish best management practices;

• Cost analysis: actual costs incurred as a direct result of the implementation of manure handling technologies;

• Recommendations and guidelines: prepare interim and final detailed reports setting out the principal findings from the results. Give the best manure management practice for the various farm scenarios covered in the Project field work.

Preliminary identification of example manure management strategies

Guangdong Province of China

1. Strategy one: specialized large-scale operations (>3,000 SPP). This strategy is proposed for those farms with adequate land for lagooning systems. The main technical steps are:

• Separation of solid manure in animal houses;

• Solids marketed after treatment⁶;

• Liquids sent to covered lagoon system with seasonal solids extraction and treated effluent discharged to a constructed wetland. The aim of constructed wetlands is to reach a water quality level allowing for its recycling in animal houses. It will be mostly relevant in areas with limited water resources.

2. Strategy two: improvement of the ‘pig-fish’ system. This strategy is proposed for farms operating alongside large fish rearing operations. The main technical steps are:

• Separation of solid manure in animal houses;

• Solids marketed after treatment;

• Liquids sent to covered lagoon with seasonal solids extraction and treated effluent to fishpond system.

3. Strategy three: small biogas (bag type or fixed dome) plant. It is similar to strategy two except that the covered lagoon system is replaced by a biogas reactor.

Thailand

1. Strategy one: specialized medium and large scale operations (>1,000 SPP) with possibility to recycle manure on surrounding crops. The main technical steps are:

• Separation of solid manure in sow houses;

• Solids marketed after treatment;

• Liquids from sows and slurry from fatteners sent to:

1. covered lagoon (if adequate land available) or other biogas reactor with seasonal solids extraction (gas converted to electricity);

2. effluent recycled on crops or stored in short term pond or tank and then recycled on crops.

2. Strategy two: specialized medium and large scale operations (>1,000 SPP) with no possibility to recycle manure on surrounding crops. The main technical steps are:

• Separation of solid manure in sow houses and/or;

• Mechanical screening/separation to produce a clarified liquid and solids;

• Solids transported out of area and marketed after treatment;

• Liquids from sows and slurry from fatteners sent to:

1. covered lagoon or other biogas reactor with seasonal solids extraction (gas converted to electricity);

2. (if adequate land available) treated effluent discharged into a lagoon treatment system (multiple storage ponds) and then discharged to stream via a final biofilter.

3. Strategy three: cluster of large and medium size farms, close to a village and with available cropland (Mapbai Tambon). The main technical steps are:

• Separation of solid manure in animal houses;

• Solids marketed after treatment if opportunity is identified. Otherwise, recycled on surrounding crops;

• Liquids sent to a central bio-gas digester. Gas used by village and outflow sent to multiple storage ponds and either discharged into stream or preferably land applied.

Vietnam

1. Strategy one: for suburban production areas with medium pig farms (>500 SPP) such as Bien Hoa City in Dong Nai province. The main technical steps are:

• In house separation of manure;

• Small, individual bio-digesters;

• Aeration step to remove nitrogen;

• Individual sedimentation tank with possible attached storage;

• Transport of solid manure and dried sludge out of area;

• Supernatant from settlement is released to streams or preferably irrigated to any available land.

2. Strategy two: for rural pig production in delta areas with dominant rice production such as Thong Tin in Ha Tay province with many small pig farms (<50 SPP). The main technical steps are:

• Option of manual collection of solid manure within the pig buildings;

• Bringing effluents to a centralized (mesophilic/mixed) biogas unit supplying gas to farms/housing nearby;

• Settlement of digestate to produce a sludge if there is the opportunity to run central or farm-based compost systems (with export of compost products out of the commune);

• Otherwise, removal of some of the solid dung and selling to local fish producers after treatment (not exceeding environmental capacity of the fish ponds), use of bag AD digesters;

• Treated effluent applied to crop land in commune to meet nutrient requirement.

Subcomponent 2: Training and extension (US$1.1 million)

The demonstration activities would be supported by training and extension to provide (a) farmers with the essential skills and technical support needed to improve their on-farm manure management practices and (b) capacity building. The training and extension approach is to provide technical consultation and advice first to farmers participating in the project, then to other livestock farmers in the project areas, and finally to further to livestock farmers in other parts of the country. Capacity building is crucial to the effort to address livestock waste pollution issues and to test the feasibility and replicability of livestock waste management practices and technologies. Activities would include training of animal husbandry extension agents, farmer associations and planning officers, study tours for participating farmers on demonstration farms, preparation of training manuals, collaboration with livestock extension projects, etc. A detailed master capacity building development plan is under preparation by each country which will be reviewed by the Bank appraisal mission.

2. Policy and Regulatory Development Component (US$4.8 million)

2.1 COMPONENT STRATEGY

Generally ineffective enforcement of the existing regulations on livestock waste management is mainly caused by (a) absence of an effective policy framework clearly linking the environmental concerns to the operational considerations of livestock production; (b) poor enforcement and general disregard of the existing legislation; (c) lack of capacity at lower levels of government throughout the region to monitor effluents, enforce regulations or advise farmers on appropriate management approaches; and (d) widespread ignorance of the cumulative environmental impacts, public risks and negative externalities (social costs, lost resource access etc.) associated with inadequately managed manure disposal. These have resulted in a failure to commit adequate public and private funding with which to take meaningful pollution prevention measures in the first place and then to remedy those that have already occurred. From this, it is concluded that more creative and credible approaches have to be adopted in designing initiatives to achieve a greater degree of compliance. For these to succeed, however, there has to be support from producers to government officials at all levels.

This component would support setting up a policy and regulatory framework for environmentally sustainable development of livestock production in each country which will induce further policy reforms and encourage farmers to adopt improved manure management practices. This component is expected to lead to the development, testing and implementation of more effective policies for livestock production development and waste management with strengthened and better-enforced policy measures, and strengthened institutions and financial incentives for enforcement and compliance. It is also expected to raise awareness about livestock waste management issues among the line agencies and general public, to support environmental policies enforcement.

2.2 ACTIVITY DESCRIPTION

Overview of activities

Subcomponent 1: Policy Development (US$1.3 million)

This subcomponent consists of a variety of elements aimed at developing a policy and regulatory framework for effective application. This will be achieved through: (a) the development of a replication strategy; (b) the review and revision of existing regulations; (c) the commitment to master planning of livestock production (at national and provincial levels) to direct the geographic focus of future intensive livestock production; (d) the development and introduction of codes of practice or best waste management practices; and (e) the development and introduction of livestock waste recycling and discharge standards. An essential part of the policy development activities would, therefore, be the establishment of a dialogue with the principal stakeholders on the proposed regulations and standards.

Subcomponent 2: Policy Testing (US$1.1 million)

Specific policy packages would be tested in sub-national jurisdictions and testing experience will feed back into the policy and regulatory development subcomponent. Code of Practices or Best Management Practices will be tested in synergy with the Livestock Waste Management Technology Demonstration component, which will promote cost-effective and replicable technical options. This subcomponent would address the regulatory and participatory aspects of the COP preparation to ensure no duplication of the COP with local existing standards or criteria. The participatory dialogue would involve all stakeholders especially private sector in an exhaustive review and negotiation of technical solutions and management options that might be adopted. Other policy measures to be tested would include replication strategy, regulations for manure marketing (contracting, norms for manure content, transport authorization, etc.) and relocation of farms.

Subcomponent 3: Awareness Raising (US$2.4 million)

This subcomponent will also support public awareness raising activities, focusing on policy measures and environment and public health issues associated with inadequate manure management. This will focus the attention of national and local governments on livestock waste policy and regulatory enforcement and facilitate further assistance with this challenge from the World Bank and other donors. The target group essentially consists in the general public and governmental agencies at national level and in Project areas. They would receive training in various aspects through a variety of approaches.

Country specific activities

Policy development and policy testing activities are country specific while awareness raising activities are mostly similar across countries.

Guangdong Province of China

Although the Project is being implemented solely in Guangdong province, it is essential to involve national level institutions. Central Ministries, particularly the Ministry of Agriculture, have a coordination role and substantial technical and financial resources that can be utilized by the Project. Two national level activities are envisioned: continued dialogue with MOA and SEPA; and the integration, expansion and improvement of the existing LEAD virtual centre Chinese platform.

At province level, it is anticipated that the policy development activities will focus on creating a policy framework combining a strong element of public compliance with the necessary tools for enforcement. Major activities as part of this pillar include:

• Development and implementation of a Replication Strategy;

• Research and drafting of a new draft policy by an expert group. This would include the identification of appropriate incentives to support policy framework, the development of licensing procedures and the formulation of a code of practice;

• The delivery of the draft to national and provincial governments and a policy dialogue through workshops in which the new draft policy and code of practice would be reviewed and the testing of these approved. The participants would be government officials from the national, provincial and local levels, farmers, and researchers not involved in the expert group;

• Implementation of GIS tools, including installation of GIS tools and data collection and the development of maps for zoning. It is anticipated that national experts may be involved but most of the responsibility will fall on staff of the provincial agricultural department;

• Development of relevant maps for implementing/enforcing policy zoning (including hardware and software needs);

• Improvement of policies and COP through round table discussions or workshops involving the expert group as well as national and provincial officials;

• Promulgation of legislation, requiring inputs from the national steering committee and the Guangdong EPB.

Policy testing would initially focus on Yuanzhou town of Boluo county. The development of COPs will provide a learning experience and ensure that future documents are the products of real experience and do not represent arbitrary rules established in isolation from producers and other stakeholders. In a context of very dynamic land use changes, options for farms relocation may also be assessed.

Thailand

For Thailand the implementation of the policy development pillar would be the responsibility of the National Steering Committee which would be chaired by a former Permanent Secretary of MOAC. The focus will be on developing a more robust policy framework with a sound basis for enforcement. It is intended that compliance should be increased by engaging in a dialogue with the stakeholders (producers; slaughterhouses, feed mills and local authorities and other interest groups) on the selection of the policy framework to be applied. It is also suggested that guidelines for the design and operation of intensive livestock operations be developed through the mechanism of best practices that will be converted into formal legislation once it has been tested and validated among stakeholders. An option identified during Project preparation would be to convert the best practices in a code of practice that will be enshrined in the revised Standard Farm Regulation. The new regulation would also benefit from inputs derived from spatial analysis of potential production areas. It is therefore important that GIS training happen early in the Project in order to facilitate this activity. The following activities will be undertaken:

• Development and implementation of a Replication Strategy;

• Implementing of GIS tools at national level;

• Development of relevant maps for provincial level and for implementing and enforcing policy zoning at national and provincial levels;

• NSC will develop a dialogue with all departments including the department of town and country planning and pig producers on a policy framework;

• The NSC will involve the Pig Board (pig development committee), as a major interest group, into the dialogue on environmental policy development;

• DLD will establish cooperation Energy Conservation Promotion Fund for pollution control in conjunction with the ENCON program. This will potentially bring additional funds into the Project, particularly for initiatives involving large scale biodigesters;

• DLD will request the Pig Board and Energy Conservation Promotion Fund to provide funds for promotion;

• DLD will develop the Revised Standard Farm Regulations through PLO in consultation with local communities;

• Identifying appropriate incentives to support policy framework;

• Development of licensing procedures;

• Workshops for reviewing the applicability of the Revised Standard Farm Regulations;

• Submission and promulgation of Revised Standard Farm Regulations as Livestock Farm Act;

• Strengthening policies for supporting manure marketing;

Policy testing. In Thailand under ECNEQA, provincial and local authorities are permitted to develop their own environmental management plans. The development of these revised Standard Farm Regulations is envisaged as part of this process and as an opportunity to introduce meaningful enforceable regulations to the Tambons. These have the responsibility for permitting new ILOs but no capacity to enforce design or operating standards. Once working models for the revised Standard Farm Regulations have been developed and applied in the pilot sites it is envisaged that the process of developing new ones will primarily be the responsibility of the provincial level officials. They will be assisted as necessary by members of the national level working group. It is anticipated that facilitators will be employed to assist with the farmer dialogue and negotiation process and that these facilitators will require training in participatory procedures. The dialogue with farmers or farmers groups will involve extensive review and negotiation over technical and management options that might be incorporated into the revised Standard Farm Regulations.

Vietnam

In Vietnam, Policy Development will consist of four separate elements involving (a) regulations on environmental protection in livestock production (at national and local level); (b) the development of livestock waste discharge and recycling standards; (c) master planning of livestock production (at national and provincial level); and (d) policies for the promotion of organic fertilizer production. The major activities associated with these elements will be:

• Development and implementation of a Replication Strategy;

• Formation of a working group;

• Study of experience in foreign countries;

• Drafting of a policy outline;

• Review of the outline by national and international experts;

• Drafting the policies by national and international experts;

• Implementing GIS tools;

• Development of relevant maps for implementing/enforcing policy zoning;

• Implementing incentives to support policy framework;

• Implementing new policies and enforce existing regulations;

• Adjustment and promulgation.

The leading agencies involved in the implementation of these activity will be MONRE, MARD and MOF at national level and DOE, DOA, VEPA, DONRE, DARDs, DOFs at provincial level. Policy testing would be implemented in two Project provinces i.e. Dong Nai and Ha Tay and will be done in conjunction with Component 1 activities. This will ensure that future documents are the products of real experience and do not represent arbitrary rules established in isolation from producers and other stakeholders.

Awareness raising activities for all three countries would include:

• Training of livestock development and environmental protection staff in spatial analysis, environmental impact assessment, monitoring of manure management environmental impacts, use of decision making tools such as GIS, and nutrient management;

• Creation of a nation-wide network of related research institutions and agricultural universities;

• Development of monitoring capacity among environmental agencies;

• Private sector integration to provide technology and services;

• Study tours and workshops involving local government staff, producers and general public;

• Communication programs and promotion materials (booklets, brochures, flyers, fact sheets, spots or programs on TV, radio, CD, VCDs), website etc.;

• Publication of tested Code of Practices or Best Management Practices.

3. Project Management and Monitoring Component (US$4.1 million)

3.1 COMPONENT STRATEGY

This component would finance consultant services, training, office equipment and incremental operating costs. It includes two subcomponents i.e. Project Management subcomponent and Project Monitoring and Evaluation subcomponent. This component would provide for efficient Project management and effective monitoring and evaluation of the social, economic, environmental and other changes brought about by the Project. Replication potential of alternative livestock waste management technologies as related to farm scale, affordability, operational capacity, material availability, and compatibility to the waste handling methods of the local farm communities would be assessed to achieve widespread replication of the tested manure management practices throughout the three participating countries.

3.2 ACTIVITY DESCRIPTION

Subcomponent 1: Project Management (US$1.2 million)

The Project would ensure that all aspects of its design and implementation are well documented and easily publicly available. This subcomponent would support a national Project Management Office in each participating country to be established as the secretariat of and reporting directly to the respective National Steering Committee. The PMO, comprising a Project manager supported by competent staff and based on existing administrative structure, would be responsible for day to day Project administration including technical support, financial management, procurement, accounting, secretary as well as monitoring and evaluation of all Project activities. Its staff composition, specific responsibilities, financial budgets and physical location would be decided by respective NSC and acceptable to the World Bank. The PMO at Guangdong Provincial Department of Finance would facilitate Project preparation and implementation in China. The following principles will guide the design of this subcomponent:

• Respect for national institutional arrangements and preferences;

• Ensuring economy, efficiency and coordination in Project implementation;

• Encouraging policy innovation and local initiative for addressing livestock waste management issues;

• Facilitating evaluation, dissemination and replication of demonstration results; and

• Consistency with Project and GEF’s global objectives.

Subcomponent 2: Project Monitoring and Evaluation (US$2.9 million)

This subcomponent would include monitoring and evaluation activities specified in the M&E Plans prepared by the participating countries and included in country specific PIPs. The major areas will include: (1) implementation progress monitoring; (2) livestock waste management system monitoring; (3) environmental management monitoring; (4) project impact monitoring; and (5) other monitoring of additional parameters required for achieving project objectives. Specific plans for monitoring the long-term Project impact will be developed during project implementation and finalized at project completion.

Three types of Project evaluation are planned (a) periodic evaluation studies made internally by the PMOs in each country with technical assistance provided by the Project’s Regional Facilitation Office under the Regional Support Services component, (b) annual audit reports, and (c) evaluations carried out by the World Bank during supervision missions, at the mid-term review, and at the implementation completion. Through extensive reporting of the findings of Project M&E, necessary adjustment or amendment would be made and lessons learned would be used to not only improve the Project performance in each country, but also help resolve potential shortcomings of the Project plans within and between Project countries. The proposed monitoring and evaluation program including the following major activities:

• Review and assessment of the capacity of laboratories in Project countries for conducting required soil, water and public health monitoring sample analyses;

• An extensive water quality testing program to be established for the proposed demonstration areas to monitor the changing quality of surface and groundwater bodies that eventually drain into the South China Sea in response to the implementation of the improved livestock waste management practices;

• Baseline data collection to establish the existing environmental and social conditions prior to Project implementation including baseline surveys/inventories of surface and groundwater quantity and quality, and public and animal health conditions;

• Stakeholder/farmer-led M&E to determine the “buy-in” and replicability of the proposed manure management systems. While this may feed into other types of evaluation, farmer/stakeholder-led evaluation will have its “own” purpose of building support and enhancing replication as a “stand-alone” activity. In addition, ad-hoc thematic social evaluation and review will be budgeted;

• Monitoring change in qualitative or quantitative values of environmental and social indicators that have been established during baseline studies. The main sub-activities include:

1. Implementation progress monitoring. This would include monitoring of the status of project implementation progress indicators and policy and regulatory development indicators.

2. Livestock waste management system monitoring. This would include , at farm and community level, the monitoring of system efficiency and the effect of the project manure management interventions on public and animal health including nitrate, phosphates and BOD, COD and E. coli discharge and volumetric outflow at the end-of-pipe of the individual farms or community, and at critical downstream locations. Process based characterizations are recommended to measure the environmental performance of waste management systems.

3. Environmental management monitoring. This would include monitoring of the major physical, chemical, and biological characteristics of unit processes, or surface and ground water measurement (where applicable) within project areas (micro-watersheds) and at the end-of-pipe on demonstration farms. Surface water monitoring would follow the process based approach and ground water monitoring could be implemented on pollutant sampling from in-ground wells in comparison with baseline data collected. Appropriate experimental designs, protocols, and cost estimates are detailed in country specific EMP's.

4. Project impact monitoring. This would include monitoring of the implementation of stakeholder participation plans, annual social impact review and public consultation, impact on human health, and long-term project impact.

5. Other monitoring of additional parameters required for achieving project objectives. Specific plans for monitoring the long-term Project impact will be developed during project implementation and finalized at project completion.

• Development of timelines and site specific technical, environmental and social indicators for each Project area;

• Establishment of TAs and training programs for respective line agencies involved in Project management, monitoring, and evaluation; and

• Evaluation of the success of Project implementation through detailed examination of identified performance indicators (cf. Annex 3).

Demonstration farm specific baseline data will be collected after the farms or villages are selected but prior to their physical construction. Country specific EMPs have been prepared and are included in the Project EA report. Since the EMP requirements also cover the surface and groundwater monitoring requirement of the Project as a whole, every effort has been made to prevent duplication of efforts between EMP and Component 1 activities. Therefore, Component 1 will concentrate on monitoring system efficiency and the effect of the Project manure management interventions on public and animal health.

4. Regional Support Services Component (US$1.5 million)

4.1 COMPONENT STRATEGY

In each of the participating countries, it is evident that a growing awareness of environmental and public health issues associated with livestock waste mismanagement is often not translated into action because of a lack of knowledge and experience about how to deal with the issue. On the other hand, many of the analytical tools and approaches required to effectively address the issue would be the same or very similar in Thailand, Vietnam and China, as well as in other countries bordering the South China Sea. These provide the base to draw on cross-country synergies, skills and economies of scale in pursuing the achievement of the Project’s objective through a regional component serving each of the participating countries. This component includes the following two subcomponents.

4.2 ACTIVITY DESCRIPTION

Subcomponent 1: Capacity Building Support (US$0.7 million)

This subcomponent would respond to the participating countries’ need for an easily accessible source of support for capacity building which is critical for implementation of a range of Project activities under the countries’ responsibility. Specifically, this would include the following supports.

1. Support for decision tools development. This activity would involve the development and adaptation to local contexts of common decision support tools and technical standards for improved livestock waste management, and their translation into national languages. These tools, tailored to local conditions while maintaining harmonization across provincial and country boundaries, would be in the form of handbooks, calculation sheets or software. Such decision support tools would include:

• Tools for spatial planning of livestock development such as GIS-based programs incorporating multiple criteria for zoning of livestock production at national and local levels;

• Nutrient flux models for calculation of pollutant and nutrient loading balances on agricultural land at farm, village, catchments and higher levels;

• Technical validation of on-farm manure management technologies especially for confined pig raising;

• Tools for monitoring socio-economic and environmental impacts of livestock production; and

• Tools for monitoring public health aspects of livestock production and its ancillary activities.

2. Support for evaluation of Project activities and outcomes. The Project would build a regional pool of experts and develop a cost effective, implementable, and credible evaluation methodology for use in evaluations as required at the initiative of the participating countries. Periodic and ad hoc evaluation missions would be organized at the request of the participating countries. In addition to Project activities and outcomes, evaluations would recommend on needs for decision-support tools development and other capacity building.

3. Support for development of training modules and packages. The Project would involve development of training modules and related technical training packages which would be closely coordinated with training plans for capacity building by participating countries. Training packages would be developed for various targeted audiences including primarily farmers, extension agencies, local and national level decision makers, the Project implementing agencies and trainers who would be trained in use of these training packages.

Subcomponent 2: Coordination and Facilitation Support (US$0.8 million)

This subcomponent would focus on regional coordination, facilitation amongst the three participating countries and the replication of Project outcomes through dissemination, decision support tools, within the three participating countries and to other countries bordering the South China Sea. Coordination with other major projects in the region would be ensured. Specifically, this subcomponent would include the following activities.

1. Regional facilitation. Regional facilitation would, through a Regional Facilitation Office headed by a Regional Project Coordinator, include activities to (a) deliver the support services for capacity building and dissemination of Project outcomes according to an agreed annual work program to be approved by the Project’s Regional Coordination Group and (b) facilitate RCG in performing its functions e.g. support for organizing annual RCG meetings.

2. Regional coordination. Regional coordination would focus mainly on key related projects and programs already existing or underway in the region through regular exchange of information, invitation to workshops, consultation on key issues. Details would be included in Project Implementation Plan for the Regional Support Services Component.

3. Regional dissemination. Regional dissemination would target primarily the three participating countries but eventually also other countries draining into the South China Sea for replication. It would consist in (a) exchange of experience and results through study tours and workshops for officials, experts and policy makers at local and national levels, as well as selected farmers and other key stakeholders involved in the Project; (b) development of an internet portal on “livestock waste management in East Asia” based on the LEAD’s virtual center to include updated information on the Project, documents and data, forums, expert roster, links, etc.; and (c) publications. Other countries in the region would be invited to participate in selected Project workshops in order to benefit from knowledge and experience gained under the Project.

Annex 5: Project Costs

East Asia And Pacific: Livestock Waste Management in East Asia Project

Project Cost Estimate

Total Project

Total Project cost is estimated based on information provided during the Project preparation. Project base cost is expressed in December 2004 prices and in US dollar only. Total Project cost includes physical and price contingencies. Physical contingencies are based on an average of 11 percent for costs under all Project components. Price contingencies are estimated based on an annual international price index of 1.5%, 0.7%, 0.7%, 1.1%, 1.0%, 1.0% for years 2005-2010. Identifiable taxes and duties are US$3.6 million and the total Project cost, net of taxes, is US$20.4 million. Therefore, the share of Project cost net of taxes is 85 percent. It is estimated that during the period 2005-2015, about US$48.4 million of leveraged investment in on-farm livestock waste management would be made as a consequence of the project.

Thailand

Vietnam

Guangdong Province of China

Regional Component

Annex 6: Implementation Arrangements

East Asia And Pacific: Livestock Waste Management in East Asia Project

The overall Project implementation arrangements would be made at regional, national and local levels. At regional level, a Regional Coordination Group represented by each participating country and FAO would be established to provide coordination and facilitation. A National Steering Committee has been formed by each participating country with members from key government ministries (agriculture, environment, public health etc.), academies within each country at national level with overall responsibility for Project preparation and implementation in respective country. A national Project Management Office or Project Implementation Unit, depending on NSC’s preference, would be established as the secretariat of and reporting directly to respective National Steering Committee. The PMO will be responsible for day to day Project administration including preparing funding requisitions and handling funds received from GEF through the Ministry of Finance. Its staff composition, specific responsibilities, financial budgets and physical location would be decided by respective NSC and acceptable to the World Bank.

Specific Project implementation arrangement structure, particularly below the national level, varies from one country to another due to different country and local environment and conditions. It may include District Executive Committee in Vietnam, Provincial Livestock Office and Tambon Administrative Organization in Thailand, County Leading Group and Township Executive Committee in Guangdong and is described below.

Vietnam

Approved by the Prime Minister’s office, a four-member National Steering Committee has been set up comprising members from MONRE and MARD. The NSC is headed by the director-general of MONRE’s Department of Environment.

Establishment of a national Project Management Office has been approved by MONRE which will be located in MONRE. The national PMO staffing would include a Project director, assistant technical officer, administrator and accountant. The Project director will be a senior individual with specific experience in Project management and expertise in livestock waste management and related environmental issues. This person will be responsible for directing work of the national PMO, including recruitment and supervision of the other national PMO staff; establishment of financial management procedures; preparation of periodic technical and financial reports; liaison with the NSC and with provincial and district level officials. In consultation with the NSC, they will identify the technical assistance requirements of the Project and make the necessary arrangements for its provision. It is expected that the Project director will assist the provinces and selected districts to establish the District Executive Committees (DEC). Initially, the focus will be on Bien Hoa District of Dong Nai Province in the south, and Thuong Tin District of Ha Tay Province in the north, that have been selected for initial implementation. As the Project progresses, this responsibility may extend to other provinces that join the Project.

DECs will initially require training to enhance their administrative and financial management capacities as well as their understanding of the technical and environmental issues involved. By the end of the training, they will have assumed responsibility for Project implementation in their areas. In view of the weak capacity of the DECs at initial stages, however, and to achieve the desired national coordination of Project activities, the national PMO may directly contract service providers required for Project delivery of the Technology Demonstration subcomponent with supervision and support as needed. These services might be as varied as facilitation for the dialogue with farmers during preparation of codes of practice, to technical and engineering services for the design and construction of manure management and treatment facilities. The DECs will be assisted as necessary with technical inputs from provincial level line agencies such as DONRE, DARD and DOST. In particular, it is anticipated that DONRE will provide the ongoing monitoring services that will be required to determine whether the Project is having the desired impact.

All key stakeholders including local administrations, communities, farmer, NGOs in Project preparation have been involved in Project preparation and will be continuously involved in project implementation. A stakeholder participation plan is under preparation and will specify the participation and consultation mechanisms tailored to facilitate the stakeholder involvement in exhaustive review and negotiation of technical solutions and management options, proposed regulations, standards and ‘code of practice’ to ensure ownership, sustainability and replicability. The private sector will be responsible for implementation in the demonstration villages who would contribute to the cost of the installation of individual or community based manure management facilities and supported by the national PMO as well as by provincial level organizations institutionally, technically and financially.

Thailand

A National Steering Committee was set up at the outset of Project preparation. NSC was expanded to comprise 12 members from Ministry of Agriculture and Cooperatives, Chulalongkorn University and MONRE. The NSC is headed by a former permanent secretary of MOAC.

A national level Project Management Office will be established and located in MOAC. The national PMO will be staffed by a Project director, an assistant technical officer, an administrator and a book keeper. The Project director will be a senior individual with specific experience in Project management and expertise in livestock waste management and related environmental issues. This person will be responsible for directing the operation of the national PMO, including recruitment and supervision of the other national PMO staff; establishment of financial management procedures; preparation of periodic technical and financial reports; liaison with the NSC; and liaison with provincial and district level officials. In consultation with the Implementation Committee, they will identify the technical assistance requirements of the Project and make the necessary arrangements for its provision.

In response to the functional role conferred on provincial governments by the present national government, it is anticipated that most Project activities will be focused on this administrative level and at Tambon level. For purposes of the delivery of Technology Demonstration subcomponent, the focus would be specifically in Ratchaburi and Chonburi provinces. The Provincial Governors’ offices will play an important role in setting policy and coordinating technical inputs and technical support. Much of this will be done by the provincial level technical staff of the line ministries. The Provincial Livestock Office (PLO) will be responsible for Project implementation at provincial level. Project funds will flow through the PLO from the national PMO. For the technology demonstration Project farms, service suppliers will be contracted directly by the PLO. These services might be as varied as facilitation of the dialogue with farmers during preparation of codes of practice, to technical and engineering services for the design and construction of manure management and treatment facilities. Eventually, and as a result of Project financed capacity development activities, the Tambon Administrative Organizations (TAO) are expected to take over these responsibilities. Then, funds and implementation arrangements and policy matters will flow through TAOs to the service providers.

All key stakeholders including local administrations, communities, farmers, NGOs in Project preparation have been involved in Project preparation and will be continuously involved in project implementation. A stakeholder participation plan is under preparation and will specify the participation and consultation mechanisms tailored to facilitate the stakeholder involvement in exhaustive review and negotiation of technical solutions and management options, proposed regulations, standards and ‘code of practice’ to ensure ownership, sustainability and replicability. Farmer associations will be invited to participate in the development of code of practice development committee on which the national PMO and participating departments will also be represented. The private sector will be responsible for implementation in the demonstration villages who would contribute to the cost of the installation of individual or community based manure management facilities and supported by the national PMO as well as by provincial level organizations institutionally, technically and financially.

China

In China, Project implementation is expected to be carried out mostly in Guangdong province. Within the framework of the overarching institutional arrangement of the Project, specific institutions would be established for the Project implementation as follows.

National Steering Committee. Although Guangdong is the only province of China currently involved in this Project, China’s NSC was constituted of national level ministries (MOF, MOA and SEPA) and Guangdong Provincial Department of Finance. The NSC is headed by a Director under MOF who is also the country’s GEF focal point. The principal reasons to adopt this set-up are to (a) ensure that the national ministries are kept informed of progress of the Project so they may identify successful Project initiatives for replication in other provinces, (b) provide a mechanism for support from the central government, and (c) recognize that the South China Sea constitutes international waters which in China come under national authority.

National Expert Group (NEG). The National Expert Group would consist of national professionals in the related disciplines. A group leader will be designated to assist the provincial PMO to coordinate the professional work involved in implementing the Project. The major functions of the NEG are, at the request of the provincial PMO, to provide professional expertise throughout the implementation of the Project including policy research, technical proposals, development of training materials, participating in training activities, special survey design and implementation, and other related professional support activities. The NEG members would be nominated and selected by the provincial PMO and accountable to provincial PMO. At different stages of Project implementation, non-NEG experts might be needed. However, activities of those non-NEG professionals will be short-term, while the work of NEG will be of a relatively longer nature to ensure consistency and efficiency.

Project Leading Group (PLG). Within Guangdong province, a provincial PLG has been established headed by the director of provincial PMO who is also a member of the NSC. PLG members comprise provincial Department of Finance (DOF), Department of Agriculture (DOA), Environmental Protection Bureau (EPB), and Department of Public Health (DOPH). The PLG is a policy setting and decision making body at provincial level with main function to (a) provide immediate guidance and assistance to the provincial PMO to enable a smooth and successful implementation of the Project in the demonstration area, and (b) keep the NSC informed of the progress of the Project. Through this involvement, NSC is able to benefit from the lessons learned and to identify Project initiatives that later are to be replicated elsewhere. Similar structure of county level PLG is expected. County PLG will be chaired by a county chief and comprise members from the line agencies at this level (Environment, Agriculture, Livestock, Veterinary Services, Fisheries, Health, and Land Management) and farmers’ association representatives.

Project Management Office. A provincial PMO would be established consisting of representatives from various governmental departments and related agencies in Guangdong province, including DOF, DOA, EPB and DOPH. The main functions of the PMO are coordination, organizational and supporting work at the operational level for the Project. The provincial PMO is to report to the provincial PLG on a regular or a request basis. To facilitate Project preparation and implementation in Guangdong province, a PMO at provincial Department of Agriculture would be set up. Establishment of a Township Executive Committee in participating townships is also expected.

During the implementation of technology demonstration subcomponent in Yuanzhou township of Boluo county, service suppliers will be contracted directly by the provincial PMO with supervision and support as needed. These services might be as varied as facilitation of the dialogue with farmers during preparation of codes of practice, to technical and engineering services for the design and construction of manure management and treatment facilities. Eventually and as a result of Project-financed capacity development activities, the Township Executive Committee will take over these responsibilities under the supervision of a county level PLG. Once the townships take over responsibility for Project implementation within their jurisdictions, funds and implementation arrangements and policy matters will flow through them to the service providers.

Regional

Regional Coordination Group. RCG’s principal role is to (a) ensure a continuing exchange of information on livestock waste management issues; (b) coordinate Project implementation among the countries, (c) ensure the inclusion of the issue of manure management on the political and budgetary agenda within respective country, (d) facilitate the gradual adoption of common policies thereon between the partners, and (e) coordinate implementation of the Regional Support Service component. RCG would meet normally twice a year.

Regional Facilitation Office. LEAD, aimed at the protection of natural resources as affected by livestock production within a poverty reduction perspective, will be responsible for implementation of the regional component. Under such arrangement, FAO has committed to financing at least US$0.5 million of the cost of the component; and has undertaken to seek additional bilateral funding, such as to permit component activities to be adequately maintained over the full duration of the Project, as desired by the participating countries. A Regional Facilitation Office would be set up prior to Project effectiveness and located in FAO’s Regional Office in Bangkok of Thailand. This Office would consist of a full-time FAO staff serving as the Regional Facilitator supported by short-term international consultants as needed plus office support and travel budget. Its main functions would be to (a) prepare an annual work program to be reviewed and approved by the RCG; (b) manage the Project activities as agreed with the World Bank including submission of financial and implementation progress reports to the World Bank on a regular basis and an annual report of activities to the participating countries; and (c) serve as the secretariat of the Project’s Regional Coordination Group.

Annex 7: Financial Management and Disbursement Arrangements

East Asia And Pacific: Livestock Waste Management in East Asia Project

Summary

Assessments of the Project’s FM arrangements in each of the participating countries and for the Regional Support Services Component have been conducted to determine whether the financial management capacity will be able to meet the requirements of BP/OP 10.02. In the three countries participating of the Project, the financial management (FM) and disbursements arrangements vary from one country to another due to different implementation arrangements and country/local environment and conditions. In summary, the FM arrangements for the Project in each country and for the regional component are considered adequate to meet the minimum requirements of the World Bank, provided the actions recommended in the individual country FM Action Plans are implemented before the Project becomes effective.

Risk Analysis

In Thailand, the risks associated with the Project are considered high due to the limitations of the government financial system for supporting the Project’s fiduciary requirements and the lack of experience in management of World Bank supported Projects and FM requirements. In China, the Project risk is assessed as moderate as the Project will have in place an adequate financial management system that can provide, with reasonable assurance, accurate and timely financial information and the Project’s finances will be managed by staff with experience in World Bank requirements. In Vietnam, the conclusion of the assessment is that there is a certain degree of fiduciary risk in the use of public resources, however the fiduciary risk for this Project is manageable with the steps that are envisioned to be taken under the financial management action plan. For the regional component, the Project risks are assessed as low, as the implementing agency has experience in financial management of similar projects and has adequate financial systems and procedures. The Project risks are considered manageable through clear specification an documentation of procedures, use of government control procedures and, where required, training of staff in the World Bank procedures, regular audits and World Bank supervision.

Implementing Arrangements

In each country, a Project Management Office (PMO) within the main implementing agencies will be established with responsibility for the day-to-day Project administration and financial management In China, the Provincial Finance Bureau will have responsibility for the Project’s financial management, while the PMO in the Ministry of Agriculture will oversee Project implementation.. A Regional Facilitation Office will be set up in the Food and Agriculture Organization (FAO) in Bangkok to implement Component 4, Regional Support Services, of the Project which will include providing Project progress reports to the World Bank on as regular basis.

In Thailand, the Department of Livestock Development (DLD) under the Ministry of Agriculture and Cooperatives (MOAC) will be the implementing agency. DLD currently comprises 16 divisions, 2 units and 2 provincial Livestock offices. To facilitate Project implementation, it is proposed that a PMO within MOAC would be set up, with 5 externally recruited staff, to administer and monitor the Project. The Project will be managed centrally by PMO, including Project activities incurred at provincial and district levels. A Project accountant will be employed with responsibility for Project day-to-day operations including accounting, financial reporting and disbursements. Since the Project is small, incompatible functions between accounting and disbursement cannot be segregated. This risk will be mitigated through supervision by the Project director and Project manager including approval and authorization of checks coupled with regular reporting and annual auditing. The Project accountant will have to be qualified with an adequate background and experience in accounting and financial management. The terms of reference and qualifications of the Project accountant will be agreed with the World Bank before recruitment and the appointment is subject to review and must be acceptable to the World Bank and these requirements are incorporated into the FM Action Plan.

In China, the grant will be implemented simultaneously with the World Bank’s lending project, the Guangdong Pearl River Environment Project. For the Project, a Provincial Project Management Office (PMO) has been established within the Guangdong Provincial Agriculture Bureau. The PMO will be responsible for the implementation of the Project. Some Project activities will be performed at county levels. In these instances, county agriculture bureaus will be responsible for those activities and will report to the PMO. The disbursement and Project financial management related functions at the provincial level will be carried out by the Guangdong Provincial Finance Bureau, which will be also responsible for the overall coordination of the Project. The Project structure set out below and staffing plan are considered proper and satisfactory.

Provincial Finance Bureau

Provincial Agriculture Bureau

County Agriculture Bureau

In Vietnam, the Project will be implemented through the Central Project Implementation Unit (CPMU) under the Department of Environment of Ministry of Natural Resources and Environment (MONRE) and two District Project Implementation Units (DPMU) of Thuong Tin District, Ha Tay Province in the North and of Bien Hoa City, Doing Nai province in the South. The DPMUs will implement most of the activities under component 1 and some activities of Component 3. The CPMU will implement activities under Component 2, Components 3 and 4 and also will provide support to DPMUs in implementing activities.

As this is the first World Bank funded Project that the MONRE and the People’s Committee of Thuong Tin District and Bien Hoa City are responsible for implementing, the agencies are not familiar with the World Bank’s policies and procedures on financial management and disbursement. The accounting software in use for government budget implementation purposes is not able to analyze expenditure by different dimensions and so the use of a separate accounting software for the Project will be more effective than modifying the current software at different agencies. Each agency will be staffed with at least one chief accountant, one accountant and one cashier. The chief accountant and the cashier could work on a part-time basis for the Project, but the accountant will be working on a full time basis. The People’s Committees will be able to employ additional resources from their accounting department for the Project as required. The Project Chief Accountant has been appointed for the Thuong Tin District DPMU and one has been identified for the Bien Hoa City DPMU and they have extensive experience in government accounting and reporting. However, FM staff at the CPMU have not been identified and the overall FM system at the CPMU has not been formed. There is a need to formally set up the Project FM system before effectiveness, including developing and adopting a Project financial management manual acceptable to the World Bank, setting up IT infrastructure for the FM system and appointing CPMU and Bien Hoa DPMU FM staff with qualifications and experience acceptable to the World Bank. These requirements are incorporated in the FM Action Plan.

Funds Flow and Disbursement Arrangements.

Disbursements of the Grant for the Project in each country will be based on the traditional disbursement system through a special account (SA) and by direct payments. Replenishment of the SAs will be made on the basis of Statements of Expenditure, supported by appropriate documentation submitted to the World Bank together with withdrawal applications, at least every 2 months or when the balance of the SA is lower than 70 percent of its authorized allocation, whichever comes first. Payments from the SA are to be made for the World Bank’s share of the Project’s eligible expenditure, in accordance with the grant agreement and the World Bank’s guidelines. For the Project’s regional component, disbursement will be on the basis of quarterly advances, as set out in a Project agreement between the World Bank and the FAO, and reimbursement of expenditures incurred for Project activities.

In Thailand, the Special Account will be kept at a minimum and used mainly for Project payments for workshops, training expenses, and small value of consultant payments. The Special Account will be maintained in US Dollars and managed by DLD. The authorized allocation is anticipated to be US$200,000. The funds flow diagram showing inflow from the World Bank and outflow for each Project component is set out below (to be inserted).

In China, funds for this GEF grant will flow from the World Bank to a special account which will be set up at and managed by the Provincial Finance Bureau, which has been managing special accounts for various lending and trust fund projects. The Bureau has accumulated extensive experience in processing withdrawal applications and is familiar with World Bank disbursement procedures. The funds will flow from the special account to the provincial PMO in the Provincial Agriculture Bureau for provincial activities and then to the county agriculture bureau to support county activities. The county agricultural bureau will submit withdrawal applications to the PMO and the PMO will then send them to the Guangdong Provincial Finance Bureau.

In Vietnam, three special accounts (SA) in US Dollar will be opened in a commercial bank as instructed by the State Bank of Vietnam, on terms and conditions acceptable to the World Bank. One account will be operated by the CPMU, and the other two by the DPMUs. The initial allocation and authorized allocation are set at US$100,000 and US$50,000 for the PPMU and DPMUs respectively. Withdrawal applications will be made by the respective SA holder and approved by the Ministry of Finance in accordance with the World Bank procedures.

World Bank

CPMU/ DPMU

(2)

(8)

(10)

(5)

(13)

(12)

(9)

Contractors Consultants

Legend

Fund flow

Document flow

1. PMU submits withdrawal application to MOF for review and approval

2. MOF reviews, approves and returns withdrawal application to PMU

3. PMU submits withdrawal application to the World Bank

4. The World Bank advances/ replenishes to the special account; or

5. The World Bank makes payment to contractor/ consultant in case of direct payment

6. Contractor/ consultant submit payment request and commercial invoice for goods/ services delivered to PMU

7. PMU verify payment request and submit it to State Treasury for review and approval

8. State Treasury authorizes payment to contractor/ consultant after review payment request; and

9. State Treasury makes payment for counterpart share of eligible expenditure

10. PMU order payment from special account

11. The commercial bank remits the World Bank share of eligible expenditure from special account

12. Contribution in cash from beneficiaries is maintained in an account at State Treasury;

13. Contribution in cash from beneficiaries is recorded by the PMU

Accounting Policies and Procedures.

The Project’s accounts and records will be maintained in accordance with the acceptable accounting standards and practices and with government regulations and procedures of each participating country.

In Thailand, the accounting and financial management system will be set up in accordance with sound accounting practices and will include the maintenance of book of accounts and supporting documents. The accounting system may be based on computerized accounting software or manual (with spreadsheets) depending on the availability of system software and the capability of the Project accountant. Maintaining a manual system with spreadsheets is acceptable for this Project. The basis of accounting will be cash and financial reports will be prepared in accordance with the Thailand accounting standards, which are compatible with IAS. The Project accountant will be responsible for preparing withdrawals and payments. World Bank staff will provide training on procedures for withdrawals and disbursements as well as report requirements, once the accountant is appointed.

In China, in order to streamline financial management of trust funds, Ministry of Finance (MOF) has issued, in July of 2001, a set of financial and accounting regulations, providing detailed instructions for accounting setup and treatments, format and content of financial statements, internal control procedures, and audit requirements. The Project will operate in accordance with these regulations. For the Project, the county agriculture bureaus will be responsible for maintaining the financial records of all the activities carried out at the county level and the provincial finance bureau will maintain the records of all activities at the provincial level. The county will prepare financial statements based on their records and submit them to the Guangdong Provincial Finance Bureau. The Provincial Finance Bureau will prepare the Project consolidated financial statements and submit the audited statements to the World Bank.

In Vietnam, the Project will use accounting policies and procedures acceptable to the World Bank. For reporting, International Public Sector Accounting Standards (IPSAS) will be used by the Project. The Project will rely as much as possible on the accounting and internal control procedures at the Ministry of Natural Resources and Environment and the two District/Provincial People’s Committees, especially in reviewing and approval of financial plans and expenditure by functional departments and authorization for payment by State Treasury. Additional and modified procedures will be established as necessary to comply with the grant agreement and the World Bank’s policies and procedures on financial management, and to ensure consistency at all levels of Project implementation. The procedures will be documented in a Project financial management manual.

For the Regional Support Services Component, the RFU of the FAO Bangkok, will maintain separate accounts and records for the Project in accordance with the FAO financial policies and procedures. The RFU will produce FMRs semi-annually and annual financial statements for the component it managers.

Reporting and Monitoring

The Project will produce Financial Monitoring Reports (FMR) and Annual audited financial statements for the Project activities in each country and for the regional component of the Project.

The FMRs are required to be submitted semi-annually to the World Bank within 45 days after the end of the period. The FMR will be used by Project management and the World Bank to monitor Project implementation and financial progress. The FRMs will consist of reports of Project expenditures by Project component/subcomponent and by disbursement categories compared to approved Project plans/budgets and should provide adequate description and explanation of Project progress and variances analysis. The FMRs are not required to be audited. The format of FMRs will be agreed before negotiation.

The annual financial statements will be prepared in accordance with the accounting standards and policies for each country and the format/content will be agreed with the World Bank. The annual financial statements prepared by each country’s implementing agency will include, as a minimum, statements of source and use of funds (implementation of grant agreement), Project financial position (balance sheet) and statement of special account. For the regional component of the Project, the annual financial statements will summarize sources and use of Project funds and use of funds by Project subcomponent and disbursement category for the year and Project to date.

Audit Arrangements

The World Bank requires that grant financial statements be audited in accordance with standards acceptable to the World Bank and for the audit to be conducted by an auditor acceptable to the World Bank. Each country’s annual financial statements and the regional component’s financial statement and audit reports will be submitted to the World Bank within 6 months of the end of each country’s financial year. Auditing fees, if applicable, may be financed by the grant.

In Thailand, the audit of the annual financial statements will be carried out by the Office of Auditor General according to audit terms of reference acceptable to the World Bank. The Auditor shall be appointed within 6 months from the date the Project becomes effective. The auditor provides an opinion on the annual financial statements and a special opinion on the appropriate use of Project funds. The auditor will also be required to provide a management letter addressing any deficiencies and weaknesses found during the course of audit.

In China, in-line with other World Bank financed grants, the Project’s financial statements will be audited in accordance with ISA and the Government Auditing Standards of the People's Republic of China (1997 edition). The Guangdong Provincial Audit Office will conduct the audit and the annual audit reports will be issued in the name of Guangdong Provincial Audit Office.

In Vietnam, the Project’s financial statements will be audited annually in accordance with under International Standards on Auditing by an independent accounting firm. The audit will be carried out in accordance with terms of reference satisfactory to the World Bank. The Auditor shall be appointed within 6 months from the date the Project becomes effective. A management letter addressing internal control weaknesses of implementation agencies will also be provided by the auditor together with the financial statements audit report.

For the regional component of the Project administered by the Regional Facilitation Office of the FAO, the financial statements will be audited by an auditor acceptable to the World Bank in accordance with audit terms of reference acceptable to the World Bank.

FM Action Plan

In order to meet the World Bank’s minimum financial management requirements, the following actions should be taken in Thailand and Vietnam and by FAO.

Allocation of Grant Proceeds – For Total Project

Allocation of Grant Proceeds – For Thailand

Allocation of Grant Proceeds – For Vietnam

Allocation of Grant Proceeds – For China

Allocation of Grant Proceeds – For FAO

Project Financing Plan (US$ ‘000)

Project Total

Thailand

Vietnam

China

Regional

Annex 8: Procurement Arrangements

East Asia And Pacific: Livestock Waste Management in East Asia Project

A General

Procurement for the proposed Project would be carried out in accordance with the World Bank’s “Guidelines: Procurement Under IBRD Loans and IDA Credits” dated May 2004 and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, and the provisions stipulated in the Legal Agreements. The general description of various items under different expenditure category are described below and summarized in Table A⁷. For each contract to be financed by the GEF Grant, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Recipient(s) and the World Bank team in the Procurement Plan(s). The Procurement Plan(s) will be updated at least annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity.

Procurement of Works (US$12.1 million): Works to be procured under the Project would include construction of manure treatment systems, including bio-gas facilities, anaerobic digestion units, aeration systems, on-farm roads, connecting canal and ditches, open storage pond, manure drying/composting facilities, sedimentation, settlement and covered lagoons and fish pond rehabilitation. These facilities would be constructed on individual or shared farms and on communal basis. The civil works would involve small valued and geographically scattered constructions only, and therefore are not suitable to be procured through ICB procedures. They would be mainly procured using NCB method. However, small works estimated to cost less than US$50,000 per contract may be procured through shopping procedures. Bidding documents for NCB contracts shall follow the Model NCB Bidding Documents acceptable to the World Bank for each country and Requests for Quotations (RFQ) for shopping contracts shall follow the Model RFQ acceptable to the World Bank for each country. The NCB procedures to be followed shall be that in the respective national procurement regulations of China and Thailand, but subject to the waivers and modifications as provided in the attachments to this Annex.

Procurement of Goods (US$0.7 million): Goods required under the Project would include office equipment for all countries and manure transportation equipment for Thailand. Contracts for these goods costing US$150,000 each would be procured through ICB procedures, and the Bank's Standard Bidding Documents for Procurement of Goods dated May 2004 shall be used. Goods estimated to cost less than US$150,000 per contract may be procured using NCB method. In such NCB contracts, bidding documents shall follow the Model NCB Bidding Documents acceptable to the World Bank for each country⁸. The NCB procedures to be followed shall be that in the respective national procurement regulations of China, Thailand and Vietnam, but subject to the waivers and modifications as provided in the attachments to this Annex. Small goods under contracts below US$50,000 each may be procured using shopping procedures. Of the total goods required, about US$150,000 worth of office equipment for FAO will be funded by FAO own sources.

Procurement of non-consulting services (US$3.3 million): Various training, workshops, study tours for farmers, NGOs, extension agencies, government officials at all levels and other stakeholders involved in the Project, all self-organized by the PMOs would be procured using the procedures acceptable to the World Bank on the basis of quality, efficiency and cost-effectiveness. Of the total cost, about US$2.4 million would be non-GEF financed.

Selection of Consultants (US$6.5 million): Consulting services would generally include policy development, policy testing, awareness raising, technical assistance, training, capacity building, monitoring and evaluation, and financial audits. These services would be procured mostly through various selection methods including QBS, CQ and IC depending on the value, nature and complexity of consulting assignments. The use of these methods for specific assignments would be prior reviewed and cleared with the World Bank in the Procurement Plans. However, CQ method would apply to assignments estimated to cost not exceeding US$100,000 per contract. Short lists of consultants for services estimated to cost less than US$200,000 equivalent per contract under Vietnam's subproject, US$300,000 equivalent per contract under China's subproject or US$500,000 equivalent per contract under Thailand's subproject may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Of the total estimated cost for consulting services, about US$3.9 million is expected to be funded by non-GEF sources.

Operating Costs (US$1.4 million): Incremental operating costs for operation of PMOs that would be financed by the Project may be procured using the respective Governments' administrative and financial management procedures acceptable to the World Bank on the basis of quality, efficiency and cost-effectiveness. Of the total estimated incremental operating cost, about US$1.1 million is expected to be funded by non-GEF sources.

B. Assessment of the agency’s capacity to implement procurement

The Project procurement would be implemented by the following implementing agencies (PIAs):

• For China's subproject, the PIA is the Provincial Project Management Office established within the Center of Rural Environment Protection and Energy Development under the Department of Agriculture of Guangdong Province (hereinafter called "China-PMO").

• For Thailand's subproject, the PIA is currently not yet setup, but it is expected that a Project Management Office would be established within Department of Livestock Development (DLD) under the Ministry of Agriculture and Cooperatives (MOAC) of Thailand for implementing Thailand's subproject (hereinafter called "Thailand-PMO").

• for Vietnam's subproject, a Project Management Office (PMO) has been established the Department of Environment within the Ministry of Natural Resource and Environment (MONRE) of Vietnam for implementing the major procurement workload under the subproject (hereinafter called "Vietnam-PMO"). In addition, some procurement activities would be decentralized to two District Executing Committees (DECs) which would be established in Thuong Tin district (Ha Tay province) and Bien Hoa town (Dong Nai province).

Three separate procurement capacity assessments were carried out by the Bank's procurement specialists in WB China, Thailand and Vietnam Offices for their respective country subproject. These capacity assessments revealed that the capacity of China-PMO is generally adequate since it had both qualified procurement staff and good experience with World Bank procurement, while that of Thailand-PMO and Vietnam-PMO/DECs is rather weak because they lack World Bank procurement experience as well as their organization has not been fixed. Accordingly, the procurement risk rating for China subprojects is moderate and for Thailand's and Vietnam's subprojects is high. The overall procurement risk under the whole Project is rated high.

Specific recommended actions to build up the PIAs' procurement capacity are mentioned in the procurement capacity assessment reports being kept in the Project files. These actions mainly include (i) timely establishment of Thailand-PMO, (ii) provision of qualified procurement staff to PMOs, (iii) provision of training on World Bank procurement to PMOs; (iv) procurement technical assistance to PMOs as needed, (v) inclusion in each Legal Agreement an annex on Bank-accepted NCB procedures; and (vi) timely procurement planning.

3. Procurement Plan

The Recipients, at appraisal, shall be developing Procurement Plans covering at least the initial period of 18 months for their respective subproject implementation which provides the basis for the procurement methods and implementation scheduling. These plans will be reviewed and agreed between the Recipients and the World Bank team and are available at the respective National Project Management Office and the Regional Facilitation Office. These agreed Procurement Plans will also be available in the Project’s database and in the Bank’s external website. The Procurement Plans will be updated in agreement with the World Bank team annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity.

D. Bank Review and Frequency of Procurement Supervision

Based on the risk ratings and the specific country public procurement environment, the Bank's prior review shall apply to the following procurement:

• All ICB and NCB contracts for works;

• All Shopping contracts for works for the first year’s implementation;

• The first Shopping contract for works for subsequent year’s implementation for each country;

• All ICB and NCB contracts for goods;

• The first Shopping contract for goods for each country;

• All contracts for GEF-funded consultant services in excess of US$50,000 for firms and US$25,000 for individuals.

A prior review ratio of about 20 percent is expected. All other contracts would be subject to ex-post review by the Bank’s supervision missions. All overseas training and study tours plans will be prior reviewed by the Bank.

Attachment 1:

Details of the Procurement Arrangement Involving International Competition

1. Works and Goods (list of contract packages which will be procured following ICB method):

   1	2	3	4	5	6	7	8	9
   Ref. No.	Contract (Description)	Estimated Cost	Procurement Method	P-Q	Domestic Preference (yes/no)	Review by Bank (Prior / Post)	Expected Bid-Opening Date	Comments
   	to be finalized during appraisal

2. Consulting Services (list of consulting assignments with short-list of both national and international firms):

Attachment 2:

[ATTACH DRAFT PROCUREMENT PLANS OF CHINA'S, THAILAND'S AND VIETNAM'S SUBPROJECTS FOR AT LEAST THE INITIAL PERIOD OF 18 MONTHS]

Attachment 3

• The NCB procedures for China (if applicable and available);

• The NCB procedures for Thailand (if applicable and available)

• The NCB procedures for Vietnam (if applicable and available)

Annex 9: Economic and Financial Analysis

East Asia And Pacific: Livestock Waste Management in East Asia Project

1. Introduction

The commercial pig raising industry is an important and rapidly growing component of the livestock sectors of Thailand, Vietnam and Guangdong province of China, where estimated total pig meat production of 4.4 million MT/year (2003) is valued at some US$3 billion at producer prices, growing at around 5 percent annually (Table 1). Modern methods of pig production were introduced to these countries at different times (Thailand in the 1970s, China in the 1980s, Vietnam in the 1990s) and have tended to displace the traditional pig breeds and animal husbandry methods from the market, which cannot compete with the much higher productivity of the modern crossbred animals and the related feed industry. Commercial producers, defined as those of whatever scale who specialize in the confined raising of pigs using modern methods to some degree, already supply more than 50 percent of the pig meat market in each country, a major destination of urban consumer expenditure⁹, and are expected to continue to make further inroads into the respective domestic markets, and possibly into regional export markets. With weak enforcement of environmental regulations, intensive modern producers generally do not pay for the negative externalities they create, although attention is increasingly being paid to mitigating and preventing these externalities, partially through the activities of this Project. Allowing the present trend towards industrialization of livestock production to continue unabated with its demonstrably negative environmental consequences will undermine societal goals for improved rural living standards and public health.

Table 1 Basic Statistics of the Pig Industry in the Project Countries/Province

Source: FAOstat Nov 2004, World Bank 2004

2. Project Rationale and Objectives

In the absence of major change, rapidly increasing livestock production in the coastal regions bordering the South China Sea can only lead to increasingly severe environmental problems, both domestic and global. The Project’s development objective is to reduce the major negative environmental and health impacts of rapidly increasing concentrated livestock production on the open waters of and thus on the people of south-east Asia. The global environment objective is to reduce livestock induced, land-based pollution and environmental degradation of the South China Sea and Gulf of Thailand. The desired project outcome/impact is reduced pollution originating from livestock production of waterways draining into the South China Sea.

3. Incentives for Improved LWM

The baseline (without the Project) and GEF Alternative (with Project) scenarios for livestock waste management in the region, described in Annex 15, are the product of an interactive set of factors comprising (a) market forces, (b) government regulatory action; (c) informal social pressure; and (d) government incentives for certain types of waste treatment facilities (e.g. biogas digesters),, and (e) farmers having imperfect technical knowledge of manure management. The actual situation is one which presents environmental and public health risks in each of the three countries, falling short of governments’ expressed socio-economic and environmental objectives, as well as a serious threat to natural resources in international waters of the South China Sea.

By far the most important component of the existing incentives is market forces which determine the range and cost of manure storage and handling facilities that farmers can invest in and their options for sale or on-farm recycling of manure products. Whether separating and drying solid pig manure for use in orchards, on other crops, or in fishponds, as widely practiced in southern China, the use of solid manure is fairly widespread and its economic value appreciated. Intensive pig producers already use various manure management systems, but only up to a certain point, as these systems are typically constrained by physical and market limitations, so tend to be overwhelmed when farms increase their stock numbers.

In all three countries, regulatory action on LWM has so far had a very limited impact on actual farm behavior, as documented in Annex 1. The project is designed to demonstrate that achieving much higher levels of compliance with regulatory standards is possible, provided that certain conditions are met: e.g. appropriate recycling and wastewater discharge standards, understanding and acceptance of such standards by farmers and the general public, adequate support for their enforcement from local authorities and communities, adequate staffing and technical training for extension and farm inspection staff, etc.

It is difficult to generalize about the impact of social pressure on adoption of better LWM in the East Asia region. There are certainly instances reported where such pressure has made a difference (e.g. in the lower Pearl River Delta in Guangdong, in Nakhon Pathom province of Thailand), and conflict between livestock and crop farmers over a range of issues, including the nuisance created by manure storage and disposal especially where pig farms are concerned. The more typical situation, however, is one of laisser-faire, in which local communities passively accept environmental and health risks that would be considered unacceptable in some other countries. In the case of the numerous specialized pig production villages in Vietnam and China, such conditions are accepted because most of the population benefits from the activity. In the future, community pressure on livestock farmers to adopt a more environment -friendly code of practice can be expected to become stronger, as a result of better information and generally improving living standards. The Project will seek to foster awareness raising to this end, starting especially in the selected demonstration areas.

To date, financial incentives for improved LWM in each of the three countries have mostly been for installation of biogas digesters, more for energy conservation reasons than for avoidance of soil, water and or air pollution. As described in Annex 4, biogas is useful as a means for removing organic pollution (BOD), pathogens and odor, but does not remove most of the excess nutrients and other noxious compounds, such as heavy metals, which are mostly still discharged into streams and rivers, with some part carried to the South China Sea. Nevertheless, continuing to support the adoption of biogas digesters would still be useful, as well as extending support to other forms of basic manure management such as construction of ponds and lagoons for storage.

In order to raise the standards of manure management on all intensive pig farms to a level acceptable by current domestic standards, it is estimated that LWM investments of the order of US$3-5 per head of the standing pig population (SPP) are needed. Such standards would aim to prevent regular discharge of fresh manure and untreated wastewater into streams and the creation of environmental nuisance such as excessive flies and odor. This level of investment, and the environmental standards it aims to achieve, is referred to as “Level 1”. As existing knowledge and market barriers are overcome, subsidy for Level 1 investment should no longer be necessary for the majority of the intensive pig producers, who (as shown in the financial analysis) would generally be able to afford it themselves. Therefore, this standard could largely be achieved through technical training and stronger regulatory enforcement, in conjunction with informal social pressure and market forces.

However, Level 1 standards of manure management, although attainable in principle by all specialized pig farmers, would not be sufficient to achieve the global environmental objective of the Project, which is to prevent excess nutrients (essentially, N and P) and other polluting compounds from livestock waste (especially heavy metals such as Cu, Zn and As) reaching the South China Sea. To achieve this objective a significantly higher standard of LWM is required, that effectively prevents discharge of untreated livestock waste into the waterways. Achieving this higher standard (“Level 2”) is considered feasible using combinations of waste treatment technologies, recycling methods and measures to minimize human health risks. On average, the investment needed to attain Level 2 standard is estimated in the order of US$8-12 per head of the SPP (Table 2). Level 2 investment is necessary in order to achieve the global environmental objective, since there is technically no other way to prevent livestock waste from entering the environment and polluting the Sea in increasing quantities.

4. Economic analysis

The Project adopts a comprehensive approach by opting for the demonstration and replication of livestock waste management methods that combine waste treatment with waste recycling wherever feasible, rather than using a technology-based approach relying exclusively on waste treatment. This comprehensive approach will only be adopted on a large scale in each country through the combination of policy development, capacity and institution building, demonstration and replication, and monitoring and evaluation activities undertaken by the Project. For economic analysis of the Project, a cost-effectiveness of these two approaches was selected to compare costs of reducing fluxes of critical nutrients (N, P) and organic matter (BOD) originating from livestock waste into the environment, using estimates of the unit cost of nutrient removal through different forms of treatment.

Table 2 presents investment and operating cost estimates for nine selected manure management systems suitable for farms in different situations that might be demonstrated under the Project, and compares the total cost per pig-cycle of seven different systems combining both treatment and recycling with those of two systems relying exclusively on treatment technology. The comparison indicates that the treatment-based systems cost on average US$2.80 per pig-cycle or twice as much as combined systems (average of US$1.40 per pig-cycle), confirming the innate cost advantage of the recycling option wherever this is feasible. In practice, recycling feasibility is limited by the availability of suitable cropland for liquid manure or slurry application within about 5 km of the farm, because beyond that distance transport becomes too costly. However, land application may also be constrained by agronomic factors or lack of familiarity with using the product.

Table 2 Typical Costs for Improved Manure Management Systems (Level 2)