1 Report on activities carried out during the reporting period 10

Financed by the European Union Preparation of the EU-funded agricultural sector programme in Ukraine Phase 2 Lot No 4 -Sectorial and project evaluations - CONTRACT FOR SERVICES No. 2005/112023 Version 1 Final reportClient: of the European Commission in Ukraine ECORYS Nederland BVExperts: Richard Moody (Team Leader); Inna Bayda; Gennadiy Kuznetsov; Yuriy BakunKyiv, February 2007This study was financed by the European Commission and executed by ECORYS Evaluation Group Consortium. The opinions expressed are those of the consultants and do not represent any official view of the European Commission or the Government of Ukraine. ECORYS Nederland BVP.O. Box 41753006 AD RotterdamWatermanweg 443067 GG RotterdamThe NetherlandsT +31 (0)10 453 88 00F +31 (0)10 453 07 68E netherlands@ecorys.comW www.ecorys.comRegistration no. 24316726 ECORYS Macro & Sector Policies T +31 (0)31 (0)10 453 87 53 F +31 (0)10 452 36 60Table of contents Report cover page 5^ List of abbreviations 6Project synopsis 7Executive summary 91 Report on activities carried out during the reporting period 102 Lessons learned and recommendations 13Annex 1 Project Work Plan and methodology 15Annex 2 Project Fiche – English and Ukrainian 23Annex 3 Meeting notes final phase 111Annex 4 SWAP experience 117Annex 5 Meeting notes 127Annex 6 Comments on the draft General State Program on social-economic development of Ukrainian Village for the period up to 2015 129^ Annex 7 English language Training report 153Annex 8 Briefing Note Modalities, conditionalities and budget allocation 159Annex 9 SWAP Information for the MAP Website 165Annex 10 Briefing note on discussion of possibilities of joint implementation and financing 169Annex 11 Briefing note on Review of WB public expenditures study (medium term expenditure framework MTEF) 171Annex 12 List of Participants of Final Presentation 177 ^ Report cover page Project Title Preparation of the EU-funded agricultural sector programme in Ukraine (Phase 2) Project Number EC Framework Contract Europe Aid Lot 4: Sectoral and project evaluation Contract Number 2006/124076 Country Ukraine Contracting Authority EC Consultant Name Delegation of the European Commission in Ukraine ECORYS Nederland BV Address 10 Kruhlo-Universitetska St., Kyiv, 01024Ukraine Watermanweg 443067 GG RotterdamThe Netherlands Tel. Number + (380-44) 253 3020 + (31-10) 453 8800 Fax number + (380-44) 230 2390 + (31-10) 452 3660 Telex number ^ 25490 NECIN NL Contact person Natalya KORCHAKOVA,Project Manager Richard MoodyTeam Leader E-mail natalya.korchakova@cec.eu.int ecorys_kyiv@voliacable.com Signatures [date] Type of report : Final ReportDate of report : 9.02.07Reporting period : 17.11.06 – 9.02.07Author of report : Richard Moody - Team Leader^ List of abbreviations CIDA Canadian International Development Agency SIDA Swedish International Development Agency ECD Delegation of the European Commission Ukraine EC European Commission EU European Union ToR Terms of References SWAP Sector Wide Approach Programme MTEF Medium-term Expenditure Framework WTO World Trade Organisation CAP Common Agricultural Policy NGO Non-government organisations MAP Ministry of Agrarian Policy USAID United States Agency for International Development ^ Project synopsis Project Title Preparation of the EU-funded agricultural sector programme in Ukraine (Phase 2) Contract Number 2006/124076 Country Ukraine Wider Objectives To set a framework for application of the sector wide approach in Ukraine's agricultural sector Specific Objective(s) to finalise the EC's sector-wide project fiche in consultation with the relevant counterparts within the Ukrainian government, donor organisations and other involved stakeholders;To build up institutional capacity of the key stakeholders (Ministries, agricultural NGOs, veterinary services) that will be later involved in development and implementation of agricultural sector programme. Expected Results The eligible activities per each component are identified and agreed with the Ukrainian government and the donors A set of modalities is suggestedA set of conditionalities fully acceptable to the government of Ukraine is suggestedNo overlapping and maximal synergy effect with other donors are achievedThe government of Ukraine has actively participated in formulation of the activities and is well prepared to lead the process of the implementation of the sector–wide approach in agricultureVisibility of the EU actions in the agricultural sector is increased. Requested services Activities specified in work plan To suggest a list of planned activities and expected results (per each component listed in the sector wide project fiche) agreed with the Ukrainian government, donor organisations and other involved stakeholdersTo update the current state of affairs in the agricultural policy in Ukraine and to revise accordingly the relevant chapters of the agricultural SWAP1 project ficheTo hold thematic consultations with relevant stakeholders groups regarding the activities to be foreseen and the results to be expected under each project component;To suggest conditionalities to be required from the government for the implementation of the agricultural SWAP projectTo suggest variants of implementing modalities of the agricultural SWAP projectto organise training in sector approach, sector programming and EU policies in agriculture and rural development for the Ukrainian key policy and decision makersTo arrange general and specialised English language training of the civil servants responsible for coordination and implementation of the agricultural SWAP project. Contract Signature 15.08.06 Project Duration 4 months + 2 months Executive summary All activities were undertaken and outputs produced as required by the TORs and as specified in the approach and methodology as well as a number of additional activities and outputs as agreed with the PM and the Beneficiary. Activities The following activities were undertaken in the reporting period (for more details please see activity report below): Discussion of possibilities of joint implementation; Briefing note on discussion of possibilities of joint implementation and financing; On the basis of the agreed list conduct language training in accordance with training plan agreed with participants; Organise public event for presentation of SWAP fiche for 1 February; Present SWAP fiche; Produce final report; Send final to appropriate parties; Review WB public expenditures study (medium term expenditure framework); Analysis of experience of SWAP, and budgetary support ; Propose conditionalities; On the basis of the agreed list conduct language training in accordance with training plan agreed with participants.Outputs All outputs as required by the TORs and approach and methodology have been produced and are annexed to this report as detailed below including project fiche, briefing note on SWAP experience, comments on the State Programme ( additional ), English Language training report, briefing note on modalities and conditionalities, SWAP information for the Website, briefing note on joint implementation and financing and a briefing note on review of WB public expenditure study and MTEF. Timing The project was extended until 9th February 2007 in order to enable the delayed language courses to be implemented and to allow the MAP further time to consider the proposed activities. Remaining activities were conducted on time, according to the revised timetable as agreed with the PM.1Report on activities carried out during the reporting period Activities (numbering refers to project work plan and methodology as attached in annex 1) 37.Discussion of possibilities of joint implementationRepeated meetings and correspondence in particular with the World Bank team and with other donors to coordinate activities – agreement that this activity should continue during TOR preparation and implementation phases as well as future programming activities. 38. Briefing note on discussion of possibilities of joint implementation and financingOn the basis of the above discussions and correspondence a briefing note on joint implementation and financing was prepared (annex 10). The briefing note concludes that whilst there is a willingness to jointly implement and finance, that further discussions are required on precise modalities at the management level.39. On the basis of the agreed list conduct language training in accordance with training plan agreed with participants Language training courses conducted in accordance with training plan. The contractor was selected on the basis of agreed criteria, the students selected according to agreed criteria and testing and an agreed study plan implemented including final testing and attendance certificates (annex 7).40. Organise public event for presentation of SWAP fiche for 1 February Final event for presentation of SWAP fiche organised and implemented. Jointly with the MAP and in premises proved by the MAP with participation of the key MAP beneficiaries, ECD, the private sector, other projects and NGO’s. (attendance list attached as annex 12).41. Present SWAP ficheAt the above public event the key activities of the project were reported and the key outputs presented including the project fiche. A discussed followed: Produce final report; Send final to appropriate parties.Activities postponed from previous phase 27. Review WB public expenditures study (medium term expenditure framework) After considerable delays the WB public expenditure report was identified and analysis was undertaken on the sections relevant to the activities of the project. As no MTEF is currently available ,a review of public financial management reports was undertaken and the multi-annual budge of the latest state programme in the agricultural sector was considered in this light. It was concluded that whilst no MTEF is in place and the budget of the state programme does not replace it in the sector there is a willingness in the government to address this issue and considerable donor activity in the sphere which should lead to its production in the medium term. (annex 11) 28. Analysis of experience of SWAP and budgetary support Analysis undertaken and briefing note sent to PM (annex4) In summary SWAPs have had mixed success in the natural resources sector primarily in Africa where they have been implemented, largely as a result of problems with the dominant means by which sector-wide approaches have been implemented – the sector investment programme. But increasing awareness and capacity building has led to a more coherent view, in which SWAPs are seen as a long-term process, with objectives including stronger management and policy capacity within government, a more coherent, broadly owned sector policy framework, and greater attention to financial sustainability. 29. Propose conditionalities Conditionalities proposed and discussed with PM (annex 8). Conditionalities are targeted at individual activities as preconditions for activity in the particular sphere. ^ 2Lessons learned and recommendations Consider project (possibly twinning) for agricultural statistics and for review of agricultural subsidies for the MAP. Look at possibilities of farm management curriculum development within ENPI instruments. As the input of the project into the “State programme for the development of the Ukrainian village” was appreciated by the MAP (Mr Drobot), examine possibilities to continue to support this process. Agree in advance a mechanism for the Beneficiary to consider and approve the programming document (e.g. fiche) as a lack thereof leads to delay and lack of clarify.^ Annex 1 Project Work Plan and methodology Tasks – according to TORs and proposal Timing as per technical Proposal Specific project activities Deadlines (by latest) ResponsibleRM, O, YB, IB, GK, ALL2 ^ Initial kick off meeting with PM 28 August RM Analysis Phase To collect policy / legal documents drafted/ approved since 1 January 2006 by the Ukrainian government and independent policy units (NGOs and donor-funded);and to review policy documents prepared by the Ukrainian-German policy groupFAO agricultural policy projectUSAID agricultural policy projectpackage of documents for preparation of the World Bank project on agricultural competitivenessDFID rural development programmea draft of the State programme for agriculture and rural development developed by the Ministry of Agricultural Policy and advise the Ministry on consistency of the proposed actions with EU agriculture and rural development policies; the assistance shall be rendered to the Ministry of Agricultural Policy to revise the programme accordingly (up to 10 man/days) Week 3 Collect and review new Ukrainian govt policies/laws – per component Collect and review new non govt policy documents Collect and review documents of Ukrainian – Germany policy group Collect and review documents of FAO policy project Collect and review documents of USAID policy project Collect and review documents for preparation of WB project including Medium term Expenditure framework and Achieving Ukraine’s agricultural potential 2004 Collect and review documents of DFID rural development programme Collect and review documents on the state programme for agriculture 4 - 12 September YB,IB,GK YB,IB,GK RM YB RM GK RM ALL Meetings with i) Ukrainian- Germany Policy Group ii) FAOiii) USAIDiv) WBv) DFIDvi) CIDAvii) IFCviii) SIDAix) Swiss bilateral Organise and undertake meetings 4 – 12 September i) RMii) YBiii) RMiv) GKv) RMvi) IBvii) IBviii) IBix) IB To identify key policy and decision makers whose informed position will positively affect the introduction of SWAP and implementation of agricultural sector programme in Ukraine Week 3 Identify key policy and decision makers in each component Prepare list of key policy and decision makers 4 -12 September YB,IB,GK YB,IB,GK To identify in cooperation with the EC Project Manager the participants in the various thematic consultations. The list of invitees to the thematical discussions is subject to approval of the EC Project Manager. The participants shall be nominated by the Ukrainian government and shall be responsible for coordination and implementation of the SWAP. The thematic consultation groups shall be formed primarily from representatives of the Cabinet of Ministers, Ministry of Agricultural Policy and its subordinate bodies, the World Bank, the German-Ukrainian policy group, the FAO policy project, IFC, SIDA, CIDA, DFID, JICA and other interested parties. Week 3 Identify invitees and prepare list of invitees to thematic discussions 4- - 12 September YB,IB,GK The list of participants for language training is subject to approval by the EC Project Manager. Week 4 Discuss list of invitees with PM 13 September ALL Inception report Prepare and submit inception report 15 September RM To arrange Ukrainian translation and preparation of documents on SWAP in the agriculture for further distribution amongst Ukrainian key stakeholders Week 5 Arrange translation of SWAP materials and arrange translation of presentation Discuss and propose SWAP Page on Ministry Website http://www.minagro.gov.ua 18-22 September ALL ALL Prepare EU food safety policy input Prepare EU Market infrastructure policy inputPrepare EU rural development policy input 25-29 September GK IB YB To check existing policy targets in terms of implementation of the ENP action plan and country strategy paper and the commitments of the Ukrainian government towards EU integration;To make analysis of the changes in the existing policy framework and to produce a Note for the attention of EC Project Manager on this matter; Update and preparation of briefing note on i) status of ENP action plan implementation in the sphere of agriculture ii) on changes in Ukrainian agricultural policy per component 2 – 6 October YB,IB,GK To provide training to key policy and decision makers within the Ukrainian government on sector approach, EU policies in agriculture and rural development. The trainings could be organised in groups or individually. The format could vary from daily training to a brief presentation (to high level officials). The aim of these activities is to have well informed and prepared Ukrainian stakeholders in a view of future SWAP project. Week 4 - 14 First component (Food safety) SWAP training - practical input into joint preparation of SWAP programme with the Ministry Second component (Market infrastructure) SWAP training - practical input into joint preparation of SWAP programme with the Ministry Third component (Rural development) SWAP training - practical input into joint preparation of SWAP programme with the Ministry i) Distribution of SWAP materials ii) Request feedback in oral and written form 16-28 October RM GK RM IB RM YB To ensure that the proposed activities for thematic consultations are compliant with EU policies. In this activity, the Consultant will take into account the lessons learnt from the previous EU Tacis projects, in particular, for:food safety component – WTO-SPS and organic farming projects;market infrastructure component – agro logistics and agro insurance projects;capacity building - IBPP projects: reform of agricultural management and interprofessional organisations in the agricultural sector. Preliminary analysis of activity proposals (gathered during join work) for compliance with EU policiesConsider proposed activities in light of relevant project recommendations 23-27 October RM RM To make suggestions on how to update the draft of the EC's SWAP project fiche. Week 6 Prepare first draft proposals for amendment of SWAP fiche 23 – 27 October ALL The Agricultural SWAP project fiche shall be discussed with the EC Project Manager no later than 7 weeks after beginning of the assignment; a Ukrainian translation of the fiche shall be arranged by Contractor. Week 7 Discussion of updated project fiche with PM 23 – 27 October All To review the study released by the World Bank on public expenditures in the agricultural sector in preparation of its loan; To review the existing medium term expenditure framework Week 7 Review WB public expenditures study (medium term expenditure framework) 30 October – 3 November ALL To review existing experience of application of sector wide approach, budgetary support and examples of implementing modalities in the relevant sectors. To propose options of conditionalities for consideration to the EC Project Manager Week 8 Analysis of experience of SWAP, budgetary support and the role of conditionalities. Propose conditionalities 30 October – 3 November IB RM ALL To analyse the possibility of Twinning projects in fields related to the project priorities (food safety, market infrastructure, rural development) Week 7 Analyse possibilities for twinning projects Propose twinning projects per component 6 – 10 November ALL RM To hold thematic consultations with the relevant stakeholders groups regarding the activities to be foreseen and results to be expected under each project component. Week 4 - 12 Thematic consultations First component (Food safety) – discussions on activities Second component (Market infrastructure) discussions on activities Third component (Rural development) discussions on activities 6-16 November RM GK RM IB RM YB To submit the minutes of the thematic discussions to the EC Project Manager; Week 12 Prepare minutes of thematic consultations Submit minutes to PM 17 November 17 November RM RM Interim report Weeks 12 Produce interim reportSend interim report to PM and to appropriate parties 17 November RM To analyse possible modalities and conditionalities in the perspective of co-financing/joint implementation and joint implementation/co-operation with the World Bank on food safety and market infrastructure and agricultural competitiveness and/or other donors (CIDA-rural development, SIDA-market infrastructure, IFC–market infrastructure, JICA) Week 9 Discussion of possibilities of joint implementation Briefing note on discussion of possibilities of joint implementation and financing 27 November – 1 December ALL RM At least 10 civil servants will take part in this training (tentative schedule: 3 - month course, 4 hours per week). The exact programme shall be proposed by the Consultant and necessary budgetary arrangements shall be made in the budget proposal. Week 4 - 14 On the basis of the agreed list conduct language training in accordance with training plan agreed with participants 17 September – 17 December O The Agricultural SWAP project fiche shall be presented in a public event to both the Ukrainian authorities and the donor community to be held no later than 2 week before the end of the assignment Week 15 Organise public event for presentation of SWAP fichePresent SWAP fiche 4 - 8 December OALL Final report Week 16 Produce final reportSend final to appropriate parties 11 – 16 December RM ^ Annex 2 Project Fiche – English and Ukrainian Title Implementation of Ukraine’s commitments under WTO and ENP frameworks in the rural sector (Sector Wide Approach for agriculture, food safety and rural development) Total cost M€ 9 million Aid Method Project approach – centralised management + budgetary support DAC-code 31110 Sector Summary The project is designed to support Ukraine in the application of a Sector Wide Approach or SWAP for agriculture and rural development, within the context of WTO accession and greater EU integration.It is programmed within the framework of a €27 million project the support to ENP Action Plan Implementation and the main issues to be addressed by the proposed project are: (i) food safety and quality standards; (ii) market infrastructure and competitiveness; and (iii) rural development. On the basis of a EC supported comprehensive Agricultural Sector Assessment, these are considered priority issues that hamper Ukraine’s efforts for improved global market access, higher production and food standards and greater international competitiveness, and improved rural livelihoods. The project will aim at implementing an agreed sector-wide programme (based on SWAP) in the development of an agricultural and rural development policy and strategy, thereby allowing the Ukrainian government to federate its own and donors’ efforts in a coherent policy framework largely based on EU agricultural and rural policies. Keeping in mind Ukraine’s WTO aspirations, the overall objective of the project is to implement Ukraine’s commitments under WTO and the ENP Action Plan.The specific objective of the project is to develop a common framework approach and understanding of the priorities and issues in the agricultural and food sector, and in the rural areas of Ukraine.Overall project results are expected to be the following: (i) greater EU integration and harmonisation (with reference to CAP and EU’s Rural Development Policy 2007-2013); and (ii) closer compliance with WTO requirements and harmonization of the legal framework with the EU. Emphasis on ‘green box’ issues, and reduced ‘yellow box’ measures.^ 1. Rationale 1.1. Strategic framework Related Programming Documents: NIP: Section 1.1 Legal and administrative reform; Section 2“Support to the private sector and assistance for economic development”, Section 3 “Support to the development of social assistance policy and services targeting vulnerable groups”; ENP Section 2.2. Economic and social reform and development; Section 2.3 Trade, market and regulatory reform; PCA Article 60 agriculture and the agro-industrial sector, 63 environment, 70 regional development. Policies and programmes such as the NIP 2004-2006, which includes the aim of improving product safety and consumer protection, and in line with the contemplated accession of Ukraine to the WTO, leads to EU supporting the international alignment of Ukraine’s agricultural reforms especially to ensure full implementation of sanitary and phyto-sanitary, and environmental standards. The EU-Ukraine ENP Action Plan of 21 February 2005, confirms and underlines specifically the need for aligning Ukraine with the EU and with international regulatory and administrative practices, and to prepare Ukraine for its participation in the EU internal market, including more co-ordination between the different concerned stakeholders in the areas of sector wide reforms. On 18/10/2006 EU Commissioner for Agriculture and Rural Development, Mariann Fischer Boel, and Ukraine's Minister of Agricultural Policy, Yuriy Melnyk, signed a Memorandum of understanding on a dialogue of agricultural issues between the Ministry of Agrarian Policy of Ukraine and the Directorate General for Agriculture and Rural development of the European Commission to set the framework for future cooperation.This particular project is designed to support Ukraine in the application of a ^ Sector Wide Approach or SWAP for agriculture and rural development, within the context of WTO accession and greater EU integration.The project is built on the assumption that by its commencement, Ukraine will join the WTO and therefore will have to cope with the WTO requirements. Similarly, WTO membership will encourage greater international integration, particularly with regard to the long-term potential for EU membership; facilitated by increased EU integration and harmonisation measures. Increased international integration and harmonisation, through WTO and EU integration, will help to focus on the efforts in Ukraine for improved global market access, higher standards and greater competitiveness over time, and improved rural livelihoods.^ 1.2. Lessons learnt Agricultural and rural investment strategy (ARIS) from July 2005 is a joint work between the Ukrainian ministry of agrarian policy and the un food and agriculture organization (fao), supported by the World Bank, which proposes and makes suggestions for mechanisms to create off-farm employment and businesses and support the development of a viable family-based agricultural sector.Within the framework of the FAO project participatory formulation of an agricultural strategy consistent with WTO accession and EU integration, four strategic policy papers have been prepared that were presented at a seminar in Kyiv in June 2006. These were Trade in Agricultural Products, Accession to WTO and Integration with EU, Reformation of Land Relations and Change of Agricultural Manufacturers’ Structure, support and regulation of agriculture and marketing and Rural development.Also commissioned by the FAO was a paper The Challenge of Conforming to Sanitary and Phytosanitary Measures for WTO Accession and EU Exports: The Case of Ukraine 3as well as “Ukraine after 2000: A Fundamental Change in Land and Farm Policy?4. The FAO is also currently working on an overall strategy for agricultural policy to further WTO accession and the achievement of a free trade agreement with the EU. There is therefore a substantial reference basis upon which the Ukrainian Government might build its own strategy for the development of the sector. Other valuable lessons are/to be learned from past and ongoing Tacis projects such as the project “Establishment of an Agricultural Standards Certification and Control Mechanism in Line with WTO-SPS Requirements” (October 2003-October 2005). The project is aimed at supporting the economic development of the agricultural sector via the implementation of international standards in food safety, animal and plant health. Main lessons from the project are: In terms of food safety and quality standards, the private sector is significantly ahead of the state, in terms of thinking and activity, driven out of necessity and commercial reality. It is difficult to work with state agencies in this area, as there is no uniform approach on thinking and the various ‘players’ are vying for control of food safety issues. There are too many vested interests willing to undermine the establishment of a single Food Safety Agency, which is required for a cohesive ‘Farm-to-Fork’ policy and practice approach. Raw material production e.g. dairy, is too fragmented and disjointed to ever satisfy market requirements in hygiene and food safety, as the farms are too small and unable to bear the investment levels required. There is a need for consolidation and concentration of dairy production in clusters, with an emphasis on stable quality milk supply to processors.The project “Improvement of Logistics Services and Marketing Channels for SMEs in Agriculture” (March 2005-December 2006) delivers the following key messages: Farmer Procurement and Marketing Groups - farmers must recognize that they can strengthen their position by learning to cooperate. It is essential to adopt a collective approach to get efficient results. Supply Chain Development - the need to consider and organise supply chains to enable farmers to reach the end user is a necessary aspect of planning. Efficiency of storage and distribution through efficient logistics will allow better marketing and enable better prices to be realised. Improvements in marketing channels will improve margins and importantly ensure that Ukrainian agriculture remains internationally competitive. Export markets are important to improve the profitability of farmers. Management Support - an efficient supply chain can only be developed by an integrated approach involving all partners in the chain and using logistics that allow accurate and timely information to be available when required. Good management and management systems are required to ensure the correct development of quality and productivity of this project. Legislation and Administrative Regulations - international standards and norms are essential in order to enter external markets. The policy and regulatory framework is critical in allowing the development of the rural and agricultural economies. Credit Provision and Grant - Agriculture is the engine of rural development but credit is the fuel required to power it!IBPP key institutions project “Reform on Agricultural Management” recommended as follows: Separation of the political and administrative apparatuses; Unification of the staff entities and creation of a transparent staff structure; Consolidation of functions, competence and responsibility at the respective work levels; Functions and personnel capacity should be structured not vertically but horizontally; Consolidation of all inner-ministerial service areas. Within the framework of the project “Co-operation of Public Bodies with Civil Organizations in the Process of Agrarian Policy”5 draft legislation facilitating the creation of operating framework for civil organizations in agricultural sector to assume an active role with public bodies was prepared but unfortunately was not passed by the Verhovna Rada.The project “Improvement of Risk Management Capacity of Farmers and SMEs in Agriculture” (May 2005-May 2007) which is ongoing and is currently developing a strategy for the development of an agricultural insurance system recommending institutional budgetary and regulatory changes to stimulate the demand for agricultural insurance and for its increased use in access to finance which will be followed up by a planned IFC project. An important lesson learned is the over-emphasis on agricultural and rural legislation for reforms, and less attention to enforcing the law due to the lack of institutional guidance backed by operational plans, which in turn should be supported by a mid-term expenditure framework (MTEF). ^ 1.3. Complementary actions Food safety The World Bank is working with the Ukrainian Government to plan a key intervention in the food safety sphere and very close cooperation in the parallel programming phase has been very productive. Direct communication with the programming mission and liaison with the Beneficiary have been very useful in ensuring no overlapping and optimum synergy. It will be vital to continue this close cooperation in the TORs drafting process to ensure continued synergies. ^ Agricultural Competitiveness and Food Safety Project of World Bank. The proposed ACFSP is envisaged to be the first of several investment operations in support of Ukraine's national integrated agriculture sector development program focusing on the improvement of agricultural competitiveness and food safety. Project components relevant to food safety: 1. Upgrading the analytical capacity of national and zonal (oblast) laboratories. This component will upgrade the analytical capability and capacity of selected national and zonal (oblast) veterinary, plant quarantine and sanitary-epidemiological laboratories in conformity to international requirements and standards. 2. Upgrading the laboratory management systems of selected central and zonal (oblast) laboratories and their accreditation6 to ISO/IEC 17025: 2005. USAID TIBA project. This project is at the stage of planning. One of its components is planned to be devoted to assistance regarding fulfilment of SPS WTO Agreement. It will be very important that close contact is taken up during the TORs drafting stage when activities will have been more precisely defined. ^ Market infrastructure The following projects are planned by international donors in the field relevant to agrarian market infrastructure, which form the basis for synergy with forthcoming EU SWAP project in agriculture:IFC: The project on agro insurance development is already approved and will be financed by CIDA (project start is planned for the mid 2007). On-going IFC projects deal more with agribusiness supply chain development (three similar projects are currently underway and will overlap in time with forthcoming EU project: (1) “Vegetable supply chain development” – Nikolaev; (2) “Development of milk sector” - Vinnitsa and (3) “Fruit sector development project” – Vinnitsa). Therefore, by the time of the EU project start, there will be a possibility for synergy and/or complementary actions and/or lessons learnt.USAID: the USAID TIBA project is also relevant to market infrastructure and appropriate synergy will be guaranteed by close contact at the TORs stage by which time the precise activities will have been defined.CIDA: in addition to the project to be implemented by IFC, CIDA has just started the second phase of the Grain Crops Project (2006-2009) with the main emphasis on: Business Planning and Risks Evaluation; Standards and Quality of Grain; Marketing and Logistics of Grain Production. And can be considered as complementary action to planned EU assistance in market infrastructure of grain sector. On-going FARM Programme, which supports advisory services in four Oblasts of Ukraine and assists in agrarian market infrastructure development can complement future EU project in establishment of marketing groups and agricultural service cooperatives.SIDA: although the direction of future support to agriculture in Ukraine is not yet determined precisely, the emphasis for synergy and complementary actions has to be placed on SIDA’s experience in work with NGOs.^ SWISS Cooperation office: two on-going projects “Organic Certification and Market Development in Ukraine” - joint funding of SDC and SECO and “Access to Rural Financial Services in the Vinnitsa Region of Ukraine” (till 2008) can complement the forthcoming EU project. Future Swiss intervention in agriculture of Ukraine for the period of 2007-2010 is under consideration^ Rural Development The following projects are planned by international donors in the field relevant to rural development, which form the basis for synergy with forthcoming EU SWAP project in agriculture:CIDA: CIDA is currently reviewing its proposed activities in the sphere and clarification is expected in the coming months.Within NAP 2006 there are two projects complementary to that in question, namely, “Regional Fund (Sustainable Local Development, phase III) with budget 15 MEURO and “Community-based approach to local development” with budget 12 MEURO. Both projects support local development and community-based initiatives. The recently completed DFID project was mainly concerned with the improvement of rural livelihoods and promotion of rural development; focusing on development of off-farm employment, local leadership development and provision of arbitration/mediation services.Based on the general consensus derived from the consultation process as part of the 2005 Agricultural Sector Assessment, the proposed EC actions are complementary with those of other donors, and can be summarised as follows: There is a need for greater donor co-ordination, with a particular emphasis on reduced overlap for maximum effect, and a request for greater collaboration on maximising impact and value for money; There is consensus that the Government should be more active in requiring greater donor coordination and collaboration in the agricultural sector (and in all sectors for that matter); It was agreed that EU support and technical assistance in the agricultural sector should be in: Institutional and Capacity Building; Policy Development and Legislative Approximation; Training & Development and Awareness Raising.^ 1.4. Donor coordination Donor coordination has traditionally been lead by the Ministry of Economy through the departments responsible for donor and IFI coordination (Directorate for cooperation with EU and Directorate for coordination of international technical assistance (bi-lateral)) and through the mechanism of the National Coordinating Unit. Under the SWAP approach, it is the MAP which should undertake an increasing role in coordinating the donor and IFI activity in the sector. This fact has been acknowledged by the inclusion of a component in the programme to address the additional capacity requirements that this increased role will entail. In October 2005, the EC Delegation received a letter from the Minister of Agrarian Policy requesting the EC to lead co-ordination of technical assistance in the area, pending the establishment of a government-led coordination process in the near future. The EU as champion and primary initiator of the SWAP approach in Ukraine will have a vital role to play in donor co-ordination process in the context of greater EU integration and harmonization of policies, regulations and legislations. For the purposes of preparing this fiche and subsequent TORs a table of relevant donor activity has been prepared and annexed to this fiche. ^ 2. Country context 1.5. Cooperation related policy of beneficiary country According to the Resolution of the Verkhovna Rada of Ukraine No 2921-IV dated September 23, 2005, the state of affairs in the agro-industrial complex of Ukraine is recognised as in crisis. For some time now, the Cabinet of Ministers of Ukraine and the Ministry of Agrarian Policy had tried to improve the situation. However, implemented measures had failed to raise productivity in agriculture, to ensure food safety and quality and to improve living standards in rural areas. Currently, there is a lack of a governmentally approved overall strategy and vision for the development of agriculture and rural areas in Ukraine. Not much attention was ever paid in the past to having a framework policy for rural development. However, recently a lot of attention was given to develop such a comprehensive state policy in agriculture and rural development:A recent attempt to define agricultural sector policy was made in the Law of ^ Ukraine “On Main Principles of the State Agrarian Policy in Ukraine”, i.e. to ensure food safety; to enhance competitiveness of Ukrainian agricultural producers on domestic and foreign food markets; and for the preservation of rural heritage and support to the rural population. In 2004, the Ministry of Agrarian Policy (МАР) has drafted the “National Programme for Social Development of Rural Areas till 2011”. The Programme’s purpose is to ensure the development of a favourable rural environment as a necessary prerequisite for efficient operation of agricultural production and sustainable development of rural settlements. This programme was not considered or adopted mainly due to the events in Ukraine in late 2004.The National Integrated Programme “Prosperity through Agrarian Development for 2005-2010” (DAR) has been developed as a follow up of the Government Programme “Towards People” by a group of NGOs and experts in coordination with the Ministry of Agricultural Policy and other ministries. The drafting of the programme has been personally supervised and coordinated by Mrs. Timoshenko, the former prime–minister.In 2005, a group of the Verkhovna Rada deputies drafted the National Agriculture Development Programme till 2015: ”Selo dlya Kozhnoho, Kozhniy dlya Sela (Countryside for Everyone, Everyone for Countryside)”. The Programme identified the following strategic objectives: (i) achievement of sustainable and efficient operation of the agro-industrial complex, which is oriented on meeting both domestic and export needs in agricultural produce and processed products; and (ii) the social revival of the rural areas, with the elimination of poverty of the majority of rural people and the gradual improvements in their livelihoods, in order to bring them up to the living standards existing in developed economies.In 2005, the Institute of Agrarian Economy of Academy of Agrarian Sciences of Ukraine has drafted the “Programme of Socio-Economic Development of Rural Areas”. The Programme identified the following strategic objectives: (i) reform of the rural social sphere through the development of a socially oriented economy; (ii) adjustment of the proportions in economic and social development of rural areas with a focus on rural people’s interests; (iii) the creation of appropriate labour and rest-time conditions in every rural settlement. None of the above programs have been adopted with corresponding budget lines allocated for their implementation. However, according to the Order of Cabinet of Ministers from October 26, 2005, the DAR programme should be reconsidered and proposed for final approval.Prime Minister Mr Echanurov has signed on 21 December 2005 the resolution № 536-p a concept of the Ukrainian villages development 2006-2010. The Ministry of Agricultural Policy is commissioned to prepare within 3 months a draft of the Ukrainian villages development 2006-2010. This document names the following priorities: Food safety and quality; Agricultural markets; Agricultural production; Financial mechanisms and investments; Agricultural science and education; Rural development; Land relations; Institutional issues.The most recent national programme in the agrarian sphere is the General State Program on social-economic development of Ukrainian Village for the period up to 2015. The process of the development of the General State Program on social-economic development of Ukrainian Village for the period up to 2015 has been very much more protracted than originally foreseen and at the time of writing the programme is still not finalized and the mechanism of its approval (Cabinet of Ministers resolution or by Law through the Verhovna Rada) is still not clear. General: The main components of the programme are: Development of rural territories; Agrarian market development; Development of external economic activities; Development of education, agrarian science, advisory services and information; Improvement of management system of agro-industrial complex.The focus of the draft General State Program on social-economic development of Ukrainian Village for the period up to 2015 has been changed from support to the development of Ukrainian village, which by definition means the emphasis on social and infrastructure development measures in the first case, to social-economic development, which prioritizes economic development of agricultural sector as a whole and support to agricultural production in particular. ^ Food safety: Main aim: implementation of State policy in the sphere of food safety ensuring and production of quality products. Tasks: harmonisation of normative and technical documentation regarding safety and quality of foodstuff with international and European requirements; activation of scientific researches and increase of implementation of science intensive and alternative technologies; development of profound biotechnologies of raw materials processing and ensuring of production of competitive foods; increase of production of packaged and ready to eat food with use of domestically produced packaging materials; introduction of international food and safety management systems, ecological safety systems, international standards of ISO series, adopted to the EU requirements; development of fast methods of testing and appropriate equipment with software for control of safety and quality of raw materials, food contact materials and food.^ Market infrastructure The following tasks stipulated for the agrarian market infrastructure development, are incorporated in the draft Program and presented in its various sub-chapters: Support to (as a priority) to the organization of the National Network of agricultural wholesale markets (commodity exchanges, wholesale markets for vegetable, fish and other fresh produce, livestock and poultry wholesale markets; wholesale trade centres of agricultural marketing/sales cooperatives; Support to the development of retail markets infrastructure of Ukrainian Cooperative Union (Ukoopspilka) system and local community markets of community ownership; Support to the formation of infrastructure for agricultural sales cooperatives and their regional and national grouping with the functions of export activities; Implementation of the information and telecommunication technologies for monitoring of agrarian market and services to rural population; Creation of infrastructure for export and external marketing. Formation of state institutional structures with the functions of the support to the development of export trade of agricultural products. As a whole, majority of planned methods and activities in the proposed Program are focused on large agricultural producers, while medium and small ones remain overlooked.^ Rural development The Program reflects the rural development problems in a quite comprehensive way and proposes approaches to integrated rural development and solutions of rural social problems. The Program establishes the following main priorities of rural development: Rural employment, poverty reduction, and development of businesses; Creation of conditions and incentives for young people to remain in rural areas; Integrated development of infrastructure in rural areas; Support for development of depressed territories; Improvement of rural development management system.Besides, significant attention was paid to the rural development issues in other aspects, such as infrastructure of agrarian market (cooperation, credit unions, etc.) and development of education and advisory activity, which directly relate to rural development and play critical part in socio-economic growth of rural areas.The project proposal for the application of SWAP in agriculture, food safety and rural development, is thus consistent with the above described national policies, strategies and programmes (albeit none adopted or successful) regarding needed agricultural reforms and the need to improving rural livelihoods in Ukraine.^ 1.6. Sector context The agricultural sector in the Ukraine makes up a significant portion of the country’s GDP (14, 5%). The sector is a major employer (about 20% of the national labour force) and is the main source of income for the majority of Ukraine’s rural population. With over 30 million ha of arable land of which over 50% composed of very fertile black soil, the sector’s economic potential is however largely underutilised. The sector suffers from low operational and economic efficiency due to overall low productivity, high production costs, scattered farm structures, outdated technologies, and overall poor farm management. Little change in agricultural policy concepts and planning has occurred since 1992. To date, Ukraine lacks a coherent agricultural and rural development policy framework. Key structural issues like: rural socio-economic development (with 1/3 of the population living in the rural areas), sector competitiveness, the institutionalisation of food safety and quality (including sanitary and phyto-sanitary control), have largely been neglected. Consequently with the demise of the agricultural sector, the socio-economic situation in rural areas is worsening, causing ongoing depopulation, increasing levels of rural poverty and food safety problems, degradation of the environment, of farm land biodiversity and the rural landscape. In a recent Resolution (23 September 2005), the Ukrainian Parliament had to finally acknowledge the critical situation of the agricultural sector and the rural areas, and the need for reform. However, unlike in the past, reform of the agricultural sector cannot be automatically linked anymore with socio-economic development of the rural areas; as was experienced in Europe after it has gone through several agricultural reforms. This was further confirmed in the EU Agenda 2000, when alongside the common organisations of the market that constitutes the “first pillar” of the Common Agricultural Policy (CAP), rural development policy was solely placed as the “second pillar”. The main purpose of this second pillar is to improve the economic, social and environmental situation of all rural areas in a context of sustainable development; independent from the development of the agricultural sector. With the introduction of the first pillar for agriculture - without compromising EU’s role of ensuring the supply of affordable food and providing a reasonable standard of living for EU farmers - more attention than before is paid to food quality and safety, environmental protection, animal health and welfare.3. Description The project will aim at implementing an agreed sector-wide programme (based on SWAP) in the development of an agricultural, food safety and rural development policy and strategy, thereby allowing the Ukrainian government to federate its own and foreign donors’ efforts into a coherent policy framework based on EU policies. Keeping in mind Ukraine’s WTO aspirations, the implementation of the WTO and the ENP Action Plan commitments will be considered altogether by the project.1.7. Objectives The overall objective of the project is to implement Ukraine’s commitments under WTO and ENP framework.^ Specific Objectives The specific objective of the programme is to develop a common framework approach and understanding of the priorities and issues in agriculture, food sector and rural areas, through: Facilitating a common understanding and approach between the EU and the Government of Ukraine, in development of the agriculture and food sectors and addressing key issues of rural development; Facilitating a common understanding and approach between the EU and the international donor community, minimising duplication and overlap, to ensure greater co-ordination and consensus on the priority issues for development in agriculture, food and rural areas, in partnership with government.In particular:Increasing the capacity of the Ministry of Agrarian Policy to enable it to fulfil its enhanced role in the SWAP development and in its dialogue with DG Agriculture Improving institutional systems organised along EU risk analysis principles for the formulation and implementation of foods safety policy including traceability and an effective system of reference laboratories.Improving access of small and medium sized agricultural producers to the market (including an improved system of wholesale and assembly markets) through access to credit and price information in rural areas, increased and more effective producer marketing groups supported by agricultural civil organizations.Improving the framework conditions and mechanisms for development and support of rural sustainable development programmes based on EU best practice.^ 1.8. Expected results and main activities Overall project results are expected to be the following: Greater EU integration and harmonisation (with reference to CAP and EU’s Rural Development Policy 2007-2013) Closer compliance with WTO requirements and harmonization of the legal framework with the EU. Emphasis on ‘green box’ issues, reduced ‘yellow box’ measures.Specific project results are:An increased capacity of the Ministry of Agrarian Policy to enable it to fulfil its enhanced role in the SWAP development and in its dialogue with DG Agriculture Improved institutional systems organised along EU risk analysis principles for the formulation and implementation of foods safety policy including traceability and an effective system of reference laboratories.Improved access of small and medium sized agricultural producers to the market (including an improved system of wholesale and assembly markets) through access to credit and price information in rural areas, increased and more effective producer marketing groups supported by agricultural civil organizations.Improved framework conditions and mechanisms for development and support of rural sustainable development programmes based on EU best practice ^ Project components & indicative activities 1. Sector wide approach capacity development 1.1 Approach and justification In the framework of the recently signed Memorandum of understanding on a dialogue of agricultural issues increased contact and mutual exchange of experiences is envisaged between the European Commission DG Agriculture and The ministry of Agrarian Policy. In addition it is essential to provide the MAP with the appropriate management and coordinating mechanisms and technical capacity to be able to fulfil the tasks required by its role in the SWAP process. The extended programming and management role required of the Ministry in the Sector Wide Approach requires new skills, organizational changes and some material support. It is proposed that this component be commenced in advance of the component activities to prepare for the above demands.1.2 Activities Support to the MAP to raise capacity in the needs analysis, prioritization, planning, coordination, implementation management monitoring and evaluation of sector wide approach programmes. Institutional To assess and propose amendments in the MAP institutional and organizational arrangements to enable it to fulfil the role required in the implementation of the Sector wide Approach. This will include looking at support to inter-ministerial working groups and make use of all available mechanism including TAIEX. Programming The technical capacity of the relevant ministry officials (both at coordination and component level) will be raised to enable them to assume a more proactive role in the needs analysis, prioritization and scheduling of technical assistance and modernization inputs. This includes raising capacity in strategic analysis and planning skills, technical assistance principles as well as PCM and English language skills to be able to deal with liaison with the ECD and deal with programming documents. Implementation management The MAP will take an increasingly proactive role in the coordination of donors and IFI’s activities and will require support to be able to undertake this additional task. In order to be able to achieve the increased participation in programming and management, the MAP will need a monitoring capacity. This will require support and will address the fundamentals of PCM as well as specific monitoring techniques. Supply contract A database covering results achieved and lessons learned from previous project and interventions as well as ongoing and planned activities will be required to enable the MAP to fulfil its increased programming and management obligations. Mechanism Service contract2. Food Safety 2.1 Approach and justification The solution of the current institutional issues are a prerequisite for an effective efficient and WTO SPS compliant food safety system. The proposed institutional changes and the introduction of risk based HACCP orientated inspection leads to more effective and efficient internal control and well as reduces barriers to trade. In line with the key EU food safety principle of traceability, animal identification facilitates animal health control and public health control including trace-back in case of contamination of the food chain and accordingly guarantees higher degree