Rural Agro-Enterprise Partnership and Inclusive Development Project

247 Pages·2017·4.71 MB·English

by  Pratiwi, Anissa Lucky

Republic of the Philippines

Rural Agro-Enterprise Partnership and Inclusive
Development Project (RAPID)
Design completion report

Main report and appendices

Document Date: 10-Jul 2017
Project No. 2000001200

Asia and the Pacific Division
Programme Management Department

Republic of the Philippines
Rural Agro-Enterprise Partnership and Inclusive Development Project (RAPID)
Design completion report

Contents
Currency equivalents v
Weights and measures v
Abbreviations and acronyms vi
Map of the project area Error! Bookmark not defined.
Executive Summary ix
Logical Framework xv
I. Strategic context and rationale 1
A. Country and rural development context 1
B. Policy, Governance and Institutional Framework 3
C. Rationale 9
II. Project description 10
A. Project area and target group 10
B. Development objective 13
C. Outcomes/Components 13
Component 1 - Value Chain Development 14
Component 2 – Productive Investment 18
Component 3 – Project Management 22
D. Lessons learned and adherence to IFAD policies 22
III. Project implementation 24
A. Approach 24
B. Organizational framework 25
C. Planning, M&E, learning and knowledge management 28
D. Financial management, procurement and governance 30
E. Supervision 31
F. Risk identification and mitigation 32
IV. Project costs, financing, benefits and sustainability 33
A. Project costs 33
B. Project financing 33
C. Summary benefits and economic analysis 34
D. Sustainability 38
V. Next steps 39

iii
Appendices
Appendix 1: Country and rural context background 40
Appendix 2: Poverty, targeting and gender 64
Appendix 3: Country performance and lessons learned 75
Appendix 4: Detailed project description 81
Appendix 5: Institutional aspects and implementation arrangements 99
Appendix 6: Planning, M&E and learning and knowledge management 121
Appendix 7: Financial management and disbursement arrangements 131
Appendix 8: Procurement 149
Appendix 9: Project cost and financing 153
Appendix 10: Economic and Financial Analysis 170
Appendix 11: Draft project implementation manual 217
Appendix 12: Compliance with IFAD policies 221
Appendix 13: Contents of the Project Life File 227
Republic of the Philippines
Rural Agro-Enterprise Partnership and Inclusive Development Project (RAPID)
Design completion report

Currency equivalents
Currency Unit = Philippines Peso (PHP_
US$ = 49 PHP

Weights and measures
1 kilogram = 1000 g
1 000 kg = 2.204 lb.
1 kilometre (km) = 0.62 mile
1 metre = 1.09 yards
1 square metre = 10.76 square feet
1 acre = 0.405 hectare
1 hectare = 2.47 acres

v
Abbreviations and acronyms

ADP Annual Development Plan
APP Annual Procurement Plan
APRACA Asia and Pacific Rural and Agricultural Credit Association
ARB Agrarian Reform Beneficiary
ARMM Autonomous Region in Muslim Mindanao
AWPB Annual Work Plan and Budget
BDS Business Development Services
BSP Bangko Sentral ng Pilipinas
CARP Comprehensive Agrarian Reform Program
CDSP Capacity Development Service Provider
CFO Commission on Filippinos Overseas
COA Commission on Audit
CONVERGE Convergence on Value Chain Enhancement for Rural Growth and
Empowerment Project
CSPE Country Strategy and Programme Evaluation
DA Department of Agriculture
DAR Department for Agrarian Reform
DBM Department of Budget and Management
DBP Development Bank of the Philippines
DED Detailed Engineering Design
DENR Department of Environment and Natural Resources
DILG Department of the Interior and Local Government
DIP Detailed Investment Plan
DOF Department of Finance
DOLE Department of Labor and Employment
DOST Department of Science & Technology
DPWH Department of Public Works and Highways
DTI Department of Trade and Industry
EOI Expression of Interest
FA Financing Agreement
FFR Financing Facility for Remittances
FSSI Foundation for a Sustainable Society, Inc.
FSP Financial Service Provider
GAD Gender and Development
GDP Gross Development Product
GESI Gender and Social Inclusion
GNI Gross National Income
GoP Government of the Philippines
GWPB Global Work Plan and Budget
ICCO Interkerkelijke Coördinati e Commissie Ontwikkelingshulp, or ICCO Cooperation
IFC International Finance Corporation
IOE Independent Office of Evaluation
IPAC Inclusive Partnerships for Agricultural Competitiveness
KM Knowledge Management
LBP Land Bank of the Philippines
LGU Local Government Unit
MCPI Microfinance Council of the Philippines
M&E Monitoring and Evaluation
MFI Microfinance Institution
MIS Management Information System
MoU Memorandum of Understanding
MSE Micro and Small Enterprise
MSME Micro, Small and Medium Enterprise
MSMED Micro, Small and Medium Enterprise Development
MTR Mid-Term Review
NATCCO National Confederation of Cooperatives
NC Negosyo Centre
Republic of the Philippines
Rural Agro-Enterprise Partnership and Inclusive Development Project (RAPID)
Design completion report

NCIP National Commission on Indigenous Peoples
NEDA National Economic Development Authority
NGAS New Government Accounting System
NGO Non-Government Organisation
O&M Operation and Maintenance
OFW Overseas Filipino Worker
OSSCO One Stop Services Center for OFWs
OWWA Overseas Workers Welfare Administration
PCC Provincial Project Coordinator
PCO Project Coordination Office
PCU Provincial Coordination Unit
PCW Philippines Women Commission
PEF Private Equity Firm
PHP Philippines Peso
PIM Project Implementation Manual
PRDP Philippine Rural Development Project
PRNDP Provincial Roads Network Development Plan
PSC Project Steering Committee
PY Project Year
RA Republic Act
RBAP Rural Bankers Association of the Philippine
RCU Regional Coordination Unit
RIMS Results and Impact Management System
ROG Regional Operations Group
RTWG Regional Technical Working Group
RuMEPP Rural Micro Enterprise Promotion Programme
SALT Sloping Agricultural Land Technology
SBC Small Business Corporation
SEC Securities and Exchange Commission
SIP Strategic Investment Plan
SME Small and Medium Enterprise
TOR Terms of Reference
VC Value Chain
VCF Value Chain Facilitator
WHO World Health Organisation

vii

Republic of the Philippines
Rural Agro-Enterprise Partnership and Inclusive Development Project (RAPID)
Design completion report

Executive Summary

1. With a GNI per capita of $3,550 in 2015, the Philippines is classified a lower middle-
income country. Its economy, GDP US$ 292 billion in 2015, has been among the fastest
growing in Asia in recent years. GDP growth accelerated to 5.9% in 2015 and to a record
6.8% in 2016. However growing economic prosperity is not widely shared. A quarter of the
population is poor, and a Gini coefficient of 0.43 in 2014 was amongst the highest in Asia.

2. Poverty is higher among the country’s 55 million rural inhabitants (35%) than among
the 45 million living in urban areas (13%); and is more pronounced in the southern island of
Mindanao. Two thirds of the country’s poor rely on agriculture for sustenance. Agriculture
employs 29% of the labour force, yet contributes only 10% of GDP; and grew at a rate of
only 1.9% per annum over the past decade. As agricultural productivity has remained
depressed, economic transformation has been characterised by growth in low-skilled
services, which has emerged as the dominant economic sector.

3. Strong overall economic growth has bolstered the Government’s investment and
poverty reduction agenda. The Government has explicitly signalled its intent to strengthen
the country’s weak infrastructure, expand social spending and pursue marginalised zones
and under-resourced development initiatives in earnest.

4. The proposed project directly addresses policy commitments of the Government of the
Philippines that are aligned to two SDGs of high relevance to IFAD: eliminating poverty and
reducing inequality. In its ten point socio-economic agenda, the Government emphasised
the need for promoting agricultural value chains by increasing productivity and rural
enterprise. Within its Pagbabago (or reducing inequality) pillar, the Philippines Development
Plan 2017-2022 specifies two target outcomes: (1) expanding economic opportunities,
including in agriculture, and (2) increasing access to economic opportunities, including
increasing access of smallholder farmers and fisherfolk to economic opportunities.

5. Micro, small and medium enterprises (MSMEs) also play an important role in Philippine
economy, employing an estimated 60% of the labour force and contributing a third of GDP.
The Government has prioiritized MSMEs as a key pillar of its economic programme. The
PDP emphasises increasing the access of micro, small and medium enterprises (MSME),
cooperatives, and overseas Filipinos (OF) to production networks and to finance.
6. Goal and Objective. The project goal is to sustainably increase the incomes of small
farmers and unemployed rural women and men across selected value chains. The
development objective is to provide strategic enabling conditions for the sustained growth of
micro and small enterprises in agricultural commodity chains with comparative advantage,
market demand, growth potential, backward linkages to small farmers, and job creation
effects.

7. Project Area. The project will be initially implemented in six regions (regions 8-13) and
twenty target provinces. These have been selected based on their growth potential in
selected commodity chains, on poverty incidence, and on operational efficiency
considerations. The project area may expanded once an effective operating model has been
estalished.

8. Value Chains. The project will initially target four agricultural value chains of the seven
prioritised by the Department of Trade and Industry (DTI), namely cocoa, coffee, processed
fruits and nuts, and coconut. These commodities present attractive market and social
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features, and have potential to provide sustained economic benefits to both small farmers
and enterprises. Once operational models for upgrading these value chains are
demonstrated to be effective, other value chains may be included, in response to evolving
market signals.

9. Target Groups. The project will directly target small farmers and micro-entrepreneurs
engaged within the selected commodity chains. It will indirectly target unemployed and
underemployed rural women and men who can potentially be employed by participating
enterprises. Special focus will be placed on women, the youth, and indigenous people.

Component 1: Value Chain Development
10. This component will deliver the following outputs: (i) strengthened Negosyo Centres
and networks in 20 target provinces, facilitating micro and small enterprise access to
markets and services; (ii) four industry-based MIS, providing information to value chain
stakeholders; (iii) qualified business service providers linked to farmers, co-operatives and
enterprises; (iv) strategic investment plans and detailed investment plans connecting farmers
to SMEs and facilitating farmers’ and SMEs’ access to markets and services; and (v) 78 000
households benefitting through 1,600 co-operatives linked to markets via 125-250 SMEs.

11. Sub-component 1.1: Value chain governance. The project will organise value chain
players and create an enabling institutional environment that promotes the growth of MSMEs
(including farmer’s cooperatives), strengthens their linkages with farmers, and facilitates
farmers’ access to markets and services. This approach will facilitate collaboration among
public agencies in supporting agriculture-based enterprises and synergies among
stakeholders. DTI's capacity to broker cross-sectoral synergies and partnerships will be
upgraded at national, regional and provincial levels. The project will support: (i) institutional
strengthening of DTI at all levels, enabling it to develop and scale successful models; (ii)
development of provincial networks of Negosyo Centers as one-stop shops for promoting
entrepreneurship; (iii) updating DTI's industry-based value chain MIS, with focus on target
commodities; (iv) involvement of Local Government Units (LGUs) in value chain mapping
and investment planning; and (v) capacity building of multi-stakeholder Industry Councils at
local and national levels.

12. Sub-component 1.2: Business services. RAPID shall develop a pre-qualification
system for business service providers (BSPs) that will provide services to farmers'
organisations and enterprises as well as to specific target groups such as women, youth and
indigenous people. Cooperatives and micro-enterprises will be supported to become service
hubs for the provision of basic services to farmers, such as linkages with SME consolidators
and input suppliers, technical advisory services, climate-smart technologies, compliance with
standards and traceability, and access to financial services and insurance products. A
package of financial and business education will be delivered to farmers' groups partnering
with SMEs or operating their own micro-enterprises, which will include budget planning, cash
flow analysis, financial literacy training, and operation of saving and credit groups.

13. Sub-component 1.3: Enterprise strengthening. The project will facilitate the
development of inclusive and equitable business partnerships between farmers and
enterprises targeting profitable domestic and export markets. Partnerships will be based on:
(i) gender-sensitive provincial value chain mapping; (ii) provincial strategic investment plans
(SIPs) for each value chain, developed through participatory and multi-stakeholder
consultations; (iii) detailed investment plans (DIPs) supporting enterprise applications for
financing (conditional grants, debt financing, equity capital); and (iv) supply chain managers
embedded in enterprises, who manage contracts and provide advisory services to farmers.
RAPID’s support will be complemented by nutritional awareness programmes for farmer