ࡱ>  GI>?@ABCDEF~Y bjbj[[ B9 \9 \c2%%h3d3H444Th4h4h457h4(@;vAA(AABnHJkmmmmmm$hQ4KBBKK44AAsSsSsSK4A4AksSKksSsS+A2N>?nW0(P84KKsSKKKKKsSKKK(KKKKKKKKKKKKK%> .2:   EU/UNIDO-UNDP Program in Armenia ENPARD Technical Assistance: Producer Group and Value Chain Development Project number: SAP 130023 Starting date: 15 January 2014 Duration: 36 months Project site: Yerevan and three marzes to be identified in the inception phase Government coordinating agency: Ministry of Agriculture Project Inputs: UNIDO inputs: 1,252,980 EUR UNDP (counterpart) inputs: 1,086,000 EUR Indirect costs UNIDO (7%): 85,000 EUR Indirect costs UNDP (7%): 76,020 EUR UNIDO co-funding 15,000 EUR Grand total 2,515,000 EUR Brief description: Under the EU ENPARD Armenia 2013, EUR 20 million has been allocated for budgetary support for agriculture and rural development for 2014-2016 and EUR 5 million for complementary support. The overall objective of the programme is to support the Government of Armenia in ensuring an efficient and sustainable agriculture contributing to better conditions in rural areas. With respect to complementary support over the 2014-16 period, FAO will be responsible for a EUR 2 million project to address the implementation of the national strategy for sustainable agricultural development and planning and supporting the provision of better agriculture statistics and the roll-out of a national agricultural census. This document refers to the second EUR 2.5 million joint UNIDO and UNDP complementary support project focusing within to-be-determined regions of the country on (1) strengthening and newly establishing producer groups, (2) engaging producer groups effectively in value addition and (3) strengthening value chains that provide improved access to affordable, better quality food. Beneficiaries of the project will be producers, producer group members and employees, and their families for which job creation and increased income effects are envisaged. At least 10 new business-oriented producer groups shall be established, 20 producer groups shall receive training and coaching, at least 3,000 farmers shall be trained, 10 producer groups shall engaged in new and improved ways of value addition and products from assisted producer groups shall attain at least 10% premium price and 20% increase in annual turnover. CONTENTS  TOC \o "1-3" \h \z \u  HYPERLINK \l "_Toc367355704" A. Context  PAGEREF _Toc367355704 \h 4  HYPERLINK \l "_Toc367355705" A.1 General context  PAGEREF _Toc367355705 \h 4  HYPERLINK \l "_Toc367355706" A.2 Sectoral Context  PAGEREF _Toc367355706 \h 5  HYPERLINK \l "_Toc367355707" Agricultural Production and Trade  PAGEREF _Toc367355707 \h 6  HYPERLINK \l "_Toc367355708" Agroindustry and Food Processing  PAGEREF _Toc367355708 \h 6  HYPERLINK \l "_Toc367355709" Cooperatives and Farmer Group Development  PAGEREF _Toc367355709 \h 7  HYPERLINK \l "_Toc367355710" B. Reasons for UNIDO/UNDP Assistance  PAGEREF _Toc367355710 \h 9  HYPERLINK \l "_Toc367355711" B.1 Links to National Development Goals  PAGEREF _Toc367355711 \h 9  HYPERLINK \l "_Toc367355712" B.2 Institutional Background  PAGEREF _Toc367355712 \h 9  HYPERLINK \l "_Toc367355713" B.3 Project rationale  PAGEREF _Toc367355713 \h 11  HYPERLINK \l "_Toc367355714" B.4 Stakeholders and Target Beneficiaries  PAGEREF _Toc367355714 \h 13  HYPERLINK \l "_Toc367355715" B.5 UNIDO and UNDP Comparative Advantage  PAGEREF _Toc367355715 \h 13  HYPERLINK \l "_Toc367355716" C. The Project  PAGEREF _Toc367355716 \h 14  HYPERLINK \l "_Toc367355717" C1: Project objectives  PAGEREF _Toc367355717 \h 14  HYPERLINK \l "_Toc367355718" C.2: The Approach  PAGEREF _Toc367355718 \h 25  HYPERLINK \l "_Toc367355719" C.3 Governance and project management structure  PAGEREF _Toc367355719 \h 25  HYPERLINK \l "_Toc367355720" C.4 RBM code and thematic area code  PAGEREF _Toc367355720 \h 27  HYPERLINK \l "_Toc367355721" C.5 International development goals  PAGEREF _Toc367355721 \h 27  HYPERLINK \l "_Toc367355722" C6. Timeline of activities  PAGEREF _Toc367355722 \h 27  HYPERLINK \l "_Toc367355723" C7. Risks  PAGEREF _Toc367355723 \h 30  HYPERLINK \l "_Toc367355724" D. Implementation Arrangements  PAGEREF _Toc367355724 \h 31  HYPERLINK \l "_Toc367355725" D.1. Counterpart Inputs:  PAGEREF _Toc367355725 \h 31  HYPERLINK \l "_Toc367355726" D.2 UNIDO/UNDP Inputs:  PAGEREF _Toc367355726 \h 31  HYPERLINK \l "_Toc367355727" International Staff (BL 11-00)  PAGEREF _Toc367355727 \h 31  HYPERLINK \l "_Toc367355728" National Staff (BL 17-00)  PAGEREF _Toc367355728 \h 32  HYPERLINK \l "_Toc367355729" Subcontracts (BL 21-00)  PAGEREF _Toc367355729 \h 32  HYPERLINK \l "_Toc367355730" Training (BL 33-00)  PAGEREF _Toc367355730 \h 32  HYPERLINK \l "_Toc367355731" Equipment (BL 45-00)  PAGEREF _Toc367355731 \h 33  HYPERLINK \l "_Toc367355732" Local & HQ Travels (BL 15-00 & 16-00)  PAGEREF _Toc367355732 \h 33  HYPERLINK \l "_Toc367355733" Miscellaneous (BL 51-00)  PAGEREF _Toc367355733 \h 33  HYPERLINK \l "_Toc367355734" D.3 Summary of the Project Budget  PAGEREF _Toc367355734 \h 33  HYPERLINK \l "_Toc367355735" E. M&E and Reporting  PAGEREF _Toc367355735 \h 33  HYPERLINK \l "_Toc367355736" F. Communication and Visibility  PAGEREF _Toc367355736 \h 35  HYPERLINK \l "_Toc367355737" G. LEGAL CONTEXT  PAGEREF _Toc367355737 \h 36  HYPERLINK \l "_Toc367355738" H. ANNEXES  PAGEREF _Toc367355738 \h 36  HYPERLINK \l "_Toc367355739" Annex 1: LOGFRAME  PAGEREF _Toc367355739 \h 37  Context A.1 General context Armenia is a sovereign state HYPERLINK "http://en.wikipedia.org/wiki/Landlocked_country" \o "Landlocked country"landlocked in the HYPERLINK "http://en.wikipedia.org/wiki/South_Caucasus" \o "South Caucasus"South Caucasus region, bordered by HYPERLINK "http://en.wikipedia.org/wiki/Turkey" \o "Turkey"Turkey to the west, Georgia to the north, HYPERLINK "http://en.wikipedia.org/wiki/Azerbaijan" \o "Azerbaijan"Azerbaijan to the east, and HYPERLINK "http://en.wikipedia.org/wiki/Iran" \o "Iran"Iran in the south. Armenia is a mountainous country with an average elevation of 1,800 metres above sea level with only 10% of the country lying below 1000 metres. The country, with a territory of 29,743 square kilometres, contains one tenth forests and woods, almost half arid land, and one seventh pasture land. Armenia has a population of 3.1 million, of which 35.8% live in rural areas, and annual population growth is 0.19%. Armenias political and economic situation depends on its geographic position as a landlocked country with closed borders to Turkey and Azerbaijan (occurring in 1993 and 1991 respectively), an on-going conflict with Azerbaijan over the Nagorno-Karabakh region, and virtually no energy resources. Presently, Armenia has only two open borders to access export markets by land: Iran and Georgia. In light of the preceding, Armenias development will depend in part on the peaceful settlement of the Nagorno-Karabakh conflict and the normalization of relations with neighbouring countries. Being part of the Soviet Union for much of the 20th century, Armenia's economy was a centrally directed HYPERLINK "http://en.wikipedia.org/wiki/Soviet" \o "Soviet"Soviet model. After the fall of the HYPERLINK "http://en.wikipedia.org/wiki/Soviet_Union" \o "Soviet Union"USSR in 1991, Armenia experienced severe economic collapse as did most other states that were a part of the Soviet Union. Essentially, a predominantly industrial country whose economy had been highly integrated with the other now independent Soviet republics had to start serving the needs of its domestic market, ensure food security for its population, and rebuild its economy to be more open, competitive, and market-driven domestically, with its former sister republics, and the broader world beyond. At the time of the Soviet Unions collapse, the agricultural sector was relatively marginal, the huge state industries were shut down, and unemployment and poverty soon spread throughout the country. International aid was able to prevent severe famine, but the recently independent state started its new economy with high levels of poverty, a deep recession, and the collapse of agricultural and industrial output. After the fall of the USSR, Armenia embarked on radical economic reforms, to include cuts in social services and the virtual elimination of financial subsidies. Poverty rose with a concomitant decline in the standard of living: With rising unemployment and the sudden loss of many peoples livelihoods in state owned and operated enterprises, agriculture and subsistence farming provided an opportunity for broad-based food security and informal employment that was not possible to this degree elsewhere in the economy. As a consequence, Armenia became the first former Soviet country to dissolve its huge state-owned collective farms and privatize agricultural land to Armenian households. Privatization led to over 330,000 small-scale farms being established with the aim to ensure at least subsistence food and informal work opportunities for the bulk of the recently unemployed. As these new landowners-now-farmers had been working in huge state-owned companies and farms, they lacked practical farming skills and experience. This, combined with fragmented production plots and often harsh growing conditions (e.g., mountain and/or low rainfall areas without irrigation) lead to low productivity of the newly established small farms. Fortunately, as the new century approached, Armenias economy began to recover and diversify. From 2000 to 2008, the country enjoyed strong economic growth with a real annual average GDP growth of 13%. As a consequence, as early as 2002, Armenia began to be classified as a lower middle income country. The recent global financial crisis seriously undermined Armenias ability to maintain the robust economic growth and poverty reduction that the country enjoyed for much of the last decade. GDP declined by 14.4% in 2009, and registered a rather modest growth of 2.1% in 2010. This did increase to 4.7% in 2011, to 7.2 % in 2012, with 6.2 % growth projected for2013. Nonetheless, even with the turnaround of the past three years, the recovery has still been insufficient to offset the socio-economic losses caused by the crisis. Poverty levels in Armenia remain high. In2011, 35% of Armenias population was living below the national poverty line, and recent figures suggest the poverty incidence reaches 40%, one of the highest levels in Asia. As would be expected and was experienced by the rest of the world, the economic decline was accompanied by rising unemployment (18.7% in 2009 versus 16.4% in 2008) with the youth unemployment rate (15-24 years old) even climbing to 38.8% in 2010. Hence, tackling income generation and unemployment, particularly youth unemployment, remains a serious challenge for Armenias socio-economic development. The youth employment to population ratio, which indicates the ability of an economy to create jobs in the country, is very low at around 19%. Further, as a result of the declining economy and minimal employment opportunities, labour migration and youth unemployment have become crucial issues. Additionally, migration predominantly male, has a distinct gender dimension as it deeply affects families and society. Up to 20% of Armenian families have a male member working outside the country, and 27% of all households are headed by women. These women comprise a vulnerable group, carrying both the burden of household management and work outside the home. In order to maintain the household, women are often involved in informal economies where workers rights are often not protected. Armenia is divided into 10 provinces (marzes), and Yerevan city, with considerable disparities between the provinces. Poverty is most prevalent along Armenia's borders, in more remote mountain areas, and in earthquake zones. The poorest marzes, with above 45% incidences of poverty, are Shirak and Lori in north-eastern and northern Armenia respectively and Kotayk in central Armenia. A.2 Sectoral Context Over the past decade, food and agriculture has been one of the main sectors of Armenia's economy and the main source of employment in rural areas. During 2004-2008, the total sector represented just over 25% of the national economy with production agriculture alone being nearly 19%. In 2011, agricultural production was estimated to be approximately 20% of GDP, and employment in agriculture was 38.9% of the overall work force. The agricultural production sector in Armenia consists of 340,000 individual private farms, 202 consumer cooperatives and approximately 100 large state and private agricultural enterprises. The agro-industrial sector employed 18,300 people (or 21.8% of the total manufacturing labour force) in 2009. Hence, together with production agriculture, the food and agriculture sector as a whole employs some 400,000 workers. Agricultural Production and Trade In 2009 FAO estimated the total arable land in Armenia to be approximately 458,000 hectares (with farmers managing over 82% including 75% of perennial crops but only 50% of hayfields). Thus, while the number of farms seems to have declined by about 5% since the initial major land distributions after independence, average farm size is still just over 1.1 hectares of land in cultivation and just over 1.4 hectares of total arable land. Within crop agriculture, grains represented 171,000 hectares; fodder, 63,000; fruits and berries, 38,000 (of which only 32,000 were being harvested); potatoes, 32,000; truck crops, 24,000; grapes, 18,000; melons, 6,000; and technical crops, 3,000. Based on these estimates, more than 100,000 hectares, or just over 22% of arable land, was not in production. Overall increases in agricultural production in Armenia have been positive if not dramatic over the past nearly two decades. While crop production is often hard to analyse because of variations in year-to-year levels of weather and shorter-term market conditions, data seems to suggest some reasonable increases between 1995 and 2010 in grains (28%), potatoes (13%), vegetables (57%), and grapes (44%) with declines only in berries (12%) and forage crops (40%). In the livestock sector, beef production has increased since 2000, at first slowly and in recent years more quickly, though this in part reflects the slaughtering of milk cows in response to dropping milk prices during the financial crisis. Sheep production also grew steadily since 2000 driven by demand from Iran, though the dramatic increase in live animal prices in 2008/9 did lead to reductions in herds of 10-20% which may negatively affect future growth. Pork production and pig numbers experienced a major decline beginning in 2007 following the outbreak of swine fever. However, this has begun to result in the establishment of commercial piggeries although pig stocks overall remain low as farmers continue to be nervous about reinvesting in this sector. While in 2009 milk production had increased by nearly 50% since independence, it has seemed to have stabilized and even declined slightly, possibly as a result of the herd reductions during the financial crisis. In 2009, egg production was just over 20% greater than found at the time of independence most of this growth experienced in 2008-9. Between 2004 and 2008, the export of food commodities increased 4.7 times over 2000 representing an increase from 10.0% to 14.4% of total exports. The world financial crisis, however, soon had an adverse effect on foreign trade to include agriculture. During the first 9 months of 2009, the volume of agricultural exports decreased by over 35% which resulted in a nearly 8% decline in the total output of the food and agriculture sector (to include processing) based on the first 11 months of that year. Agroindustry and Food Processing The agroindustrial sector generates USD 580 million, or about 50% of total manufacturing output with food processing representing nearly 80% of this total. The agro-industrial sector (mainly food and beverage) consists of 831 agro-industrial enterprises (or about 35% of total industrial enterprises), most of which are private small or medium-scale enterprises. It largely consists of small private businesses that were created through the privatization of former state-owned processing companies. Output declined by 6.4% in 2009 after nearly a decade of steady growth. Labour productivity in agro-processing is growing over time, doubling between 2005 and 2009. Important subsectors include alcoholic and non-alcoholic beverages, preserving fruits, and dairy processing with wine, brandy and cheese production the most important products. The main suppliers of raw materials to processing units are private farmers, who produce over 98% of gross agricultural product. Food processing is considered to have a high development potential in particular through the establishment of foreign corporations and their investments. Given limited arable land and transport problems, the countrys comparative advantages in agriculture will most likely not lie in the production of bulk commodities such as grains but rather in the production of high-value products. Cooperatives and Farmer Group Development According to data from the governments State Registry, 3,737 production and 338 consumer cooperatives are presently registered in Armenia, of which, as noted above 202 are agricultural. Numerous international and national programmes have focused on promoting the development of cooperatives in Armenia. As a consequence, in all phases of cooperative development, some progress has been made. Nonetheless, because of the backgrounds and outlooks of many farmers; often the lack of understanding of the purpose, principles, and characteristics of cooperatives; and minimal participation by cooperative members in their management and economic activities, many established cooperatives fall short of their development potential and some even ceased to exist or exist only on paper. Thus, to date, the cooperative movement in Armenia remains underdeveloped and is yet to be considered an integral part of the agricultural value chain. Nonetheless, the Government of Armenia has adopted the 2010-2020 Sustainable Strategy Program for Agricultural and Rural Development of the Republic of Armenia, in which the development of cooperatives is mentioned among the strategys main priorities. Additionally, a draft Law on Cooperatives is presently in the development stage. Beyond cooperatives, there have been other approaches to farmers organizing for mutual benefit which have been successful. The experience of the Swiss Development Cooperation (SDC) suggests that the leveraging of private investments into milk collection centres and running them as private businesses, rather than funding or subsidising, may provide a more effective approach than how cooperatives have sometimes been established under some donor and government initiatives. According to SDC, independent milk collection businesses offered a flexible model for farmers to sell to buyers who had better terms. Since the investor in question was reliant on milk collection for his livelihood and had contracted a loan that he was responsible for repaying, his business stayed open year round and worked through difficult times. This was not the case with local milk cooperatives and village authorities that received donated equipment in a similar project closed in 2009 when milk prices dropped considerably, and delayed payments to farmers. Another example of apparent successful producer groups are the Water User Associations (WUA). Research suggests that the water management system in Armenia is more successful than in Georgia or Azerbaijan because of these associations even though they are charging higher water rates than in the other two countries. Practically all the countrys irrigated land is under WUAs, and collection charges and rates have increased countrywide whereby the current charge is now just above the full recovery cost of operating the system. Higher water irrigation costs then translate into increased revenues for the WUAs which in turn enhance their ability to maintain and repair the irrigation system in place. Moreover, as the system is increasingly reliable and properly maintained, the incentive is greater for farmers to irrigate their land and pay the levied charges since irrigation water is now a reliable resource which has a direct positive effect on productivity and potential farmer income. B. Reasons for UNIDO/UNDP Assistance B.1 Links to National Development Goals The project directly targets national development priorities and specific policies set by the government. With regards to the development of the agricultural sector, as set forth in the 2010-2020 Sustainable Agricultural Development Strategy of the Republic of Armenia, the main goals of government are promoting the industrialization of agriculture, increasing food security, and shaping favourable conditions for promoting export-oriented production. The reasons for this priority focus on agriculture by the government are that agriculture comprises a high share of growth and GDP, is a key link to the growth of the agro-industrial sector which has large export and growth potential, and can be a major contributor to enhanced and balanced regional development. In order to achieve the main objectives, the governments Strategy for Sustainable Agricultural Development envisions increased competitiveness of locally produced farm products, the substitution of imported agro-products, and the development of an export-oriented food and agricultural sector. Furthermore, the strategy promotes zonal specialization, efficient distribution of production, development of production and technical services, and enhanced refurbishment of production to reduce agricultural risk. Furthermore, through fostering the strengthening of farmers organizations and cooperatives, the issue of fragmentation of the Armenian agriculture will be addressed. With regard to the latter, the strengthening of producer groups, the Strategy for Sustainable Agricultural Development also makes the case for assisting in the formation of cooperation between farmers and processing entities, assisting smallholders in the establishment of production that can more quickly adapt to changing markets, and rationalising the distribution of processing organizations across rural areas in appropriate parts of the country. To assist in the development of producer groups, the government is currently working on a new legislation for cooperative development. With respect to rural development, one main aim of government is also to create non agricultural jobs and expand the share of non-agricultural incomes in rural areas. This makes the development of the agro-processing sector crucial to contribute to such growth and to more balanced regional development and employment creation. Main targets of government support to agro-processing and other value addition include the introduction of advanced technologies and the increased competitiveness of products. In this the Strategy for Sustainable Agricultural Development foresees promoting the development of the processing industry, especially SMEs, for wines, preserves, jams, comfitures, syrups, dried fruits, spices, national desserts (alani, sujukh, doshab), and the packaging of herbs (to include medicinal herbs) for beverages and teas. Furthermore, an export promotion strategy shall be developed, marketing support rendered, and contractual relations developed with producers of raw materials that can be enhanced. B.2 Institutional Background The European Union has been engaged on the agriculture sector in Armenia since the 1990s. In 2010, the EU Delegation conducted a Review of the EU-assisted Development Aid in the Agriculture Sector in Armenia over five years and a Sector Policy Support Programme (SPSP) was elaborated. Further, in the current European Neighbourhood Policy (ENP) Action Plan, one of the priorities for action by the EU in Armenia is to enhance agricultural production and rural development. Armenia also forms part of the EU's recent initiative European Neighbourhood Programme for Agriculture and Rural Development (ENPARD), including, inter alia, improving agricultural productivity and developing public and private capacities on the basis of a well-defined long-term sector-wide strategy, prior capacity assessment and sector stakeholder involvement. As part of the European Neighbourhood Programme for Agriculture and Rural Development (ENPARD Armenia) the EU has allocated EUR 20 million. Under the framework of ENPARD, the EU Delegation to Armenia has requested UNIDO and UNDP to provide EUR 2.5 million of technical assistance for the development of producer groups and selected value adding chains. In a similar request, the EU Delegation has posted to FAO for a EUR 2 million ENPARD technical support program in improve the institutional capacity of the Ministry of Agriculture in policy making and formulation of sector support, improved agricultural productivity and access to land, and the planning for and conduct of an agricultural census. Both projects are intended to provide technical assistance to and complement the implementation of the ENPARD EUR 20 million grant of the EU to the Government of Armenia, and their activities shall be in line with the ENPARD action plan that still is to be developed during the inception phase of all ENPARD projects. Through linking three important government priorities, the proposed project is in line with current government policies and addresses strategic goals set for the development of the country. Specifically, the project will assist in (1) developing a sustainable agriculture through increased access to markets, increased productivity and the formation of producer groups; (2) expanding the agro-processing sector through developing value addition components of selected value chains; and (3) reducing migration from rural communities to urban areas and abroad through increasing producer household incomes and creating rural employment opportunities . B.3 Project rationale The project addresses three main areas which encompass both problems and opportunities. Producer group development Farmers do not typically become part of effective producer groups that help source inputs and add value to their products through better production and harvesting practices, transformation, and/or marketing support. Producer groups can face difficulties in registration and acquiring the required permits for providing production inputs and handling, processing and marketing of food and non-food products. Producers groups frequently do not foster joint learning and coordination among members. Producer groups often lack specialized members with capacities in business planning and administration. Producer groups frequently lack access to adequate capital. Women, youth, and other vulnerable groups can face challenges in forming and participating in producer groups. Agro-processing and other value addition Producer groups are frequently not able to process their primary products and add value to the degree that opportunities exist to do so. Producer groups do not generally engage in product development and often lack capacities in packaging, branding and labelling. Only few producer groups have the size and are able to deliver appropriate products in sufficient quantity and quality to meet the requirements of national and international buyers. Producer groups have not significantly ventured into niche market production of gourmet, organic, and fair trade foods. Producer groups often lack access to national and international markets for food and agricultural products due to the difficulty of competing with higher quality products from other countries, particularly Europe, or fulfilling the respective requirements of those markets. Producer groups frequently lack capacity to comply with food safety and quality standards for entering the higher-value European markets. Value chain development and improving access to food Producers have generally not organized to market their production cooperatively for higher returns, but instead most products are sold directly to middlemen. Producers often lack the knowledge and skills to produce better quality products with higher productivity. Producers commonly lack access to primary production knowledge, extension services, and business development services. Producers can lack access to appropriate, competitively priced farm inputs of the needed quality. Producers typically lack access to the national and international investment community and capital markets providing reasonable rates and terms. Based on the problem areas identified above the project intends to do the following: Promote the development of producer groups through the application of flexible organizational models and intensive sensitization and training programs while taking into consideration value chain conditions and development opportunities as well as the local context and specific needs of producers. In most Western economies cooperatives have been able to play a major role in the development of their agricultural sectors and rural areas. In many former Soviet republics that tried to establish market-economy-based cooperatives (in transition from the planned-economy kolchos and sowchos models from Soviet times), the development of cooperatives falls short of its true potential for various reasons. The first of these has been the absence of appropriate laws for the establishment and operation of effective cooperatives. Second, producers still resist forming such entities due to the perception that this would be a return to state managed farms and factories. Also the various negative experiences that producers may have had with both old and new types of cooperatives come also comes into play. Third, even when cooperatives have been established as part of well-planned donor and other projects, these are often artificially created and only exist so long as members continue to receive free goods, services, and financial assistance. The challenge now is to find cooperative models that move away from theoretical best-practice solutions to realistic best-fit approaches that take into account local conditions, the capacities of members, and real development needs. With this in mind the project will be sufficiently flexible to not only promote cooperative models but also to embrace other forms of business-oriented collective action and producer groupings that contribute to economic development and the well-being of producers and their families. These can include producer associations, Limited Liability Companies (LLCs), partnerships, other standard legal entities, and even loose temporary relationships to address specific issues or activities. In this document, all such business-oriented entities, to include cooperatives, are referred to collectively as producer groups. Add value to primary products in order to increase incomes of producers. Presently the high quality of local agricultural products, significant idle production capacity, availability of qualified workers and relatively low labour costs, agro-processing and other value addition for primary agricultural products together provide an important development opportunity. If successfully addressed, value addition will increase incomes and employment in both primary production and processing thereby providing better livelihood opportunities for people in rural areas. In fact, current government policies consider agro-processing as one of the priority sectors for development for transforming the Armenian economy from low-value-added to high-value-added production. Successful agro-processing needs to emphasize balanced regional development and the engagement of rural communities. It also must start from real growth opportunities based on sufficient primary production, existing physical capacities, skills and local knowledge, readily available technical innovation, and upgrading solutions and marketing opportunities. The project will engage in supporting the Government of Armenia to develop value addition facilities and infrastructure as well as developing and strengthening the skills and capacities of producer organizations in its effective use. Strengthen value chains in other areas than producer group development and value addition, such as primary production, post-harvest handling, storage, transport, business services, capital access, and trade which will enable the production, processing and marketing of higher value quality goods. This will also include support in the establishment of better business linkages and services between value chain actors and service providers, and the improvement of the functioning and governance of the value chain through concerted efforts of coordination. Experience has taught that in underdeveloped economies and for sectors within these economies, it is generally necessary to understand all components of a value chain and then address multiple components of that chain for development initiatives to be successful. While this project will concentrate considerable resources on value-addition and producer groups, these applications may not be successful unless appropriate steps are also taken in other segments of the value chain referenced above. In fact, actions which address other components of the value chain, e.g,., input supply, access to capital, business services, can sometimes have equal if not greater positive effects on employment creation and income enhancement. Ultimately, all the preceding should result in better functioning chains for food products that will improve the well-being of Armenian consumers through better access to more affordable, higher quality foods. B.4 Stakeholders and Target Beneficiaries Stakeholder partners for the project will be: Ministry of Agriculture, other line ministries and government agencies; Regional departments of agriculture, local authorities, and extension services; Other advisory services and non-profits engaged agricultural and rural development; and Input providers and buyers of products of the targeted value chains. As the project will focus on improving primary production, value addition (to include product development), and marketing, targeted producers, producer group members and employees, and their families will be the direct beneficiaries of the project through job creation and increased incomes. This in turn will benefit the rural communities of the targeted producers and producer groups as a result of new opportunities to establish related value chain support enterprises and the multiplier effects which occur with any expansion of a local economy. Additionally Armenian consumers will directly benefit as more product will be available nationally of a better quality and price. Furthermore, the project will promote exports which will lead to improved trade balances, a stronger currency, better incomes, job creation, and resulting multipliers in those components of the targeted value chains engaged in export-oriented production, value addition, transport, and marketing. Finally, due to the special attention of the project on women, youth, and other at risk segments of the population, these groups will have access to employment, business, and income-enhancing opportunities that would not have existed otherwise. B.5 UNIDO and UNDP Comparative Advantage UNIDO is the leading UN agency in supporting industry development. It has strong expertise worldwide in supporting value addition in agriculture on a micro to medium scale levels in developing and transitional countries. Additionally, it has vast experience supporting farmers groups and cooperatives around the world in setting up processing and transformation equipment and provide related training and coaching to make these operations effective and profitable. Among others, UNIDO has unique experience to help farmers groups and cooperatives embed their value addition operations in the wider value chain, to include support to supplier network development, product development and marketing support, and creating links with buyers. UNIDO currently implements the project Productive work for youth in Armenia that supports youth-led enterprise creation and expansion, which promotes sound development of the local private sector. By setting up a youth entrepreneurship fund, the project enhances the access of young entrepreneurs and start-ups to needed capital resources as the lack of sufficient capital is considered a major hindrance to successful business creation and development. Furthermore, in close cooperation with local institutions, the project provides young entrepreneurs non-financial support beyond simply business creation. UNIDO also supported the establishment of the Centre for International Industrial Cooperation (CIIC) in Armenia, which will be able to provide unique technical services in the establishment of small agribusiness to ENPARD. Further, UNIDO supported local entrepreneurship in vulnerable communities populated by refugees by enhancing business competencies of local would-be entrepreneurs, expanding access to credit through establishment of a seven-year SME-supporting Fund, and upgrading local infrastructure by building or refurbishing community-owned facilities. UNIDO has a very good reputation to be not simply supply driven but in working towards addressing concrete needs of farmers groups and private sector associations; and finally UNIDO has a neutral position and strong partnership and cooperation with the Government of Armenia, as well as with key stakeholders present in the country. UNDP is a leading UN agency for economic development initiatives engaging also in the food and agriculture sector with experience throughout the Caucasus region addressing value chains from producer to consumer. Among its activities in Armenia, UNDP undertook an integrated community development project in Lusadzor which included return of non-cultivated land to crop rotation, distribution of seedlings, planting of orchards, construction of internal irrigation networks, introduction of artificial insemination for cattle, establishment of greenhouses, and establishment of cooperative kitchen (including bakery, dried fruit production, and cold storage). UNDP has also completed other agro-related projects in Armenia to include stakeholder training in marketing, production technology, planning, business, dried fruit production, and greenhouse technologies; development of a marketplace web portal; support to 19 dried fruit producers; construction of 29 greenhouses with drip irrigation in Ptghavan and Tavush; support for cheese production in Koti; and establishment of a collection centre with cold storage, sorting, and packing in Bagratashen. UNDP has also successfully piloted installation of anti-hail nets for the vineyards in Aygehovit, Tavush and Alvank communities. In neighboring Georgia, UNDP has engaged in numerous successful projects to include expanding access to farm credit through infusion of capital into the micro-credit sector, expanding and strengthening of business development services, and establishing agriculture/agro-processing vocational education and training (VET) centres. Presently UNDP is engaged in the Pankisi Valley where the focus is on assessing agricultural and market development needs; developing farmers production capabilities through the provision of extension; assistance in animal husbandry; creating and developing farmers associations; and developing a small dairy processing plant. UNDP is also engaged in the development of vulnerable communities in Shida Kartli providing consulting services to farmers; demonstration projects in food processing and preservation; and improved access to agriculture markets through harvest consolidation. UNDP is completing a project in the Adjara to expand and enhance business development services, improve professional skills and employment prospects in agriculture, and promote agriculture trade. Specifically, the project established the Batumi Business Incubator and the Trade Promotion Centre, the development of an Extension and Consolidation Model, and the published relevant stakeholder guides. Very importantly, UNDP is undertaking a large ENPARD three year initiative in the Adjara Autonomous Republic to increase and improve services to small farmers; develop business-oriented small farmer groups, associations, and other forms of profit-based collaborative actions between farmers; and develop the institutional capacity of the Ministry of Agriculture of Adjara. UNDP will utilize the knowledge, experience, and skills from ENPARD and other regional projects to enhance the effectiveness of the ENPARD initiative in Armenia. . The Project C1: Project objectives The overall objective of the EU ENPARD project is to support the Government of Armenia in ensuring an efficient and sustainable agriculture, contributing to better conditions in rural areas of the country. The primary outcomes of this UNIDO-UNDP ENPARD Technical Assistance project will be strengthened value chains, additional and more effective producer groups, increased rural incomes and employment, and greater consumer access to more affordable, better quality food. In particular the project will support the implementation of the EU ENPARD grant to the Government of Armenia (GoA). The three proposed outputs from this project are: Output 1: Strengthened and newly established producer groups. Within the targeted value chains and marzes, the project will develop effective, sustainable new producer groups as well as assist and strengthen existing ones in the various stages of their development. Output 2: Producer groups effectively engaged in value addition. The project will support the building of physical infrastructure as well as human capacity and skills that enable producers to add value to primary agricultural production. Output 3: Strengthened value chains that provide improved access to affordable, better quality food. The project will identify and develop key intervention points at any level within the selected value chains that will benefit not only stakeholders of those value chains but also Armenian consumers locally and nationally. Specific activities to be undertaken to achieve each output include: Output 1: Strengthened and newly established producer groups Activity 1.1: Identify marzes and value chains. The project will focus on three value chains in at least three marzes which address agricultural and non-agricultural activities. The EU Action Fiche for the overall ENPARD project indicates that initiatives to improve input and production systems should focus particularly on livestock (to include aquaculture), fruits and vegetables, and non-agricultural activities. Within these guidelines, the project will choose marzes and value chains drawing from a series of selection criteria including (a) supportiveness of national agricultural development strategy and government priorities, (b) reasonable probability of success of development interventions within project time horizon, (c) impact potential in income generation, employment creation, and poverty alleviation, (d) adequate financial and technical resources to make material impact, (e) complementary (or duplication avoidance) of prior, ongoing, or proposed donor/government initiatives and (f) useful for providing effective development models in targeted value chains. FAO and the Ministry of Agriculture will provide input and guidance during this selection process. Activity 1.2: Identify existing and the potential for new business-oriented producer groups: The project will survey types, sizes, and activities of existing groups and initiatives where multiple producers have joined together (e.g., cooperative, association, limited liability company, other legal entity, informally) to address issues such as input and capital procurement, equipment availability and utilization, harvesting, marketing, transportation, technical information, field trials, production research, packing, processing, storage, extension and other technical services. In addition opportunities for establishing new producer groups will be identified. Then a prioritization process will be undertaken for determining existing and potential producer groups with the most promise for meeting project objectives. Prioritization criteria shall include reasonable probability of assistance success, number of people who will benefit, possible employment generation, opportunities for marketing the producers products, and potential for expanded revenues and profits. Once prioritization has occurred, it will be possible to develop a detailed implementation plan for Output 1. Nonetheless, while it is ideal to identify and prioritize producer groups, other beneficiaries and detailed actions in the early stages of the project, conditions are fluid. As a consequence, the project must remain flexible and open to new possibilities in the face of a changing operating environment. Activity 1.3 Educate producers as to producer group types and characteristics. A major reason for the limited development of producer groups in Armenia has been the lack of adequate knowledge among producers as to the range of organizational possibilities and their benefits, requirements, and regulatory and tax implications. Working closely with the Ministry of Agriculture, its GMAKs and FAO, the project will (1) identify those organizational structures which have the most potential for benefiting producers; (2) with FAO, assemble existing laws and regulations relevant to the organizational structures identified, and (3) conduct education sessions to familiarize producers with the options open to them and help them understand the advantages and caveats of collective action. As it is expected that legal, regulatory, and tax policies for producer groups may evolve over the next three years due to the Ministry of Agricultures and FAOs efforts to improve and rationalize related laws, the attractiveness of one type of group over another may change. As a consequence, refresher courses will be offered over the life of the project. Prior to the conclusion of the project, UNDP will work with the Ministry of Agriculture and FAO to develop appropriate materials for continuing initiatives to educate producers in the appropriateness, establishment, and operation of various types of producer groups. Activity 1.4 Establish new producers groups: Project staff will work closely with interested producers in the targeted marzes to establish new producer groups in priority functional areas, such as value addition, input supply, production services, consolidation and marketing. Specifically, project assistance will include help in (1) reviewing their options as to the legal and organizational structure which best fits the objectives of a targeted group of producers, (2) developing by-laws and organizational and administrative structures for the option chosen, (3) advising on legal and other steps necessary to become officially registered and operational, (4) meeting with prospective members to explain the preceding, and (5) assisting with the formal establishment of the producer group, to include formation of boards, elections of board members and officers, and the securing of necessary staff. Once established, producer group members and employees will have access to appropriate training and assistance opportunities outlined elsewhere under the various activities of Outputs 1, 2, and 3. Additionally, if the Ministry of Agriculture is able to do so, and in coordination with FAO, the project will assist in the establishment of an Office (or Desk) of Producer Organizations. This would be a one-stop location where interested producers can obtain information on laws, regulations, and tax policy related to relevant producer groups and where any necessary permits, licenses, or accreditation can be secured. Activity 1.5: Develop managerial, administrative, and operational capacities of producer groups. Important to the success of the project will be the further development of new producer groups once established and the strengthening of existing groups. To accomplish this, capacity building assistance will be required in business (to include market) analysis and planning, administration, accounting, budgeting and financial management, human resource management, capital procurement, food safety and traceability, logistics, machinery/ equipment procurement and maintenance, marketing, and board of director responsibilities and oversight. Training modules will be developed and offered to both staff and board members of interested producer groups. Additionally, newly established and existing targeted groups will receive direct hands-on consulting assistance from project staff in the above areas on an as-needed basis. Additionally, the project will assist in the preparation of initial business plans and budgets, the identification of sources for start-up capital, and the process for securing this capital. Further, the project will provide limited levels of financial assistance to selected producer groups for the purchase of key inputs required for their establishment and strengthening. Finally, in close cooperation with FAO, the project will assist in strengthening the capacities of the Ministry of Agriculture to provide training and hands-on advice to those producer groups requiring assistance. In the event there are private sector entities interested in providing such services, the project would assist them in developing the capacity to do so. Activity 1.6: Improve capacity of producer groups to participate in policy decision-making. In spite of their importance economically and of the nations population and workforce, rural areas and the agriculture sector are under-represented in the establishment of laws, regulations, investments, and plans which affect them. To address this, the project will undertake three initiatives. The first will educate producers as to how to effectively monitor, understand, and influence the political process in Armenia, both locally and nationally. Second the project will work with producer groups to establish a government affairs capability that can effectively represent the interests of its members at the local and possibly national level. Third, the possibility will be explored as to the desirability of forming producer associations whose primary function is not production or value addition, but representing the interests of a value chain, or even the agriculture sector more broadly, in the adoption of laws, regulations, and taxes, and the allocation of public resources, both human and financial. Activity 1.7: Coordinate with MOA and FAO in the development of appropriate legislation for the establishment and operation of producer groups. UNDP will assist FAO to support the government to develop and adopt legislation to foster and facilitate the establishment and operation of farmers associations and cooperatives. It will be able to provide extensive information as to the types, numbers, problems, and needs of existing producer groups as well as the problems and challenges affecting the more rapid development of such groups. Furthermore, it will provide estimates of achievable financial, employment, and development benefits if appropriate legislation is passed. Finally, the projects staff will review draft legislation before submitted to any legislative committees as to how well proposed language realistically addresses actual needs. Related to all the preceding would be the provision of input and review as to the establishment of appropriate and effective oversight/coordinating entities to include the possible Desk of Producer Organizations. Activity 1.8: Promote participation and access of women, youth, and other vulnerable groups. The project will work to insure that all age groups, genders, ethnic and socio-economic groups have equal access to the assistance provided and benefits generated. A project specialist in the field engaging vulnerable groups will be assigned to work with women, youth, and other potentially disadvantaged groups which are identified. This specialists primary role will be to (1) create awareness among these groups as to project opportunities and how to access them, (2) insure applications for training, producer group establishment and assistance, and available financial and technical resources are equitably evaluated and awarded, and (3) insure any charges of discrimination related to project activities are addressed in a timely and objective manner. Additionally, this specialist will work with the Ministry of Agriculture to establish a Desk of Women, Youth, and Vulnerable Populations to continue this work at the conclusion of the project. Activity 1.9: Develop models for the further establishment of sustainable producer groups. While the scope of this ENPARD technical assistance is set for three value chains in at least three marzes, the knowledge gained in the establishment, strengthening, and operation of a range of producer groups may be applicable more broadly across Armenia. Even if this is not the case for producer groups for agricultural and rural non-agricultural value chains as a whole, it may be for the value chains on which the project concentrated. Thus, it is the intent to work closely with the Ministry of Agriculture and FAO throughout the project to develop models and supporting materials for establishing, managing and operating producer groups that may be more widely applicable than the marzes (and even value chains) in which the project was involved. As such models are identified and defined, and supporting materials developed, the project will convey this information to the Ministry and FAO for integration into the Ministrys extension and training activities. As appropriate, project staff will act in a consulting capacity to the FAO project as it develops the extension capabilities of the Ministry in producer group development. Output 2. Producer groups effectively engaged in value addition Activity 2.1 Identify business-oriented producers groups that aim to engage in value addition. From the producer groups selected in Activity 1.2, a subset of groups (e.g., cooperatives, association, partnerships, etc.) will be identified to receive support in value addition. The selected groups will be assisted in the setting up and strengthening of value addition plants and associated activities (activities 2.2 to 2.10). In fact, activity 2.1 will lead to the establishment of detailed action plans for Output 2. Focus shall be put on existing groups and cooperatives that have the strong aim to engage in processing and other value addition. The aim is to strengthen existing local value addition initiatives and ensure a business-oriented approach as well as the sustainability of the groups supported. The criteria for the selection of this subset will include, for example, the groups motivation to engage in value addition and processing, their organizational maturity, quantity of primary products available, existing processing capacities, existing skills and now-how, the availability of technical solutions and/or others to be defined in the inception phase of the project. Activity 2.2: Install appropriate technologies/equipment and improve technical performance of producer groups value addition capacities. The project will support producer groups to acquire most appropriate technical equipment and machinery (e.g., subsidized out of the ENPARD budgetary support component or through other means of finance) and complement existing capacities to enable the production of higher quality and higher value products. The project will particularly provide expertise in setting up processing and packing units, factory layouts, choice of equipment, and development of production protocols. It will also ensure that, once the equipment is set up, enough training and coaching is provided to operate the plant efficiently and necessary skills among group members and employees are built. Among these skills are quality control, factory management, reception of primary materials, maintenance of machineries, and operation of machineries. These skills are to be communicated via training courses, on the job demonstration as well as through visits to best practice companies in Armenia and abroad. The project also ensures that equipment is used for the equitable processing of members primary production. If the capacities allow, additional volume from non-members and surrounding villages can be processed. Activity 2.3: Study existing and potential markets and support producer groups to develop new and improved value added products. Still in the inception phase the project will set out to develop a sophisticated market analysis which looks into the potentials for selling existing and new products to various marketing segments in Armenia, the New Independent States and other higher value markets such as the Gulf States and Europe. The study will also venture into the testing of products on markets and the sending out of samples to potential buyers. Further the project will bring in a product design specialist who together with selected members and employees of the targeted producer groups will identify, develop and test new and improved products that respond to buyer demands and consumer preferences. Here the project may also draw from national experts, marketing consultants, and technological laboratories. This requires feedback from marketing studies as well as a screening of the technical solutions that are available. In the case of newly established processing facilities, the product development will be engaged in developing and adjusting the required protocols for production. Activity 2.4: Improve producer groups technical capacities in storage and packaging of value added products. The project will support producer groups to invest in appropriate packaging solutions and storage facilities (e.g. subsidized out of the ENPARD budgetary support component) and provide the necessary technical expertise and training to ensure its efficient application. This includes technical advice in the choice of the equipment, packaging materials and labelling, in the building of storage space, and in the start of operations. Further there will be extensive training and coaching in the continued operation of related machinery. Special emphasis will be put on the application of food safety regulations and the compliance with quality standards. Activity 2.5: Help producer groups develop marketing capacities and link them to buyers of value added products. The project will train selected staff of targeted producer groups to develop marketing skills. This will include training on development of marketing strategies, guidance to identify buyer lists and use rosters and internet to contact potential buyers. Furthermore, the project will promote access to potential national and international buyers, to better understand desired products and qualities of interest to them. Visits to countries and trade fairs may also be sponsored if promising marketing opportunities occur. The project will also support the producers groups to develop their own brands, and marketing strategies to expand marketing opportunities and tap into new markets. At the conclusion of the project, effective buyer relationships need to have been developed and maintained to sustain viable business operations of the producer groups. Activity 2.6: Build value addition producer groups entrepreneurial and business planning capacities. The project will engage in the communication and delivery of entrepreneurial skills. This starts with training that is geared to cultivating the entrepreneurial spirit of business-oriented processors. It continues with building capacities in business planning, administration, accounting, work organization, and human resource management. Furthermore, the project will assist the groups in the implementation of their business plans throughout the project to include regular coaching sessions and mentoring. Activity 2.7: Link producer groups to existing finance schemes. The project will apply UNIDO methodology of project/investment appraisal and feasibility analysis to facilitate financial planning and secure needed capital. It will help value addition groups develop fundable business plans and access existing government and private banking and micro-finance schemes including SME, DNC and others. Furthermore, in close cooperation with the UNIDO Centre for International Industrial Cooperation, the project will promote access to international investors and strengthened business linkages through the organization of Business to Business (B2B) meetings. Additionally, the project will work with targeted value adding producer groups to access innovative financing facilities and services. Activity 2.8: Improve value addition producer groups capacities to comply with food safety and quality standards. Agricultural products have to comply with food safety standards in Armenia and in the countries to where they are exported (e.g., Russia and the EU). While the country is still building up its food safety legislation compliance infrastructure, there are few companies that are actually fully compliant. The project will make an effort to gradually improve the quality and food safety of the targeted producer groups products starting with complying with national regulations and gradually upgrading to international and EU standards. In addition to setting up quality standards compliant equipment and small quality laboratories, the project will provide training to staff handling products and link producer groups with national and international certification bodies. Activity 2.9: Support value addition producer groups to engage in cleaner production and energy saving technologies and practices. In order to enhance sustainable entrepreneurship and showcase the benefits of cleaner production and how businesses can reduce costs by being environmentally sustainable, UNIDO will assist processing groups to apply resource efficient and environmentally sustainable techniques, machinery, and equipment in production processes, storage, transportation, energy sourcing, and other relevant activities. Activity 2.10: Support access of women, youth and other vulnerable groups to participate in value addition. The project will identify entry points and opportunities along the selected value chains for youth, women and other vulnerable groups to engage in value addition. The project will closely cooperate with youth and womens organization and build their capacities to support young entrepreneurs (business plan development, entrepreneurship training, mentoring) and job-seekers (counseling and mentoring). The project will furthermore contribute to the skills matching by facilitating linkages between the value chains and local private and public training institutions. Output 3: Strengthened value chains that provide improved access to affordable, better quality food Activity 3.1: Conduct analysis of selected value chains and develop intervention strategies. An analysis will be undertaken for each targeted value chain following UNIDOs value chain analysis method. This analysis will enable a better understanding of value chain development bottlenecks and opportunities and identify needs for assistance. Furthermore the project will identify challenges to participation of rural people in the various segments of the targeted value chains. UNDP and FAO will augment elements of this survey in their fields of responsibility, particularly with regard to the analysis of primary production constraints and current participation of youth, women and other vulnerable groups. Based on this analytic work, each UN organization (UNIDO, UNDP, FAO) will develop a detailed action plan for Output 3 with key intervention points in their areas of responsibility. Activity 3.2: Support government agencies and value chain actors to better coordinate, support, and link value chain components. The value chain analysis and intervention planning conducted under Activities 3.1 will also provide insights into how government agencies, working with value chain actors, can best assist the development, coordination, and linking of key components of targeted value chains in the selected marzes. Once support points have been determined, the project will coordinate with FAO, the Ministry of Agriculture, its GMAKs, and other relevant entities to utilize, strengthen, or develop value chain development support capacities. This will include a broadening of Ministry of Agriculture initiatives beyond simply the producer groups assisted to addressing the targeted value chains in their entirety. A related task will be to work closely with public and private business development service providers and improve their capacity to offer targeted, high quality services to producer groups and other actors in the value chain beyond the projects duration. This may include assisting the FAO ENPARD project in the training of trainers in the fields of business plan development, financial appraisal, branding and marketing, as well as business planning and entrepreneurship. Activity 3.3: Improve producer access to primary production knowledge, market information, and extension services. Management, budgetary, and staff training challenges often jeopardize the effective delivery of production related public research, education, and extension services. Additionally, evolving information technologies and input supply systems have opened non-traditional approaches that may sometimes be more cost and operationally effective. As a consequence, the project will explore a range of alternatives to providing these essential services and information. This could include conveying production and marketing knowledge via partnerships with input suppliers, buyers, processors and others that are in regular contact with farmers. It will likely entail the use of communications technologies employing television, cellular phones, and computers, individually and through community information centres. These may be linked with or use remote interactive teaching on knowledge not readily available in Armenia. However, it is important to ensure the relevance of the teaching content to local situations. Additionally, the existing education system may provide a valuable resource and opportunity for conveying production and marketing information differently than in the past. In fact, the information technology sector in rural areas may represent one of the most promising employment opportunities for rural youth. Within this evolving information milieu, the project will act as a catalyst and facilitator for identifying, promoting, and assisting the development of effective approaches for providing up-to-date, relevant research, education and extension. Activity 3.4: Develop Good Agricultural Practices (GAP) and disaster risk management approaches. Major challenges for primary producers engaging in a new and different kind of production using unfamiliar inputs and new technologies is to employ these so as to produce the required quality and maintain safety for the producer, their communities, and the environment. The project will develop appropriate production protocols for the targeted value chains in the selected marzes that minimize such risks. The knowledge and approaches developed will be shared with the FAO and Ministry of Agriculture for possible adaptation to national initiatives for the adoption of Good Agricultural Practices. Armenia producers also face major challenges with respect to the short and longer term effects of natural disasters such as earthquakes, hail, and drought, and the impending implications of climate change. As these are unpredictable and irregular or longer term in nature, the project will primarily identify key factors over which producers have some reasonable degree of control and then develop risk management tools to be applied in the targeted value chains. To the degree these are immediately actionable by and beneficial to producers, training courses will be developed and offered. However, the primary capacity building may be less at the producer level than within the Ministry of Agriculture and GMAKs which will be responsible for their further diffusion and application. The protocols developed will also be shared with FAO so they can be incorporated in that projects capacity building initiatives with these government institutions. Additionally, the project may undertake small pilot projects in areas of special interest or need, e.g., drip irrigation, hail protection. If any of the preceding suggests an immediate more broad-based need or opportunity for adoption of an important technology, the project will coordinate with international donors, the private sector, and the Government of Armenia to secure additional financial and technical support. Activity 3.5: Improve producer access to better quality production inputs and related services. Within the targeted value chains and marzes, the project will identify the input supply challenges of greatest importance and work to find solutions that meet the needs of local producers. Further to the support to producer groups, the project will also support individual producers to access inputs through a range of measures including (1) purchasing, (2) appropriate regulations, monitoring, and testing as to stated representations of product quality and characteristics, (3) production credit, (4) innovative approaches for machinery and equipment to include machinery service companies, parts and repair, and leasing, (5) effective and efficient international sourcing, and (6) technical support in the introduction and use of new or unfamiliar inputs. Activity 3.6: Support producers to improve harvesting techniques, post-harvest handling, and storage. The project will work with producers, individually or those associated with value addition groups, to promote the use of appropriate harvest, post-harvest handling, and storage technologies and approaches which enhance product safety, quality, value, and marketability. The activity will first identify and then match appropriate technical solutions to consumer/market preferences and regulatory requirements. It will then provide technical expertise in (1) advising on needed harvesting requirements, (2) establishing post-harvest and storage systems, and (3) training and coaching for optimal operation. Activity 3.7: Build producer groups capacities to source quality products and set up effective supplier networks. This includes the management of both horizontal and vertical alliances as well as the creation and strengthening of supplier networks. Based on identified bottlenecks, the project will work with primary producers, packers, and processors on customer relationship management and working relationships to enhance communication along the value chain. Furthermore the project will assist in the establishment and improvement of supply relationships. To achieve this, producers will be given the tools necessary for them to provide their suppliers with clear product requirements. Inefficient administrative procedures existing between primary producers and value adding producers that are detrimental to the relationship are thus eliminated. Finally, the suppliers are taught how to provide better products, while improving their management so as to reduce costs, shorten delivery times and guarantee the quality of their products. Activity 3.8: Support traders, transporters and marketers to better service targeted value chains. Many producers in the targeted value chains will likely continue to rely on external transporters, traders, and marketers to move and sell their output rather than doing themselves individually or cooperatively. As a consequence, the project will address the following: (1) transportation capacity (quantity, timeliness, quality, modes), (2) pricing (fair to the producer while providing reasonable return to the service provider), (3) market information access (where there are potentially competing interests between the producer and trader/marketer), (4) dispute resolution (when there is alleged short weights, damage or spoilage), and (5) payments and finance. While actors involved in moving product from farm to end markets may choose to remain legally and organizationally separate from one another, the project will work to develop effective relationships between producers, producer groups, transporters, and traders/marketers. This can be done through loose affiliations, contractual arrangements, and even joint financing of trucks, storage facilities, and/or sales representatives and offices. Activity 3.9: Develop innovative financing facilities and services, and improve access to capital. Access to operating and investment capital at reasonable terms and rates is often an obstacle to a more rapid and substantive development of the food and agriculture sector. The project will therefore enhance modern value chain finance mechanisms facilitating relationships between finance institutions, buyers and suppliers. Financing needs along the value chain will be identified and opportunities will be presented to the different actors of the value chains. Furthermore, the project will identify potential innovative finance arrangements that address gaps, needs, and sources. For those that are feasible, approaches will be developed for their implementation. The concepts will be presented to donors, financial institutions, and others who have the capacity to fund and/or implement such initiatives. To the degree that producer insurance programs become available in Armenia during the course of the project, they will be integrated into the credit expansion approaches recommended and promoted by the project. Project Activity Plan (Summary) Output 1: Strengthened and newly established producer groups.ActivitiesResponsibilitiesPartners1.1: Identify marzes and value chainsUNDP, UNIDO GoA, FAO, stakeholders1.2 1.2: Identify existing and the potential for new business-oriented producer groupsUNDP1.3 Educate producers as to producer group types and characteristicsUNDP,LSP1.4 Establish new producers groupsUNDP1.5 Develop managerial, administrative, and operational capacities of producer groups.UNDP,GoA, FAO, LSP1.6 Improve capacity of producer groups to participate in policy decision-making.UNDPFAO, LSP1.7 Coordinate with MOA and FAO in the development of appropriate legislation for the establishment and operation of producer groups.UNDPGoA, FAO1.8 Promote participation and access of women, youth, and other vulnerable groupsUNDPMOA1.9 Develop models for the further establishment of sustainable producer groups.UNDPGoA, FAO Output 2. Producer groups effectively engaged in value addition.ActivitiesResponsibilitiesPartners2.1 Identify business-oriented producers groups that aim to engage in value addition.UNIDO, UNDPGoA2.2 Install appropriate technologies/equipment and improve technical performance of producer groups value addition capacities.UNIDOcivil works contractors2.3 Study existing and potential markets and support producer groups to develop new and improved value added products.UNIDOLSP2.4 Improve producer groups technical capacities in storage and packaging of value added products.UNIDOLSP2.5 Help producer groups develop marketing capacities and link them to buyers of value added products.UNIDOLSP2.6 Build value addition producer groups entrepreneurial and business planning capacities.UNIDOLSP2.7 Link producer groups to existing finance schemes.UNIDO2.8 Improve value addition producer groups capacities to comply with food safety and quality standards.UNIDO,LSP2.9 Support value addition producer groups to engage in cleaner production and energy saving technologies and practicesUNIDO2.10 Support access of women, youth and other vulnerable groups to participate in value additionUNIDO, UNDPGoA Output 3: Strengthened value chains that provide improved access to affordable, better quality food.ActivitiesResponsibilitiesPartners3.1 Conduct analysis of selected value chains and develop intervention strategies.UNIDO, UNDPFAO3.2 Support government agencies and value chain actors to better coordinate, support, and link value chain components.UNDP, UNIDO GoA,3.3 Improve producer access to primary production knowledge, market information, and extension services.UNDPGoA, FAO, LSP3.4 Develop Good Agricultural Practices (GAP) and disaster risk management approaches.UNDPGoA, FAO3.5 Improve producer access to better quality production inputs and related services.3.6 Support producers to improve harvesting techniques, post-harvest handling, and storageUNDP, UNIDOLSP3.7 Build producer groups capacities to source quality products and set up effective supplier networksUNDP, UNIDOLSP3.8 Support traders, transporters and marketers to better service targeted value chains.UNDPGoA, FAO, LSP3.9 Develop innovative financing facilities and services, and improve access to capitalUNDPUNDPGoA = Government of Armenia, LSP = Local Service Providers C.2: The Approach In the implementation of the above described output related activities, the project will pursue the following logic sequence: First, marzes and value chains will be chosen in order to define the focus and scope of interventions. UNIDO, UNDP, and FAO will work together to make these determinations. Second, opportunities for new producer groups will be identified for support in their establishment and registration along with identifying existing producer groups who would also receive assistance in their organizational strengthening to respond to Output 1. UNDP will lead these activities in collaboration with FAO and UNIDO in areas where their responsibilities overlap. Third, producer groups will be identified (as a subset of the preceding) that will receive support with regard to agro-processing and other value addition to respond to Output 2. UNIDO will lead these activities. Forth, other value chain actors will be identified that will receive support to respond to Output 3. UNDP will lead these activities in collaboration with FAO and UNIDO. The detailed activities will be defined after full value chain analyses. Fifth, opportunities to provide modules, materials, training, and other assistance to public and private entities will be identified so as to contribute to the sustainability of interventions beyond project completion as well as expanding successful models and tools to other regions or value chains. UNIDO and UNDP will work with FAO to strengthen the Ministry of Agriculture, other governmental entities, and private sector service providers. In essence UNIDO will be responsible for capacity strengthening, coaching, and the provision of machinery, equipment, and other inputs as part of pilot projects when producer groups are value addition related, and UNDP when it is commodity production and marketing related. In order to provide the best assistance and avoid duplication of effort, a given producer group will work only with UNDP or UNIDO but not with both. The activities of the two agencies lead to optimal synergies as they will target various segments and development bottlenecks along selected value chains (drawing particularly from a joint value chain analysis). Both organizations will coordinate and exchange relevant information and expertise with FAO as reflected in the output-related activities described under C1. C.3 Governance and project management structure As stipulated in the Action Fiche of the ENPARD, UNIDO is the lead agency for the implementation of the present project. However, the collaborating agency UNDP will take major responsibility in the implementation of Output 1 and Output 3. Each UN agency will have separate responsibilities as stipulated in the activity plan in section C.1 and will independently administer the respective funds according to their organizations rules and regulations. UNIDO will have overall technical and financial reporting responsibility for the project but will draw from UNDP reporting for the activities assigned to UNDP. The project management structure foresees 5 organizational units: UNIDO Project Implementation Unit: The UNIDO component will be implemented by the Agri-Business Development Branch Agro-Industries and Sectoral Support Branch and the Business, Investment and Technology Services Branch in close cooperation with the Europe and NIS Programme and the UNIDO Desk in Armenia. Head of UNIDO Operations will be performing the coordinating and monitoring functions in the field. UNIDO will be responsible for the delivery of all activities under Ouput 2 as well as selected activities under Output 3, as stipulated in the attached work plan. UNIDO will recruit a project coordinator (in the beginning international to see if to be changed to national after the first year) and a project assistant for the duration of the project. Furthermore UNIDO will recruit experts who will provide short and medium term technical assistance as required by the different project activities. Profiles, allocation and duration of mission of those consultants will be identified in the inception phase of the project, as the exact description of profiles can only be defined once the value chains and marzes are selected. Where national expertise is available, UNIDO will work with national experts. International experts will only be considered if national expertise is lacking and a clear value added can be provided by the international expert. UNDP Project Implementation Unit: UNDP will be responsible for the delivery of all activities under Outputs 1 and 3, as stipulated in the attached work plan. These portions of the project will be directly managed by the UNDP Community Development Project which will minimize administrative expenses and ensure immediate initiation of the activities. A project coordinator, project assistant and project experts will be involved in day-to-day activities. UNIDO and UNDP will be trying to locate their project staff in the same office and benefit from sharing joint logistics. UNDP, drawing from the size of its operations in Armenia, will provide the necessary logistical support to the project including renting office space and hiring of a joint logistics team including drivers and clerks. Project Steering Committee (UNIDO/UNDP component): The steering committee will meet quarterly and have the main task to monitor the implementation of the project as defined in the work plan as well as offer the opportunity of coordination between stakeholders. Regular meetings of the component steering committee will enhance the synchronization of activities as well as the coordination with the EU, the government and other local stakeholders. Core members of the steering committee will be the UNIDO and UNDP project teams as well as representatives of the Ministry of Agriculture and the EU delegation. Sub committees will be established upon selection of the marzes and value chains to ensure cooperation with local institutions and coordination with actors engaged in the selected value chains. As needed, coordination meetings will be conducted to ensure the synchronization of activities implemented by FAO and under the larger ENPARD component (budget support component) and to maximize synergies between activities and avoid overlapping between the different ENPARD components. ENPARD Armenia Coordination Committee: The ENPARD coordination committee will be responsible for the overall coordination of all ENPARD activities. The committee will be include representatives of the Government of Armenia, (e.g., Ministry of Agriculture,, Ministry of Territorial Administration), the EU, representatives of the private sector (to include the farmers union), and the implementing agencies (UNIDO/UNDP and FAO). ENPARD Regional Coordination: To enhance learning and exchange, it is envisaged to organize annual meetings of stakeholder and agencies involved in the implementation of ENPARD projects in the Caucasus. This ENPARD lessons-learned mechanism will offer the opportunity to exchange best practices with partners engaged in the implementation of ENPARD in other countries (e.g., Georgia).  C.4 RBM code and thematic area code The project falls into UNIDOs poverty reduction portfolio (EC1) and in particular Agribusiness and Rural Enterprise Development (EC13), its thematic area is poverty reduction through productive activities (PRP) C.5 International development goals The proposed project will contribute towards MDG 1: Eradicate extreme poverty and hunger; particularly to 1A: Halve the proportion of people living on less than $1 a day, and 1B: Achieve Decent Employment for Women, Men, and Young People. It will also contribute to MDG 3: Promote gender equality and empower women as well as to MDG 7: Ensure environmental sustainability. C6. Timeline of activities Phase 1. Inception, Analysis and Design (6 months): The Inception, Analysis and Design Phase will be overseen by a management team with designated representatives from the EU, UNIDO, UNDP, and the Ministry of Agriculture until such time as the the international and the national project coordinator are in place. This group will trigger the works required to select the value chains and marzes and launch the value chain and producer group identification studies. All the identification process will be driven by stakeholders in the respective marzes and value chains, to include farmers and government officials responsible for agriculture and rural development. This phase will also ensure collection of background knowledge and data needed to provide an information and evaluation baseline for the project, identify potential value-chain resources (e.g., farmers, producer groups, funding), and develop detailed project implementation plans, both overall and for the first year. Phase 2. Project Implementation (27 months): The Implementation Phase is the core component of the project and will generate virtually all of the outputs and success indicator products if the project evolves as planned. Nonetheless, project management and its steering committee advisory boards must be open to alterations in focus and operational activities if changing conditions or new information suggests that modifications to implementation plans will better achieve project objectives and desired results. Phase 3. Project Completion (3 months): The Project Completion Phase will ensure promotion of the project approach to other development agents and insure effective transition to those business-oriented groups developed during the project as well as to strengthened local support institutions. In addition to UNIDO and UNDP end-of-project evaluations, third party specialists will be asked to review the project to provide additional insights and recommendations. On the basis of a sound evaluation, it will develop strategies for either exit or continuation of interventions, if necessary, through local institutions to ensure sustainability. The project will also strengthen its efforts to publicize lessons learned and diffuse the models and materials for further producer group and value-chain development recommending, among others, future producer group/value-chain work. Table: Timeline of Activities (Gant Chart) Year201420152016Quarter1q2q3q4q1q2q3q4q1q2q3q4qOutput 1: Strengthened and newly established producer groups1.1 Identify marzes and value chains.1.2 Identify existing and the potential for new business-oriented producer groups1.3 Educate producers as to producer group types and characteristics1.4 Establish new producers groups 1.5 Develop managerial, administrative, and operational capacities of producer groups.1.6: Improve capacity of producer groups to participate in policy decision-making.1.7: Coordinate with MOA and FAO in the development of appropriate legislation for the establishment and operation of producer groups.1.8: Promote participation and access of women, youth, and other vulnerable groups1.9: Develop models for the further establishment of sustainable producer groups.Output 2. Producer groups effectively engaged in value addition.2.1 Identify business-oriented producers groups that aim to engage in value addition.2.2 Install appropriate technologies/equipment and improve technical performance of producer groups value addition capacities.2.3 Study existing and potential markets and support producer groups to develop new and improved value added products.2.4 Improve producer groups technical capacities in storage and packaging of value added products.2.5 Help producer groups develop marketing capacities and link them to buyers of value added products.2.6 Build value addition producer groups entrepreneurial and business planning capacities.2.7 Link producer groups to existing finance schemes.2.8 Improve value addition producer groups capacities to comply with food safety and quality standards.2.9 Support value addition producer groups to engage in cleaner production and energy saving technologies and practices2.10 Support access of women, youth and other vulnerable groups to participate in value addition.Output 3: Strengthened value chains that provide improved access to affordable, better quality food.3.1 Conduct analysis of selected value chains and develop intervention strategies.3.2 Support government agencies and value chain actors to better coordinate, support, and link value chain components.3.3 Improve producer access to primary production knowledge, market information, and extension services.3.4 Develop Good Agricultural Practices (GAP) and disaster risk management approaches.3.5 Improve producer access to better quality production inputs and related services3.6 Support producers to improve harvesting techniques, post-harvest handling, and storage3.7 Build producer groups capacities to source quality products and set up effective supplier networks3.8 Support traders, transporters and marketers to better service targeted value chains.3.9 Develop innovative financing facilities and services, and improve access to capitalOutput 4. Project Monitoring and Evaluation4.1 Project evaluationOutput 5: UNIDO project management5.1 Identification of staff, consultants, contractors and local service providers5.2 Project implementation and administration5.3 Supervision visits and headquarter travel5.4 Local travel Output 6: UNDP project management6.1 Identification of staff, consultants, contractors and local service providers6.2 Project implementation and administration6.3 Supervision visits and headquarter travel6.4 Local travel 6.5 Visibility actions  C7. Risks Major risks associated with the implementation of this project are presented in the following risk management framework: RiskMitigating Measures (included in the various activities of the project)Likelihood of OccurrenceImpact, if Risk occursProduction risks: Attacks from pests, diseases, natural disasters and management failures may cause drops in primary production.Monitor the status of production and quality of product Experts provide production recommandations and solutions to failure Producers apply disaster risk reduction tool developed by the projectmediumMedium Organizational risks: Producer groups do not attain organizational maturityCareful choice of producer groups Administrative skills and business plan development Training and coaching on organizational developmentmediumHighQuality risk: Producers and processors do not attain adequate product quality and product cannot be sold on the marketChoice of production and processing equipment Quality control system Training and coaching on quality Development of protocols that ensure qualitymediummediumPolicy and policy support risks: The agricultural and rural development strategies may not be implemented by the GoA , associated programs such as ENPARD to not meet the interest of the GoAEffective collaboration with the GoA in the development of policies and strategies (lead by FAO) Continuous discourse and engagement with national and local policy makers and lobby groups Adequate reporting of progress and results to policy makerslowmediumRisks from geopolitical tensions: Groups of the society may object to policies and project interventions, conflict with neighboring countries may ariseContinues demonstration of relevance of the project on income generation and employment as well as business makinglowhighMarket risk: Prices and demand for products of the selected value chains dwindle. Dependence on international market prices. Higher-quality and higher-value products may only be marketable to a smaller portion of more wealthy consumers.Introduction of cost effective production and processing operations, increasing efficiency in value chain organization and overall Marketing study and market testing Marketing campaign Segmentation between NIS (few price increase) and European market (higher price increase)mediummediumExternal intervention risk: Other development projects and government initiatives interfere with Continuous discourse with government and development community Adequate reporting of progress and results to policy makerslowlowProducer risks: Producers fail to see producer group alternatives as providing sufficient incentive for participation Careful choice of producer groups Continuous demonstration of advantages of producer groups lowmediumValue Chain Cooperation Risk: Value chain actors unable to perceive or unwilling to pursue mutually beneficial relationships due to lack of trust, flexibility, and other similar reasons.Demonstrate the advantage of value chain cooperation to the different actors engaged Training and coaching on the economic benefits of functioning value chains mediummediumCapital Risk: Insufficient capital available to undertake the value addition processes required to meet output objectives. Financial institutions, donors, and other potential investment sources resistant to expanded exposure in the food and agriculture sector. Careful financial planning in inception phase Study of the financial market and existing financing schemes Adequate reporting of results achieved in the selected value chains / marzes Continues demonstration of high potential of the food and agriculture sectorlowmedium D. Implementation Arrangements The project will be implemented in close cooperation with the Ministry of Agriculture as the Government Coordinating Agency. The Ministry of Industry has actually requested UNIDO support to value addition in agricultural value chains and will be the lead agency to implement the EUR 20 million main ENPARD project which this project is only complementing as a support facility. Therefore main role of the project is to support implementation of the main project through providing expertise, training and lessons learned from pilots. The project will work with local consulting companies, individual consultants and government development and research/extension agencies to ensure the implementation of planned activities. The project will directly work with a subset of producer groups in at least three marzes and within three value chains and support them to and a not yet defined number of cooperative-owned oil mills (both will be government-selected). This includes: D.1. Counterpart Inputs: Through the MoA, the Government of Armenia will: Guarantee timely and effective full support throughout the implementation of the various project phases Contribute to the collection and analysis of available related national data and material with its own professional field capacity Provide all necessary national and/or regional government authorizations to carry out field activities, taking into consideration that the absence of these authorizations could prevent or delay field project activities Make available, when possible, office space with telephone facilities for use by the experts during the missions and provide meeting rooms for official meetings and workshops Cover the travel costs and daily allowances of Ministry staff working with the project and of national institutions participating in workshops D.2 UNIDO/UNDP Inputs: International Staff (BL 11-00) The project will hire a number of international experts in areas where local expertise can be blended and enhanced with knowledge from abroad. Overall Euro 591,480 shall be spent for this. This includes an international project coordinator who will work full time with the project in the first year and part time in the following two years. Main tasks of international experts will include support to the following: 1.1 Identify marzes and value chains 1.7 Coordinate with MOA and FAO in the development of appropriate legislation for operation of groups 2.2 Install appropriate technologies/equipment and improve technical performance of groups value addition capacities 2.3 Study existing and potential markets and support groups to develop new and improved value added products 2.4 Improve groups technical capacities in storage and packaging of value added products 2.7 Link groups to existing finance schemes 2.9 Support groups to engage in cleaner production and energy saving technologies and practices 3.1 Conduct analysis of selected value chains and develop strategies National Staff (BL 17-00) The project will employ a national project coordinator and part time project assistants. Further the project will follow the rule to hire national staff wherever possible. Only in case that the required expertise is not available locally, the recruitment of international consultants may be considered. The recruitment of national experts on the order Euro 447,500 envisages the following tasks: 1.1: Identify marzes and value chains. 1.2: Identify existing and the potential for new business-oriented producer groups 1.3 Educate producers as to producer group types and characteristics 1.5: Develop managerial, administrative, and operational capacities of producer groups. 1.6: Improve capacity of producer groups to participate in policy decision-making. 1.7: Coordinate with MOA and FAO in the development of appropriate legislation for the establishment and operation of producer groups. 1.8: Promote participation and access of women, youth, and other vulnerable groups 2.1 Identify business-oriented producers groups that aim to engage in value addition. 2.2: Install appropriate technologies/equipment and improve technical performance of producer groups value addition capacities. 2.3: Study existing and potential markets and support producer groups to develop new and improved value added products. 2.4: Improve producer groups technical capacities in storage and packaging of value added products. 2.6: Build value addition producer groups entrepreneurial and business planning capacities. 2.7: Link producer groups to existing finance schemes. 2.8: Improve value addition producer groups capacities to comply with food safety and quality standards. 2.9: Support value addition producer groups to engage in cleaner production and energy saving technologies and practices 2.10: Support access of women, youth and other vulnerable groups to participate in value addition. 3.2: Support government agencies and value chain actors to better coordinate, support, and link value chain components. 3.4: Develop Good Agricultural Practices (GAP) and disaster risk management approaches. 3.5: Improve producer access to better quality production inputs and related services. 3.6: Support producers to improve harvesting techniques, post-harvest handling, and storage 3.8: Support traders, transporters and marketers to better service targeted value chains. 3.9: Develop innovative financing facilities and services, and improve access to capital Subcontracts (BL 21-00) A total allocation of Euro 565,000 is earmarked for subcontracting including the development of business plans and ongoing support to the management of the producer groups, the rehabilitation of existing facilities, the development of production protocols, and organization of a marketing and awareness raising campaign. Specific Terms of Reference (ToRs) for these subcontracts will be prepared throughout the course of the project as such support and involvement is required. Training (BL 33-00) While most of the training with members of the identified producer groups is actually conducted during individual sessions of local and international consultants as well by subcontracted service providers, a total allocation of Euro 97,000 has been earmarked for the organization of workshops on the value chains at the marz level. Equipment (BL 45-00) A total allocation of Euro 336,000 has been allocated for equipment. Of this Euro 100,000 will be used by UNDP for purchase of pilot hail nets and drip irrigation systems as well as other equipment. UNIDO will use Euro 200.000 for providing pilot processing equipment to a limited number of producer groups (e.g. 4 or 5). The rest of the funds is used to purchase a project vehicle. Local & HQ Travels (BL 15-00 & 16-00) A total of Euro 168,000 has been allocated to ensure recruitment of local support staff and for local travel. Euro 30,000 has been allocated for travelling of headquarter staff to ensure their engagement in backstopping and monitoring. Miscellaneous (BL 51-00) A total allocation of Euro 119.000 has been allocated for fuel and operation and maintenance of the three vehicles, communications, stationary and printing for the 36 month of project operations. D.3 Summary of the Project Budget OutputsResponsibility1st year2nd year3rd yearTotalOutput 1: Strengthened and newly established producer groups.UNDP10600011600055000277000Output 2: Producer groups effectively engaged in value addition.UNIDO35750028950077500724500Output 3: Strengthened value chains that provide improved access to affordable, better quality food.UNDP18600017750052500416000Output 4. Project Monitoring and EvaluationUNIDO27000270002700081000Output 5: UNIDO project managementUNIDO263000156000128480547480Output 6: UNDP project managementUNDP148840164995155185469020Total10883409309954956652515000 Budget positionsBudget line# 1st year2nd year3rd yearTotalInternational consultancies1132000018400087480591480Local support staff and travel15560005600056000168000Headquarters travel1610000100001000030000National consultants1719850015000099000447500Subcontracts21203000237000125000565000Training workshops3320000440003300097000Equipment451800001530003000336000Miscellaneous51320003700050000119000Indirect costs688405999532185161020Total10883409309954956652515000 E. M&E and Reporting Monitoring and evaluation will be done with the use of the key performance indicators on the level of project outcomes and outputs respectively. The indicators and their means of verification are included in the logframe. The below table illustrates how the various indicators inform on the results of value chain development. Intervention logicIndicatorsSources of verificationEvaluation exercise Output 1: Strengthened and newly established producer groups.At least 10 new business-oriented producer groups established Training conducted for staff of at least 20 producer groups in a) business planning, administration and organization, b) budgeting and financial management c) commodity marketing, d) food safety and traceability at production level, and e) policy advice for agricultural and rural development decision-making At least 1,000 farmers trained in each targeted marzes as to possible structures and benefits of group organization Manual for establishing/operating producer groups developedProject progress reports Project records on assisted producers and producer groupsSemestrial reportingOutput 2: Producer groups effectively engaged in value addition. At least 10 producer groups engage in new and improved ways of value addition Products from modernized producer groups attain at least 10% premium price and annual turnover increased by 20% 90% of the products from the targeted producer groups comply with new improved food quality standardsProject progress reports Project records on sales Value chain survey Project records on producer groups Value chain survey Consumer surveyBaseline study Semestrial reporting End of project evaluationOutput 3: Strengthened value chains that provide improved access to affordable, better quality food.GAP and Risk assessment protocols developed and conveyed to MOA with any necessary training of trainers Supplies of targeted producers to value chains has increased by 15% Targeted value chain actors employ 5% more workers on averageProject progress reports Project records on targeted value chain actorsFinal project reporting The key performance indicators as well as contextual qualitative information will be collected according to the following indicative Monitoring & Evaluation Work plan. Type of M&E activityResponsible PartiesBudget EUR*Time frameInception workshop and inception report UNIDO Project Manager; UNDP Project Manager, Steering Committee0**Within first two months of project start up M&E design and tools to collect and record data (performance indicators) UNIDO Project Manager, UNDP Project Manager, PIU (Chief technical Advisor + National project coordinator)0**Start of projectBaseline study, verification of information collected during project formulationInternational consultant, local evaluation service provider27.000After choice of value chains and marzesRegular monitoring and analysis of performance indicators PIU0*Regularly to feed into project management Quarterly progress reportsPIU, Stakeholder consultation workshops0*Every three monthsYearly progress report UNIDO project manager, UNDP project manager, local evaluation service provider27.000After 12 and 24 month Terminal project evaluation and reporting on lessons learnedUNIDO commissioned international consultant, local evaluation service provider27.000Evaluation at least one month before the end of the project; report at the end of project implementationVisits to field sites UNIDO Project Manager, UNDP Project Manager,0*Every 6 monthTOTAL indicative cost * Costs are covered under UNIDO/UNDP staff time and travel expenses ** Costs are covered under Project Management Costs 81.000PIU = Project Implementation Unit A consultant team will conduct a baseline study collecting relevant data on socioeconomic conditions in all intervention areas through surveys among households and producer groups. Data will not only be collected in households and producer groups that are going to be affected by the project but also in a control group. The project managers of UNIDO and UNDP together with the project implementation unit (PIU) staff will design the M&E system, particularly the parameters for reporting. The PIU will also help the national evaluation consultants to design their baseline studies, mid-term and final reports. Particular emphasis shall be placed on overall progress, achievements, the organizational performance of the groups and challenges in making the producer groups self-managed and sustainable. For monitoring, there will be quarterly project progress reports that inform about progress in planned activities which may lead to adjustments in project work plans. Additionally, participatory monitoring workshops will be conducted with the marzes affected. F. Communication and Visibility All visibility and communication activities of the project will be in line with the HYPERLINK "http://ec.europa.eu/europeaid/work/procedures/financing/international_organisations/other_documents_related_united_nations/document/joint_visibility_guidelines.pdf" \t "_blank" \o "http://ec.europa.eu/europeaid/work/procedures/financing/international_organisations/other_documents_related_united_nations/document/joint_visibility_guidelines.pdf Joint Visibility Guidelines for EC-UN actions in the field"Joint Visibility Guidelines for EU-UN actions in the field and comply with Article 11 of the FAFA (Financial and Administrative Framework Agreement). The project will also carry out all communication and visibility activities in close cooperation with the EU Delegation in Armenia, in particular the Press and Information Officer. Particular reference is also made to the Communication and Visibility Manual for EU External Actions . In the inception phase of the project, a communication and visibility plan will be drafted and discussed with the EU delegation in Armenia. Elements which will be considered are inter alia press releases, press conferences, press visits, brochures and newsletters, web site activities, photographs and other suitable measures as listed in the Joint Visibility Guidelines. The communication and visibility plan will be drafted according to the EU template and will include overall objectives, the target groups within Armenia as well as the EU and specify detailed activities and indicators of achievement. During the whole duration of the project, UNIDO/UNDP will report on the implementation of the communication and visibility plan as well as well as milestones and outputs achieved as agreed to in the plan. The budget to carry out the agreed upon activities included under Visibility Actions in the attached project budget. Furthermore, the EU flag will be included in all project communication as well as the reference that This project is funded by the European Union. Additionally, the disclaimer annexed to the Joint Visibility Guidelines for EU-UN actions in the field will be included in all publications. G. LEGAL CONTEXT The Government of Armenia agrees to apply to the present project, mutatis mutandis, the provisions of the Standard Basic Assistance Agreement between the United Nations Development Programme and the Government signed on 8 March 1995 and effective 8 June 2000. H. ANNEXES Annex 1: Logframe Annex 2: Letter of request from Armenian Government Annex 3: EU Action Fiche ENPARD Armenia Annex 1: LOGFRAME Project HierarchyObjectively Verifiable IndicatorsSources of VerificationRisks Goal: Support the Government of Armenia in ensuring an efficient and sustainable agriculture, contributing to better conditions in rural areas of Armenia Output 1: Strengthened and newly established producer groups.At least 10 new business-oriented producer groups established and with at least 3 in value addition Training conducted for staff of at least 20 producer groups in a) business planning, administration and organization, b) budgeting and financial management c) commodity marketing, d) food safety and traceability at production level, and e) effective involvement in agricultural and rural policy and planning decision-making At least 1,000 farmers trained in each targeted marzes as to possible structures and benefits of group organization Manual for establishing/operating producer groups developedProject progress reports Project records on assisted producer groupsProducer risks: Producers fail to see producer group alternatives as providing sufficient incentive for participation Organizational risks: Producer groups do not attain organizational maturity Capital Risk: Insufficient capital available for producer groups establishment or expansion Output 2: Producer groups effectively engaged in value addition.At least 10 producer groups engaged in new and improved ways of value addition Products from assisted producer groups attain at least 10% premium price and 20% increase in annual turnover 90% of the products from targeted producer groups comply with improved food quality standardsProject progress reports Project records on sales Value chain survey Project records on producer groups Value chain survey Consumer surveyMarket risk: Prices and demand for products dwindle. Dependence on international market prices. Higher-quality and higher-value products may only be marketable to a small portion of more wealthy consumers. Capital risk: Insufficient capital available to undertake the value addition processes required to meet output objectives Quality risk: Producers and processors do not attain adequate product quality and product cannot be sold on market.Output 3: Strengthened value chains that provide improved access to affordable, better quality foodOutput from targeted producers and producer groups increased by 15% Euro 1.5 million in new financing secured for targeted value chains in the selected marzes GAP and disaster risk assessment protocols developed and provided to the MOA with related training of staff Targeted value chain actors employ 5% more workers on average Project progress reports Project records on targeted value chain actorsExternal intervention risk: Other development projects and government initiatives interfere with Production risks: Attacks from pests, diseases, natural disasters and management failures may cause drops in primary production. Risks from geopolitical tensions: Groups of the society may object policies and project interventions, conflict with neighboring countries may arise Policy and policy support risks: Agricultural and rural development strategies may not be implemented by the GoA , associated programs such as ENPARD do not meet interest of GoA Capital Risk: Financial institutions, donors, and other potential investment sources resistant to expanded exposure in the food and agriculture sector. GAP-Disaster Management Risk: Viable economical GAP and disaster management protocols not found. Value Chain Cooperation Risk: Value chain actors unable to perceive or unwilling to pursue mutually beneficial relationships due to lack of trust, flexibility, and other similar reasons.  V. Haykazyan, J. Pretty: Sustainability in Armenia: New Challenges for the Agricultural Sector. Centre for Environment and Society Occasional Paper 2006-1, University of Essex  UN Food and Agriculture Organization of the United Nations. Eastern Europe and Central Asia Agroindustry Development. Country Brief Armenia. 2012.  UN Food and Agriculture Organization of the United Nations. Eastern Europe and Central Asia Agroindustry Development. Country Brief Armenia. 2012.  2014-2016 Medium-term public expenditure framework. http://www.gov.am/files/docs/1184.pdf  Progressive Social Technologies Centre: Study of Migrants Returning to Armenia in 2002-2008.  IFAD: Armenia Gender Profile, 2007.  National Statistics Service of the Republic of Armenia 2013 HYPERLINK "http://www.armstat.am"www.armstat.am. / International Fund for Agricultural Development. Rural Poverty Portal. Country Profile Armenia: www.ruralpovertyportal.org/country/home/tags/armenia  Government of the Republic of Armenia. Armenia Development Strategy for 2012 2025, Yerevan, 2012.  2010_2020 Sustainable Strategy Program for Agricultural and Rural Development of Armenia http://www.minagro.am/am/  Cooperative legislation reform: Guidelines for Armenia, http://icare.am/icare/publications  2012-Armenia in Figures. www..armstat.am  Republic of Armenia (2010). 2010-2020 Sustainable Strategy Program for Agricultural and Rural Development, Republic of Armenia., RA, 4 November, 2010, no. 1476-N.  http://www.swiss-cooperation.admin.ch/southerncaucasus/en/Home/COMPLETED_PROJECTS  'opŸ–mZJ:ZmZ*ZhZtB*CJOJQJaJphh\0B*CJOJQJaJphh(B*CJOJQJaJph%h7hZtB*CJOJQJaJph(h7hZt5B*CJOJQJaJphh%hZt5CJh7hZt5CJh7hZtCJDj?ih||hZt5B*CJOJQJU^JaJmHnHphtHu4h7hZt5B*CJOJQJ^JaJmH phsH Djh||hZt5B*CJOJQJU^JaJmHnHphtHu'p F W s   0$ x^`a$gd%0$ zx]^`za$gd%0$ zx^`za$gd%$a$gd%$a$gd(0$a$gd - F W n r     / 1 # l¯¯¯¯¯¯¥zzzztt hMCJ h@ CJ h~jKCJ h%CJ hCJ h\0CJ h^CJ 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