NATIONAL RESTORATION OF RURAL PRODUCTIVE CAPACITY PROJECT

INTRODUCTION

The Government of the Kingdom of Cambodia (GKC) has received a loan from the Asian Infrastructure Investment Bank (AIIB) to finance the National Restoration of Rural Productive Capacity Project covering five provinces (Pailin, Kampong Chhnang, Tbuong Khmum, Prey Veng and Koh Kong). The Project is being financed under the Bank’s CoVID-19 Crisis Recovery Facility. The Project is designed to maintain and accelerate rural infrastructure spending, create short term employment, generate income, build the capacity of local labour and national contactors to ensure quality infrastructure delivery building on the national standards that have been established with support from other development partners and establish foundations for learning and knowledge sharing among key project stakeholders to scale up rural infrastructure and rural basic service delivery in the future. The Project will also support the GKC communication effort to (i) enhance awareness of targeted rural populations about social distancing; and (ii) build their preparedness and resilience during the aftermath of the COVID-19 pandemic.

The Project is being implemented over a three year period commencing in early 2021and is financed by a loan from AIIB amounting to US$60 million. The Ministry of Rural Development is the Executing Agency.

Objective

The overall project objective is “to sustain the rural economy and livelihoods of vulnerable rural populations and returning migrants affected by the CoVID-19 pandemic.

Results

The Project is expected to generate the following key results in the targeted areas in the five provinces as an emergency response to the CoVID-19 pandemic:
a. 50,000 short-term local employment benefits and income generation, including re-skilling and capacity development of the local labour targeting the vulnerable groups of the population and returning migrants who lost their jobs due to the COVOD-19 pandemic and who live in the project area.
b. 24 national contractors trained in quality rural infrastructure delivery and basic rural services provision including CoVID-19 precaution measures.
c. 100 facilities including economic (markets), health (health centres and social (schools) with improved road access.
d. 150,000 people with improved access to water sanitation and hygiene facilities, especially hand-washing as primary CoVID-19 mitigation.

Beneficiaries

The Project will benefit about 480,000 rural people in the five targeted provinces and maximize the benefits to vulnerable groups (women, children and unemployed returned migrants) whose socio-economic conditions are adversely affected by the CoVID-19 pandemic and are looking for short-term employment benefits. The works and services under the project are expected to be low value and based on national competitive bidding prioritizing job opportunities and benefits for local residents as well as returning migrants.

Project Data Sheet

 

Project Name

National Restoration of
Rural Productive Capacity Project

Project Number

P000446

Country

Cambodia

Project Status

Active

Project Modality

Loan

Costs and Financing Plan

Project cost: $67.5 million

Financing Plan:

Government of Kingdom of
Cambodia: $US$ 7.5 million (taxes)

AIIB Loan: US$ 60 million
(Components A & B).

Special Fund Window (SFW):
US$ 10 million(interest buy-down)

Source of Funding

Loan: 0446A Asian Infrastructure
Investment Bank

Grant: SFW Asian Infrastructure
Investment Bank

Size and terms of AIIB
loan

US$ 60 million

Fixed spread: Final
maturity of 21 years including 12 years grace period with an average maturity
of 16.57 years.

AIIB standard interest
rates for foxed spread sovereign-backed loans, minus interest buy-down
through the SFW.

Executing Agency

Ministry of Rural Development (MRD)

Guarantor

Sovereign

Environmental and Social
Category

B

Risk Category

M

Conditions of
effectiveness

PMU established at the MRD

Key covenants/Conditions
for disbursement

Key covenants:

·Capacity development, satisfactory to the Bank, for rural residents in target areas on occupational health and safety, finalized within nine months of
effectiveness.

·Consultation
and capacity building, satisfactory to the Bank, om approximately 50 villages
in Project areas, conducted within 12 months of effectiveness.

·Capacity
building, satisfactory to the Bank, with approximately 10 local contractors,
within 18 months of effectiveness.

Conditions for Disbursement
for works contracts:

·     ESMPF, Project Delivery
Strategy and project Operation Manual have each been approved by the Bank and
the PMU has been established.

Strategic Agenda

Economic Resilience

Drivers of change

Employment and Income
generation

Gender equity and
mainstreaming

Capacity building

Sector

Rural Development

Description

The National Restoration of
Rural Productive Capacity Project will provide support to sustain the rural
economy and livelihoods of rural populations and returning migrants affected
by the CoVID-19 pandemic in five provinces (Pailin,
Kampong Chhnang, Tbuong Khmum,
Prey Veng and Koh Kong). The Project will assist
the Government by (i) investing in rural economic
development that will generate short-term employment under the construction
contracts for rural roads and water and sanitation financed by the project as
well as the ensuing operation and maintenance tasks; and (ii) strengthening
capacity development by reskilling of local residents and the national
contractors to deliver quality infrastructure under the project.

Project rationale

Cambodia
has a record of sound macroeconomic management with an average GDP growth of
over 7% between 2015-2019, which although declining to 2.5% in 2020 and 2021
is now expected to recover rapidly. There was a reduction in poverty rates
from 47.8% in 2007 to 13.5% in 2014, but increased to 17.8% in 2019 &
2020, with about 90% of the poor households living in rural areas and low
public debt (in nominal terms) at 28% of GDP. The country maintains a strong
revenue generation potential and has high debt affordability with health
growth potential during the post-pandemic period.

Cambodia
achieved effective management of the CoVID-10 outbreak by the imposition of
strict lockdowns, movement restrictions and enforcement of social distancing
as well a rapid roll out of the vaccination program with support mainly from
China that resulted in relatively low mortality rates compared with other
countries in the region. However, the global pandemic directly impacted
Cambodia’s main engines of growth in manufacturing (garment textile and
footwear), construction and tourism that together account for 43% of GDP, 74%
of goods and services exported and 35% of foreign direct investment. In
addition, the collapse of the tourism industry following the imposition of
the strict global travel restrictions resulted in further hardship through
the loss of large number of jobs and income for the service industries.

Cambodia’s
rural areas were already under stress prior to the CoVID-19 pandemic with
smallholder farmers struggling to access markets. The livelihoods of rural
households remain very fragile with and are highly vulnerable to economic shocks
such as that caused by the CoVID-19 pandemic, and this was further
exacerbated by the return of large numbers of migrant workers who had lost
their jobs due to factory closures. The result has been an increase in the
level of indebtedness of poor rural households that has been incurred during
the period of lost employment.

The
AIIB can add value by contributing to the funding gap for critical rural
infrastructure and continue the Government’s national rural infrastructure
program under its Rectangular Strategy (Phase IV: 2019 – 2023) and its
over-reaching objectives of growth, employment and equity and efficiency.
This is consistent with the AIIB CoVID-19 Crisis Recovery Facility to support
the economic resilience of AIIB members providing financing social and
economic response and recovery including infrastructure investments and
restoration or productive capital.

Project Objective

To sustain the rural
economy and livelihoods of vulnerable rural populations and returning
migrants affected by the CoVID-19 pandemic.

Project Results

a. 50,000 short-term local employment benefits and income generation, including re-skilling and capacity development of the local labor
targeting the vulnerable groups of the population and returning migrants who lost their jobs due to the COVOD-19 pandemic and who live in the project area.

b.  24 national contractors trained in quality rural infrastructure delivery and basic rural services provision including CoVID-19 precaution measures.

c. 100 facilities including economic (markets), health (health centers
and social (schools) with improved road access.

d.  150,000 people with improved access to water sanitation and hygiene facilities, especially hand-washing as primary CoVID-19 mitigation.

Project Outputs

·  Upgrading and climate proofing of about 235 km of existing rural roads, adaptation of unstable bridges and collapsed drainage systems to improve access to markets, schools and health centers and sustain urban-rural
linkages within the provinces as well as with the national capital together
with greening of the embankments using bio-engineered solutions and
indigenous materials to accommodate safe walking and cycling and promote rural road safety.

·  Restoring and climate proofing about 75 community ponds with strengthening of embankments using bioengineered solutions and construction of about 75 new community ponds and associated WASH facilities, promotion of improved sanitation and hygiene especially hand-washing practices to deliver basic CoVID-19 prevention measures to vulnerable groups in the population and community mobilization for the operation and maintenance of the facilities.

·  Reskilling of the local residents and national contractors to deliver quality rural infrastructure and basic rural services as well as to provide for scaling-up future rural infrastructure programs. Vulnerable groups prioritized for
training on occupational health and safety designed under the Environment and Social Code of Practice. National contractors trained to deliver emergency quality infrastructure program to meet the requirements of the Government’s well-established standard designs.

·  Effective project management support to the central PMU and the provincial PIUs and ensure full compliance with the loan covenants and strict adherence to all
Government’s Standard Operation Procedures.

Progress towards
objective

The project implementation commenced in
February 2021 with the establishment of the PMU based in MRD and also the
establishment of the Project Implementation Units (PIUs) in each province.
The Project Operation Manual has been prepared and was approved in December
2021. The Resettlement Planning Framework (RPF) was prepared, in consultation
with the General Department of Resettlement (GDR), and also the indigenous
Peoples Planning Framework (IPPF) and both were approved for disclosure in
January 2022. The Environmental and Social Management Planning Framework was
prepared and approved for disclosure in May 2022. Eight individual
consultants have been recruited to support the PMU. The recruitment of the
three consultancy teams for (i) design or rural
roads (SP1); (ii) construction supervision of rural roads (SP2); and (iii)
design and construction supervision of WASH facilities (SP3) has commenced.
The SP1 team are expected to mobilize in August 2022 and the other two teams
later in 2022. The designs for the first four rural roads and 41 community
ponds have been completed in-house by the PMU teams. The Environment and
Social Management Plans (ESMPs) for the four rural roads have been completed
and approved for disclosure and the four contracts will be awarded in July
2022. The overall weighted physical progress at the end of Q1 2022 was 16.4%
against the elapsed time of 33%.

 

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