Completion Report

Project Number: 35297-013 Loan Numbers: 2259-LAO (SF) and Cofin 8229-LAO-IFAD Grant Numbers: 0055-LAO (SF) and 0056-LAO June 2015

Lao People’s Democratic Republic: Northern Region

Sustainable Livelihoods through Livestock

Development Project

This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit - kip (KN)

At Appraisal At Project Completion 1 August 2006 7 June 2014

KN1.00 = $0.000099 $0.00012 $1.00 = KN10,148 KN8,059

ABBREVIATIONS

ADB – Asian Development Bank CDD – community-driven development CIAT – International Center for Tropical Agriculture CSP – country strategy and program DAFO – district agriculture and forestry office DLF – Department of Livestock and Fisheries DLWU – District Lao Women’s Union DMF – design and monitoring framework EGDP – ethnic groups development plan EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return GAP – gender action plan IFAD – International Fund for Agricultural Development JFPR – Japan Fund for Poverty Reduction Lao PDR – Lao People’s Democratic Republic LPG – livestock production group LWU – Lao Women’s Union MAF – Ministry of Agriculture and Forestry M&E – monitoring and evaluation MTR – midterm review PAFO – provincial agriculture and forestry office PCR – project completion report PIU – project implementation unit RIMS – Results and Impact Management System RRP – report and recommendation of the President SDC – Swiss Agency for Development and Cooperation TA – technical assistance VIDF – village infrastructure development fund VLF – village livelihood fund VSCC – village savings and credit committee

WEIGHTS AND MEASURES

ha (hectare) – 10,000 square meters t (ton) – 1,000 kilograms

NOTES

(i) The fiscal year of the government ends on 30 September. (ii) In this report, "$" refers to US dollars. Vice-President S. Groff, Operations 2 Director General J. Nugent, Southeast Asia Department (SERD) Director S. Nicoll, Lao People’s Democratic Republic Resident Mission (LRM),

SERD

Team leader S. Phanouvong, Senior Project Officer, LRM, SERD Team members C. Bounnad, Associate Project Analyst, LRM, SERD

T. Saphakdy, Social Development Officer (Gender), LRM, SERD S. Schipani, Senior Portfolio Management Specialist, LRM, SERD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA i MAP xi I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 3 C. Project Costs 5 D. Disbursements 5 E. Project Schedule 6 F. Implementation Arrangements 7 G. Conditions and Covenants 7 H. Consultant Recruitment and Procurement 8 I. Performance of Consultants, Contractors, and Suppliers 9 J. Performance of the Borrower and the Executing Agency 10 K. Performance of the Asian Development Bank 10

III. EVALUATION OF PERFORMANCE 11 A. Relevance 11 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 12 E. Impact 13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons 14 C. Recommendations 15

APPENDIXES

1. Design and Monitoring Framework 16

2. Quality of the Project’s Monitoring and Evaluation Data 27

3. Summary of Gender Equality Results and Achievements 31

4. Key Features and Lessons from Livestock Extension, the Village Livelihood Fund, and the Village Infrastructure Development Fund

40

5. Loan and Grant Disbursements by Year and Quarter 49

6. Chronology of Main Events 50

7. Status of Compliance with Loan Covenants (Loan 2259) 52

8. Ethnic Groups Development Plan 59

9. Utilization of Consulting Services 63

10. Procurement of Vehicles and Equipment 64

11. Major Contracts for Civil Works 65

12. Economic Reassessment 66

13. Calculation of Overall Project Rating 76

i

BASIC DATA Loan 2259-LAO (SF)

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan

7. Project Completion Report Number

Lao People’s Democratic Republic 2259-LAO (SF) Northern Region Sustainable Livelihoods through Livestock Development Project Government of the Lao People’s Democratic Republic Ministry of Agriculture and Forestry SDR 6,256,000 ($9,548,754 equivalent) PCR:LAO 1502

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

28 June 2007 31 March 2014 28 August 2006 29 August 2006 29 September 2006 15 January 2007 15 April 2007 28 June 2007 1 31 December 2012 12 August 2014 1 1% per annum during grace period; 1.5% per annum during amortization period 32 8

8. Disbursements a. Dates Initial Disbursement

10 September 2007

Final Disbursement

12 August 2014

Time Interval

84 months

Effective Date

28 June 2007

Original Closing Date

31 December 2012

Time Interval

66 months

ii

b. Amount (SDR)

Category Original

Allocation Last Revised

Allocation Amount

Disbursed Undisbursed

Balancea

01 Civil Works 1,211,000 1,697,954 1,688,895 9,059 02 Equipment 512,000 477,601 469,660 7,941 03 Material 353,000 185,788 207,130 (21,342) 04 Village Revolving Fund 1,211,000 1,536,196 1,448,849 87,347 05 Farmer Training 403,000 957,449 986,603 (29,154) 06 Supervision 336,000 1,233,005 1,239,925 (6,920) 07 Interest Charge 155,000 155,000 155,000 0 08 Unallocated 2,075,000 13,007 0 13,007

Total 6,256,000 6,256,000 6,196,062 59,938

Total ($ equivalent) $9,300,000 $9,638,769 $9,548,754 $90,016

( ) = negative. a

Cancelled on 12 August 2014.

iii

BASIC DATA Grant 0055-LAO (SF)

A. Grant Identification 1. Country 2. Grant Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Grant 7. Project Completion Report Number

Lao People’s Democratic Republic 0055-LAO (SF) Northern Region Sustainable Livelihoods through Livestock Development Project Government of the Lao People’s Democratic Republic Ministry of Agriculture and Forestry $700,000 PCR:LAO 1502

B. Grant Data 1. Appraisal – Date Started – Date Completed 2. Grant Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Grant Agreement 5. Date of Grant Effectiveness – In Grant Agreement – Actual – Number of Extensions 6. Closing Date – In Grant Agreement – Actual – Number of Extensions

28 June 2007 31 March 2014 28 August 2006 29 August 2006 29 September 2006 15 January 2007 15 April 2007 28 June 2007 1 31 December 2012 8 July 2014 1

7. Disbursements

a. Dates

Initial Disbursement

20 June 2008

Final Disbursement

8 July 2014

Time Interval

73 months

Effective Date

28 June 2007

Original Closing Date

31 December 2012

Time Interval

66 months

iv

b. Amount ($)

Category Original Allocation

Last Revised Allocation

Amount Disbursed

Undisbursed Balance

a

3101 Consulting services (National & International)

388,000 591,640 529,076 62,564

3201 Civil Works for Training Center, Vehicle Procurement (net of tax)

100,000 100,000 99,751 249

3801 Training, Seminars, and Workshops

212,000 8,360 0 8,360

Total 700,000 700,000 628,827 71,173 a Cancelled on 8 July 2014.

v

BASIC DATA Loan Cofin 8229-LAO-IFAD

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Lao People’s Democratic Republic Cofin 8229-LAO-IFAD Northern Region Sustainable Livelihoods through Livestock Development Project Government of the Lao People’s Democratic Republic Ministry of Agriculture and Forestry SDR 2,000,000 ($3,059,933 equivalent) PCR:LAO 1502

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions

7. Disbursements

a. Dates

10 July 2007 31 March 2014 14 December 2006 29 January 2007 10 July 2007 10 July 2007 0 31 March 2014 29 May 2015 0

Initial Disbursement

5 August 2008

Final Disbursement

29 May 2015

Time Interval

81 months

Effective Date

10 July 2007

Original Closing Date

31 March 2014

Time Interval

80 months

vi

b. Amount (SDR)

Category

Original Allocation

Last Revised

Allocation

Amount

Disbursed

Undisbursed

Balancea

01 Village Livelihood Fund 900,000 900,000 1,022,757 (122,757) 02 Marketing and Poultry 600,000 600,000 761,452 (161,452) 03 Unallocated 500,000 500,000 0 500,000

Total 2,000,000 2,000,000 1,784,209 215,791 Total ($ equivalent) 3,000,000 3,083,856 2,751,122 332,734

( ) = negative. a Cancelled on 29 May 2015.

vii

BASIC DATA Grant 0056-LAO

A. Grant Identification 1. Country 2. Grant Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Grant

7. Project Completion Report Number

Lao People’s Democratic Republic 0056-LAO Northern Region Sustainable Livelihoods through Livestock Development Project Government of the Lao People’s Democratic Republic Ministry of Agriculture and Forestry $3,500,000 PCR:LAO 1502

B. Grant Data 1. Appraisal – Date Started – Date Completed 2. Grant Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Grant Agreement 5. Date of Grant Effectiveness – In Grant Agreement – Actual – Number of Extensions 6. Closing Date – In Grant Agreement – Actual – Number of Extensions

28 June 2007 31 March 2014 28 August 2006 29 August 2006 29 September 2006 15 January 2007 15 April 2007 28 June 2007 1 31 December 2012 17 May 2013 0

7. Disbursements

a. Dates

Initial Disbursement

19 February 2009

Final Disbursement

17 May 2013

Time Interval

52 months

Effective Date

28 June 2007

Original Closing Date

31 December 2012

Time Interval

42 months

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b. Amount ($)

Category Original Allocation

Last Revised Allocation

Amount Disbursed

Undisbursed Balance

a

3101 Consulting Services (Remuneration, Per Diem, Travel Expenses) 2,145,000

2,312,604

2,275,953

36,651

3401 Research & Development (Communication, Report Preparation, Production)

19

19

9.59

9.41

3801 Agency Training 409,980

322,376

316,037

6,339

4801 Others 875,000

795,000

775,081

19,919

4901 Contingency

70,001

70,001

0

70,001

Total 3,500,000

3,500,000

3,367,081

132,919

a Cancelled on 17 May 2013.

C. Project Data

1. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs

Borrower Financed 1.10 1.75 Beneficiary Financed 0.80 0.48 ADB Financed 10.00 10.18 Other External Financing:

- SDC 3.50 2.75

- IFAD 3.00 3.37

Total 18.40 18.53

IDC Costs Borrower Financed 0 0 ADB Financed 0 0 Other External Financing 0 0

Total 0 0

ADB = Asian Development Bank, IDC = interest during construction, IFAD = International Fund for Agricultural Development, SDC = Swiss Agency for Development and Cooperation.

2. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual

A. Base Cost

1. Enhance Village Livestock System 11.80* 9.34 2. Capacity Building for Community Driven

Development 3.40 3.90

3. Implementation Management 0.50 5.05 4. Unallocated 0.80 0

Subtotal (A) 16.50 18.29

ix

B. Contingency 1.50 C. Financing Charges During Implementation 0.40 0.24

Total (A+B+C) 18.40 18.53

* adjusted for arithmetical errors in the report and recommendation of the president

3. Project Schedule

Item Appraisal Estimate Actual

Date of Contract with Implementation Consultants Q2 2008 29 October 2008 Completion of Engagement Q4 2012 31 March 2014 Date of Contract with 18 District Lao Women’s Union Q4 2006 19 December 2008 Completion of Engagement Q4 2011 31 March 2014 Date of Contract with National Consultant for VLF Capacity Building

27 September 2011

Completion of Engagement 31 December 2013 Date of Contract with Regional Office Advisor 1 April 2010 Completion of Engagement 31 March 2014 Date of Contract with National Project Management Specialist

Q2 2008 4 May 2010

Completion of Engagement Q4 2012 31 December 2012 Date of Award of Civil Works Contract Office Renovation Q4 2006 7 January 2009 Office New Construction Q4 2006 10 February 2009 Accommodation for Regional Office Training Center 5 June 2009 Vaccine Storage 25 March 2011 Village Infrastructure Q4 2006 30 October 2009 Completion of Contracts Q4 2008 31 December 2012 Equipment and Supplies Q4 2006 30 October 2013 Completion of Contracts Q4 2008 30 October 2013 Other Milestones Extension of Loan Closing Date 31 March 2014

4. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives Implementation Progress

From 28 August 2006 to 31 December 2006 Satisfactory Satisfactory From 1 January 2007 to 31 December 2007 Satisfactory Satisfactory From 1 January 2008 to 31 December 2008 Satisfactory Satisfactory From 1 January 2009 to 31 December 2009 Satisfactory Satisfactory From 1 January 2010 to 31 December 2010 Satisfactory Satisfactory From 1 January 2011 to 31 December 2011 Satisfactory Satisfactory From 1 January 2012 to 31 December 2012 Satisfactory Satisfactory From 1 January 2013 to 31 December 2013 Satisfactory Satisfactory From 1 January 2014 to 31 March 2014 Satisfactory Satisfactory

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-

Days

Specialization of Members

a

Inception 22 March 2007 3 11 a, b, c Loan Review Mission1 9 August 2007 1 2 a

x

Loan Review Mission 2 3 April 2008 2 6 a, c, d Loan Review Mission 3 5 November 2008 1 3 a Loan Review Mission 4 15 December 2008 1 4 a Loan Review Mission 5 14 January 2009 3 6 a, c, f Special Project Administration Mission 25 May 2009 4 7 a, c, e, f Loan Review Mission 6 7 December 2009 5 4 c, e, f, g Loan Review Mission 7 7 May 2010 2 4 c, f, h, i Mid-term Review Mission 6 November 2010 5 13 e, f, h, i, j, k Loan Review Mission 8 9 May 2011 3 11 c, l Loan Review Mission 9 9 October 2011 4 10 a, c, i, l Social Safeguard Mission 3 February 2012 2 8 a, k, l, m Loan Review Mission 10 12 August 2012 2 8 c, l, n Loan Review Mission 11 26 March 2013 2 9 c, l, n Loan Review Mission 12 23 January 2014 2 8 c, k, l, m, o Project Completion Review 19 May 2014 2 11 c, k, l, p a a = sr. social development specialist, b = procurement specialist, c = associate project analyst, d = financial

specialist, e = project administration unit head, f = project officer, g = sr. portfolio management specialist, h = finance and administration officer, i = sr. project assistant, j = social development specialist, k = gender and development specialist, l = sr. project officer, m = environment specialist, n = procurement officer, o = sr. natural resource and agriculture specialist, p = agriculture economist.

xi

MAP

I. PROJECT DESCRIPTION 1. The Northern Region Sustainable Livelihoods through Livestock Development Project aimed to reduce poverty by improving the sustainability of livelihoods for upland smallholders in the northern part of the Lao People’s Democratic Republic (Lao PDR). The immediate outcome was to raise livestock productivity and profitability. The project covered 18 districts in the provinces of Bokeo, Houaphan, Louang-Namtha, Louangphabang, and Xiangkhoang, and it targeted its interventions to be inclusive of women and disadvantaged upland ethnic groups. Following a reformulation after the project’s midterm review (MTR) in November 2010, project components included (i) improvement of on-farm livestock production technologies, (ii) development of market efficiency and livestock enterprises, (iii) strengthening of participatory extension networks, (iv) effective community-driven development (CDD), and (v) strengthening of project implementation management. 1 Appendix 1 presents the design and monitoring framework (DMF) after it was significantly revised in November 2010 to provide more specific targets than those stated at project approval. 2 2. The project was approved by the Asian Development Bank (ADB) in September 2006, became effective in June 2007, and closed in March 2014, following a 15-month extension of the closing date. Project funding was provided by (i) ADB Loan 2259-LAO, for $9.3 million equivalent from the Asian Development Fund; (ii) ADB Grant 0055-LAO, for $0.7 million, also from the Asian Development Fund; (iii) a grant of $3.5 million from the Swiss Agency for Development and Cooperation (SDC), which financed consultants, contractual services, and training; (iv) a loan of $3.0 million from the International Fund for Agricultural Development (IFAD), which was targeted initially at the project’s marketing, poultry, and revolving fund activities; and (v) a grant of $0.46 million from the Japan Fund for Poverty Reduction (JFPR) for capacity building technical assistance.3

II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 3. Relevance to country needs and strategies. Livestock are a major component of agricultural systems in the Lao PDR, contributing more than one-third of value added in the agriculture sector. Livestock are particularly important in the northern provinces, where the terrain is mountainous and food crop agriculture is based on unsustainable shifting cultivation. The project area is populated mainly by ethnic groups who tend to be relatively poor and isolated from mainstream development because of their language and culture. In the project’s target districts, 60% of the households were poor and food insecure at the time of the project design. Technical options for more intensive food crop production were limited, but there was potential for more intensive, commercially oriented livestock, which would raise incomes, reduce poverty, and improve the sustainability of upland farming. The project concept was particularly relevant to the needs of poor ethnic women because they play a major role in the management

1 The project’s approved components comprised (i) enhancement of productivity of livestock systems, (ii) capacity

building for CDD, and (iii) support for implementation management. 2 The original DMF did not provide baseline data or clearly define performance targets. ADB. 2006. Report and

Recommendation of the President to the Board of Directors: Proposed Loan and Asian Development Fund Grant to the Lao People’s Democratic Republic for the Northern Region Sustainable Livelihoods through Livestock Development Project. Manila.

3 ADB. 2007. Proposed Grant Assistance to the Lao People’s Democratic Republic for Enhancing Capacity of Local

Government Agencies and Lao Women’s Union for Sustainable Poverty Reduction in Northern Lao People’s Democratic Republic. Manila.

2

of small livestock (pigs and poultry). Thus, the project concept was highly relevant to the country’s development potential and needs. 4. The project was also relevant to prevailing ADB and government strategies. Poverty reduction was the overarching goal of ADB’s Country Strategy and Program (CSP) for the Lao PDR.4 The project was consistent with the CSP pillars of pro-poor, sustainable growth, and inclusive social development, and with the priority given to agriculture in the CSP. In turn, the CSP was consistent with the government’s Sixth Five-Year National Socio-Economic Development Plan, in which commercial agriculture was a priority.5 By focusing on the northern provinces, from which the Lao PDR exports livestock to Viet Nam and the People’s Republic of China, the project fit well with ongoing ADB-financed regional technical assistance (TA) projects for transboundary animal disease control and trade facilitation in the Greater Mekong Subregion.6 5. Relevance of design and formulation. The project’s design suffered from several shortcomings. It mixed intensified, commercially oriented livestock production with village infrastructure, targeted poverty reduction, and the establishment of a new microfinance provider. The CDD approach was laudable, but the design underestimated the time needed to build up full understanding of CDD among all stakeholders. The design did not recognize the complications of creating a microfinance facility—ultimately known as the village livelihood fund (VLF)—which was added to the project preparatory TA and the project’s design without a clear implementation plan, budget, or consultant support.7The market and enterprise development component did not adequately reflect existing market conditions in the project area. As a result, the component never materialized after it became apparent in late 2009 that existing marketing channels and trade practices were sufficient to handle the limited incremental livestock supply expected from the project. The project’s initial DMF did not provide essential baseline data or define clear, realistic performance targets and indicators. Although the importance of strong monitoring and evaluation (M&E) was noted in the RRP, the project’s M&E system was not well designed at appraisal.8 Ensuing weaknesses in the M&E database complicated routine project M&E. A program for literacy and numeracy training of ethnic groups was never implemented because it was poorly designed and underbudgeted. The design and budget initially did not provide any national consultants to support project administration in the main regional office and the provincial offices, assuming incorrectly that these would be provided by the government. Capacity weaknesses in the provincial agriculture and forestry offices (PAFOs) and the district agriculture and forestry offices (DAFOs) were a problem throughout the project’s implementation. 6. On the positive side, the project’s approach to smallholder livestock extension and smallholder development was technically sound, reflecting the solid experience of the project preparatory TA implementing organization, and a large knowledge base from external support and research on Lao PDR livestock systems. The project design reflected the consultants’ strong technical expertise in livestock. As the project was subsequently processed by ADB, 4 ADB. 2006. Country Strategy and Program: Lao People’s Democratic Republic, 2007-2011. Manila

5 Government of Lao PDR. 2006. Sixth Five-Year National Socio-Economic Development Plan. Vientiane

6 ADB. 2004. Technical Assistance to Cambodia, People’s Republic of China, Lao People’s Democratic Republic,

Thailand, and Viet Nam for Transboundary Animal Disease Control in the Greater Mekong Subregion. Manila. (TA6192-REG).

7 ADB. 2003. Technical Assistance to the Lao People’s Democratic Republic for Preparing the Participatory Livestock

Development Project. Manila. (TA 4287-LAO). The TA was implemented by the International Center for Agriculture. 8 For example, the RRP promised a baseline survey that would use IFAD’s Results and Impact Management System

(RIMS) surveys, which focus on changes in just two broad development indicators: (i) household assets, and (ii) child malnutrition. Changes in either could not be attributed to the project.

3

gender and social goals became more prominent. The project preparatory TA provided no detail on the design of its proposed microfinance facility and village infrastructure support. The draft DMF in the project preparatory TA focused on relevant livestock performance targets, but was short of baseline data and well-defined performance indicators. The draft terms of reference for project consultants focused almost exclusively on strengthening livestock extension, but made little provision for community development and social dimensions, and none whatsoever for the microfinance component. Hence, while the project preparatory TA reflected strong sector expertise and sound understanding of the project area; it contributed to several of the shortcomings of the ensuing project. 7. ADB recognized and addressed the inexperience of provincial and district agencies in participatory extension in advance. In parallel with the project preparatory TA, ADB provided another technical assistance (TA) to build capacity of the national, provincial, and district extension officers who were likely to be involved in the project, with the goal of facilitating a fast start-up. The TA was implemented by the International Center for Agriculture (CIAT). 9 It succeeded in training a cadre of extension trainers, but the subsequent slow start-up of the project (para. 18) led to a 1-year halt in activities and funding after completion of the TA in December 2007, causing an interruption in the intended smooth transition from the TA to the project. Moreover, consistent with the terms of reference, CIAT’s approach was technical, gave little attention to social and participatory dimensions, and focused on larger livestock (cattle and pigs) with little attention to goats and poultry. Hence, the TA benefited predominantly wealthier families, with limited participation of poor households, women, and ethnic groups. 8. The project design and terms of reference for consultants lacked specificity on how the VLF component was to be implemented, but ADB prepared a separate TA (footnote 3) to build capacity for CDD, ethnic group outreach, and microfinance management in the Lao Women’s Union, which was to be contracted to manage the VLF. The TA trained provincial and district personnel in participatory approaches to upland livelihoods development, and in project implementation procedures, financial management, and procurement. At completion, the TA was evaluated as successful overall, but it was noted that the implementation period of 4 years was too short to ensure that the trainees were fully able to apply their skills to support villages initiate project activities. B. Project Outputs 9. At completion, the project covered 324 villages, as compared to 408 as expected at appraisal, which reflects a reduction in scope that was agreed after the project’s MTR. The following discussion (paras. 10–14) compares project outputs at the time of completion (September 2013) with the targets set in the revised DMF.10 The DMF data are from the project’s M&E system (Appendix 1). Taking the DMF data at face value, and based on a weighted average of the DMF’s performance indicators, the executing agency’s PCR estimated the project’s overall physical progress at 106% at completion. However, the M&E data are of inconsistent quality and must be viewed with caution.11 Appendixes 1 and 2 provide details.

9 ADB. 2003. Technical Assistance to the Lao People’s Democratic Republic for Capacity Building for Smallholder

Livestock Systems. Manila. (TA 4406-LAO). 10

There was no major change in the activities of the project, but the outcomes and outputs of the revised DMF are more comprehensive and specific than those in the original RRP. However, in most cases there continued to be a lack of baseline data. The revised DMF was accompanied by a revision of the DMF’s output groupings as compared to the RRP. The revised groupings are followed in this PCR.

11 In contrast, the data on VLF operations are considered of better quality because the information was easier to collect and was compiled consistently with standardized microfinance software.

4

1. Improvement of Livestock Production Technology

10. As reported in the M&E database, the project exceeded its targets for farmer adoption of forage technology, improved animal housing, and the cultivation of forage crops and cassava. The project established 71 out of 72 planned demonstration units. According to the database, 6,000 households—more than half of all livestock production group (LPG) members (para. 12)—fully applied an improved livestock management system. Targets for vaccinating livestock were all met or exceeded. However, the executing agency’s PCR questions the accuracy and sustainability of the achievements recorded in the M&E system (Appendix 2).

2. Development of Market Efficiency and Livestock Enterprises 11. The project met all DMF targets for improving household knowledge about livestock markets, access to market information, and livestock trading. This knowledge was conveyed in group training and study tours. However, the project’s original subcomponent for market and enterprise development was more ambitious, but was never implemented. As designed, this subcomponent was to have added a major commercialization objective to the project by (i) promoting input supply businesses, including breeders; (ii) supporting private livestock trading farms, the upgrading of market centers, and measures to facilitate export growth; (iii) developing contract supply arrangements for smallholders; and (iv) supporting group marketing to improve farm gate returns for livestock.12 As noted in para. 5, the timing proved premature.

3. Strengthening of Participatory Extension Networks 12. The project created about 1,600 LPGs comprising 13,071 households and included both husband and wife in almost all cases. Reflecting household preferences, more than two-thirds of the LPGs were devoted to cattle and pigs; only 13% were devoted to poultry. This distribution is strongly correlated with the market value of the livestock. The rationale for including smaller livestock—particularly poultry—in the project’s scope was that small animals would be relatively easy for the poor to adopt. Overall, the project generally met its numeric targets for the participation of women and upland ethnic groups, but fell short of its target to attract the poorest households to join the LPGs, since these households are less able to bear the risk of intensified livestock and often have less time available for group activities. The project met its target of recruiting women into the livestock extension service, but a general problem was the difficulty of recruiting ethnic people who had both the required agricultural training and language skills. Gender impacts of the project are discussed in Appendix 3.

4. Effective Community-Driven Development 13. The DMF’s main CDD indicators include VLF lending and village infrastructure. The VLF provided more than 9,500 loans to households (159% of the target), 98% of which were for livestock investment. Of the livestock loans, 57% were used for cattle and 37% for pigs, and only 3% were used for poultry. By the program’s definition, the default rate was extremely low (less than 1%), but concern about rising arrears emerged toward the end of the project. Access to loans by women, ethnic groups, and poor households exceeded all targets. The village infrastructure development fund (VIDF) financed 248 small infrastructure schemes, which was lower than the target of 300 schemes due to cost escalation during the project’s implementation.

12

The subcomponent was to have been financed entirely by the IFAD loan. Underutilized IFAD funds for this and the poultry subcomponent were ultimately transferred to the village infrastructure development fund (VIDF) and VLF.

5

Of the VIDF investments, 52% were village meeting halls, with the remainder comprising mainly water supply, ponds, bridges, access roads, and irrigation improvements. In general, the civil works used suitable designs, construction quality was satisfactory, and maintenance is within the capacity of the villages. Appendix 4 provides a synopsis of the major project activities.

5. Strengthening of Project Implementation Management 14. The purpose of this component was to ensure efficient project implementation by supporting the project’s management structure at national and provincial levels within existing government institutions. The indicators in the DMF relate to the regularity of steering and coordination committee meetings, and the timeliness of submitting work plans, progress reports, and audits, for which almost all targets were achieved. The DMF, however, could not capture more meaningful indicators of capacity and performance. Regular committee meetings are laudable, but they do not necessarily reflect qualitative performance or any change in management skills and capacity. As discussed in paras. 34–35, there were some significant issues in regard to project management. C. Project Costs 15. At appraisal, the total project cost was estimated at $18.4 million equivalent. ADB was to finance $10.0 million equivalent (54.5% of the total cost) through its loan and grant; IFAD was to fund $3.0 equivalent (16.3% of the total cost) for the VLF, marketing, and poultry subcomponents; SDC was to finance $3.5 million (19.0% of the total cost) for consultants, contract services of the District Lao Women’s Union (DLWU), and CDD field specialists; the government was to contribute $1.1 million equivalent (5.8% of the total cost); and the project beneficiaries were to contribute $0.8 million equivalent in kind (4.4% of the total cost). 16. At completion, the actual project cost was $18.53 million. ADB financed $10.18 million, IFAD financed $2.75 million, and SDC financed $3.37 million. The government financed $1.1 million by providing office space, staff salaries, and tax exemptions for imported materials.13 The addition of five staff members to the project’s regional office (the main project implementation unit) in September 2011 to monitor the VLF activity increased the government contribution to $1.75 million. It is difficult to value the project beneficiaries’ contributions in terms of time devoted to LPG activities and labor and local materials to construct village infrastructure, but it is likely to be in line with the appraisal estimate. In addition, the beneficiaries contributed savings to the VLF estimated at $0.48 million equivalent. During the life of the project, civil works costs increased by more than 50% as compared to the appraisal estimate. This was a result of the MTR’s decision to expand the scope of the VIDF program from 165 to 248 schemes due to the high community demand, and escalation of material and construction costs (Appendix 4). D. Disbursements 17. With delayed project start-up disbursements by all cofinanciers were initially slow, even after the project’s physical progress began to improve. For 2009, an annual disbursement of only $0.9 million was achieved against the projection of $3.0 million. However, as the project gained momentum in 2010, particularly through accelerated implementation of the VLF and VIDF subcomponents, total annual disbursement rose to $3.1 million and was satisfactory thereafter. Disbursement of IFAD funds were often delayed because of (i) slow progress in

13

Due to depreciation of the Special Drawing Right during project implementation, the dollar-equivalent value of the ADB loan was $9.64 million at the time of closing

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implementing the poultry and marketing activities; (ii) a slow two-step procedure by which withdrawal applications were initially processed by ADB, then sent to IFAD headquarters in Rome for approval and replenishment; and (iii) the low ceiling of IFAD’s imprest account and subaccounts, which necessitated frequent withdrawal applications. 14 Disbursement of IFAD funds improved after May 2011, when IFAD agreed to broaden eligible expenditures to include VLF lending for all animal types, capacity building activities, and the VIDF. There were no issues with SDC disbursement since these funds were transferred to ADB in periodic tranches. The project’s quarterly disbursements are presented in Appendix 5. E. Project Schedule 18. The original project schedule assumed unrealistically that the loan would be effective within 2 months, with consultants and the project office in place by the end of 2006, and field activities ready to begin in early 2007. In fact, loan effectiveness was delayed until June 2007,15 the contract for the main team of consultants was not signed until November 2008,16 and the consultants did not mobilize until January 2009, 2 years later than envisioned at appraisal. Primarily as a result of this delay, the project’s actual field implementation was ultimately about 1 year shorter than the 6 years originally expected, even with a 15-month extension. 19. In 2008, the first year after loan effectiveness, the regional office was understaffed and had limited consultant support. Project activities were largely confined to renovating the regional office, PAFOs and DAFOs, and procuring vehicles and equipment. Activity at the village level was limited to brief DAFO visits for village selection, community consultations, and initial formation and training of LPGs. Contracts for the DLWUs were not finalized until January 2009, which delayed the start-up of CDD activities and the initial training in microfinance under the Enhancing Capacity of Local Government Agencies and Lao Women’s Union for Sustainable Poverty Reduction in Northern Lao PDR Project (footnote 3). 20. The project M&E system was set up with considerable delay. An international M&E consultant worked briefly in late 2009 before resigning for personal reasons. There was no further progress until new M&E consultants were mobilized in early 2010. The first Results and Impact Monitoring System (RIMS) survey was completed in October 2010, far too late to provide a meaningful baseline, even if it had collected relevant information (footnote 8). At the time of the MTR in November 2010 (more than 4 years after approval), there was no reliable information on the project’s physical progress. The regional office made a strong effort to train DAFO staff in monitoring and quarterly reporting, but given the complexity of the project’s economic and social objectives, data collection and data entry processes were complicated, resulting in a database of numerous interrelated files, few of which were ever analyzed beyond simple data tabulations. Many of these files are unintelligible now that the M&E consultants have completed their work.

14

From 2009 to 2011, total IFAD disbursement amounted to only $0.28 million, including zero disbursement in 2009 15

The loan effectiveness conditions were fairly standard and required no significant policy or institutional action. Rather, the delay was due to the government’s delay in submitting proper documentation to ADB to confirm its fulfillment of effectiveness conditions for the IFAD loan.

16 The delay in recruitment was the cumulative result of several factors: (i) the 1-year delay by the executing agency in issuing invitations to consultants; (ii) ADB’s request, 2 months after the government’s ranking of proposals was submitted to ADB, that the proposals be reevaluated; and (iii) a subsequent 5-month delay in the reevaluation and approval of the proposals. The weak capacity of the newly established regional office underlay the problems. The regional office had difficulty recruiting capable support staff because of its location in Louangphabang and because the Ministry of Finance had not allowed it to offer competitive salary scales. ADB had provided for advance action on recruitment, but the regional office was not able to utilize this.

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21. Prior to the MTR in November 2010, senior ADB managers were concerned about slow progress of the project. It was clear that a loan extension would be needed if the project was to achieve its main outputs, but ADB was unwilling to consider this until the executing agency could demonstrate that problems had been resolved. Despite the difficulties, there was commitment by all partners to get the project on track. A major phased reformulation unfolded during November 2010–May 2012, culminating in (i) a substantially revised project framework with clearer and more realistic targets, (ii) a revised project scope that reduced the number of target villages from 408 to 324, (iii) a more practical design of the VLF, and (iv) a revised implementation and disbursement plan. In June 2012, ADB approved a 15-month extension of the project completion date from December 2012 to March 2014. 22. From the MTR through completion, the project stayed on track. The formation and training of LPGs was completed, and VIDF, farm demonstration, and village learning activities were fully implemented. VLF lending commenced in 2010 and accelerated rapidly. All field activities were substantially complete by the end of 2013. Overall, the project’s effective implementation period was 5 years, rather than 6 years as planned at appraisal. All major components were implemented within this time frame, but with the reduced scope as agreed following the MTR. F. Implementation Arrangements 23. The Ministry of Agriculture and Forestry (MAF) was the project’s executing agency and the MAF’s Department of Livestock and Fisheries (DLF) was the implementing agency. The regional office in Louangphabang provided day-to-day project management and supervision. 24. The DLWUs were primarily responsible for the initial CDD activities, including community mobilization and formation of the LPGs, and for the implementation of the VLF. The main role of the DAFOs was to provide the extension and demonstration services to the LPGs. While these tasks were interdependent and needed to be coordinated, the DAFOs and DLWUs worked under separate arrangements with different incentive structures and reporting lines, resulting in poor coordination at times. This disrupted the implementation of the project’s five-step approach to CDD, which envisioned the following coordinated, well sequenced inputs: (i) building rapport with villagers, (ii) forming LPGs, (iii) planning and facilitating group activities, (iv) facilitating village learning, and (v) linking farmers and villages to resources (Appendix 4). 25. The PAFOs mainly played a coordinating role between the regional office and the districts. They had little substantive involvement in project management, which was centralized in the regional office. PAFO capacity was weakened when the regional office shortened the contracts of the provincial extension consultants (para. 29). The regional office’s location in Louangphabang had disadvantages compared to being located in Vientiane: (i) it was much harder to recruit qualified staff; (ii) coordination with the Vientiane-based MAF, the Ministry of Finance, and other concerned central government agencies was more difficult; and (iii) travel time to the districts outside of Louangphabang province was longer.17

G. Conditions and Covenants 26. Government compliance with loan covenants was less than satisfactory (Appendix 7).

17

Given the Lao PDR’s limited interprovincial air network, travel from Louangphabang to the provinces was always by road, often requiring a full day’s journey just to reach a provincial capital. In contrast, most capitals of the participating provinces are serviced by direct flights of 1 hour or less from Vientiane.

8

The major issue was the delay in establishing a performance baseline and M&E system (para. 20). The baseline survey was undertaken very late in October 2010 and did not meet the requirements of the project. Other than this, less than full compliance with loan covenants resulted in no significant impact on project performance. Financial and anticorruption covenants were satisfactorily met except for the submission of the 2006–2007 financial statement, which was waived by ADB due to the small amount of project expenditure. The DLF was to assign staff to its coordination office in Vientiane, which was to carry out financial management in consultation with the regional office. Unfortunately, the DLF was only able to assign a junior officer who had little experience, but the regional office handled financial management adequately. An initial environmental examination was completed for the project, and an environmental management plan (EMP) was prepared. Local environmental offices monitored the construction of civil works. However, monitoring records were not systematically kept, and quarterly progress reports did not discuss the EMP. ADB review missions, including a safeguards review mission in March 2012, did not observe any significant environmental impacts of the project. Finally, the project could not directly provide literacy and numeracy training to ethnic group communities since the amount budgeted was inadequate and this type of training fell outside the MAF’s mandate and competency. However, all other aspects of the project’s ethnic groups development plan (EGDP) were implemented satisfactorily (Appendix 8). 27. The project had a gender equity theme and included a gender action plan (GAP) that set targets to ensure equitable involvement of women in (i) all village-based training (especially for smaller livestock), (ii) VLF and VIDF operations, and (iii) access to VLF loans (Appendix 3). In addition, the GAP set targets for women’s representation in the DAFOs, gender training of PAFO/DAFO staff, and gender disaggregation in the M&E system. Overall, the implementation of the GAP was satisfactory and had positive impacts on the lives of women in the project villages. Women comprised 50% of all LPG members, jointly participated with their husbands in 97% of all VLF lending, and women’s participation in the LPGs had a significant impact on their knowledge and self-confidence in livestock management, which in turn energized their roles in household and village decision making. 28. A few GAP targets were hard to fully achieve or proved less relevant. Although effort was made to attract women to join the extension service, it was difficult to find enough women with adequate technical knowledge of agriculture. At completion, 35% of the DAFO extension workers were woman, which met the revised target and constituted an increase over pre-project levels, but was less than the appraisal target of 50%. In addition, the DMF set a target for reducing the amount of time women spent daily in collecting and preparing pig feed. This was based on the view that the drudgery of cut-and-carry fodder collection would be reduced by the planting of forages and feed crops like cassava. Although the M&E system indicates that women’s time input decreased overall, the time devoted to animal care by both women and men actually rose in those households that engage in commercialized livestock rearing for a major source of income. In retrospect, a more relevant indicator of women’s time use would have measured income earned per hour, rather than time input alone. H. Consultant Recruitment and Procurement 29. Other than the regional office advisor (international) and project management specialist (national), who were recruited as individual consultants, the project was designed to provide 409 person-months of national consultants and 58 person-months of international consultants, mainly for technical support in extension-related areas (Appendix 9). The consultants were recruited under four contracts. There were numerous changes in the tenure of consultants that

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disrupted the flow of work. It took time for the regional office to appreciate the importance of a strong M&E system and the need to build capacity in order to establish the VLF. An international regional office advisor was recruited using single-source selection at the start of the project, but he resigned halfway through his assignment for personal reasons, and was replaced by another international adviser and an additional national project management specialist. The project design incorrectly assumed that the regional office would have internal M&E capacity. It had none, and there was no consultant support for M&E until mid-2009. The original international M&E consultant resigned after 1 month of input. His replacement provided only 4.5 months of intermittent input from June 2009 to March 2014, which did not adequately support to the project. Fortunately, a competent national M&E specialist also started in June 2009, remained with the project until its closure in late 2013, and provided the sustained support that was needed. National extension support specialists were initially located in the five project provinces, but the regional office viewed them as unnecessary, so their contracts were shortened and they were replaced by government staff. In fact, the already limited role and effectiveness of the PAFOs was probably weakened since the project had added to the provincial workload but had not added commensurate capacity. 30. Under the Enhancing Capacity of Local Government Agencies and Lao Women’s Union for Sustainable Poverty Reduction in Northern Lao PDR (footnote 3), an international firm and a national firm were engaged separately in May 2008, 7 months after the grant became effective. However, the international firm’s performance was poor and it effectively withdrew from the project in March 2010, although it did not formally inform the regional office until June 2011.18 After a delay of 15 months, the capacity building support for the VLF resumed under the leadership of the national firm. The hiatus led to a delay in training DLWU staff, installing software for microfinance management, and routine VLF reporting by the districts. Ultimately, the firm’s inputs were extended by 49 person-months with loan and grant funds after the regional office recognized the importance of providing capacity building for DLWU and support for financial management in the PAFOs and DAFOs. 31. Vehicles, computers, and office equipment were procured under international shopping using ADB’s Procurement Guidelines, and were distributed to the project offices. Other small equipment was procured using local shopping (Appendix 10). For the construction or renovation of PAFO and DAFO offices, the training facility, and the project’s vaccine storage room, 21 contract packages were awarded for civil works using national shopping or national competitive bidding, following government procedures acceptable to ADB (Appendix 11). For village infrastructure, 242 contracts were awarded, all under national shopping. No major problems were experienced in contract awards for civil works. The package arrangements were appropriate given the nature of the works. However, due to escalating construction costs and changes in the infrastructure options available to the villages, the project was able to construct or renovate only 248 schemes out of the 300 planned at the time of the MTR. I. Performance of Consultants, Contractors, and Suppliers 32. With the exception of the international firm initially selected to support establishment of the VLF (para. 30), the consultants’ performance is rated satisfactory overall. The consultants built effective working relationships with counterpart staff and provided adequate training to the regional office, the PAFOs and DAFOs, and the DLWUs. However, the second international regional office advisor and national project management specialist were not utilized effectively

18

The proposed microfinance system was viewed as unsuitable to the local context, especially the approach, bylaws, and guidelines, which reflected a lack of experience in the Lao PDR.

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and provided inadequate support to the preparation of work plans, quarterly reports, and reporting on safeguard compliance. The international M&E specialist provided intermittent inputs that were inadequate to rectify the shortcomings of the M&E system. DLWU staff performed well in implementing and monitoring the VLF program once the training was completed, microfinance management software was installed, and experience was gained during the initial VLF lending period. The DLWUs played an important role in facilitating the active participation of women and ethnic groups in project activities (Appendixes 3 and 8). Overall, DLWU performance is rated highly satisfactory. 33. Supplier performance is rated satisfactory and goods were delivered according to agreed schedules. The construction and/or renovation of PAFO and DAFO offices and the construction of village halls, access roads, water supply systems, and other infrastructure were of a uniform and generally satisfactory standard, and there were no major delays in completion. J. Performance of the Borrower and the Executing Agency 34. The performance of the executing agency is rated satisfactory overall. Weaknesses in the regional office and PAFOs in project administration were not addressed at appraisal. As a result, there were start-up issues because government staff lacked experience with ADB standards for procurement, accounting, and project administration. ADB addressed this by providing training through a national consultant in September 2011, after which efficiency improved. The project design also did not recognize that the regional office’s location in Louangphabang would complicate the secondment and recruitment of staff (para. 25). 35. ADB review missions noted that the project’s leadership, while strongly committed to the goal of improving livestock productivity and farm incomes, did not initially appreciate the challenges of achieving the related goals of CDD, and of the management tasks required. It took time for the regional office to appreciate the important roles that were to be played by the consultants working on the VLF and M&E. Overall management of the project was concentrated in the regional office, with a limited role played by the provincial offices. As the project staff gained experience project disbursement and overall performance improved. 36. Almost all national, provincial, and district steering committee and coordination meetings were held as planned. The executing agency submitted a comprehensive PCR in May 2014, which made frank observations about the performance and sustainability of all project components. This document was a valuable resource for preparing the ADB PCR. K. Performance of the Asian Development Bank 37. From 2007 to 2014, ADB fielded 16 review missions, including nine from March 2007 to March 2010, which reflected a high level of assistance to a slow-moving project. ADB provided consultant support during 2008 when the regional office’s weak capacity in accounting and procurement became apparent. In late 2009, ADB’s headquarters-based project officer retired and was not immediately replaced. The potential loss of continuity was overcome by the hands-on involvement of headquarters-based project administration unit and close attention by staff of the Lao PDR Resident Mission. Delegation of project administration to the Lao PDR resident mission in January 2010 allowed closer monitoring and backstopping. It was clear by mid-2010 that a loan extension would be needed if the project was to achieve its goals, but ADB held off on agreeing to this until progress had accelerated. By mid-2011, good progress was being made and the regional office was advised by ADB to complete a thorough revision of the implementation plan, with a view to the 15-month extension. The extension was approved in

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June 2012, and the resident mission monitored the project closely thereafter. Resident mission staff worked closely with the local offices of IFAD and SDC to expedite the project’s implementation. Overall, ADB’s performance is rated satisfactory.

III. EVALUATION OF PERFORMANCE A. Relevance 38. The project was highly relevant to the developmental potential of the Lao PDR and to the needs of the country’s relatively poor ethnic groups and women. It was fully consistent with government and ADB strategies and priorities. The project introduced appropriate technologies with a socially sensitive CDD approach. However, the design was complex and underestimated the resources (time, funding, and consultants) needed to implement all components. The initial capacity building of extension workers was not well integrated with the main project. Similarly, having two separate teams of consultants and separate funding sources to manage the extension activities and the establishment of the VLF contributed to coordination difficulties between the DAFOs and DLWUs. Poultry, marketing and trade, and literacy training components were inadequately designed and never fully implemented. The project’s initial DMF and weak M&E system were incapable of providing the necessary information for monitoring progress and outcomes. Overall, the project is rated relevant, but at the low end due to its design shortcomings. B. Effectiveness in Achieving Outcome 39. Household income from livestock rose by almost 500%, from $87 in 2008 to $425 in 2013 (Appendix 1). While livestock mortality declined in general, the target level for poultry was not reached. The percentage of households owning cattle and poultry rose to well above their target levels. Although the targets for households owning pigs and goats were not reached, the growth in numbers was still impressive. For the 18 districts overall, the goal of more than doubling the large ruminant population was not achieved, but this target was overambitious and depended upon developments outside the project villages. Overall, if the M&E data are taken at face value, the project would be considered effective. 40. However, the executing agency’s PCR raised significant concerns about the quality and consistency of the M&E data (para. 9 and Appendix 2). Besides calling into question the actual levels of change, the executing agency’s PCR raised doubt about the sustainability of these changes. These concerns parallel the observations of ADB’s PCR mission. While the household income increase is possible given livestock prices during 2010–2013, it cannot be substantiated in the M&E files. The project achieved greater awareness of the benefits of vaccination and greater use of vaccines, but their use may not outlast the free provision of vaccination services provided by the project, except possibly for cattle (para. 42). It is likely that the M&E system has significantly overestimated the number of households that have adopted improved animal housing and fully applied improved livestock management systems. The poor quality of the M&E data and gaps in the monitoring system, for example, its failure to measure the real impacts of the improved technologies on animal weight gain, offtake, and selling prices, and track the household-level use and productivity impacts of VLF loans. This makes it impossible to confirm the links between project outputs and outcomes. Nonetheless, the PCR mission found that some farms are doing very well. The project has had important impacts in terms of villager knowledge and awareness about better livestock management. However, on the basis of the

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limited adoption observed by the PCR mission and the difficulty in corroborating the results in the DMF, the project is rated less than effective. C. Efficiency in Achieving Outcome and Outputs 41. The economic internal rate of return for the project as a whole is estimated at 15.7% (Appendix 12), slightly below the estimate of 17.2% at appraisal. Smallholder investments in livestock are expected to yield attractive financial internal rates of return ranging from 14% to 60% over a 20-year period, with higher returns for households that adopt the project’s recommended practices. Financial and economic benefits are most sensitive to reductions in the price of cattle and pigs. The village infrastructure investments use appropriate construction methods, and operation and maintenance should be within the capacity of the communities to manage. There will be few recurrent costs for the government, other than follow-up monitoring and technical guidance by the DAFOs. The VLF served a useful purpose in giving farmers access to credit in order to expand their livestock operations, but its subsidies and management are unlikely to be unsustainable (para. 42). Overall, the project is rated efficient, but at the lower end due to the issues and delays that arose during implementation. D. Preliminary Assessment of Sustainability 42. The sustainability of the project is rated less than likely. The sustainability of the entities created by the project is uncertain. DAFO activities have wound down, and district staff travel much less frequently to the project villages. The project’s provision of free vaccines has ended, although a smaller program focused on cattle continues with external and local government support. With its present lending terms and cost structure, the VLF is unlikely to sustain operations unless the national and provincial governments agree to provide a continuing subsidy of DLWU’s operational costs. The executing agency’s PCR indicates that the LPGs are likely to disband if they are no longer linked to the project’s extension support and VLF loans. To the extent farmers adopted elements of improved technology only to obtain VLF loans, the prospects for sustainability are further weakened. 43. Given the very strong local and regional demand for meat, especially beef and pork, it is highly likely that the farmers of northern Lao PDR will continue to expand livestock production. The project successfully exposed about 13,000 farm households to the potential advantages of more intensive, commercially oriented livestock practices. It was clear in the PCR mission’s field visits that some of these households have adopted some or all of these practices, and are now expanding their operations vertically as well as horizontally. In this sense, the project impact is likely to be sustainable. The project has also been successful in its outreach to the poor, women, and disadvantaged ethnic groups, and has catalyzed a long-term process for the gradual intensification and commercialization of livestock production. 44. ADB’s safeguard system classified the project as category A for indigenous peoples, B for environment, and C for resettlement. There was no involuntary resettlement as a result of the project’s activities, including the village infrastructure component. Because of the project’s strong focus on ethnic groups and women, social impacts were monitored carefully by ADB review missions. The project generally achieved its goals of ensuring equitable participation of ethnic groups and women, both quantitatively and qualitatively (Appendixes 3 and 8). 45. A formal safeguard review mission was fielded in February 2012, about 5.5 years after original approval. The mission found that the project’s EMP was never reflected in the project’s overall implementation plan (Appendix 7). Hence, there was no active monitoring of

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environmental impacts by project staff at the district and village levels. No provision for consultant support to the EMP was made in the project’s design. However, the final ADB loan review mission found that the District Offices of Natural Resources and Environment were consistently involved in approving small civil works (e.g., village halls and sanitation) and supervision of larger works (e.g., village access roads and bridges), although this involvement was rarely recorded. No major adverse impacts of the project were anticipated, nor were any observed during implementation or by the PCR mission. Such impacts might have included accumulation of animal wastes and potential health impacts from larger livestock numbers. Unfortunately, the lack of active monitoring also means that the project’s likely environmental benefits have not been recorded. These include (i) a reduction in shifting cultivation as land was converted to permanent forage and pasture, and (ii) improved village hygiene through greater confinement of animals and better animal disease control. E. Impact 46. While the overall impact of the project was moderate it did succeed in introducing a highly participatory, inclusive, science-based approach to smallholder livestock improvement.19 It was a complex project with a diverse set of development goals and outcomes and a challenging range of project activities, not all of which could be fully implemented. It succeeded in involving women and disadvantaged ethnic groups. It was not fully successful in attracting the poorest households to join the LPGs, but they participated actively in VLF borrowing. The project created widespread village awareness of the potential for improved livestock technology, especially vaccines. It created a cadre of experienced district staff, who are now capable of participatory approaches to village development. There was rapid uptake of VLF loans to purchase livestock and expand production, and the project brought financial and economic benefits to participating households. Overall, the project created long-term momentum towards a process of modernizing and commercializing smallholder livestock production, and it has provided a foundation for the subsequent focused support in the Northern Smallholder Livestock Commercialization Project.20 47. According to the DMF, the broader impacts associated with the project have largely been realized: poverty and malnutrition have declined while household asset ownership has risen (Appendix 1). Of course, such changes cannot be solely attributed to the project since there have been various sources of growth both within and outside the target villages (e.g., expansion of cash crops, and the growth and economic dynamism of the provincial and district towns). The project had positive social impacts consistent with the goals of its GAP and EGDP (Appendixes 3 and 8). There were no significant adverse environmental or resettlement impacts. Field observations indicate that the project had environmental benefits since some households were able to abandon shifting cultivation, as their incomes came increasingly from commercial livestock production. The project impact is rated less than satisfactory.

19

The project’s expected impact as stated in the RRP was “sustainable livelihoods of upland farmers from livestock development.” In the post-MTR DMF, the impact was “reduce poverty by improving the sustainability of livelihoods for upland smallholders.” Impact indicators included the levels of poverty, malnutrition, household asset ownership, income from livestock, and livestock exports. While the project, through VLF lending and livestock purchases, did contribute to greater asset ownership and livestock income, it is not possible to confirm that the DMF targets were achieved. Poverty appears to have declined in the project area, but the evidence on malnutrition from the RIMS surveys is inconclusive. In any event, changes in poverty and malnutrition could reflect broader socioeconomic trends and seasonal effects that cannot be attributed to the project. The sustainability of project interventions is uncertain (paras. 42–43). Thus, it is fair to conclude that direct project impacts have been positive but moderate.

20 ADB. 2014. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Lao People’s Democratic Republic for the Northern Smallholder Livestock Commercialization Project. Manila

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IV. OVERALL ASSESSMENT AND RECOMMENDATIONS A. Overall Assessment 48. Overall, the project is rated less than successful. Despite its design deficiencies, it was relevant. It was financially and economically viable, and was therefore efficient. However, it was less than effective in achieving its outcome, and is not likely to be sustainable without additional support. The project was overambitious in setting targets for technology adoption that were beyond the capacity of traditional small livestock producers, most of whom are from relatively isolated ethnic groups. The project succeeded, however, in initiating a process of transformation to higher input, commercially oriented livestock management, providing a good starting point for ADB's next phase of support under the Northern Smallholder Livestock Commercialization Project (footnote 20). B. Lessons 49. Several lessons can be drawn from the project experience to improve performance of future ADB assistance to the sector:

(i) The speed with which VLF loans were absorbed shows that there is a strong unmet demand for credit among livestock producers. Access to finance is a constraint to further expansion of livestock production. Increases in loan ceilings and tenure terms are needed to meet the needs of commercial producers. The issue is whether such finance is best provided through commercial channels at market rates or through ad hoc, heavily subsidized arrangements like the VLF.

(ii) While the project design was inclusive of women and ethnic groups (and while it met related targets), the poorest households were harder to reach, despite the attention given to poverty targeting. The poor had less free time to participate in project activities, and were less able to bear the risk of intensified livestock.

(iii) Experience from this project and from other countries at a similar development stage shows that the transition from low-input livestock to commercially oriented production is a lengthy process that is seldom achieved in less than 10 years or by any single project. Sustained donor engagement is important.

(iv) Attitudinal change is a slow process. The limited education of women and their traditional household roles constrained their participation in LPG meetings, which included men and women. These factors also caused women, especially those from ethnic groups, to revert to traditional livestock practices.

(v) Language was a barrier to full participation by the relatively isolated ethnic groups, particularly ethnic women. The project’s provision for numeracy and Lao language training was too small to be effective. More effort is needed to conduct training and prepare extension materials in different ethnic languages.

(vi) Achieving GAP targets relied on suitable training of DAFO and DLWU staff in participatory methods, and clear and realistic targets for women’s participation that were easy for project staff to understand and monitor. In contrast, the objectives of the EGDP were less clear, and little specific training was given to project staff, which limited some outputs of the EGDP.

(vii) A highly centralized management structure is unsuited to projects covering dispersed, remote areas because it limits the flexibility to respond to community demands and needs, and it stifles the initiative and ownership of implementing partners like the DAFOs and PAFOs.

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C. Recommendations

1. Project Related 50. The significant project investment merits continuing attention to project villages by the DAFOs, but at the same time, recommendations must be pragmatic given the DAFOs’ limited resources. DAFO extension workers should visit the project villages as regularly as possible, particularly those that showed good potential for further technology adoption and commercialization. ADB and its partners should build upon the project’s momentum by focusing future assistance on farmers identified as strong performers and who are committed to greater commercial development. 51. With the end of the project, vaccines will be less readily available to villagers. Since the benefits of vaccines are now widely understood by the LPGs, and the costs of vaccination are low, the DAFOs should take the lead in ensuring vaccine availability in their districts through at-cost provision by the DAFOs themselves or by private traders or village leaders who have interest in delivering vaccination and medicines (e.g., for deworming calves). 52. ADB’s support to livestock development will continue under the Northern Smallholder Livestock Commercialization Project (footnote 20), so no further evaluation of the project is warranted at this time. However, the new project should make a scientifically credible effort to measure the adoption and impacts of improved livestock technology, covering vaccination, forage and feed practices, and animal confinement. The new project could, for a carefully selected sample (using household panel data), measure animal health, mortality, weight gain, and selling prices in order to substantiate the linkages between technology adoption and farm income. At completion of the new project, a detailed assessment of the impacts and sustainability of ADB’s overall support for commercial livestock development in Lao PDR should be undertaken.

2. General 53. The design of future ADB projects in the agriculture sector should focus on activities and components directly related to core outcomes. Social outcomes should be fully integrated and adequately financed by the core project, and not dependent upon resources external to the main project’s financing and implementation arrangements. 54. The project’s five-step approach to CDD required a high degree of coordination between the DAFOs and DLWUs (para. 24). This proved difficult to achieve. When multiple implementing agencies are involved in the delivery of interdependent inputs, care is needed to ensure that there is a unified chain of accountability so that the programs fully complement each other. 55. DMF targets (including goals for the participation of women and ethnic groups) and safeguard agreements need to be realistic. Additionally, the activities to achieve them should be adequately resourced and monitored if they are to be pursued diligently by project staff. All important requirements should be clearly set out in the project administration manual.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Targets / Indicators

Achievements/Assessment

Impact Improved Sustainability of Livelihoods of Upland Smallholders in Northern Lao PDR

Poor households in target districts reduced by 12% by 2017 Number of households owned key assets increased by 20% by 2017 Percentage of malnutrition among children under 5 year reduced by 10 %by 2017

Achievements: Poor households in target districts reduced from 39% in 2005 to 25% in 2013. Number of households owning key assets increased from 26% in 2010 to 38% in 2013. Chronic malnutrition among children aged under 5 years reduced from 53% in 2010 to 48% in 2013. Assessment: Poverty level: According to government surveys and statistics, rural poverty has been declining throughout the Lao PDR for the past decade. While the project has certainly contributed to this decline, it would be inadvisable to attribute the entire decline to the project alone Asset ownership: The asset index used in the RIMS surveys is based on a weighted average of indicators of housing quality (size, quality of water supply and sanitation, use of electricity and appliances, ownership of transport), food security, availability of farmland, use of farm equipment, and livestock ownership. The RIMS results show a substantial decline in the percentage of households in the lowest asset ownership groups, but the numbers in the RIMS reports are not strictly comparable to those above. While the project has certainly contributed to this decline, the change cannot be entirely attributed to the project. Moreover, the two RIMS surveys used different randomly selected samples of 30 villages in 2010 and 2013. Changes over time in assets, income, malnutrition and other indicators may simply reflect sampling differences. More conclusive findings would have required a panel survey tracking the same villages and households over time. Malnutrition: Chronic malnutrition (manifested in low height-for-age, or stunting) declined in the RIMS surveys. While the project probably had some impact on this decline, it would be inadvisable to attribute the decline solely to the project. However,

Appendix 1 17

acute malnutrition (manifested in low weight-for-height, or wasting) rose sharply from

7% to 13% in these surveys, which may indicate a nutritional impact of seasonality in food availability. The share of low weight-for-age individuals remained unchanged (28%) from 2010 to 2013.

Outcome Enhanced Village Livestock Management

Average household income from livestock production increased from $87 in 2008 to $400 by 2013 Livestock population for large ruminant increased annually by 10% by 2013 from the 2005 level Average number of pigs owned per household increased from 1.8 in 2005 to 3.7 by 2013 Average number of goats owned per household increased from 0.51 in 2005 to 1.5 by 2013 Average number of poultry owned per household increased from 10.5 in 2005 to 15 by 2013 Number of household raised large ruminant increased by 10% by 2013 from the 2005 level

Achievements (2013): Average household income from livestock production increased from $87 in 2008 to $425 Livestock population for large ruminants increase annually by 82%

1

Average number of pigs owned per household increased to 3.5 heads Average number of goats owned per household increased to 1.3 heads

Average number of poultry owned per household increased to 20.2

Number of household raising large ruminants increased by 16%

1 There are some discrepancies between the numbers reported in the executing agency’s PCR on performance targets, cumulative achievements, and the

corresponding percentages of achievement of targets

18 Appendix 1

Mortality of large ruminants decreased by 10% by 2013 from the 2005 level Mortality of pigs decreased by 10% by 2013 from the 2005 level Mortality of goats decreased by 10% by 2013 from the 2005 level

Mortality of poultry decreased by 20% by 2013 from the 2005 level Women spend less than 1.2 hours per day on feed collection and preparation for pig production

Mortality of large ruminant decreased by 11%

Mortality of pig decreased by 21%

Mortality of goat decreased by 6% Mortality of poultry decreased by 25% Women spend 1.5 hours per day on feed collection and preparation for pig production Assessment: Livestock ownership and income: The VLF data show that a significant number of livestock were purchased with VLF loans and field observations show that livestock sales increased as a result. The project conducted, in conjunction with the RIMS, surveys of 900 randomly selected households in late 2010 and again in late 2013, which provided reasonably reliable information on changes in some key indicators over time, including livestock ownership and incomes. However, the PCR mission was unable to confirm the increase from $87 to $425 with the M&E files provided. At the livestock selling prices reported to the PCR mission, the incremental income ($338 equivalent) is roughly equivalent to two 70-kilogram pigs, 80 0.8-kilogram chickens, or about one-quarter of the value of a mature, fattened cow. Sales of this scale are possible. But it should be noted that the RIMS surveys showed only a small increase in ownership from 2010 to 2013: from 63% to 65% for cattle and from 76% to 78% for pigs. Thus, the RIMS results do not support the M&E data. The project consultants were unable to corroborate the DMF’s reported change in income with the M&E database. Large ruminant numbers: The geographical area covered by the DMF’s target for total large ruminants is not stated, but presumably must refer to the 18 project districts as a whole, not just the project villages. The expected doubling of the large ruminant

Appendix 1 19

population in just 9 years was highly ambitious, even though the project was well over its target of increasing the share of households raising these animals. Livestock mortality: District level data obtained by the PCR mission generally show declining mortality, often remarkably sharp. However, there is great variability across districts in the logical consistency of the data, so the statistics should be interpreted cautiously. Farmer acceptance of vaccines and the sustainability of vaccine use: The government has distributed free or highly subsidized vaccines through the project and other programs that focus mainly on cattle. In the future, project villagers can access vaccines at cost through the DAFOs. Farmers now appreciate the effectiveness of vaccines, but logistical constraints affect their ability to access and use them regularly. Vaccines are cheap per dose per animal. The main constraints are the reliability of cold storage, and the distance to district towns and to herds that are kept in open pastures far from the village. A lack of regular vaccine supply, the continued widespread practice of allowing livestock to move about freely (thus increasing their exposure to diseased animals), and the villagers’ slow awareness of disease epidemics all pose significant risks to the sustainability of vaccine use unless there is regular follow-up by the DAFO extension workers. Willingness of farmers to change traditional livestock practices: The project successfully demonstrated improved livestock management practices. As a result, many villagers have changed from purely traditional practices, although few have yet adopted the entire range of the project’s recommendations (e.g., animal confinement, year-round forage). The new technologies and systems introduced by the project are more labor-intensive than the low-input traditional systems, and therefore reduce the farmer’s time for other income-generating and social activities. It appears that most farmers who were willing to experiment with one or more of the improved practices have tended to revert to the traditional low-input systems, particularly in villages where the project activities were more top-down and less participatory. Ability of livestock markets to absorb greater animal sales: There is a strong, active market for livestock both domestically and in Viet Nam, the People’s Republic of China and Thailand. Provincial policies on livestock trade and cross-border movement vary widely in Lao PDR. Although most trade in livestock is informal and does not cross official border checkpoints, taxes on livestock sales and other restrictive policies could slow the development of formal markets as commercial herds grow.

20 Appendix 1

Willingness of farmers to grow forages: Forage has been widely planted in the project villages, but the executing agency’s PCR suggests that this is usually on a small scale and is not yet for commercial livestock operations, which is consistent with the PCR mission’s observations. Dry season water availability constrains the ability to maintain forage pastures year-round. The sustainability of the forages and pastures planted under the project is uncertain. Adequacy of skills among DAFO, DLWU, and other community support workers: Considerable training was provided at the beginning of the project and then in follow-up sessions. At project completion, DAFO and DLWU staff in many districts appeared able to undertake their tasks competently and with self-confidence. However, their performance was strongly influenced by the commitment and motivation provided by senior DAFO and DLWU personnel. At the village level, the project made considerable time demands of village livelihood committee workers, yet provided little incentive for their sustained participation. Women’s time input: The time devoted to animal care by both women and men increased in those households that now engage in commercialized livestock breeding and/or fattening for a major source of income. A more relevant indicator of women’s time allocation would have been some measure of income earned per hour, rather than time input alone.

Output 1 Improved On-farm Livestock Production Technologies

6,000 households in project villages adopted livestock forage technologies At least 3,000 hectare of forage/cassava cultivated 72 on-farm demonstration units established 12,000 households adopted improved animal housing 6,000 households fully applied improved livestock management system

Achievements: 6,810 households in project villages adopted livestock forage technologies 5,416 hectare of forage/cassava cultivated 71 on-farm demonstration units established 12,986 households adopted improved animal housing 6,810 households fully applied improved livestock management system

21 Appendix 1

75% of large ruminant population vaccinated 75 percent of pig population vaccinated 75 percent of goat population vaccinated 60 percent of poultry population vaccinated

166% of large ruminant population vaccinate21

86 percent of pig population vaccinated 75 percent of goat population vaccinated 60 percent of poultry population vaccinated Assessment: Forage data: These data are based on quarterly reports from the DAFOs and should be interpreted cautiously. Forage crop areas were not measured with precision. The PCR mission’s observations showed areas where the crops were in poor condition or had died. Farmers are finding it difficult to maintain productive pastures during the long dry season. Vaccination data: While there is no doubt that the project’s provision of free or subsidized vaccination services has contributed to greater awareness of the importance of vaccination and demand for vaccines, the PCR mission’s observations suggest that the data likely err on the high side. The completion of the project has meant the cessation of the project’s vaccination program and a significant reduction in the frequency of DAFO extension visits to the villages. Hence, there should be major concern about the sustainability of vaccine use in the future. Data on the cattle population and the percentage of large ruminants vaccinated are suspect due to (i) underreporting caused by farmer concern about provincial taxes on cattle, (ii) the difficulty extension workers had in reaching cattle left grazing in pastures located far from the village compounds, (iii) the reluctance of many farmers to tag cattle after vaccination, and (iv) the unknown entry and exit of cattle from the population. Improved livestock management: Based on interviews with project consultants and other key informants, and the PCR mission’s field observations, it appears unlikely that such a high number of households (52% of the total LPG membership) have fully adopted all components of the improved practices (planting and feeding forages, forage supplements, confinement, and vaccination). It is also unlikely that essentially all LPG households (12,986 out of 13,071) have adopted improved animal housing. It may be more reasonable to say that some significant percentage has adopted at least

2 Presumably this includes cattle vaccinated more than once or where vaccination was combined with deworming medication

22 Appendix 1

some elements of these practices. How sustainable this adoption will be is a major question.

Output 2 Developed Market Efficiency and Livestock Enterprises

6,000 livestock production group (LPG) members are aware of negotiation skills with traders 1,500 LPGs receive training on marketing 155 LPGs participate in study tour on marketing 8,400 households have access to livestock market information

Achievements: 6,045 LPG members are aware of negotiation skills with traders 1,601 LPGs receive training on marketing 168 LPGs participate in study tour on marketing 8,400 households have access to livestock market information Assessment: Training, study tours, and market information: These data are relatively easy to measure and should be reliable

Output 3 Strengthened Participatory Extension Networks

Each extension worker spend at least 20 days per month in field 6,000 of LPG members are women 6,000 of LPG members are poor households 9,600 of LPG members are ethnic groups At least 35% of extension workers are women

Achievements: Each extension worker spends 22 days per month in field 12,668 of LPG members are women 1,548 of LPG members are poor households 9,127 of LPG members are ethnic groups 35% of extension workers are women

Appendix 1 23

Assessment: Availability and timeliness of appointment of extension workers with adequate skills in ethnic group languages: Extension workers were appointed on time, but it was difficult to find sufficient people from the ethnic groups who had both the required agricultural training and language skills. The project dealt with this by using interpreter from the ethnic groups, as necessary. LPG membership of women and ethnic groups: Husband and wife were both required to join an LPG as a condition for VLF access, so the figure of 12,668 is unsurprising.Two-thirds of the LPG members were from ethnic groups and one-third was from the majority Lao-Tai ethnic group. The distribution of membership by ethnic group reflects the distribution in the district population fairly well. The main exception is that the Hmong ethnic group was somewhat underrepresented (25% of the population but only 15% of LPG members). Quality of LPG participation, cohesion, and sustainability: The project succeeded in creating about 1,600 LPGs comprising 13,071 member households (including both husband and wife in almost all cases). It more or less achieved its target of ethnic group membership, but fell slightly short in the membership of poor households. What is not known, however, is the quality and continuity of this participation, since there are no data of the regularity of participation in LPG meetings or on the initiatives taken by individual households to apply and sustain the practices promoted by the extension workers. With the project’s completion and the end of regular DAFO visits, the executing agency’s PCR concludes that the LPGs are likely to disband, especially if they are no longer linked to the loans provided by the VLF, in addition to extension support. To the extent farmers adopted elements of improved technology mainly to obtain VLF loans, prospects are sustainability are further weakened. Membership of poor households in LPGs: The project used a participatory CDD approach in engaging all villagers in project activities, with specific efforts made to include the poor, women, and ethnic groups. However, there was less participation of the poor in the extension activities as compared to middle-income households. The poorest households have less free time for LPG meetings, have less land for forage production, and were less able to bear the risk of intensified livestock. Additionally, the VLF’s 20% savings requirement may have been a barrier for some. LPG membership by animal type: Of 1,600 LPGs, 50% focused on cattle, 37% on pigs, 8% on goats, and only 3% on poultry. This distribution is strongly correlated with the market value of the livestock. A major rationale for including smaller livestock – particularly poultry – in the project’s scope was that small animals would be easier for

24 Appendix 1

the poor to adopt. The preponderance of poor households in cattle groups and their limited membership in poultry groups reflects the incentives of VLF guidelines. The expectation was that larger loans would be available, even if cattle were was not the household’s first choice or within its capacity.

Output 4 Effective Community-Driven Development

At least 6,000 loans provided and repaid to the village livelihoods fund (VLF) Number of non-performing loans not exceed 300 3,000 VLF loans taken by women 300 female headed households accessed to loans 3,000 VLF loans taken by poor household members 3,600 VLF loans taken by ethnic groups 300 village saving and credit committee (VSCC) having at least 1 woman representative in each VSCC 300 village infrastructure schemes constructed/renovated At least 180 VSCC fully applied VLF procedures/guidelines

Achievement:

9,519 loans provided and repaid to the VLFs There were 5 non-performing loans 9,502 VLF loans taken by women 203 female headed households accessed to loans 3,498 VLF loans taken by poor household members 6,032 VLF loans taken by ethnic groups 373 VSCC having at least 1 woman representative in each VSCC 260 village infrastructure schemes constructed/renovated 180 VSCC fully applied VLF procedures/guidelines

Appendix 1 25

Assessment: VLF Data: VLF records have been well maintained due to training of DLWU staff and the installation of specialized microfinance software. Nonperforming loans: The indicator on non-performing loan used above applies to loans that have been written off, usually because of the death of the borrower. Other data show that problems of overdue loans and declining portfolio quality were growing rapidly from 2012 onward, prompting significant concern by the Micro Finance Center in its final report of December 2012 and by the regional office in its final quarterly report in 2013. Village infrastructure: Due to increased construction costs and changes in the infrastructure options available to the villages, the project was able to construct or renovate only 248 schemes out of 300 planned. Loans to women: Since husbands and wives were always cosignatories on VLF loans, the achievement of 9,502 is unsurprising. Application of VLF procedures: In general, the PCR mission was impressed with the self-confidence and dedication of the younger DLWU staff who implemented the VLF. However, it is not clear that VLF procedures were strictly followed in all cases. The executing agency’s PCR notes that the requirement for each potential borrower to develop an individual business plan was generally ignored.

Output 5 Strengthened Project Implementation Management

12 semi-annual meetings of project steering committee (PSC) organized 24 provincial PSC meetings organized 60 project coordination meetings organized 1,080 monthly district coordination meetings organized

Achievement: 11 semi-annual PSC meetings organized 24 provincial PSC meetings organized 60 project coordination meetings organized 1,080 monthly district coordination meetings organized

26 Appendix 1

30 annual work plans and budget prepared by provincial/ district implementation unit (PIU/DIU) 24 quarterly progress reports prepared and submitted on time

6 audit reports prepared and submitted on time

30 annual work plans and budgets prepared by PIU/DIU 24 quarterly progress reports prepared and submitted on time 7 audit reports prepared and submitted on time Assessment: Relevance of indicators: While the regularity of steering committee and coordination meetings is laudable, it is unclear how well this reflects any qualitative change in management skills and practices. Moreover, the ADB review mission in December 2009 reported that some provincial meetings were not being held due to unavailability of staff.

Source: Asian Development Bank

Appendix 2 27

QUALITY OF THE PROJECT’S MONITORING AND EVALUATION DATA 1. The project’s monitoring and evaluation (M&E) database contains (i) quarterly data on village work activities and livestock indicators submitted by the district agriculture and forestry offices (DAFOs), (ii) the results of two surveys (2010 and 2013) of incomes and living standards that covered 900 randomly selected households across the project area, and (iii) routine reports on village livelihood fund (VLF) operations submitted by the District Lao Women’s Unions (DLWUs). There was considerable delay in establishing the M&E system (main text, para. 20) 2. The reliability of the M&E data on technology adoption that were collected after the revision of the design and monitoring framework (DMF) in late 2011 is questionable for the following reasons:

(i) The project never undertook a baseline survey, so it is impossible to know how ambitious the targets were.

(ii) The project’s M&E system in practice started very late in 2010 and the database is not well organized. It has therefore not been possible to confirm the achievements claimed for key outcomes such as livestock ownership, mortality rates, and household income.

(iii) Data collection is extremely challenging in the steep uplands of northern Lao People’s Democratic Republic (Lao PDR), where livestock are often kept far from the main village compound. It is very difficult to reach the animals to vaccinate them, count tails, or inspect the quality of forage and housing.

(iv) As project staff indicated and as confirmed by the project completion report (PCR) mission, the level of effort by the DAFOs and the quality of the data they submitted varied greatly by district. In contrast, the data on VLF lending from the DLWUs are believed to be more reliable because the data needs were simpler, data collection was less dispersed, and data entry was facilitated by the use of standardized microfinance management software in all districts.

3. Project staff acknowledged gaps and biases in the DAFO data, which was consistent with the field observations of the PCR mission. The main text of the executing agency’s PCR provides frank observations about farmer attitudes and technology adoption that are at variance with the quantitative indicators of change reported in the M&E database. The executing agency’s PCR raises considerable doubt about the level and sustainability of these changes for the following reasons:

(i) While the project’s DMF reports that 6,810 hectares of forage were planted (114% of the targeted amount), the executing agency’s PCR text notes, “There have been conflicting and unclear reports as to what area of established forage continues to be utilized, what area has died back or what has been replaced by an alternative or commercial crop. There has been a recognized but undocumented drop-off rate of farmers who started to grow forages but then stopped. The most common reasons for farmers to have stopped growing forages include (a) the prerequisite that they were required to grow forages in order to access the VLF; (b) initial ‘overselling’ of potential benefits causing many farmers to plant forage areas but not being genuinely interested; (c) not all farmers testing something new can be expected to adopt the technology; (d) lack of individual technical follow-up by district staff, particularly when working through livestock production groups (LPGs); and (e) poor targeting of farmers (finding out who is really interested in improving their livestock production) by the project and district staff”.1

1 Ministry of Agriculture and Forestry (MAF). 2014. Executing Agency’s project completion report. para.156, p43.

28 Appendix 2

(ii) The project’s DMF reports that 71 out of the targeted 72 farm demonstration units were established (one was considered unneeded). The executing agency’s PCR text notes, “While the concept of establishing demonstration sites within the village has promise, the performance of the project’s demonstration farms has been variable. Of the 71 units established, very few have effectively demonstrated good practice, the majority not performing as well as initially envisaged. This has been largely due to poor farmer selection. Farmers were identified not for their skills, experience or capacities, but rather on a ‘hands up who wants to be’ basis. Many saw it as an opportunity to source free animals. Demonstration interventions have been mainly top-down, where villagers were advised how to manage their livestock with little decision-making input from the villagers themselves (bottom-up). Many adapted the project-controlled demonstrations to fit their own perceptions. For example, villagers that received goats for demonstration purposes followed early advice but soon reverted from keeping goats in houses and feeding cut and carry at strategic times, to releasing their animals to graze sown forage and native browse. As a result, good practice and a resource from which others could learn were diluted and issues, especially relating to kid survival and general well-being, persisted”.2

(iii) The project’s DMF claims 100% achievement or better in meeting vaccination targets. The ADB mission observed that the project accomplished greater awareness of the benefits of vaccination and greater use of vaccines, at least during the period of the project’s free provision. The text of the executing agency’s PCR notes, “An increasing number of farmers can now see the benefit of vaccinations and de-wormers and are now more skilled in observing the health of their animals and are treating animals using vaccines and medicines themselves. They attribute improved animal health as the main contribution to reducing animal deaths, resulting in more livestock and thus, increased household income. However, in the majority of cases, vaccines have been provided free of charge and there continues to be a large number of farmers whose knowledge of the spread of diseases and how to prevent them are still rudimentary. These issues need to be further addressed to ensure that farmers can develop and implement long term and sustainable preventative rather than curative animal health measures. Possibly the main benefit of the adoption of enhanced livestock management technologies has been the improved survival of animals. This has resulted in farmers being able to accumulate more animals and thereby benefit from increased sales. However, an increased number of animals does not necessarily equate to higher per head returns, reproductive rates and growth rates. In fact, because of increased stocking pressure, the opposite can occur and much more can and needs to be done on farm to improve overall livestock productivity”.3

(iv) The DMF claims that 6,000 households (114% of target) fully apply an improved livestock management system, which includes vaccination, forages and improved feeding practices, and confinement. The DMF further claims that almost 13,000 households (i.e., almost all LPG members) have adopted improved animal housing However, the executing agency’s PCR notes, “While livestock numbers have increased, there are as yet but a small number of individual members within the LPGs demonstrating good practice. Livestock numbers may have increased but overall productivity has not. Widespread adoption of new technologies and improved practices remains very low”. 4 The claim that essentially all households adopted

2 Appendix 2, footnote 1, para. 158, p44.

3 Appendix 2, footnote 1, para. 164 and 166, p45 and p46.

4 Appendix 2, footnote 1, para. 167, p46.

Appendix 2 29

improved animal housing is completely at variance with the observations of the ADB PCR mission.

(v) The executing agency’s PCR also questions M&E figures on livestock numbers: “There continues to be a flow of conflicting data that is difficult to decipher and even more difficult draw a conclusion. For example, LDP physical progress as of December 2013 shows…the large ruminant population increasing from 163,640 to 285,525 and the number of households raising cattle and buffalo increasing by 26%, but data collected during the second Results and Impact Monitoring System (RIMS) survey (September–October 2013) shows only a 2% increase in the number of households owning large ruminants”.5

(vi) The executing agency’s PCR points to a fundamental gap in the M&E system: the failure to measure, for at least a small and carefully managed sample of farms, the impacts of technology adoption on animal health, mortality, growth, weight gain, offtake, and selling prices. Such information would substantiate the linkages between technology and farm income. The executing agency’s PCR notes, “Whereas LDP has been able to capture and record increased numbers of livestock per family, it has not been able to portray improved production in terms of individual increases in animal weight gain, birthing intervals, birth rate, survival rate and farm gate returns. Despite on-going training and constant urging, obtaining qualitative data from the districts has been challenging. All data received from the districts has been questionable and how one interprets said data is a matter of conjecture”.6

(vii) A further gap in the M&E system is the failure to monitor the use of VLF loans beyond recording basic information on loan amounts, general purpose (e.g., type of livestock purchased using the loan), household savings in the VLF (a loan requirement), and repayment information. There is no information on whether and how the 9,500 VLF borrowers combined the loans with other elements of the improved livestock systems. There is also doubt about the integrity of the loan application process. In theory, borrowers were required to submit a business plan showing how the loan would be used, but the executing agency’s PCR notes, “The requirement for each potential borrower to develop an individual business plan was generally ignored”.7 ADB’s PCR mission examined a few of the standard business plan forms submitted by VLF borrowers. The form essentially listed nothing more that the type and number of livestock to be purchased, and the amount of profit that was expected to repay the loan.

(viii) In the outcome indicators, the DMF reported that average household income from livestock production increased from $87 in 2008 to $425 in 2013. At livestock selling prices reported to the ADB mission, this incremental income ($338 equivalent) is roughly equivalent to two 70-kilogram pigs, 80 0.8-kilogram chickens, or about one-quarter of the value of a mature, fattened cow. Sales of this scale are possible, but the ADB mission was unable to confirm the income with the M&E files provided by the regional office.8

5 Appendix 2, footnote 1, para. 169, p47.

6 Appendix 2, footnote 1, para. 169, p47.

7 Appendix 2, footnote 1, para. 150, p42.

8 Several requests to the project’s former M&E specialists for clarification of the income calculation could not be answered.

30 Appendix 2

4. The major reformulation of the DMF in late 2011 occurred at an advanced stage of the project’s implementation. The reformulation improved the clarity and specificity of the project’s targets and indicators, but also made much greater demands of DAFO staff for routine data collection. Little direct training in the revised DMF requirements was provided to DAFO staff, who only received a stream of written instructions from the regional office on the new data collection requirements. This increased their work burden and was also a source of confusion and misinterpretation in the districts. Many of the project’s achievements cannot be substantiated because of the failure to (i) establish the M&E system at early stage of project implementation, and (ii) provide proper training after the DMF was updated in 2011. Moreover, the M&E database is composed of a large number of complicated, interrelated files, many of which are unintelligible now that the consultants have completed their work. 5. The PCR mission visited 13 villages in 7 of the project’s 18 districts. The mission observed numerous examples of LPGs or, more commonly, small numbers of individual farmers, who had progressed well in the uptake of technology and in greater commercial orientation, but there is no convincing, direct evidence of the project’s overall impact. While 9,519 households received loans to buy livestock, indicating the project’s impact in terms of horizontal expansion, it is largely unknown what the vertical expansion has been in terms of technology adoption, animal productivity, offtake, market value, and farm income.

Appendix 3 31

SUMMARY OF GENDER EQUALITY RESULTS AND ACHIEVEMENTS A. Project Description 1. The impact of the Northern Region Sustainable Livelihoods through Livestock Development Project was to reduce poverty by improving the sustainable livelihoods of upland farmers of 18 project districts in five northern provinces. The principal outcome included improved livestock productivity and profitability in integrated upland farming systems. Project components included (i) improvement of on-farm livestock production technologies, (ii) development of market efficiency and livestock enterprises, (iii) strengthening of participatory extension networks, (iv) effective community-driven development (CDD), and (v) strengthening of project implementation management. 2. The project covered 18 poor districts spread across the provinces of Bokeo, Houaphan, Louang-Namtha, Louangphabang, and Xiangkhoang. The 18 districts comprise 1,200 villages, of which 408 (comprising 17,000 households) were originally targeted for project activities. Based on assessment during the midterm review in November 2010, the project target was reduced to 321 villages. There were 13,100 participating households as of December 2013. In the project area, more than 70% of households were from ethnic groups, predominantly Kmou, Hmong, and Akhah. These households were expected to benefit from increased incomes due to improvements in livestock rearing and marketing of large ruminants (cattle and buffalo), pigs, goats, and poultry. 3. The project was approved by the Asian Development Bank (ADB) in September 2006, became effective in June 2007, and was completed in March 2014. The project was categorized as having a gender equity theme and included a gender action plan (GAP). B. Gender Analysis and Project Design Features

1. Gender Issues and Gender Action Plan Features 4. In the project area, women’s lives are dominated by patriarchal economic and social structures. Women have heavy workloads, lower status, and less voice in household and village decision making. The GAP aimed to address these issues by (i) improving women’s knowledge and their access to financial, physical, and social capital for improved livelihoods; (ii) offering literacy and numeracy training to reduce their initial disadvantages; (iii) enabling community mobilization and village organization to provide women with access to extension services; (iv) providing access to credit; and (v) improving their participation in community decision-making processes. 5. The key gender targets include the following:

(i) at least 50% of all trainees in village-based training programs are expected to be women;

(ii) in training programs aimed at smaller livestock (especially poultry), women are expected to comprise about 70%–80% of all trainees;

(iii) women will be equitably represented in village revolving fund and infrastructure fund management;

(iv) women will constitute at least 30% of all beneficiaries under the village revolving funds;

(v) at least 50% of all extension workers will be women;

32 Appendix 3

(vi) gender training will be provided to staff of the Provincial Agriculture and Forestry Offices (PAFOs) and the District Agriculture and Forestry Offices (DAFOs); and

(vii) all benefit monitoring and evaluation (M&E) will be gender-responsive by measuring (a) project impacts on women in terms of labor use, (b) improved productivity of livestock, (c) participation in training and enterprise promotion, (d) access to credit, and (e) membership in community-based groups.

2. Overall Assessment of Gender-Related Results and Achievements

6. Implementation of the GAP was generally satisfactory and had positive impacts on the lives of women in the project area. Women participated fully in village-based livestock production groups (LPGs), received livestock extension training, had access to loans from the Village livelihood fund (VLF), and received gender training. Husbands and wives jointly registered in the LPGs, although the level of participation differed depending upon the type of livestock. At project completion, 13,071 households comprising 24,602 people (12,688 women and 11,914 men) were registered in LPGs. 7. The LPGs were mixed groups of men and women. The training was conducted for all members and did not involve women-only groups. Nonetheless, participation by gender varied depending on the type of livestock. Men were the main participants in large ruminant LPGs, whereas women were most active in the goat and poultry groups, and in training for pig feed preparation. While the project trained both men and women as village poultry extension workers, most were women. 8. The GAP set a target of 30%–50% of the loans going to women. However, since there is joint membership in the LPGs, the loans were provided jointly to both spouses, with loan documents being signed by both husband and wife. Focus group interviews in six districts with 14 LPGs indicate that women were fully active in loan utilization and livestock rearing under this joint arrangement. 9. At appraisal, the project set a target of having 50% female extension workers in the DAFOs, but it became apparent during the first 3 years of implementation that it would be difficult to find women with adequate technical knowledge of agriculture. As a result, the target was lowered to 35% at the project’s midterm review in 2010. The 35% level was achieved and is believed to constitute a significant increase as compared to the level before the project, but unfortunately the M&E database did not establish a baseline, so this cannot be confirmed. C. Gender Equality Results

1. Participation, Access to Project Resources, and Practical Benefits 10. The project interventions (i) engaged women through the LPGs, (ii) provided new knowledge for livestock development, and (iii) allowed women to access credit to expand household livestock operations and earn additional cash income. Previously, women from ethnic groups such as the Kmou, Hmong, and Akhah had little access to extension services and formal credit. 11. The project achieved the following key results:

(i) 12,668 women (compared to the target of 6,000 women) were LPG members and received training;

Appendix 3 33

(ii) 6,738 (93%) of the 7,270 participants in small livestock training programs were women;

(iii) at least one female in the village saving and credit committee (VSCC) in each village

(iv) women constituted more than 50% of VLF beneficiaries, and of the 9,519 VLF members, 9,299 members registered under the names of husband and wife (married couples), 17 registered under the names of men (single fathers or single men), and 203 registered under the names of women (female heads of household or single women);

(v) of the 72 extension workers, 25 (35%) were women; (vi) gender trainings were provided to staff of the PAFOs and DAFOs; (vii) project M&E data showed that men and women had equal opportunity to

participate in the project activities and to access benefits from the project, including (a) livestock extension training, (b) enterprise development, (c) accessing credit, (d) membership in village-based production groups, and (e) gender training.

Box A3: Case Study of the Project’s Impact on a Woman Beneficiary Ms. Ken Phoumvongxay lives in Syviengkhan Village in Khoun District in Xiangkhoang Province with her husband and children. She became member of the livestock production group (LPG) in 2008. Before she joined the LPG, she raised cattle, pigs, and poultry. However, her poultry were often infected with disease, and she seldom sold chickens. After joining the LPG, she received training in small livestock (chicken and goats), and was appointed as poultry coordinator for the village. She learned how to vaccinate chickens, prepare chicken feed, and manage poultry production. Being a small livestock coordinator, she conducted monthly meetings with other women raising poultry to provide them with extension advice. The mortality rate of chickens has decreased significantly in the village due to regular vaccination. Now she has a poultry farm, which brings in regular income for her. She sells chickens three times a year and earns around KN4 million per year, compared to only KN250,000 previously. During the Hmong New Year in January 2014, she sold chickens and earned KN1 million. In 2012, she received extension training for large ruminants and took a VLF loan of KN5 million jointly with her husband. Previously, she had three cattle and four pigs, and with the loan she and her husband bought another cow and three more pigs. She is now engaged in cattle and pig fattening, and she sold three cattle and three pigs during 2013 to 2014, earning KN16 million. With her income, she has paid for her children’s education and household goods, and she opened a small shop in her village. She is proud of this, and she is also happy that during rainy season of 2014, after working hard in the paddy fields, she was able to prepare chicken soup for the family. In the past, they could not have afforded to have chicken soup after long hours of work. She now feels confident participating in village meetings. Previously, she and other women in the village seldom attended village meetings.

2. Strategic Changes in Gender Relations 12. Women’s participation in the LPGs led to networking and knowledge sharing with other women in the village, which helped build confidence among women in taking care of livestock. Women learned how to vaccinate poultry, although vaccination of goats, pigs, and large ruminants remains a male domain. However, in some cases women also vaccinated pigs and goats, although many were initially afraid. For the first time, women had access to a formal source of credit. Women also became members of the village loan committee. Normally, only

34 Appendix 3

men had access to formal credit from financial institutions. Women’s interaction with public officials such as government extension workers and District Lao Women’s Union (DLWU) staff has increased, as well as their visibility in the public sphere. Women’s participation in the LPGs has made them more assertive and has increased their attendance and involvement in other village meetings. Women are now more involved in dealing with livestock traders. Decisions on selling livestock and how to spend the income are made jointly by the husband and wife. When livestock are sold, women tend to ensure that the money is spent for family welfare and the children’s education. 13. The project disseminated knowledge on animal and village hygiene, animal vaccination and health care, improved feed preparation, animal confinement for fattening, feed and fodder development for pigs and large ruminants, and overall livestock management. The capacity of women to apply this knowledge naturally varied depending upon the type of livestock, the household’s resource base, and the individual capacity to absorb and apply new technology and to utilize the loans effectively. Similar to the pattern observed for the project as a whole, in many villages there are small groups of women who successfully practice improved livestock management, and who have adopted an increasingly commercial orientation. However, extension training was provided primarily by male extension workers, which often inhibited the active participation of women. 14. The project’s design and monitoring framework (DMF) set a target for reducing the amount of time women spent daily in collecting and preparing pig feed. This was based on the view that the drudgery of cut-and-carry fodder collection would be reduced by the planting of forages and feed crops like cassava. The M&E system indicated that women’s time input increased from 1.2 to 1.5 hours per day over the life of the project, since the time devoted to animal care by both women and men rose in households that now engage in commercialized livestock breeding and/or fattening for a major source of income. Moreover, free grazing was traditionally the main feed source for most livestock, so the labor input was minimal. A more relevant indicator of women’s time allocation would have been some measure of income earned per hour, rather than time input alone.1 15. A qualitative study of participation conducted in 2012 found that the project contributed significantly to incremental changes in the status of women. 2 The impacts included (i) increased mobility and access to markets, (ii) increased quality of participation in LPG meetings, (iii) greater independence in making household decisions, and (iv) greater skill and confidence in livestock management. The project completion review mission's observations in the field confirm the very active role that women played in discussions on pig and poultry production.

3. Contribution of Gender Equality Results to Overall Loan Outcomes and Effectiveness

16. By ensuring that women participated fully in the project, the GAP contributed to the project’s goal of improving the livelihoods of poor upland communities. Women’s access to

1 The project introduced fodder crops for large ruminants, and crops like cassava for pigs and poultry. Cattle fattening

requires larger quantities of feed than was used in the past. Both women and men participate in collecting forages and preparing feed (cooked rice, rice husks, and cassava, in addition to forage). Where animals are now confined, daily watering and cleaning of pens is required. These activities take time, but they also generate income. Moreover, many households now have more animals than before, which naturally require more time to manage.

2 Ministry of Agriculture and Forestry (MAF). 2012. “Capturing Qualitative Results: The Northern Region Sustainable

Livelihoods through Livestock Development Project”.

Appendix 3 35

training and loans ensured that income from livestock would be generated and shared more equally. Women have gained self-confidence and have become more active in all aspects of village life. Box A3 presents a case study of one woman who gained new skills, confidence, and increased income through her involvement in the project.

D. Lessons Learned and Recommendations 17. The followings factors were critical to the success in achieving GAP targets:

(i) A project design that specifically targeted women’s participation in the LPGs for extension training and loans. A special ADB gender and social development review mission in March 2010 recommended strengthening the gender targets in the DMF, which sharpened the focus on gender by project implementation staff.

(ii) Community mobilization and training to develop household capacity before the members took loans.

(iii) Involvement of the DLWU, given its focus on working with women. (iv) Suitable training of DAFOs and DLWUs staff in CDD and participatory methods. (v) Generally clear and realistic targets for women’s participation that was easy for

project staff to understand and monitor. 18. The project faced the following challenges during implementation:

(i) During training, women were not always active participants since most of the extension staff were men, and women were not trained separately from men. The LPGs mixed men and women, which inhibited women from becoming the leaders of these groups.

(ii) The limited education of women and their traditional household roles meant they tended to revert toward traditional livestock management practices, particularly women from the ethnic groups. Bringing attitudinal change is a slow process.

(iii) There were only two community facilitators per district from DLWU, and their work was not always synchronized with the extension activities. There was also a lack of coordination between DLWU and DAFO when VLF lending was operationalized.

(iv) Training was conducted in the Lao language, which was a barrier for ethnic group members and for women in particular. Although village interpreters were used, the training would have been much more effective if conducted in the appropriate ethnic language. However, it was difficult to find people from the ethnic groups who had both the language skills and the required technical knowledge of agriculture.

(v) Basic literacy skills would have enhanced the effectiveness of extension training. The project design included numeracy and basic literacy training for ethnic group members, but this training was not conducted. The budget allocated for this activity was inadequate and, given this constraint, the executing agency felt that education was not the responsibility of the Ministry of Agriculture and Forestry, which in any event lacked the competency to design or manage such a program.

(vi) The M&E system was established after a considerable delay, and it was not until an advanced stage that the system captured gender-disaggregated data. Hence, there are gaps in evaluating some aspects of the GAP.

(vii) The person-months provided for the international community development and gender specialist were not enough to provide inputs throughout the project. Much of this specialist’s input came during the first 18 months of the project, when other activities were moving very slowly.

36 Appendix 3

19. Sustainability. The extension and VLF lending provided knowledge and opportunities to expand and commercialize livestock production. The investment in capacity development has had encouraging results for a core group of farmers. This group should gradually expand in the future as other households observe the benefits of improved livestock management. Women will benefit from continuing support and encouragement by the DAFOs and DLWUs. 20. Recommendations. The following recommendations will enhance and promote more sustainable impacts on women:

(i) Future project design should allow for organization of separate training activities and consultations with men and women, so that women can more fully participate.

(ii) The GAP indicators and M&E system should be consistent with the project design, and should be updated accordingly if there is any reformulation of the design during implementation.

(iii) GAP targets need to be realistic if they are to be pursued diligently by project staff. For instance, while the goal of 50% female extension workers was laudable, it was impractical given the scarcity of women with suitable training in agriculture.

(iv) Special attention is needed to ensure effective coordination when different project participants (i.e., DAFOs and LWUs) have different accountabilities and reporting channels, yet must deliver closely integrated inputs.

(v) DLWU staff performed effectively, but women community facilitators should be developed from within the village in order to maximize the sustainable impact.

(vi) More effort is needed to conduct training and prepare extension materials in the relevant language of the ethnic groups.

Appendix 3 37

Gender Action Plan (GAP Activities, Indicators and Targets, Timeframe and

Responsibility)

Achievements

Output 1: Improvement of on-farm livestock production technologies

1. Facilitate women’s participation in the training by organizing training at a convenient time for women.

Achieved The project facilitated women’s participation in the training by organizing training at a convenient time for women and informing participants at least 1 day in advance.

Indicator: 2. Women are expected to comprise 70%–80% of all

trainees in training programs on small livestock.

Achieved Training and on the job training on small livestock (pigs, goats, and poultry) for women has increased, with women comprising 6,738 (93%) of the 7,270 total participants.

Output 2: Development of market efficiency and livestock enterprises

3. Set up quota for women to participate in village-based training programs.

Achieved To ensure that women participate in village-based training programs, the project set up quota of at least 50% of women in each training and workshop.

Indicator: 4. At least 50% of the trainees is in all village-based

training programs are women.

Achieved On-the-job trainings to improve livestock productivity were conducted for upland ethnic farmers, including (i) building rapport with target villages, (ii) forming livestock production groups (LPG), (iii) planning and facilitating group activities, (iv) facilitating village learning activities, and (v) linking farmers and village to resources. 12,668 women were LPG members and received training, well in excess of the 6,000 women targeted in the project design and monitoring framework.

Output 3: Strengthening of participatory extension networks

5. Ensure husband and wife jointly register for VLF. Achieved Registration in VLF included both the name of husband and wife.

Indicator: 6. 6,000 (or 50%) of LPG members are women.

Achieved Out of 13,071 LPG household members, 12,301 members (94%) were registered under both husband and wife. In addition, 367 were women members (single mothers or women) and 432 were men members (single fathers or men).

Output 4: Effective community-driven development

7. Based on baseline data, women will form at least 30%–50% of all beneficiaries under the village revolving funds.

Achieved A total of 9,519 village revolving fund or VLF members were registered under the project, of which 9,299 members (or 97%) were registered under the names of husband and wife (50% men and 50% women) and 203 registered

38 Appendix 3

under the names of women (female heads of household or single women). Indicator:

8. 3,000 (or 50%) of VLF loans taken by women.

Achieved Of the total 9,519 VLF members:

(i) 9,299 members registered under the names of husband and wife (50% men and 50% women);

(ii) 17 registered under the names of men (single fathers or single men); and

(iii) 203 registered under the names of women (female heads of household or single women).

9. Set quota for women representatives in VLF. Achieved The project set quota of at least one female in the VLF and village savings and credit committee and a condition that registrations for the VLF must be in both the husband’s and wife’s names.

10. Separate consultation with men’s group and women’s group before project provides infrastructure.

Achieved Before providing infrastructure, the project conducted separate consultations with the men’s group and women’s group to identify priority of infrastructure.

11. Encourage women to participate in village revolving funds by arranging separate group discussions for women to ensure they understand the objective and system of the village revolving fund.

Achieved The project encouraged women to participate in the VLF by conducting separate group discussions for men and women.

Indicator: 12. 300 women, or 50%, of female-headed households

access loans.

Achieved 225 female-headed households were identified in the project areas, of which 203 (or 90%) accessed VLF loans.

13. Women will be equitably represented in VLF and infrastructure fund management structures.

Achieved The project set a condition that at least one representative from the village Lao Women’s Union must be included in each VSCC.

Indicator: 14. There is at least one woman representative in each VSCC.

Achieved Out of 2,282 VSCC committee members, 326 (one for each of the 326 villages) were female.

Output 5: Strengthening of project implementation management

15. Provide capacity building for women to be extension workers (based on women’s needs in specific areas).

Achieved Based on women’s needs, the project provided training for women to be extension workers responsible for the following: (i) report writing, (ii) forming LPGs, (iii) planning and facilitating group activities, (iv) facilitating village learning activities, and (v) linking farmers and village to resources.

Appendix 3 39

Notes: The project hired a gender consultant with intermittent inputs. Future projects should assign a gender focal point based in the project office that can follow up on GAP implementation regularly.

Indicator: 16. At least 35% of all extension workers will be women.

Achieved Out of 72 extension workers, 25 (35%) are women.

17. Gender training will be provided to staff of the PAFOs and DAFOs.

Achieved Gender awareness training conducted from staff of the regional office, PAFO, and DAFO with 72 participants, including 25 women (35%).

18. Conduct gender needs assessment of PAFO and DAFO staff.

Achieved The project conducted gender needs assessment for PAFO and DAFO staff. The following gender needs were identified: (i) lack of understanding of project gender requirement, and (ii) weak gender sensitive reporting, including collecting both qualitative and quantitative data.

19. Prepare terms of reference for gender training. Achieved Before requesting budget for gender training, the project prepared detailed terms of reference for gender training.

20. Provide gender training based on gender needs. Achieved Based on gender needs, the project provided training on gender awareness, requirement, and monitoring and reporting of gender data.

21. All benefit monitoring and evaluation (M&E) will be gender-responsive and measure project impacts on women in terms of returns to labor, improved productivity of livestock, participation in enterprise promotion, access to credit, membership of community based groups, and extent of participation in training.

Achieved The project monitoring system included data collection on gender achievements and provided information on benefits to women. However, the M&E system was established with considerable delay, and it was not until an advanced stage that the system captured gender-disaggregated data. At project completion, the project M&E data showed that men and women had equal opportunity to participate in the project activities and to access benefits from the project, including livestock extension training, enterprise development, accessing credit, membership in village based production groups, and gender training.

22. All information produced by the project to ensure sex- disaggregated data.

Achieved. The project’s GAP had been implemented and sex disaggregate data was collected and reported on activities and indicators.

23. Project impact analysis using the GAP follow-up matrix was attached in the project performance progress report as an

annex.

Achieved The project used the GAP table in updating the progress of GAP implementation, and attached the updated GAP in the project performance progress reports as an Annex.

40 Appendix 4

KEY FEATURES AND LESSONS FROM LIVESTOCK EXTENSION, THE VILLAGE LIVELIHOOD FUND, AND THE VILLAGE INFRASTRUCTURE DEVELOPMENT FUND

1. This appendix summarizes the principal features and lessons from the three main components of the Northern Region Sustainable Livelihoods through Livestock Development Project. The assessment is based on the findings of the Asian Development Bank (ADB) project completion report (PCR) mission in May 2014, the PCR prepared by the project’s executing agency in March 2014, and other special studies conducted under the project.1 A. Project’s Five-Step Approach to Community-Driven Development 2. The project design envisioned a sequence of interrelated steps to establish village-level livestock production groups (LPGs), provide training and livestock extension, link LPG members to credit under the village livelihood fund (VLF), and provide community support under the village infrastructure development fund (VIDF). These steps, the expected outcomes, and the primary task responsibilities are shown in Table 1.

Table A4.1: Community-Driven Development Process to Support Livestock Production Groups

Process Steps Outputs/Outcomes Key Responsibilities

1. Building rapport with the village

a. Introduce project to villagers b. Conduct livelihoods analysis c. Engage women, poor households, and ethnic groups d. Follow-up commitments and agreements

a. Good working relationships with villagers established b. Villagers understand project purpose c. Women, poo households, and ethnic groups targeted d. Villagers agree to participate in LPGs

a. DLWU (principal) b. DAFO c. Community facilitators d. Consultants

2. Forming LPGs a. Form LPGs based on interest in specific livestock b. Select priority livestock problems c. Train group leaders and members d. Support LPG activities and link these to village e. Review progress, innovate, and improve

a. LPGs formed with 5–10 households each b. Women, poor households, and ethnic groups are LPG members or form their own groups c. LPGs strengthened

a. DAFO (principal) b. DLWU c. Community facilitators d. Consultants

3. Planning and facilitating group activities

a. Problem diagnosis b. Search for potential solutions c. Test and evaluate options d. Share information within the LPGs and report to village

a. LPGs capable of analyzing problems and testing solutions b. Livestock management practices improved c. Information sharing within and between LPGs and with

a. DAFO (principal) b. Consultants c. Community facilitators

1 These studies include: (i) W. Stur and P. Phengsavanh. 2014. Lessons Learnt from the Northern Livestock Development Project and Assessment of Livestock Value Chains in Northern Lao People’s Democratic Republic. Vientiane: International Fund for Agricultural Development (IFAD); (ii) R. Hickson and B. Khanthaphat. 2011. Evaluation Report of Village Livelihood Fund Microfinance Program: Final Report. Louangphabang Project Regional Office; and (iii) S. Watkins, et al. 2013. Socioeconomic Impact at Household Level of Livestock Production and Commercialization Activities Funded by Swiss Agency for Development and Cooperation in Lao People’s Democratic Republic. Vientiane: Swiss Agency for Development and Cooperation (SDC). In addition, details about the project’s overall implementation can be found in the government’s PCR (2014), and in specialized reports prepared in 2014 for the ADB PCR mission by V. Phengvichit (livestock technology and extension) and S. Simmanivong (Village Infrastructure Fund).

Appendix 4 41

Process Steps Outputs/Outcomes Key Responsibilities

e Reach out to other farmers in village

village d. Activities targeted at women, poor, and ethnic groups

4. Facilitating village learning

a. Testing and innovation b. Farmer-to-farmer exchanges, including study tours c. Reflection meetings

a. Villagers trying out improved livestock practices b. Technology transfer facilitated by farmers c. Farmers initiate new activities d. Information and technology accessible by women, poor households, and ethnic groups

a. DAFO (principal) b. Consultants

5. Linking farmers and villages to resources

a. VLF lending and VIDF schemes operationalized b. Monitoring of loan use and household livestock activities

a. Farmers use loans to improve livelihoods b. Village accesses VIDF funds to enhance social and economic opportunities, especially for women, the poor households, and ethnic groups

a. DLWU (principal) b. DAFO c. Microfinance consultants

DAFO = district agriculture and forestry office, DLWU = District Lao Women’s Union, LPG = livestock production group, VIDF = village infrastructure development fund, VLF = Village livelihood fund. Source: MAF. 2014. Government’s project completion report.

3. To work as planned, the project design required closely coordinated efforts by the District Lao Women’s Union (DLWUs) and the district agriculture and forestry offices (DAFOs). DLWU tasks focused on community organization, facilitating LPG activities, preparing applications by villages to access the VIDF and VLF, developing villager skills for administering the VLF, and overall gender development. The DAFOs took the lead in forming the LPGs, identifying priority livestock problems, training LPG members, monitoring technology adoption, and organizing farmer-to-farmer exchanges. 4. Coordination issues emerged during the project’s implementation. The DAFOs and DLWUs worked under different incentives and had different reporting lines. 2 Coordination of their activities was weak at times. Impending access to microfinance often distracted the villagers from the livestock production improvement program that VLF was intended to complement. DAFO staff and extension workers were distracted from the core role of extension by being involved in credit and infrastructure activities. The lesson is that when a microfinance program is blended with a production enhancement program, careful design is needed to ensure that the programs complement each other and do not interfere with each other, and that the roles and expected outcomes of all service providers are clearly delineated. B. Extension for Improved Livestock Practices 5. The approach to improving livestock management comprised four basic elements: (i) vaccination and parasite control, particularly deworming of young cattle and buffalo; (ii) confinement of most livestock in pens or enclosed pastures to control the spread of communicable diseases, assure access to feed and water, and improve village hygiene; (iii) improved feeding practices based on the planting of forages, forage grasses, cassava, and

2 DAFO staff and extension workers were provided with motorcycles, fuel, and a modest per diem for village work, but

received no additional salary incentive. DLWU staff, many of whom were hired on a contractual basis, received a salary supplement to transport support.

42 Appendix 4

legumes to increase the quantity and nutritional quality of feed; and (iv) the intensification of the production cycle, e.g., moving from one growth or fattening cycle per year to three cycles in the case of poultry, two for pigs, and two for cattle depending on dry season forage availability.3 6. The project did not make efforts to (i) improve livestock breeding given the difficulty posed in conditions where most animals are free-range; or (ii) introduce feed additives and concentrates, with the exception of poultry. Rather, the focus was on introducing simple, proven techniques that were well-suited to local agroclimatic conditions and that could be most easily adapted to existing farming systems and household resource constraints, with minimal reliance on purchased inputs. 7. The introduced practices entailed a significant increase (35%–45%) in the level of household labor required for livestock management. Labor requirements would be even higher in fully commercialized systems. Thus, even with relatively simple technologies, the new practices attempted to transform the traditional low-input, low-productivity systems (in which livestock are primarily a source of household wealth and security), into a more market-oriented system (in which livestock are raised as a regular income source). Time scarcity constrained household ability to participate in project activities and in more intensive livestock management, particularly in villages where there are competing opportunities in cash crops.4 This constraint needs to be considered when designing rural development projects in the northern uplands of Lao People’s Democratic Republic (Lao PDR). 8. Vaccination was done for free and the project was successful in vaccinating a large number of livestock (Figure A4.1).5 Nearly all farmers met by the PCR mission expressed greater awareness and acceptance of the benefits of vaccination. The PCR mission’s discussions with farmers, the executing agency’s monitoring and evaluation (M&E) database, and district statistics for the period 2008-2013 all indicate a decline in livestock mortality, but the precise level is not known with certainty. With the closure of the project, regular extension visits to the villages and free vaccination have ended. In the absence of alternative supply channels, it is unlikely that vaccination rates will be sustained.

3 Forage availability during the dry season (November through March) proved to be a major constraint in most of the

project area and must be addressed through continuing applied agronomic research and on-farm trials. 4 For example, farmers in remote villages were reluctant to accept penning of pigs. Letting animals roam freely

without supervision has almost zero labor and input requirements. 5 The project was not the only source of support for livestock vaccination in the project area. The World Organisation

for Animal Health is assisting the Lao PDR in vaccinating cattle against foot-and-mouth disease and hemorrhagic septicaemia. With the goal of creating 10 districts in northern Lao PDR free of foot-and-mouth disease and hemorrhagic septicaemia, the national and provincial governments contribute financially to the World Organisation for Animal Health program. The Red Cross and other international nongovernment organizations also support livestock vaccination at the local level.

Appendix 4 43

Figure A4.1: Number of Livestock Vaccinations in the Project Area by Year

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2008 2009 2010 2011 2012 2013

Large Ruminants

Pigs

Goats

PoultryNum

ber

of

livesto

ck

Year

Source: Project’s monitoring and evaluation database.

9. There are no reliable data on the levels and sustainability of technology adoption. The achievements recorded in the executing agency’s M&E database are clearly inflated. The 2014 studies that attempted to assess adoption (Appendix 4, footnote 1) used informal methods. Both concluded that while numerous examples of good adoption can be found, the overall level of adoption is below that recorded in the executing agency’s M&E database. 10. Key project lessons include the following:

(i) The importance of improved animal health, nutrition, and hygiene has been demonstrated, but is not yet sustainable without further support.

(ii) The project created a cadre of experienced district extension staff who are now capable and self-confident in participatory approaches to livestock development. These staff members provide an important foundation for future support in the project area.

(iii) Accurately measuring the adoption, outcomes, and sustainability of multiple-input livestock technology is inherently difficult. It would best be approached through a careful survey of small groups of households on a repeat (panel) basis throughout the life of the project and beyond.

(iv) Agricultural projects are inherently complex and require greater flexibility than infrastructure projects. Disbursement is a key indicator of progress of donor-financed projects. Pressure to disburse funds early in the life of the project contributed to poor implementation practices.

(v) The wide adoption of improved, commercially oriented practices takes time in traditional livestock systems and is seldom achieved in less than 10 years. Sustained donor engagement is needed.

44 Appendix 4

(vi) Village selection is critical for success. Resource availability (particularly labor) must be carefully assessed.

(vii) Working with ethnic groups requires special approaches if the predominant language is not widely understood. It was particularly difficult to interpret the technical language used for production systems improvements.

C. The Village Livelihood Fund 11. The VLF was established in August 2010. Its purpose was to support village households to (i) acquire additional livelihood assets; (ii) invest in livestock and agriculture production, marketing activities and trade, and other income-generating activities; (iii) invest and manage household resources in an economically sound manner to raise incomes and savings; and (iv) reduce dependence on informal sources of credit. The VLF was to give priority to poor and female-headed households. The VLF program was implemented by the DLWUs, in cooperation with village savings and credit committees (VSCCs) set up under the project. The project succeeded in establishing the program in 260 villages across five provinces. 12. The VLF offered loans at highly subsidized interest rates: 8%–12% per year depending on the use of the loan, as compared to an estimated 24% needed to cover the full costs of lending. Loans ranged from KN1 million to KN8 million depending on the type of livestock purchased (Table A4.2). Accessing VLF required a 20% savings deposit by the borrowing households. In practice, many households did not or could not comply with this requirement, in which case 20% was withheld from the disbursed loan. In total, the VLF provided loans to 9,519 households, with an average loan amount of KN420,000 (Table A4.3). The majority of VLF loan funds were used to expand cattle and buffalo production (50% of the total) or pig production (37%).

Table A4.2: Village Livelihood Fund Loan Terms

Livestock/Purpose Maximum

Loan Size (KN million)

Loan Period

(months) Interest Rate Principal

Poultry 1.0 12 8% Monthly after first

sales

Goat raising 3.0 12 8% One installment

Pig & Goat Fattening 3.0 6 8% One installment

Pig Raising 4.0 12 8% One installment

Cattle Raising 8.0 36 8% (≤5 million Kip) 12%

(> 5million Kip) One installment

Cattle Fattening 8.0 6 8% (≤5million; 12%)

(>5million Kip) One installment

Sources: Project VLF guidelines.

Table A4.3: Use of Village Livelihood Fund Loans

KN million KN million

Loan Purpose

2010 2011 2012 2013 Total Share of

Loan funds

Total Borrowers

(House-houses)

Average Loan Size

Loan Ceiling

(VLF guideline)

Livestock Purchased

per loan (District

data)

Estimated Total

Livestock Purchased

Cattle/ Buffalo

1,692 5,842 8,228 4,453 20,214 50% 3,750 5.39 8 1.3 5,054

Pig 2,850 4,574 4,121 3,445 14,990 37% 3,637 4.12 3-4 10 36,370

Appendix 4 45

Goat 581 1,001 1,017 613 3,212 8% 1,028 3.21 3 2.4 2,467

Poultry 229 310 308 386 1,232 3% 967 1.27 1 25 24,175

All Other a

43 102 180

320 645 2% 137 4.71 3-4 0 0

Total 5,394 11,830

13,853

9,216 40,292 100% 9,519 4.23 0 0 0

a Includes fishing, cattle trading, weaving and handicrafts.

Sources: Project VLF database.

13. The project targeted the poor, women, and ethnic groups, with the poor proving relatively difficult to reach. At the time of project closure, the distribution of VLF lending had somewhat favored households of middle and upper wealth status: 37% of the loans went to households classified as “poor” (who made up an estimated 46% of the project area population in late 2010), 49% went to “middle” households (45% of the population), and 14% went to “well-off” households (9% of the population).6 The poorest households were less able to bear the risks of intensified livestock and had less time available for LPG activities and for more intensive livestock management. However, there was an even balance of VLF lending by gender. Husband and wives were joint members in the LPGs, and loan documents were co-signed by both spouses. Women-headed households were targeted for loan access. Out of 367 women-headed households, all women who applied for loans (203) received them. There was a reasonably well-balanced distribution of VLF loans among the ethnic groups in the project area. 14. There were start-up issues as the VLF was established. Repeat training was required to build capacity of the DLWU staff in loan management, accounting, and monitoring. The VSCCs would have benefited from more training in order to fully understand VLF operations, the motivation of borrowers, and monitoring of loan use and repayment. There were also delays in setting up an appropriate computer software system for microfinance management. All of these problems were largely overcome by 2012-2013. 15. The executing agency’s quarterly reports show that arrears on VLF loans reached an alarming level from September 2012 onward. In part, this arose because VLF loan terms did not follow the standards of the Bank of Lao PDR in defining arrears.7 Nonetheless, arrears have possibly grown since the project’s closure as farmers have come to realize that regular DAFO and DWLU visits will not continue. 16. Given VLF’s highly subsidized and ad hoc nature, as early as May 2011, ADB and the International Fund for Agricultural Development (IFAD) were concerned about the sustainability of VLF beyond the project’s closing date. This prompted use of project and other funds for a study of options to sustain the VLF.8 The study’s overall recommendation was that VLF should be replaced or supported by a specialized, independent, professionally managed microfinance institution. The study assessed the pros and cons of four options for VLF: (i) retool it as a new LWU-owned microfinance institution modeled on LWU’s existing Women and Family

6 Wealth status was measured in the first impact survey of the project’s Results and Impact Management System in

October 2010. Wealth groups were defined using a locally adapted household index comprising (i) size and quality of dwelling, (ii) source of drinking water, (iii) toilet facility, (iv) electrification and ownership of electric appliances, (v) ownership of assets such as motorcycles, and (vi) seasonal food security. 7 Bank of Lao PDR standards assume that payments on both loan principal and interest will be made on a monthly

basis. However, under VLF terms only the interest is payable monthly. The principal is to be repaid in full at the end of the loan term, which ranges from 6 to 36 months (Table A4.2). Thus, by the Bank of Lao PDR standard, many VLF loans would be considered delinquent even if interest payments are up to date and the principal is not yet due. 8 The study was undertaken by Hickson and Khanthaphat (footnote 1). Funds were sourced from a project

(Enhancing Capacity of Local Government Agencies and Lao Women’s Union for Sustainable Poverty Reduction in Northern Lao PDR) financed by the Japan Fund for Poverty Reduction and approved in April 2007.

46 Appendix 4

Development Fund; (ii) create district-level microfinance institutions under the supervision of the district government; (iii) transfer the VLF portfolio to the government-owned Nayoby Bank; or (iv) close down the VLF program after all outstanding loans are repaid. As of March 2014, VLF operations were continuing with the existing capital base and staff, and the government appeared committed to reformulating the program on a sustainable basis.9 17. Overall, despite its inefficiency compared to best microfinance practices, the VLF was effective in assisting more than 9,500 households to expand livestock production, with total lending of $5 million at the time of project closing. However, it is not clear how commercially oriented and sustainable the production increase has been, and to what degree better technology has been adopted. However, in the absence of further support, either from a new project or directly from the government, the VLF cannot continue to operate for more than a few years. 18. Key VLF lessons include the following:

(i) It is obvious from the speed with which VLF loans were absorbed that there is a strong unmet demand for credit among livestock producers and project area households.

(ii) Access to finance is likely to constrain further expansion of commercial livestock production. Loan ceilings and tenures will need to increase to meet the needs of commercially oriented production. The financial rates of return to livestock are sufficiently high that more sustainable, higher-interest credit should be readily affordable .

(iii) The project has trained 18 district teams comprising about 90 staff (mainly women working for the DLWUs) who constitute a strong human resource base for a reconfigured and more efficient microfinance institution that could emerge from the VLF.

(iv) A major issue for future projects is whether directed microfinance is best provided through commercial channels at market rates or through ad hoc, heavily subsidized, and unsustainable arrangements like the VLF.

D. The Village Infrastructure Development Fund 19. The VIDF had the overriding objective of synergizing community involvement in the project by supporting small-scale village infrastructure that would complement the associated development of livestock. The VIDF was intended to enable communities to be more self-reliant by enhancing their cooperation, solidarity, and ownership. The VIDF had the following principles: (i) empowering communities to actively engage in development activities based on local needs, knowledge, and resources; (ii) using transparent criteria to prioritize and select viable community investments with equitable sharing of benefits; (iii) accounting for ethnic and gender diversity and poverty conditions in the community; and (iv) expecting significant community contributions to the investment in kind and/or cash, with subsequent management and maintenance of the infrastructure to be within the capacity of the community. Village development committees were established to coordinate and manage the selection and construction of infrastructure, while the DAFOs and provincial agriculture and forestry offices (PAFOs) coordinated and monitored the flow of funds.

9

The options were still being considered during the final processing of the Northern Smallholder Livestock Commercialization Project.

Appendix 4 47

20. Five types of infrastructure were initially supported by the VIDF: village meeting halls, gravity-fed water supply systems, small irrigation, bridges, and water tanks. This list grew to include village access roads, school rehabilitation, public toilets, and small biogas pits. In total, the VIDF financed 248 village schemes. More than half (52%) of the schemes were village meetings halls. The remainder comprised mainly water supply, ponds, bridges, access roads, and irrigation improvements. Not all project villages received VIDF support, and some villages received as many as three VIDF investments. The prioritization of villages was to have been coordinated by the deputy head of the DAFO. However, ADB review missions noted weaknesses in VIDF coordination at the provincial and district levels. ADB recommended that additional DAFO staff should be assigned, but this did not prove possible. As a result, there is concern that overall supervision of VIDF implementation was weak, and that the participatory process for allocating the VIDF across villages and selecting VIDF schemes within villages may not have been followed consistently. 21. There was a high demand for the types of infrastructure financed by the VIDF. The original target for VIDF construction was 162 small projects. Given the strong demand, the target was increased to 300 schemes following the project’s midterm review (MTR) in late 2010. However, this target could not be achieved due to cost escalation. Adjustments were made to the VIDF guidelines based on agreement of the MTR, including (i) raising the VIDF ceiling per district from $70,000 to $130,000; (ii) raising the ceiling per village from $1,500 to $20,000; and (iii) allowing larger and more complex schemes using the services of qualified contractors to manage and supervise the construction, and employing paid village labor to the maximum extent possible. 22. By mid-2012, ADB noted that the demand for VIDF investments was outstripping the availability of funds, even after reallocation of almost $1.0 million from the IFAD loan to the VIDF in 2011. It was decided to focus the VIDF on schemes that would have direct impact on livestock production and marketing development. However, since this occurred fairly late in the project’s implementation, it is not clear what impact the decision had. In total, $3.4 million was spent on village infrastructure under the project. Including expenditures for the project’s regional office facilities and rehabilitation of PAFO and DAFO offices ($0.57 million), almost $4.00 million was spent on civil works, as compared to the $2.60 million budgeted at project approval. 23. During ADB’s PCR mission in May 2014, the team inspected VIDF schemes in six districts of Louang-Namtha, Louangphabang, and Xiangkhoang, including five village meeting halls, three gravity-fed water supply systems, two bridges, water ponds, and one biogas unit. Most of the VIDF infrastructure seemed well designed and constructed, and appropriate for local conditions. Most facilities were built with acceptable construction standards and materials (sand, gravel, steel bars, and cement), and appeared to be well maintained. The villages had contributed significant savings and labor to construction and maintenance. The water supply systems require regular cleaning by the villagers, who were making repairs as needed and using village funds to buy spare parts. 24. In principal, VIDF infrastructure was selected based on community consensus about priorities. While village meeting halls are useful for various community purposes (including the provision of livestock extension under the project, and as meeting points for farmers and traders), it is unknown why village meeting halls were prioritized in so many cases. Water supply and village access (roads and bridges) were also major needs for village development, and villagers said that the bridges made travel easier, particularly during the rainy season, when river levels are high with strong currents. Water supply is particularly important for women, who typically spend considerable time each day collecting water.

48 Appendix 4

25. Although the village infrastructure was generally well constructed, some design and sustainability issues were noted. A few meeting halls were located close to river banks or main roads, or on newly filled soil, all of which could affect their structural integrity over time or in the event of landslides or floods. In one water supply system, the availability of water from the source is highly seasonal. Safety and sustainability of the infrastructure are particularly important in the case of the bridges. In one village, a bridge was damaged by a truck. Although the villagers will fix the bridge with community contributions, competent supervision is warranted to ensure its structural stability. 26. Key VIDF lessons include the following:

(i) The VIDF financed village infrastructure for which there was clear need and

demand. However, like other elements of the project, more attention was needed at the design stage to ensure adequate local government capacity for smooth implementation.

(ii) For future projects, greater supervision during planning and construction will ensure that the schemes are technically and environmentally sound, and physically sustainable.

(iii) Even with good design and construction, there may be damage and maintenance needs that the communities are incapable of managing on their own. District agency monitoring and support will be warranted to ensure sustained functioning.

49 Appendix 5

LOAN and GRANT DISBURSEMENTS BY YEAR AND QUARTER ($’000)

Year Quarter Amount Cumulative Total Projected Actual 2007 Q1 0 0 0 Q2 0 0 0 Q3 0 920 920 Q4 0 245 1,165 2008 Q1 0 26 1,191 Q2 108 114 1,305 Q3 318 318 1,623 Q4 0 152 1,775 2009 Q1 1,000 171 1,946 Q2 800 331 2,277 Q3 625 188 2,465 Q4 600 284 2,749 2010 Q1 479 543 3,292 Q2 632 272 3,564 Q3 851 657 4,221 Q4 1,694 1,633 5,854 2011 Q1 596 719 6,573 Q2 825 502 7,074 Q3 842 952 8,026 Q4 565 950 8,976 2012 Q1 730 734 9,710 Q2 1,090 914 10,624 Q3 810 1,138 11,761 Q4 590 639 12,400 2013 Q1 1,260 758 13,159 Q2 610 1,658 14,817 Q3 720 323 15,140 Q4 540 6 15,146 2014 Q1 262 210 15,356 Q2 0 576 15,932 Q3 0 0 0 Q4 0 0 0 Total 16,547 16,297 15,932 Note: Includes the loan and grant from the Asian Development Bank’s Asian Development Fund, the loan from the International Fund for Agricultural Development, and the grant from the Swiss Agency for Development and Cooperation. Source: Asian Development Bank Loan and Grant Financial Information System.

50 Appendix 6

CHRONOLOGY OF MAIN EVENTS

Date Event 2006 13–24 February 2006 Fact-finding mission 14–19 June 2006 Appraisal mission 28–29 August 2006 Loan negotiations 29 September 2006 Loan approval 15 September 2006 Cofinancing arrangement finalized and agreement signed (Swiss Agency for

Development and Cooperation) 2007 15 January 2007 Signing of (i) Loan 2259, (ii) Grant 0055, and (iii) Grant 0056 29 January 2007 Signing of Loan 8229 30 June 2007 Extension of (i) Loan 2259, (ii) Grant 0055, and (iii) Grant 0056 effectiveness 28 June 2007 (i) Loan 2259, (ii) Grant 0055, and (iii) Grant 0056 declared effective 10 July 2007 Loan 8229 declared effective 12 February –2 March 2007

Inception mission fielded

10 September 2007 Loan 2259 initial advance to the imprest account disbursed 5 November 2007 First regional office advisor contract signed 2008 29 October 2008 Project implementation consultant contract signed (firm) 5 August 2008 Loan 8229 initial advance to the imprest account disbursed 19 December 2008 18 District Lao Women’s Union contracts signed 2009 7 January 2009 First contract for office renovation signed 10 February 2009 First contract for new office construction signed 25 May 2009 Special project administration mission fielded 5 June 2009 Regional office training accommodation contract signed 6 August 2009 Grant 0056 initial advance to the imprest account disbursed 30 October 2009 First contract for village infrastructure signed 21 December 2009 Amendment 1 for contract of project implementation consultant signed 2010 6 November 2010 Midterm review mission fielded 4 May 2010 National project management specialist contract signed 1 April 2010 Second regional office advisor contract signed 2011 25 March 2011 Vaccine storage contract signed 5 May 2011 Amendment 1 of national project management specialist signed 14 July 2011 Amendment 2 for contract of project implementation consultant signed 2 September 2011 International microfinance specialist mobilized 2 September 2011 National microfinance specialist mobilized 2012 21 June 2012 Extension of (i) Loan 2259 and (ii) Grant 0055 closing date to 31 March 2014 19 November 2012 Amendment 3 for contract of project implementation consultant signed 17 December 2012 Amendment 4 for contract of project implementation consultant signed 15 May 2012 Amendment 2 of national project management specialist signed 2013 15 January 2013 Second regional office advisor amended 17 May 2013 Grant 0056 account financially closed and undisbursed amount canceled 2014 17 February 2014 International social and development specialist mobilized

Appendix 6 51

31 March 2014 Loan 2259 closed 14 May 2014 Borrower’s project completion review submitted to the ADB 8 July 2014 Grant 0055 account financially closed and undisbursed amount canceled 12 August 2014 Loan 2259 account financially closed and undisbursed amount canceled Source: ADB. 2007. Project Administration Memorandum: Lao People’s Democratic Republic: Northern Region Sustainable Livelihoods through Livestock Development Project. Manila; project progress reports.

52 Appendix 7

STATUS OF COMPLIANCE WITH LOAN COVENANTS (LOAN 2259)

Covenant

Reference in Loan Agreement

Status of Compliance National Level 1. MAF shall be the Project Executing Agency and shall be responsible for overall execution of the Project, including preparation and submission of required reports to ADB. MAF shall designate the head of the RO as the National Project Director, who shall be responsible for overall Project implementation and management, including coordination with Participating Provinces and submission of consolidated progress reports, financial reports and annual Project work plans to PSC for review and approval.

Schedule 5 Para. 1

Complied. The National Project Director was appointed under Ministry Nomination No. 0437/MAF of 31 May 2006.

2. PSC chaired by the Vice Minister of MAF and including representatives from MAF, National Agricultural and Forestry Extension Service, National Agriculture and Forestry Research Institute, MOF, Ministry of Foreign Affairs, and representatives of Participating Provinces shall approve annual Project work plans, provide guidance to MAF on policy and interdepartmental cooperation, and review Project implementation. PSC shall meet on a semi-annual basis, or as required to review implementation progress.

Schedule 5 Para. 2

Complied. MAF personnel provided satisfactory support to the project. Annual work plans were prepared and updated on a quarterly basis as needed.

3. DLF shall be responsible for overall implementation of the Project, and shall establish a national coordination office within DLF and assign staff to the coordination office for the purpose of coordination among institutions involved in the Project, especially coordination with MOF in attending to financial management of the Project. The coordination office shall carry out financial management in consultation with the National Project Director.

Schedule 5 Para. 3

Complied. DLF was appointed as implementing agency by the executing agency (MAF). DLF assigned a single junior staff member with little experience to the coordination office; financial management was handled adequately by the regional office.

Fielding of Consultants 4. Except as ADB may otherwise agree, Lao PDR shall apply quality-and-cost-based selection for selecting and engaging consulting services.

Schedule 4 para 4

Complied.

Regional Level 5. The RO shall provide day-to-day management and coordination of Project activities under the supervision of DLF. The National Project Director shall be assisted by an assistant director and staff of the RO. The RO shall submit monthly and quarterly progress reports to DLF. (Financing Agreement, Schedule 5, para. 4)

Schedule 5 Para. 4

Complied. The regional office provided day-to-day management and coordination. The national project director was assisted by regional office staff. Monthly and quarterly progress reports were submitted to DLF.

Provincial Level MAF shall ensure that Project activities in a Participating Province are

Schedule 5 para. 5

Complied.

Appendix 7 53

Covenant

Reference in Loan Agreement

Status of Compliance incorporated into annual PAFO work plans to be collated into the annual Project work plan. 6. (a) Lao PDR shall (i) maintain, or cause to be maintained, separate accounts for the Project, including separate accounts for the Loan and the Grant; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and the Grant proceeds and compliance with the financial covenants of this Financing Agreement as well as on the use of the procedures for imprest account and statement of expenditures, all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. (b) Lao PDR shall enable ADB, upon ADB's request, to discuss Lao PDR's financial statements for the Project and its financial affairs related to the Project from time to time with the auditors appointed by Lao PDR pursuant to Section 4.02(a) here above, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of Lao PDR unless Lao PDR shall otherwise agree.

Section 4.02 Complied. (i) Separate accounts were maintained for each loan and grant. (ii) Project financial account was audited annually by State Audit Organization. (iii) Audited reports were submitted to ADB. - Financial statements for FY2006–2007 were not submitted due to the small amount of project expenditure (waiver approved by ADB on 14 April 2008). - FY2007–2008 audit report was submitted to ADB on 25 June 2009. - FY2008–2009 audit report completed in January 2010 and submitted to ADB on 31 March 2010. - FY2009–2010 audit report was submitted to ADB on 28 March 2011. - FY2010–2011 audit report was submitted to ADB on 28 March 2012. - FY2011–2012 audit report was submitted to ADB on 29 March 2013. - FY2012–2013 audit report was submitted to ADB on 13 March 2014.

7. Lao PDR shall enable ADB, representatives to inspect the Project, the Goods and Works financed out of the proceeds of the Loan and Grant, and any relevant records and documents.

Section 4.03 Complied. Inspection of project goods and works was done by ADB loan review missions and by the government during annual audits.

A PIU shall be established within the Livestock Section of the PAFO in each Participating Province and operationalized in order to coordinate

Schedule 5 para. 6

Complied. PIUs were established in each PAFO, and a full-

54 Appendix 7

Covenant

Reference in Loan Agreement

Status of Compliance implementation in the respective Participating Provinces. A PIU shall be headed by the PAFO director of the respective Participating Provinces and comprise of a full time officer responsible for provincial implementation, and necessary administrative support staff from PAFO.

time officer was assigned in each PIU.

The PCCs shall be convened by the respective provincial vice governors, and consist of representatives of provincial departments and mass organizations concerned, and shall meet quarterly. The PCCs shall endorse annual PIU work plans and budgets, review implementation progress, and guide provincial Project activities.

Schedule 5 para. 7

Complied. PCCs were appointed and met quarterly to review implementation progress and endorse PIU work plans.

Counterpart Contribution and Funds

Lao PDR shall prepare estimates of counterpart fund requirements 12 months in advance, make timely submission of annual budgetary appropriation requests and take all other measures necessary or appropriate for prompt release of appropriated funds to the Participating Provinces during each year of Project implementation.

Schedule 5 para. 8

Complied. Counterpart contributions comprised taxes and duties forgone, staff salaries, office space, and the use of public land. At completion, the counterpart contribution totaled $1.6 million, or 145% of the original estimate in the RRP.

"The Village Revolving Funds shall be managed by Village Revolving Fund groups formed under part B and assisted by LWU."

Schedule 5 para 9

Complied.

Before any funds may be withdrawn from the imprest account for the purpose of a Village Revolving Fund, (a) MAF shall have prepared guidelines and criteria satisfactory to ADB for the selection of village and borrowers; (b) the RO shall have engaged LWU units at provincial and district level which will provide training and support to the Village Revolving Fund group of a participating village in managing a Village Revolving Fund and all aspects relevant to cooperative lending operations, such as risk assessment, loan assessment, loan administration, and accounting and record keeping; and the Village Revolving Fund groups shall have collected deposits from its members such that the ratio of group savings to funds made available by ADB shall be at least 20:80. This ratio shall be maintained throughout the operation of the Village Revolving Fund.

Schedule 5 para. 10

Complied. a) Village and borrower selection criteria were established, and bylaws and guidelines were approved by ADB in June 2010. b) LWU was contracted in all 18 districts and provided training to VLF groups. Software and a manual for the accounting system were in place as of March 2011, and suitable training of LWU and village staff was provided. Village revolving fund groups collected deposits from members based on the ratio of 20:80. This ratio, however, was found inappropriate and was revised to 20:100 through a minor change in scope on 4 June 2013.

All funds withdrawn from the imprest account for the purpose of the Village Revolving Funds shall be deposited in bank accounts at commercial banks

Schedule 5 para. 11

Complied. Funds were deposited with banks located in the

Appendix 7 55

Covenant

Reference in Loan Agreement

Status of Compliance acceptable to ADB and maintained by respective LWU units of district level before disbursement to individual borrowers. MAF shall ensure that all service provider agreements between the RO and LWU units contain provisions that mandate contracted LWU units to submit monthly progress and financial reports to the RO, the respective PCCs, and the PSC, on the outcomes and sustainability of the village revolving fund program.

district (or in the province where no suitable district bank was available), and ADB was informed of which banks accounts were engaged.

The average size of loans from a Village Revolving Fund shall be less than $300 equivalent and no loan to an individual borrower shall be in excess of $500 equivalent per individual borrower.

Schedule 5 para. 12

Complied. A minor change in implementation arrangement was approved on 4 June 2013, and Financial Agreement of Loan 2259 and IFAD Loan 8229 were amended accordingly: "The average size loans from a Village livelihood fund shall be less than $750 equivalent and no loan to an individual borrower shall be in excess of $1,300 equivalent per individual borrower."

1

Lao PDR shall ensure that (a) the facilities to be constructed, upgraded or renovated and the equipment to be provided under the Project are designed, constructed, operated and maintained in compliance with applicable environmental laws and regulations of Lao PDR, ADB' s Environment Policy and the initial environmental examination prepared for the Project; (b) all mitigation measures detailed in the EMP are implemented and monitored to a satisfactory standard, and (c) implementation of the EMP is reported to ADB as part of the quarterly Project reports.

Schedule 5 para. 13

Partially complied. (a) Local environmental offices reviewed civil works construction plans and activities to ensure compliance with relevant regulations. However, records of these reviews were not kept systematically. (b) ADB’s safeguard review mission in February 2012 found that the EMP was not disseminated to PIUs and extension workers, or translated in the implementation plan used by extension workers. The mission concluded that the EMP was not systematically monitored and reported. ADB’s project administration memorandum made only a single reference to the initial environmental examination and EMP as a covenant “not yet due,” but provided no detail on what the EMP comprised and the specific measures and responsibilities required. Nonetheless, the 2012 safeguard review mission concluded that the project complied with most

1 Amendments to the Financing Agreement(Special Operations) dated 30 August 2013, p3, para 12

56 Appendix 7

Covenant

Reference in Loan Agreement

Status of Compliance environmental requirements, and it noted that no major environmental and social impacts or risks were found as a result of project’s activities. (c) Quarterly reports regularly contained a short text box on the EMP that noted, “civil works constructed to date involve offices in urban centers with minimal environmental impact,” occasionally adding, “compliance monitoring needed for village infrastructure.” Thus, there was no reporting on village infrastructure or other elements of the initial environmental examination and EMP. In light of the anticipated environmental risks and impacts of the project, the EMP comprised (i) collaboration with concerned authorities in monitoring land use changes; (ii) soil and water quality monitoring, training of local staff and beneficiaries in sound environmental practices, and environmental impact monitoring; (iii) support for Unexplored Ordinance clearance, where relevant, and reporting of the results of implementation; (iv) soil erosion and surface water contamination training and monitoring as part of the extension workers’ routine work; (v) improved hygiene and environmental health through penning to control animal movement, appropriate disposal of wastes, disease control through vaccination, and vaccine management; and (vi) provision of environmental screening in civil works contracts, consultation with local environmental authorities to obtain permits prior to construction of major civil works, and provision of mitigation measures in contracts.

Appendix 7 57

Covenant

Reference in Loan Agreement

Status of Compliance

Ethnic Groups

Lao PDR shall ensure that the EGDP prepared for the Project is implemented. In particular, Lao PDR shall ensure that (a) participatory approaches are fully utilized to enable full participation of ethnic groups in decision making; and (b) capacity building such as literacy and numeracy trainings shall be widely provided to ethnic groups.

Schedule 5 para. 14

Partially complied. (a) The project fully utilized participatory approaches in mobilizing livestock production groups. (b) The project could not directly provide literacy and numeracy training, since the amount budgeted was inadequate. However, the project built the capacity of ethnic groups in administration of the VLF, including basic accounting practices.

Resettlement

Lao PDR shall cause DLF, the RO and PIUs to comply with ADB's Policy on Involuntary Resettlement and ensure that land to be acquired for any civil works is clear of occupation and not under any use as defined by ADB's Policy on Involuntary Resettlement.

Schedule 5 para. 15

Complied. All civil works were constructed on public or village-owned land and did not involve any resettlement.

Gender

Lao PDR shall ensure that the gender action plan prepared for the Project is fully implemented in a timely manner, and that adequate resources are allocated for this purpose. In particular, Lao PDR shall cause PIUs to (a) promote women’s participation in village based training programs such that approximately half of all trainees are women, and (b) encourage women’s participation in Village Revolving Fund groups at a level of at least 50 (fifty) percent of all the group members.

Schedule 5 para. 16

Complied. The gender action plan was prepared and carefully implemented, and its status was updated quarterly.

Anticorruption MAF shall establish controls and procedures for flow of funds, financial information, accountability and audits, and develop adequate safeguards to ensure compliance with ADB's Anticorruption Policy and to protect assets from fraud, waste and abuse. The RO shall conduct period physical inventories of fixed assets and stocks, and ensure that periodic reconciliation is performed among different offices. All external costs related to the audits and investigations shall be borne by the Project. MAF shall ensure that it is known to officials and workers of the RO, all PAFOs, all PIUs and all related PAFEOs, and villagers of participating villages to whom to report on suspected fraud, waste or misuse of Project resources and property.

Schedule 5 para. 17

Complied. Inspection of fixed assets was performed by the State Audit Office as part of the audit requirement. All other controls and procedures were satisfactory to ADB.

58 Appendix 7

Covenant

Reference in Loan Agreement

Status of Compliance

Performance Monitoring and Evaluation

Lao PDR shall ensure that project performance monitoring and evaluation is conducted for each project Part and Component. IFAD Results Impact Management System (RIMS), which uses a household asset index and malnutrition among children under 5 years of age as mandatory indicators, shall be used for baseline survey.

Schedule 5 para. 18

Partially complied. The DMF was revised in 2012 to refine unclear indicators that were difficult to monitor. Project performance monitoring was updated quarterly. The RIMS surveys provided some baseline data at the midterm review (2010) and at completion of the project (2013). However, these surveys did not provide an adequate baseline of many indicators incorporated in the final version of the DMF.

Review

Lao PDR and ADB along with IFAD and SDC shall jointly conduct reviews of the Project at least twice a year throughout the entire Project implementation period. In addition to these reviews, a comprehensive midterm review shall be carried out in the fourth year of project implementation addressing social and gender impacts, progress in implementation procedures, procurement performance, compliance with covenants in this Financing Agreement in addition to actual physical and financial progress of the project.

Schedule 5 para. 19

Complied. ADB and SDC jointly conducted review missions. IFAD joined review missions after the midterm review in November 2010.

ADB = Asian Development Bank, DLF = Department of Livestock and Fisheries, EMP = environmental management plan, IFAD = International Fund for Agricultural Development, LWU = Lao Women’s Union, MAF = Ministry of Agriculture and Forestry, PAFO = provincial agriculture and forestry office, PIU = project implementation unit, RIMS = Results and Impact Management System, RRP = report and recommendation of the President, SDC = Swiss Agency for Development and Cooperation, VLF = Village livelihood fund.

Appendix 8 59

ETHNIC GROUPS DEVELOPMENT PLAN 1. The Lao People’s Democratic Republic (Lao PDR) is culturally diverse. The government officially recognizes 49 main ethnic groups and more than 160 subgroups. Cultural diversity is greatest in the uplands of northern Lao PDR where the Northern Region Sustainable Livelihoods through Livestock Development Project was implemented. When the project was prepared in 2005, it was clear that there would be significant impacts on ethnic groups in the project area, as defined in the prevailing Asian Development Bank (ADB) Policy on Indigenous Peoples (1998). An ethnic groups development plan (EGDP) was prepared to ensure the full participation of and equitable access to project outputs by all ethnic groups, with particular attention paid to the needs of ethnic women. 2. The main components of the EGDP were similar to those of the project: (i) train extension workers to develop social, gender, and cultural skills to enable them to work with diverse ethnic communities; (ii) mobilize and organize ethnic smallholders into village-based livestock production groups (LPGs) for community-driven development (CDD); (iii) provide extension and credit access, mobilize savings, promote microenterprise development, and strengthen market orientation; and (iv) facilitate improved access to resources for better management and marketing of livestock products. For specific outreach to ethnic communities, the EGDP also envisioned the provision of literacy and numeracy training in the Lao language and development of audiovisual extension materials in ethnic group languages for radio broadcasts in the project areas. 3. With its focus on ethnic women, the EGDP was closely linked to the project’s gender action plan (GAP). However, unlike the GAP, the EGDP did not set numeric targets for ethnic group participation. Rather, it contained estimated budgetary allocations that would support the implementation of the EGDP. These amounted to $5.0 million, or 28% of the total original project cost. It is impossible to track disbursements for any particular ethnic group, but ethnic group participation in major project activities—LPGs, farm extension, and borrowing from the village livelihood fund (VLF)—clearly shows that ethnic groups’ proportional share of total project funding was well in excess of 28%, which is an inevitable outcome given the predominance of ethnic groups in the project area. 4. As part of project completion, a social assessment was undertaken through visits to 14 project villages and interviews with 59 LPGs. Of the 14 villages, one was from the majority Lao-Tai community, four comprised mixed ethnic groups, and the remaining nine were from upland ethnic groups, mainly Hmong, and Akhahh. ADB’s subsequent mission to prepare this project completion report (PCR) revisited these villages. The social assessment, the PCR mission, and the project’s monitoring and evaluation (M&E) data all show that the project achieved equitable participation by all ethnic groups in project activities. 5. Table A8.1 shows the estimated ethnic composition of the project area population and the composition of all LPGs. The population estimates are from the project’s 2013 Results and Impact Management System (RIMS) survey of 900 households in 30 villages randomly selected from the total 324 villages covered by the project.1 The Lao-Tai, who comprise two-thirds of the national population, made up only 27% of this sample’s population. About 69% of the households and 73% of the people are from minority ethnic groups. A single ethnic group usually predominates within an individual village. In the RIMS sample, there was a single ethnic

1 Since no comprehensive baseline survey was ever undertaken, there is no precise information available on the

ethnic composition of the project villages as a whole.

60 Appendix 8

group in 18 villages (60%), two ethnic groups were present in 8 villages (27%), and three or more ethnic groups lived in only 4 villages (13%). As a result, the M&E database classifies LPGs by ethnic group, which reflects the predominant ethnic makeup of the LPGs and the villages. Table A8.1: Composition of Results and Impact Management System Sample Households

and all Livestock Production Groups Ethnic Group Estimated Population Composition of LPGs

Households People Shares of HHs

Shares of

People

LPGs HHs in LPGS

% of LPG HHs

Lao-Tai 1,014 4,980 31% 27% 490 3,944 30%

Kmou 1,098 6,468 34% 35% 610 5,103 39%

Hmong 793 5,648 25% 3000% 245 1,991 15%

Akhah and Sing Silee 268 1,201 8% 6% 130 1,023 8%

Sing Moon and Phong

15 120 0% 1% 21 173 1%

La Mat 43 234 1% 1% 34 281 2%

La Hoo 0 0 0% 0% 57 471 4%

Emean 0 0 0% 0% 10 85 1%

Total 3,231 18,651 100% 100% 1,597 13,071 100%

LPG = livestock production group, HHs = households Note: Totals may not add due to rounding. Sources: Results and Impact Management System, Second Impact Survey Report (end of Project), January 2014;

Project monitoring and evaluation database.

6. A total of 1,597 LPGs were formed with a total membership of 13,071 households, 70% of which comprised ethnic group communities and 30% of which were Lao-Tai. There is some mismatch between the composition of the LPGs and the RIMS estimates of the population overall. The Hmong, who comprised 25% of the RIMS households in 2013, made up only 15% of the LPGs. In contrast, 67 LPGs comprising 556 households were from the La Hoo and Emean groups, even though these groups were not present in the RIMS sample. Given the predominance of a single ethnic group in most villages, these discrepancies reflect sampling errors in the RIMS survey. The membership in the LPGs was equally divided between men and women, since participation of both spouses (if present) was a requirement for participation in the LPGs.

Appendix 8 61

Table A8.2: Distribution of Households, Livestock Production Group Membership, and Village Livelihood Fund Loans by Ethnic Group

Ethnic Group

Shares of:

Population (households)

LPG Members VLF Loans

Lao-Tai 31% 30% 37%

Kmou 34% 39% 36%

Hmong 25% 15% 8%

Akhah and Sing Silee 8% 8% 11%

Sing Moon and Phong <1% 1% 2%

La Mat 1% 2% 2%

La Hoo <1% 4% 2%

Emean <1% 1% 1%

Total 100% 100% 100%

LPG = livestock production group, VLF = village livelihood fund. Note: Totals may not add due to rounding. Sources: Table A8.1; project monitoring and evaluation database.

7. Out the 9,519 VLF loans, 63% were provided to ethnic groups and 37% to the Lao-Tai (Table A8.2). The state-run Nayoby Bank is an alternative source of subsidized credit in some areas of Louangphabang and Xiangkhoang provinces, particularly in Hmong communities where cattle predominate and households prefer the more attractive terms offered by Nayoby Bank.2 Hmong households therefore took a relatively small share of VLF loans. In the project area as a whole, however, the VLF has been the major source of microfinance for the project villages. Thus, the project improved access to finance for ethnic groups to expand livestock and other livelihood activities. A large number of ethnic minority women were able to use loans for the first time for productive activities. 8. Overall, the intent of the EGDP was largely achieved. This finding is consistent with the ADB safeguard review mission of March 2012, which concluded that gender and ethnic dimensions had been mainstreamed through the CDD approach—the starting point for all project activities. The project provided opportunities for isolated upland ethnic communities to manage their livestock more effectively than before, giving them new skills when dealing with traders and more awareness of market developments. More regular interaction between district extension staff and the remote communities provides a foundation for future extension outreach. Some households have increased household income significantly from selling livestock, demonstrating strong potential for greater commercialization of livestock production. However, there was variation among households in utilizing the extension knowledge, depending on their absorptive capacity and resource base. Continued monitoring and motivational support would be needed to expand technology adoption and commercialization by the weaker households. 9. Despite the overall achievement, there are areas where outputs were not delivered as planned:

(i) The project was not able to provide literacy and numeracy training to the ethnic groups, as this activity was inadequately planned and budgeted, and was not

2 Field observations indicate that loans of KN15 million–KN20 million are needed by farmers who wish to engage in

commercial cattle fattening. VLF offered a maximum loan amount of KN8 million for cattle, repayable in 3 years at 8% annual interest, and with a 20% household savings requirement. In contrast, Nayoby Bank offered a maximum loan of KN30 million, repayable in 5 years at 7% interest, with no savings requirement.

62 Appendix 8

effectively pursued during the project’s early implementation. The extension workers provided training in the Lao language, with interpretation done in ethnic languages by suitable LPG members. Language was a constraint for some communities, especially for women. The use of ethnic languages would have enhanced training effectiveness, particularly for the smaller groups such as the Akhah and Sing Silee.3

(ii) The project was not able to develop audiovisual extension materials in ethnic group languages for radio broadcasts in the project area. No explicit budget was provided for this, and no clear guidance was provided in the project administration memorandum or by ADB’s early review missions.

(iii) While it had been hoped that the district agriculture and forestry offices would recruit extension workers who could provide training in the local languages, it proved extremely difficult to find sufficient people from the ethnic groups who had both the required agricultural training and language skills.

10. According to the executing agency’s PCR, the purpose and scope of the village-level literacy and numeracy training was never clearly understood by the project’s managers. ADB’s project documents gave responsibility for the training to the District Lao Women’s Union, which had neither the staff nor the experience to implement such training. ADB provided no guidance on how to select the villages for the training or how to recruit the trainers. Given the many implementation challenges that the project faced, and the recognition that this component was inadequately planned and budgeted, the decision was made to drop the training component during an ADB review mission in December 2009. The failure to carry out these activities was unfortunate, but did not appear to have a significant impact on the project’s overall success in ensuring equitable and effective participation by the ethnic groups. 11. The clear lesson is that project components need to have focused and well-understood objectives, and must be designed and budgeted realistically in light of local implementation capacities. Components not directly related to core project outcomes should be avoided.

3 ADB’s review mission in December 2009 observed that language was not a significant barrier for the larger Kmou

and Hmong communities.

Appendix 9 63

UTILIZATION OF CONSULTING SERVICES

Position

Input at Appraisal (person-months)

Actual Input (person-months)

A. Lao Consulting Group

International Consultants

Extension Training Consultant 20 34 Community Mobilization and Gender 6 6 Monitoring and Evaluation Consultant 6 5 Livestock Production Consultant 8 6 Marketing and Trade Development 6 2 Smallholder Poultry Consultant 3 3 Project Management Consultant 2 Subtotal – International 49 58

National Consultants

Extension Training Coordinator

44 57

Community Mobilization and Gender

33 33

Extension Support Consultant 1 55 35 Extension Support Consultant 2 55 34 Extension Support Consultant 3 55 35 Extension Support Consultant 4 55 35 Extension Support Consultant 5 55 36 Smallholder Poultry Production 50 9 Smallholder Poultry Production 36 Project Management Specialist 1 Monitoring and Evaluation Specialist 46 Marketing and Trade Development 3 Subtotal – National 402 360 Subtotal (A) 451 418

B. Micro Finance Center

National Consultants Microfinance Team Leader 4 Microfinance Consultant 1 15 Microfinance Consultant 2 15 Microfinance Consultant 3 15 Subtotal (B) 49

C. Regional Office Advisor (International) 15 15.5

Subtotal: (C) 15 15.5 D. Project Management Specialist (National) 31

Subtotal: (D) 31 Grant Total (A+B+C) 466 513.5

Source: Executing Agency Progress Report and Asian Development Bank Disbursement Records.

64 Appendix 10

PROCUREMENT OF VEHICLES AND EQUIPMENT

Description Quantity 2014 User Plan Actual RO BK LNT LPB HP XK VTE

I Vehicles 1 Toyota jeep 2 1 1 2 Ford pickup truck 12 15 4 2 2 2 2 2 1 3 Motorcycle 89 153 10 15 32 32 45 15 4 II Office Equipment 1 Desktop computer 84 90 13 9 17 15 21 8 7 2 Acer laptop computer 11 2 2 2 3 2 2 4 3 Toshiba laptop computer 1 1 4 Lenovo laptop computer 24 5 2 4 4 6 2 1 5 HP printer

35 54 9 7 9 10 10 7 2

6 Epson printer 3 2 1 7 Canon printer 1 1 8 Epson LCD projector 6 6 2 1 1 1 1 9 LCD screen 6 7 3 1 1 1 1 10 Digital camera 33 26 4 4 7 6 2 3 11 GPS Device 20 2 2 12 Fax machine 21 29 6 3 4 5 6 3 2 13 Desk phone 5 2 2 14 Scanner 1 1 15 External hard drive 6 5 1 16 Photocopy machine 27 27 3 3 5 5 7 3 1 17 Generator 1 1 4 18 Nitrogen production machine 1 1 19 Microwave 1 1 20 Water heater 7 7 21 Washing machine 1 1 22 Coffee maker 1 1 23 Scale 21 1 2 4 4 8 2 24 Megaphone 19 1 2 4 4 6 2 25 Refrigerator 6 24 5 4 5 4 5 1 26 Mobile phone 1 1 27 Water cooler 1 1 28 Vacuum sweeper 1 1 29 Television 1 1 30 Paper shredder 1 1 31 Air-conditioner 10 12 5 4 3 32 Loan mower 3 1 1 1 33 CCTV 19 1 2 4 4 6 2 34 Computer Server 1 III Office furniture 1 Office desk

129

62 23 2 5 16 6 2 8 2 Wooden table 199 10 21 48 33 61 26 3 Office chair 462 51 71 97 42 103 84 14 4 Client bench 18 2 4 4 6 2 5 Wardrobe 6 6 6 Filing cabinet 111 25 12 18 14 32 10

BK = Bokeo, HP = Houaphan, LNT = Louang-Namtha, LPB = Luangphabang RO = Regional Office, VTE = Vientiane, XK = Xiangkhoang. Source: Project records.

Appendix 11 65

MAJOR CONTRACTS FOR CIVIL WORKS

No. Description Province/District Number of Schemes

Contract Amount ($)

I A. PAFO/DAFO Offices and Project Facilities

1 Training accommodation LPB, RO 1 86,307

2 Vaccine storage room LPB, RO 1 31,245

3 Bokeo PIU Office BK 1 69,148

4 Louang-Namtha PIU Office LNT 1 25,970

5 Louangphabang PIU Office LPB 1 56,270

6 Xiangkhoang PIU Office XK 1 42,015

7 Houaphan PIU Office HP 1 73,118

8 Meung DAFO Office BK 1 12,266

9 Pha-Oudom DAFO Office BK 1 3,201

10 Sing DAFO Office LNT 1 35,247

11 Long DAFO Office LNT 1 11,665

12 Nale DAFO Office LNT 1 15,141

13 Phonxai DAFO Office LPB 1 10,669

14 Pakxeng DAFO Office LPB 1 10,333

15 Viangkham DAFO Office LPB 1 11,777

16 Xamtai DAFO Office HP 1 13,310

17 Houa-Muang DAFO Office HP 1 12,726

18 Ed DAFO Office HP 1 12,931

19 Xiangkho DAFO Office HP 1 12,930

20 Khoun DAFO Office XK 1 10,148

21 Nonghed DAFO Office XK 1 10,272

Total (A) 21 566,687

II. B. Village Infrastructure Fund

22 Village meeting hall BK, LNT,LPB,HP, XK 130 891,939

23 Irrigation system BK, LNT,LPB,HP, XK 15 297,590

24 Gravity-fed water supply system BK, LNT,LPB,HP, XK 28 437,743

25 Water pond BK, LNT,LPB,HP, XK 16 293,326

26 Bridge BK, LNT,LPB,HP, XK 29 670,534

27 Access road BK, LNT,LPB,HP, XK 19 633,260

28 Renovation of school BK, LNT,LPB,HP, XK 8 158,132

29 Public toilet HP, XK 3 4,220

Total (B): 248 3,386,744

Total (A)+(B) 269 3,953,431

BK = Bokeo, DAFO = district agriculture and forestry office, HP = Houaphan, LNT = Louang-Namtha, LPB = Louangphabang, PAFO = provincial agriculture and forestry office, PIU = project implementation unit, RO = regional office, XK = Xiangkhoang Source: project records.

66 Appendix 12

ECONOMIC REASSESSMENT 1. The project completion review (PCR) mission visited three of the five project provinces and seven of the 18 project districts in May 2014 to directly observe the village livestock activities and to interview farmers, village leaders, local staff of the district agriculture and forestry offices (DAFOs) and District Lao Women’s Unions (DLWUs), and project management personnel in the Louangphabang regional office. In the course of the field work, the mission collected data on project implementation; before- and after-project livestock technology (vaccination, confinement, and feeding practices); production costs; animal morbidity and mortality; and market prices of livestock, labor, and other inputs. This information provides the basis for the economic reassessment of the project. In addition, the mission asked about the continuing activities of the DAFOs and DLWUs in support of the livestock production groups (LPGs) and village livelihood fund (VLF) borrowers. Finally, the mission examined the quality and costs of village infrastructure financed by the project.1 A. Village Conditions in the Project Area 2. Many indicators of improved welfare and prosperity were apparent in almost all of the villages visited by the mission. All villages had electrification, and electric appliances, parabolas, and motorcycles were commonplace, although most housing was constructed with traditional wood and bamboo material. The local roads were typically unpaved and rough, but the mission was able to drive directly to village meeting locations in all of the villages visited. 3. There are various sources of dynamism in rural areas of Lao People’s Democratic Republic (Lao PDR). In the province of Louang-Namtha, the mission frequently observed plantations of perennial crops like rubber, banana, sugarcane, and teak, both in relatively large foreign concessions and in smaller private holdings. Contract farming has become common and provides a more secure source of income. Fueled by rapidly growing demand for meat and therefore livestock feed in Thailand and Viet Nam, corn has become a widespread upland crop. The small towns of Lao PDR appear to be growing rapidly, providing educational and work opportunities for rural people located within commuting distance. One result of this dynamism is that the rural labor market has tightened and rural wage rates have risen rapidly in the last few years. 4. Villagers and DAFO personnel in several locations reported that in recent years there was a significant decline in the production of rice under shifting cultivation on steep upland slopes. It was not possible to quantify this change because of the difficulty of measuring cropped areas on steep land. The major source of the change has been the emergence of rubber, banana, sugarcane, and corn as rainfed cash crops, replacing rice, most notably in Louang-Namtha province. At the margin, the project has also had a positive impact through the substitution of permanent forage crops in place of seasonal crops on steep slopes. More generally, the growing market orientation and commercialization of agriculture, in addition to expanding off-farm labor opportunities, means that many villagers now prefer to purchase their rice in local markets so that they can devote their labor to more remunerative activities.

1 Social dimensions and impacts of the project are discussed in Appendixes 3 and 8.

Appendix 12 67

B. Data Sources and Consistency 5. The livestock enterprise models were prepared starting with the basic models developed under the project preparatory technical assistance,2 assessing their present relevance in the field, and updating these with data on livestock technology and prices collected in the field during the PCR mission. Given concerns about the reliability of the project’s monitoring and evaluation (M&E) data the PCR mission checked the consistency of the EA’s data on livestock technology adoption, productivity growth, and mortality with district-, village-, and farm-level information obtained in the field. Besides price data, the mission recorded information on the costs of constructing animal enclosures (pens and fences) and planting forage crops, as recommended by the extension services. Overall, the models developed by the project preparatory technical assistance capture the features of the predominant traditional livestock systems and remain relevant in terms of physical inputs and outputs. In interviews with farmers, the PCR mission assembled models of typical practices by progressive farmers who had adopted the recommended new technologies. Appendix 4 discusses the key elements of the introduced livestock management practices. There is considerable diversity in livestock production systems in terms of herd size, management practices, and commercial orientation. For example, improved cattle production should involve deworming and vaccination, but feed can be provided in various ways depending upon household land, labor and capital availability (e.g., by pen feeding, enclosed or fenced pastures, or cut and carry, and with numerous options for forages and concentrates).3 Reducing this diversity to a few discrete input-output models is an unavoidable oversimplification of reality.

2 Asian Development Bank (ADB). 2003. Technical Assistance to the Lao People’s Democratic Republic for

Preparing the Participatory Livestock Development Project. Manila. 3 Studies of the diversity and dynamism of cattle production and marketing systems in Lao PDR are contained in (i) A.

Phonvisay. 2013. Livestock and Livelihoods: Trajectories in the Production and Marketing of Large Ruminants in the Uplands of Northern Laos (PhD thesis). University of Queensland; and (ii) N. Bourgeois Lüthi. 2010. Beef Cattle and Buffalo Trade Patterns from Xiengkhouang Province, Lao PDR to Viet Nam in a Rapidly Evolving Regional Marketing Context (MSc thesis). University of London.

68 Appendix 12

Table A12.1: Household-Level Financial Costs and Returns to Livestock (KN)

Cattle Pigs Goats Poultry

Technology Traditional Improved Traditional Improved Traditional Improved Traditional Improved

Cycle 1 Per Year 1 Per Year 1 Per Year 2 Per Year 1 Per Year 2 Per Year 1 Per Year 3 Per Year

Investment Costs 0 4,600,000 500,000 1,650,000 3,750,000 5,670,000 880,000 2,590,000

Purchase breeding stock 0 0 0 0 3,750,000 2,500,000 380,000 490,000

Pens/fences (materials & labor)

0 3,000,000 500,000 1,650,000 0 2,870,000 500,000 2,100,000

Pasture (labor) 0 1,600,000 0 0 0 0 0 0

Other labor 0 0 0 0 0 300,000 0 0

Seasonal Costs per Cycle 20,395,313 24,357,500 4,240,941 4,535,000 1,260,000 1,516,500 560,000 1,217,750

Purchase animals 18,000,000 18,000,000 3,000,000 3,000,000 0 0 0 0

Vaccine/medicine/vitamins 0 30,000 90,000 90,000 0 4,000 0 64,000

Seed 0 25,000 0 0 0 7,500 0 0

Feed 0 3,240,000 86,400 307,500 0 0 0 760,000

Labor 2,395,313 3,062,500 1,064,541 1,137,500 1,260,000 1,505,000 560,000 393,750

Periodic Maintenance 0 1,050,000 75,000 310,000 0 307,500 480,000 740,000

Replace breeding stock 0 0 0 0 0 0 380,000 490,000

Repair pens/fences (3 years)

0 450,000 75,000 310,000 0 300,000 100,000 250,000

Re-sow pasture (10 years) 0 425,000 0 0 0 7,500 0 0

Other labor 0 175,000 0 0 0 0 0 0

Credit Costsa 16,960,000 16,960,000 3,120,000 3,120,000 3,240,000 3,240,000 1,080,000 1,080,000

Loan 16,000,000 16,000,000 3,000,000 3,000,000 3,000,000 3,000,000 1,000,000 1,000,000

Interest 960,000 960,000 120,000 120,000 240,000 240,000 80,000 80,000

Gross Return per Year 23,587,500 30,200,000 5,421,000 10,792,000 760,421 3,178,000 1,113,600 4,875,000

Animal salesb 23,587,500 30,000,000 5,346,000 10,692,000 760,421 3,078,000 1,113,600 4,987,500

Manure value 0 200,000 75,000 100,000 0 100,000 0 150,000

Average Net Return per Year

2,344,188 4,544,500 820,559 1,490,500 601,800 1,166,125 311,600 816,250

Mortality Rate 8% 0% 10% 10% 10% 5% 20% 10%

VLF Borrowing Households (traditional and improved)

3,750 3,637 1,028 967

FIRR (20 years) 28% 48% 24% 60% 14% 24% 40% 51%

VLF = village livelihood fund. a

For cattle, these costs assume households borrow the maximum VLF amount in year 1, then half this amount in years 2 and 3. For other livestock, only a single loan is taken. b For traditional goat rearing, the average return reflects buildup of the herd over time.

Source: Project completion review mission estimates.

6. Table A12.1 shows that livestock are highly profitable in financial terms for individual households, even when using traditional management practices. The project offered farm households the opportunity to significantly raise the returns from livestock. The PCR mission found several examples of LPGs or, more often, small numbers of individual farmers who have progressed well in adopting recommended technology and a more commercial orientation.

Appendix 12 69

7. District-level data collected by the PCR mission indicate that livestock numbers have grown more rapidly since 2008 in the project target villages than in the districts as a whole.4 Hence, the project has impacted horizontal expansion of livestock production using traditional technology. About 9,500 households took VLF loans to expand or initiate livestock raising, half of which were used to purchase cattle or buffalo, and 37% of which were used to purchase pigs. Unfortunately, there is no definitive evidence on the extent of vertical expansion, i.e., how many households fully or partially adopted improved technology. The following analysis uses the 9,500 borrowing households to estimate the net revenue stream for the project. However, not all LPG members who participated in the extension activities were interested in and/or able to access VLF loans. Hence, using only the VLF borrowers results in a decrease of the total estimated benefits by excluding LPG members who expanded their livestock activities on the basis of the extension advice alone. The mission’s field observations suggest that non-borrowing adopters could be significant in number.5 8. Vaccination and deworming of calves have increased and are contributing to the growth of cattle production. This conclusion is supported by the mission’s interviews with DAFO staff and villagers, and by district-level data on livestock mortality. The project’s survey of 900 households in October 2013 revealed that about two-thirds of the respondents had vaccinated their livestock within the previous 12 months, although the types of livestock and vaccines were not specified.6 Lower mortality appears to be a positive outcome, although it is not completely attributable to the project given the contributions of the World Organisation for Animal Health and other sources.7 Sustainability of vaccination in the project villages is uncertain given the end of project support, but a number of villagers reported that they are capable of obtaining vaccines and medicines in the district towns and administering them by themselves. 9. However, with the exception of vaccination, the extent of vertical expansion through other forms of improved technology is not known. Thus, the analysis below aggregates horizontal and vertical incremental revenue changes by using varying assumptions about growth sources besides vaccination. 10. The annual rates of return to individual enterprises are sensitive to (i) the number of animals raised, (ii) the number of production cycles per year (poultry and pigs), (iii) whether young animals for fattening are purchased at the start of each cycle or are the offspring of the existing herd, and (iv) mortality. The models used in this analysis are conservative in regard to the scale and frequency of the operations, and in regard to animal mortality, reflecting the conditions and most typical practices observed in the project villages. Dry season forage availability was a constraint to year-round cattle fattening in most of the project area, which is why the cattle models considered in this analysis assume only a single annual production cycle for fattening.

4 The World Bank’s database on economic indicators for Lao PDR indicates that the national index of livestock

production rose by 26% from 2009 to 2012. 5 For example, in Louangphabang and Xiangkhoang provinces, the PCR mission met progressive cattle farmers who

did not borrow from the VLF. Some had access to loans from Nayoby Bank, which operates in 46 of the poorest districts of Lao PDR and offers terms more attractive than those of the VLF.

6 The data are from IFAD’s Results and Impact Management System (RIMS) survey of 30 villages randomly selected

from the 324 villages covered by the project. 7 The World Organisation for Animal Health is providing $3.5 million in assistance to Lao PDR to help with

vaccinating cattle against foot-and-mouth disease and hemorrhagic septicaemia. With the goal of creating 10 districts in northern Lao PDR free of foot-and-mouth disease and hemorrhagic septicaemia, the national and provincial governments also contribute financially to the vaccination program. The Red Cross and international nongovernment organizations also support livestock vaccination at the local level.

70 Appendix 12

C. Economic Analysis

1. Methods and Assumptions 11. The project-level analysis uses the following methodology:

(i) For tradable inputs and outputs, world market prices plus transport differentials to Lao PDR were compared to the financial prices actually paid or received at the farm level (Table A12.2). Adjustments from financial to economic prices were made for livestock and labor. No adjustments were made for other tradable agricultural inputs (seeds and vaccines) since their contribution to total production costs was very small.

(ii) A technology adoption rate of 25% is assumed, i.e., among all VLF borrowers for a given type of livestock, 75% use the loans to expand livestock operations with no change in technology (horizontal expansion), while 25% adopt technology recommended under the project (vertical expansion). The livestock models for the adopters are based on farmer interviews during the PCR mission.

(iii) The buildup of net benefits took 5 years, from the start of project disbursements in 2007 to when the initial VLF loans were fully repaid in 2011. This reflects the 2-year delay in the project’s start-up.

(iv) Project costs include Asian Development Bank (ADB) and external cofinancing, including the Japan Fund for Poverty Reduction capacity building technical assistance. Government in-kind costs and the value of foregone taxes and duties are excluded. Project costs not directly linked to capacity building of the DAFOs and DLWUs, LPG formation, livestock extension and technology adoption, and activities for gender and ethnic group development are excluded. The excluded costs include infrastructure not directly related to livestock as well as part of the overhead for project supervision and implementation management.8

(v) In the economic analysis, the local currency share of project costs is adjusted by the standard conversion factor, which is 0.9 for Lao PDR.

(vi) All cost and revenue streams are in 2014 kip. (vii) The economic life of the project is assumed to be 20 years with no salvage value.

12. Livestock prices vary across different production systems (e.g., traditional free roaming versus confined pen feeding) reflecting the differences in weight gain and physical condition; these difference are incorporated in the analysis. Most project economic analyses in Lao PDR, including the project’s project preparatory technical assistance, assume that the economic value of rural labor is below the market level. The mission’s observations suggest that the recent surge of investment in plantation crops—particularly rubber—has contributed to rapid growth of rural employment and wages that could prove unsustainable.9 Moreover, much of the labor used in animal husbandry (herding, cutting feed, and watering) is performed by family members for whom the opportunity cost of time is low. Hence, the economic analysis values labor at 80% of the observed market wage. Non-tradable farm commodities, particularly the rice bran used as

8 Of the project’s externally financed infrastructure support, 45% ($1.62 million), was spent on the rehabilitation of

infrastructure that did not directly contribute to the project’s livestock development, including provincial and district agriculture offices, village meeting halls, irrigation, school renovation, and public toilets. However, the construction of training facilities, a vaccine storage room, and village water ponds, bridges, and access roads, amounting to 55% of the infrastructure support, contributed to improved livestock productivity and are included in project costs. Similarly, the project’s supervision and implementation component financed about $1.89 million in support of project overhead and management, of which it is estimated that 43% (mainly for the regional office overhead and costs for the international advisors) did not directly contribute to village livestock development.

9 For example, rubber farmers in Louang-Namtha have recently received prices for raw latex far below expectations.

Appendix 12 71

feed and materials used to build pens, are valued at the farm-gate prices reported to the PCR mission. 13. Other than labor, the major difference between financial and economic prices lies in the interest rate for livestock loans. The financial models assume that all livestock investments are initially financed by the maximum loans available from the VLF for a given purpose, with terms and conditions as shown in Table A4.2 of Appendix 4. The VLF annual interest rates at 8% and 12% were well below the full cost of funds estimated in an evaluation of the VLF program.10 That evaluation demonstrated that to be financially sustainable, an annual rate of 24% would be needed to cover inflation and the costs of funds, operating expenses, loan losses, and a small margin for profit or growth. The rate of 24% is used in the economic analysis. 14. The kip is presently allowed to fluctuate with the market within a managed band. The kip–US dollar exchange rate has been stable at about KN8,000 = $1 since 2011. There is no indication of major undervaluation or overvaluation of the kip. Given the government’s policy of seeking a balanced kip exchange rate with both the dollar and the Thai baht, there is no reason to expect significant change in the dollar’s value versus the kip during the time frame used in the analysis. However, long-run inflation is projected to be higher in Lao PDR as compared to major international trade partners, which would add depreciation pressure. 11 Hence, an average exchange rate of KN8,300 = $1 is used.

Table A12.2: Economic Price Adjustments

Item Financial Economic

2014 exchange rate (KN/$) 8,024 8,300

Cattle (KN/kilogram, average selling weight) 70,000 68,420

Pork (KN/kilogram live weight, 45–50 kilograms)

45,000 43,300

Chicken (KN/bird, average selling weight of 0.8 kilogram)

35,000 32,000

Labor (KN/day) 35,000 28,000

Loan interest rate (%/year) 8%–12% 24%

Standard conversion factor 0 0.9

Source: Project completion review mission estimates.

2. Project Benefits

15. Quantified benefits of the project include the incremental net value of livestock produced by the 9,500 households that took VLF loans. The principal unquantified benefits include (i) incremental livestock income for farmers who adopted some or all of the introduced technology but did not borrow from the VLF, (ii) the benefits of the village infrastructure investments, (iii) nutritional impacts of the higher household incomes and greater availability of meat (chicken and pork) on household food security, and (iv) the environmental benefits of reduced shifting cultivation. These benefits are offset by the exclusion of costs for (i) village infrastructure unrelated to livestock, (ii) the project preparatory technical assistance and advisory technical assistance used to prepare the project, and (iii) many of the overhead costs of project management. On balance, the excluded benefits are expected to outweigh the excluded costs, reducing the estimated economic viability.

10 R. Hickson and B. Khanthaphat. 2011. Evaluation of Village Livelihood Fund Microfinance Program: Final Report.

Louangphabang. 11

Lao Economic Forecasts 2014-2050. http://www.tradingeconomics.com/laos/forecast.

72 Appendix 12

3. Results

Table A12.3: Estimated Financial Internal Rates of Return and Economic Internal Rates of Return

Livestock System FIRR EIRR

Cattle Traditional 28.0% 31.0% Improved 48.0% 59.0% Pigs Traditional 24.0% 26.0% Improved 60.0% 74.0% Goats Traditional 14.0% 18.0% Improved 24.0% 31.0% Poultry Traditional 40.0% 40.0% Improved 51.0% 56.0% Overall project 13.0% 15.7%

EIRR = economic internal rate of return, FIRR = financial internal rate of return. Source: Project completion review mission estimates.

16. With the exception of traditional poultry, the conversion from financial to economic prices raises the estimated internal rates of return (EIRRs) to livestock production (Table A12.3). The lower economic wage rate significantly lowers total production costs. Together with the effect of the standard conversion factor on non-tradable inputs, lower economic production costs outweigh the impact of the higher interest rate and lower economic prices of livestock. The overall EIRR for the project is estimated at 15.7%, which is above the benchmark opportunity cost of capital (12.0%) but slightly below the appraisal estimate of 17.2%. The financial internal rate of return (FIRR), at 13.0%, is well above the 2013 benchmark weighted average cost of capital for Lao PDR (4.0%–4.3%). 17. The livestock models remain financially viable even if a market-based rate of interest is charged on loans (Table A12.4). Over the 20-year period used to calculate the FIRRs, paying a market-based interest for the initial start-up loans would generally reduce the FIRR by only a few percentage points, all other things being equal. With the exception of goats (which are not widely raised in northern Lao PDR), even short-term (i.e., 1–2 year) investments would remain profitable at a market-based interest rate.12 18. Sensitivity analysis examines (i) the implementation delay, (ii) technology adoption rates, (iii) livestock mortality rates, and (iv) cattle and pig prices. The results in Table A12.5 show that the EIRR would have been 17.2%, or identical to the appraisal estimate, if the implementation delay had been 1 year shorter. The EIRR is highly sensitive to prices of cattle and pigs, which is not surprising given that they accounted for 87% of all VLF lending. Goat and poultry made up such a small share of VLF borrowing that large changes in their prices have little impact on the project’s overall EIRR. Given the dominance of cattle in the net benefit stream and their profitability even using traditional practices, changes in the adoption rate of improved practices have relatively little impact on the EIRR. If adoption had been 100%, as is essentially claimed in the project’s M&E system, the EIRR would rise to 25.2%. At an adoption rate of 50%, the EIRR is 19.0%, or slightly above the appraisal estimate of 17.2%. The EIRR is relatively insensitive to large changes in project costs and livestock mortality.

12 Hickson and Khanthaphat (footnote 10) reach a similar conclusion.

Appendix 12 73

Table A12.4: Financial Internal Rates of Return at Village Livelihood Fund and Market Interest Rates

Livestock System FIRR (VLF) FIRR (24%)

Cattle Traditional 28% 26% Improved 48% 45% Pigs Traditional 24% 22% Improved 60% 55% Goats Traditional 14% 13% Improved 24% 22% Poultry Traditional 40% 35% Improved 51% 48% Overall project 13.0% 12.4%

FIRR = financial internal rate of return, VLF = Village livelihood fund. Source: Project completion review mission estimates.

Table A12.5: Sensitivity to Project Risks

Parameter EIRR Switching Valuea Sensitivity

b

Base case 15.7% 0 0

Reduce implementation delay by 1 year

17.2% 0 0

Adoption 20% lower 15.0% 0c 0

Adoption rate 50% 19.0% 0 0.21

Adoption rate 100% 25.2% 0 0

Mortality 20% higher 13.3% 33% 0.76

Cattle price 10% lower 6.3% 4% 2.76

Pig price 10% lower 13.4% 15% 1.57

Project costs 20% higher 14.0% 47% 0.54

EIRR = economic internal rate of return. a

The switching value is the percentage change in the parameter that yields an EIRR of 12%. b

The sensitivity shows the percentage change in the EIRR for a 1% change in the parameter. c

If the adoption rate falls to 0.0%, the EIRR falls to 12.3%. Source: Project completion review mission estimates.

19. Given the data limitations, simplifications, and assumptions needed for this analysis, the following conclusions can be drawn:

(i) With the exception of goats, livestock production is a highly attractive financial investment for rural households, even using traditional technologies. Despite the profitability, however, resource availability and labor market opportunities are a major determinant of any household’s interest in and capacity for the more intensive livestock practices introduced by the project.

(ii) The project has likely delivered net economic benefits in excess of the 12% benchmark and more or less in line with the estimate made at appraisal.

(iii) These conclusions are relatively insensitive to the levels of technology adoption, animal mortality rates, and project costs, but are highly sensitive to prices of cattle and pigs given their dominance in the aggregate revenue stream of VLF borrowers.

20. Summary tables showing the FIRR and EIRR calculations are presented below.

74 Appendix 12

Table A12.6: Project Net Revenue Stream – Financial (KN’000)

Cattle Pigs Goats Poultry Total Household

Year Traditional Improved Traditional Improved Traditional Improved Traditional Improved Net Financial Returns

Project Costs

JFPR Costs

Net Revenue

1 1,112,391 (1,112,391)

2 331,693 109,300 ( 440,993)

3 318,037 149,030 (467,067)

4 (1,487,197) (659,766) (665,555) (268,047) (298,840) (104,946) (23,672) (33,077) (3,541,100) 1,701,185 144,514 (5,386,799)

5 (294,697) 150,234 (103,638) 165,665 (172,087) (40,567) (38,177) 3,427 (329,841) 798,946 46,980 (1,175,767)

6 (294,697) 150,234 (103,638) 165,665 77,717 42,701 40,150 29,536 107,667 763,842 (656,175)

7 897,803 489,141 301,433 137,479 77,717 42,701 5,338 11,646 1,963,256 950,827 1,012,429

8 897,803 547,734 321,891 165,665 77,717 42,701 40,150 29,536 2,123,196 893,208 1,229,988

9 897,803 547,734 321,891 165,665 77,717 34,798 40,150 29,536 2,115,293 2,115,293

10 897,803 489,141 301,433 137,479 77,717 42,701 5,338 11,646 1,963,256 1,963,256

11 897,803 547,734 321,891 165,665 77,717 42,701 40,150 29,536 2,123,196 2,123,196

12 897,803 547,734 321,891 165,665 77,717 42,701 40,150 29,536 2,123,196 2,123,196

13 897,803 449,297 301,433 137,479 77,717 42,701 5,338 11,646 1,923,412 1,923,412

14 897,803 547,734 321,891 165,665 77,717 34,798 40,150 29,536 2,115,293 2,115,293

15 897,803 547,734 321,891 165,665 77,717 42,701 40,150 29,536 2,123,196 2,123,196

16 897,803 489,141 301,433 137,479 77,717 42,701 5,338 11,646 1,963,256 1,963,256

17 897,803 547,734 321,891 165,665 77,717 42,701 40,150 29,536 2,123,196 2,123,196

18 897,803 547,734 321,891 165,665 77,717 42,701 40,150 29,536 2,123,196 2,123,196

19 897,803 489,141 301,433 137,479 77,717 34,798 5,338 11,646 1,955,353 1,955,353

20 897,803 547,734 321,891 165,665 77,717 42,701 40,150 29,536 2,123,196 2,123,196

21 897,803 547,734 321,891 165,665 77,717 42,701 40,150 29,536 2,123,196 2,123,196

22 897,803 489,141 301,433 137,479 77,717 42,701 5,338 11,646 1,963,256 1,963,256

23 897,803 507,891 321,891 165,665 77,717 42,701 40,150 29,536 2,083,352 2,083,352

FIRR =

13.0%

FIRR = financial internal rate of return, JFPR = Japan Fund for Poverty Reduction. ( ) = negative. Source: Project completion review mission estimates.

Appendix 12 75

Table A12.7: Project Net Revenue Stream – Economic (KN’000)

Cattle Pigs Goats Poultry Total Household

Year Traditional Improved Traditional Improved Traditional Improved Traditional Improved Net Economic Returns

Project Costs a

JFPR Costs

Net Revenue

1 1,031,324 (1,031,324)

2 307,520 109,300 (416,820)

3 294,860 149,030 (443,890)

4 (1,518,891) (585,094) (682,546) (259,971) (279,410) (87,521)

(20,338) (27,152) (3,460,923) 1,577,210 144,514 (5,182,648)

5 (258,891) 193,031 (101,536) 195,563 (189,666) (45,168)

(48,927) (659) 256,251) 740,723 46,980 (1,043,954)

6 (258,891) 193,031 (101,536) 195,563 97,146 50,436

41,004 29,318

246,073 708,176 (462,104)

7 1,001,109 561,938 338,314 170,195 97,146 50,436

8,672 13,099

2,240,910 881,535 1,359,375

8 1,001,109 613,031 356,726 195,563 97,146 50,436

41,004 29,318

2,384,335 828,115 1,556,220

9 1,001,109 613,031 356,726 195,563 97,146 43,305

41,004 29,318

2,377,203 2,377,203

10 1,001,109 561,938 338,314 170,195 97,146 50,436

8,672 13,099

2,240,910 2,240,910

11 1,001,109 613,031 356,726 195,563 97,146 50,436

41,004 29,318

2,384,335 2,384,335

12 1,001,109 613,031 356,726 195,563 97,146 50,436

41,004 29,318

2,384,335 2,384,335

13 1,001,109 522,094 338,314 170,195 97,146 50,436

8,672 13,099

2,201,066 2,201,066

14 1,001,109 613,031 356,726 195,563 97,146 43,305

41,004 29,318

2,377,203 2,377,203

15 1,001,109 613,031 356,726 195,563 97,146 50,436

41,004 29,318

2,384,335 2,384,335

16 1,001,109 561,938 338,314 170,195 97,146 50,436

8,672 13,099

2,240,910 2,240,910

17 1,001,109 613,031 356,726 195,563 97,146 50,436

41,004 29,318

2,384,335 2,384,335

18 1,001,109 613,031 356,726 195,563 97,146 50,436

41,004 29,318

2,384,335 2,384,335

19 1,001,109 561,938 338,314 170,195 97,146 43,305

8,672 13,099

2,233,778 2,233,778

20 1,001,109 613,031 356,726 195,563 97,146 50,436

41,004 29,318

2,384,335 2,384,335

21 1,001,109 613,031 356,726 195,563 97,146 50,436

41,004 29,318

2,384,335 2,384,335

22 1,001,109 561,938 338,314 170,195 97,146 50,436

8,672 13,099

2,240,910 2,240,910

23 1,001,109 573,188 356,726 195,563 97,146 50,436

41,004 29,318

2,344,491 2,344,491

a Local Kip costs adjusted by the standard conversion factor of 0.9. EIRR = 15.7%

EIRR = economic internal rate of return, JFPR = Japan Fund for Poverty Reduction. ( ) = negative. Source: Project completion review mission estimates.

76 Appendix 13

CALCULATION OF OVERALL PROJECT RATING1

Criterion Weight Rating

Relevance 25% 2.0 Effectiveness 25% 1.0 Efficiency 25% 2.0 Sustainability 25% 1.0 Weighted Average 1.5 (Less than Successful) Source: Asian Development Bank and the project completion review mission estimate.

1 For project loans, the Asian Development Bank’s Independent Evaluation Department guidelines use four criteria to rate performance with associated weights as indicated. For each criterion, a separate evaluation is undertaken and a rating is given on a scale of 0 to 3 (0 = unsuccessful, 1 = less than successful, 2 = successful, and 3 = highly successful). The overall rating is the weighted average. http://www.adb.org/Documents/Guidelines/Evaluation/PPER-PSO/ default.asp