Specifications	Description
General project information	The name of the project is additional financing for food security and agriculture productivity projects. The parent project was approved on 27 April 2017, with a closing date of 30 Dec 2022. However, the additional financing of the project is planned to begin in January 2022 and end in December 2024.The total project cost is US$5.54 million. The team leaders will be Felipe Jr FadullonDizon and Valens Mwumvaneza. The location of the project will be in South Asia (in particular Bhutan). The implementing agency will be; department of agriculture, the ministry of agriculture and Forest and the ministry of finance. The specific area where the project will be undertaken is Gewogs in southwest Bhutan.
Project briefing information	The project objective is to benefit approximately 11,938 households through its integrated interventions directly. The project will ensure increased food security and agriculture productivity in Bhutan. The objectives’ success will be measured by various indicators such as increased productivity of supported crops by atleast 25% in the target areas. It will also be measured by the increase in the marketed value of agricultural production by 25% in targeted areas (Ministry of Agriculture, 2013, P.45). The project components are improving productivity, food security and nutrition with a budget of USD 5.68 million. The second component is to link farmers to markets costing USD 4.883 million. World Bank aims at reducing rural poverty and malnutrition through climate-smart agricultural productivity enhancement for food and nutrition security (Renewable Natural Resources Sector Programme Ministry of Agriculture and Forestry, 2013). The total cost of the parent project is USD 9.33 million.
Main stakeholder	The royal government of Bhutan, Bhutan residents,world health organization and World Bank.
The macro-environment surrounding the project.	Bhutan is a landlocked country in the south Asia region bordering China and India. The country is located high in the eastern Himalayan mountain range and is situated in an ecologically fragile area vulnerable to internal and external shocks. The country has approximately 763,000 people and has 7.8 percent of the total land area, which is arable, while the area under cultivation is 3 percent. Large areas are exposed to floods, monsoons, landslides and droughts (Department of Agriculture Ministry of Agriculture & Forests Royal Government of Bhutan, 2020, P. 37). The rural poverty in the country is 16.7 percent, and the urban poverty is 1.8 percent. Thirty-five percent of the households face yearly food shortages, while 34 percent of children under the age of 5 are stunted, experience impairing cognitive and physical growth. The country experiences constraints in the agriculture sector due to its size and mountainous terrain.

Section B: Feasibility and economic analyses of additional financing for food security and agriculture productivity project – Bhutan.

This section details the feasibility and economic analysis of additional financing for food security and agriculture productivity project in Bhutan and uses relevant methods and tools as described below.

Methods/Tools	Stakeholders
Financial Statement and Ratio Analysis	Project budget team
Macro-economic Environment and Financial Feasibility Methods (CBA, NPV, IRR)	Project manager, project budget team
Procurement Analysis and Sources of Finances	Procurement department
Schedule Feasibility	Project manager
Earned Value Analysis	Project manager
The legal environment	Project legal team

B1. Financial Statement and Ratio Analysis

As of July 30, 2020, the project funding had received a disbursement of USD 7.153 million. The project requested additional funding amounting to USD 4.640 million and a supplemental SE administrative fee request of USD 0.365 million. The audited consolidated and separate financial statement provides that the grants and the beneficiary borrowing involved substantial estimations and judgment by the management (Royal Government of Bhutan Ministry of Agriculture and Forests, 2021). The estimations affected the material for the financial position of the project and the results as well. The economy has been affected by the Covid-19 pandemic. Since Bhutan is a trade and tourism dependence, it is more susceptible to pandemic-induced shock. The additional financing to the FSSAP grant supports protectingthe poor and vulnerable affected by the economic crisis.

The parent project was fully financed by a grant of USD 8 million from Global agriculture and food security, the government of Bhutan contribution of US$1.12 million and a beneficiary contribution of US$ 0.24 million.

Financing plan (US$ Millions)

Financier	Commitments
Local beneficiaries	0.49
Borrower/Recipient	0.41
Global Agriculture and Food Security Program	4.64

Project Financing Data (US$ Millions) Summary

Item	Amount
Total project cost	5.54
Total financing	5.54
Of which IBRD/IDA	0.00
Financing gap	0.00

B2. Macro-economic Environment and Financial Feasibility Methods (CBA, NPV, IRR)

Bhutan has experienced an economic downturn that is attributed to the Covid-19 pandemic and will require continued financial support to help them recover from the crisis. The project will have massive economic benefits for Bhutan. The assumption made for the growth is that Bhutan’s gross domestic product is expected to contract by 3.4% in 2021 and grow by 3.7% in 2022. Secondly, the Bhutan inflation rates are forecasted to be 6.4% in 2021, while in 2022, it will reduce to 5.3%. The capita gross domestic product for the country is expected at -4.4% in 2021 and will increase to 2.7% in 2022 (The World Bank. 2021). The government has established a department of macroeconomic affairs responsible for coordinating macroeconomic policies, and that will strengthen the coordination of fiscal and monetary policies. Since the rehabilitation will involve both the public and private sectors, the government has established a clear policy framework to help public-private partnerships succeed, leading to social and economic development.

It is believed that the difficulties of the international environment and the structural impediments like the country’s poor social and physical infrastructure are to be blamed for the miniature economic development and the agricultural growth challenges experienced in Bhutan. The engagement in agricultural practice in Bhutan has lacked the financial support to propel it to high productivity (Christensen et al., 2021, p. 56). With the additional financing for the food productivity project, the country will likely attain the desired food productivity.

The project’s cost-benefit analysis is based on the assumption that the timeline for the project will be two years, a year for resettlement and one year to increase agricultural productivity and enhance access to markets. Therefore, with the completion of the project, many people will benefit from the agricultural initiatives that will be in operation. Thus, the cost-benefit would be at an increasing rate. When the project’s cost-benefit is increasing, the net present value (NPV) would be positive with the active usage of the project deliverables. A positive net present value would make the internal rate of return boost with an estimation of 3% per year.

B3. Procurement Analysis and Sources of Finances

World Bank has partnered with the royal government of Bhutan to ensure the food crisis experienced is eliminated. The source of finance for the project will be from three centers; the World Bank, the royal government of Bhutan and the local beneficiary. The local beneficiaries are committed to providing US$ 0.49, the borrower (The royal government of Bhutan) is committed to providing US$ 0.41. the remaining amount of US$ 4.64 will be provided by the global agriculture and food security program through the World Bank. The global agriculture and food security program will be responsible for the procurement process and will adhere to the IPF Borrowers’ World Bank procurement regulations.

As stipulated in the procurement regulations, the systematic tracking and exchange in the procurement system of the world will be applied in the preparation, clearance and updating of the procurement plans and executing all the activities of the project procurement. The procurement procedure of Bhutan and the local areas in the project will be applied under paragraph 5.3 of the procurement regulation. All contracts need to utilize the standard procurement document provided by World Bank to ensure a global competitive procurement. The contracts in the resettlement process need to be specific to the tables of procurement plans in the systematic tracking and exchanges in the procurement system (Bhutan Food Security and Agriculture Productivity Project, 2021, p. 7). All the covered individuals in the resettlement plan are required to be accountable for their actions in consideration of the procurement regulation to ensure accountability. The project will involve service providers in the resettlement process and will be required to send their proposal bids for approval. The requisition for the proposal bids will need submission of a document from the bidder with a signed agreement at the bidding time. The need for such document is to get incorporated in contract manifesting for application confirmation and check compliance with anti-corruption guidelines stipulated by the bank.

B4. Schedule Feasibility

According to the revised timeline, the project is expected to run up to December 2024 after the approval of the additional financing. The timeline for the release of the funds will run in hand with the execution of projects.The total funding in the additional financing will be US$ 4.64 million, and the disbursement will be done in phases to execute the project. Ninety-three percent of the total funding will be disbursed within the first 18 months, distributed in different months of the year. The cumulative projected disbursements are 17% in 6 months, 45% in 9 months, 59% in 12 months and the 93% will have been disbursed in the 18^th month (Royal Government of Bhutan Ministry of Agriculture and Forests, 2021). The additional financing has an extension of the closing date on December 2024, which has been requested to finalize the activities covered by the initial grant. US$ 2.86 million that will be remaining will be disbursed by December 2022, an amount of 75% and the remaining by December 2024.

The different activities of resettlement and upgrading the land will be distributed within two years. The spreading within the two years will influence the project’s positive impact, economic growth, and preparing the project sustainability.

B5. Earned Value Analysis

Having a budget of $ 4.64 million, every single year will consume a total of $2.32 million. The determination of achieving deliverables is vested on a number of social and environmental issues that may hinder or promote the execution of the project. The project has not commenced, and the assumption is that the additional financing will be utilized by next year and will take two years in the added duration from the initial project. The earned value analysis will help the project manager and the director understand the project progress and estimate when they may lag behind schedule. The project’s end up cost will be $ 4.64 million after the additional request and the allocation for the two additional years in the schedule are within the budget.

B6. The Legal Environment

The project is governed by Bhutan Agriculture and food regulatory authority and Bhutan Biodiversity authority. The agreement was signed on July 2021 by the project director from the National Environment Commission secretariat and the project manager from Bhutan agriculture and food regulatory authority. The agreement identified different levels of economic development and resettlement plans of the people in the different areas. The compensation process is stipulated in the agreement to ensure the smooth progress of the project without hurdles (The Royal Government of Bhutan, 2013, P. 15). The agreement has taken into account the obligations in the preexisting agreements and the objectives to improve agricultural productivity, increase food security and provide a market for the products. The major legal aim of the agreement is to ensure all resettlements are completed, and compensation is done for those who lose their land in the project.

Section C: Executive Summary

The main objective of this project is to enhance food security and agriculture productivity and enable access to the market for farmers in selected gewogs in southwest Bhutan. The project will ensure sustainable food production in Bhutan and will assist the farmers in accessing marketing for their products. The project will involve the resettlement of people to create land for production. The main stakeholders in the project are the royal government of Bhutan, the locals from Gewogs and the World Bank. The project is expected to begin in January 2022 and be complete in December 2024. The projected is approximated to benefit 11,938 households in Gewogs.

The method used for the project analysis includes financial statement and ratio analysis, macroeconomic environment and financial feasibility methods, procurement analysis and source of finance, schedule feasibility and earned value analysis.

The project financing of the project will be distributed at different times across the two years to ensure the schedule is achieved and the objective attained. With a budget of $ 4.64 from the Global agriculture and food security program, $ 0.41 from the royal government of Bhutan and 0.49 from local beneficiaries, the project will manage to reduce poverty through adequate food production. The total funds will be distributed equally for the two years, and the determination of attaining the set deliverables will be affected by environmental aspects. The project recommends constructing multi-chamber cold stores, pack houses, irrigation channels and involving the displaced employees in farming in the 5 project Dzongkhags. The project will also support farm inputs such as protected agriculture, improved quality seeds and women-friendly mini-tillers.

References

The Royal Government of Bhutan, 2013. Bhutan Food Security and Accelerated Poverty Reduction Project. 1(2), pp.1-28.

Bhutan Food Security and Agriculture Productivity Project (FSAPP), 2021. RESETTLEMENT FRAMEWORK For the development of Abbreviated Resettlement Action Plan (A-RAP). Thimpu, pp.3-10.

Christensen, G., Fillecia, T. and Gulliver, A., 2021. Bhutan Agricultural sector review. FAO Investment Center, pp.20-76.

Department of Agriculture Ministry of Agriculture & Forests Royal Government of Bhutan, 2020. Bhutan Food Security and Agriculture Productivity Project (FSAPP). Pp.25-67.

Ministry of Agriculture, 2013. RNR SECTOR TENTH PLAN (2008 – 2013) Enabling farming communities to overcome poverty. The RNR sector, pp.4-215.

Renewable Natural Resources Sector Programme Ministry of Agriculture and Forestry, 2013. Annual Review RNRSP. Assessment of Sector Policy and Programme Implementation & Validation of Performance Assessment Framework Final Report. Thimpu, pp.20-75.

Royal Government of Bhutan Ministry of Agriculture and Forests, 2021. Additional Financing Request Proposal for GAFSP Covid-19 response fund. Thimpu.

The World Bank. 2021. Additional Financing for Food Security and Agriculture Productivity Project. [online] Available at: <https://projects.worldbank.org/en/projects-operations/project-detail/P175717> [Accessed 30 July 2021].

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Section A: Project Specifications