Mongolia Livestock Commercialization Project

FOR OFFICIAL USE ONLY
Report No: PAD3517
INTERNATIONAL DEVELOPMENT ASSOCIATION
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 21.80 MILLION

(US$30 MILLION EQUIVALENT)
TO
MONGOLIA
FOR A
LIVESTOCK COMMERCIALIZATION PROJECT
NOVEMBER 21, 2019
Agriculture and Food Global Practice

East Asia and Pacific Region
This document has a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
CURRENCY EQUIVALENTS
(Exchange Rate Effective October 10, 2019)
Currency Unit = Mongolian Tugriks (MNT)

MNT 2,660 = US$1
US$ 1.379 = SDR 1
FISCAL YEAR
January 1 - December 31
ABBREVIATIONS AND ACRONYMS
AIRS Animal Identification and Registration System

CERC Contingent Emergency Response Component
CGAP Country Gender Action Plan
CSA Climate-smart Agriculture
C-PIM CERC Project Implementation Manual
CPS Country Partnership Strategy
CPF Country Partnership Framework
CRI Corporate Results Indicator
CSO Civil Society Organization
DA Designated Account
DALY Disability-adjusted Life Year
DPO Development Policy Operation
DLI Disbursement-linked Indicator
EHS Environmental, Health, and Safety
EIRR Economic Internal Rate of Return
ERR Economic Rate of Return
ESMF Environmental and Social Management Framework
EMSO Economic Management Support Operation
ERP Economic Recovery Program
EX-ACT EX-Ante Carbon-balance Tool
FAO Food and Agriculture Organization
FDI Foreign Direct Investment
FIRR Financial Internal Rate of Return
FM Financial Management
FMD Foot-and-Mouth Disease
FMM Financial Management Manual
GAVS General Authority of Veterinary Services
GDP Gross Domestic Product
GEMS Geo-enabling Initiative for Monitoring and Supervision
GHG Greenhouse Gas
GoM Government of Mongolia
GRM Grievance Redress Mechanism
ICT Information and Communication Technology
ICR Implementation Completion and Results Report
IFC International Finance Corporation
IFR Interim Financial Report
IPM Independent Process Monitoring
IPF Investment Project Financing
ISM Implementation Support Mission
INDC Intended Nationally Determined Contribution
LAMP Livestock and Agricultural Marketing Project
LIMS Laboratory Information Management System
M&E Monitoring and Evaluation
MIS Management Information System
MOF Ministry of Finance
MOFALI Ministry of Food, Agriculture, and Light Industry
MTR Midterm Review
NEMA National Emergency Management Agency
NGO Nongovernmental Organization
NPV Net Present Value
OHS Occupational Health and Safety
OIE Office International des Epizooties (World Organization for Animal Health)
PAD Project Appraisal Document
PDO Project Development Objective
PEF Pandemic Emergency Financing Facility
PPR Peste des Petits Ruminants (aka Goat Plague)
PIM Project Implementation Manual
PIU Project Implementation Unit
PMP Pest Management Plan
PSC Project Steering Committee
PVS Performance and Veterinary Services
SCD Systematic Country Diagnostic
SDC Swiss Agency for Development Corporation
SLP Sustainable Livelihoods Project
SMEs Small and Medium Enterprises
SOE Statement of Expenditures
TAD Transboundary Animal Disease
TFP Total Factor Productivity
ToR Terms of Reference
TSP Technical Service Provider
TSU Technical Support Unit
UNOPS United Nations Office for Project Services
USAID U.S. Agency for International Development
VCS Veterinary Certification System
WWF World Wildlife Fund for Nature
Regional Vice President: Victoria Kwakwa
Country Director: Martin Raiser
Regional Director: Benoit Bosquet
Practice Manager: Dina Umali-Deininger
Task Team Leader(s): Sitaramachandra Machiraju
The World Bank
Livestock Commercialization Project (P165945)
TABLE OF CONTENTS
DATASHEET ........................................................................................................................... 1
I. STRATEGIC CONTEXT ...................................................................................................... 8
A. Country Context................................................................................................................................ 8
B. Sectoral and Institutional Context .................................................................................................. 10
C. Relevance to Higher Level Objectives............................................................................................. 13
II. PROJECT DESCRIPTION.................................................................................................. 14
A. Project Development Objective ..................................................................................................... 14
B. Project Components ....................................................................................................................... 14
C. Project Financing ............................................................................................................................ 18
D. Project Beneficiaries and Project Scope ......................................................................................... 19
D. Results Chain .................................................................................................................................. 19
E. Rationale for Bank Involvement and Role of Partners ................................................................... 22
F. Lessons Learned and Reflected in the Project Design .................................................................... 23
III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 24
A. Institutional and Implementation Arrangements .......................................................................... 24
B. Results Monitoring and Evaluation Arrangements......................................................................... 25
C. Sustainability................................................................................................................................... 26
IV. PROJECT APPRAISAL SUMMARY ................................................................................... 27
A. Technical, Economic, and Financial Analysis (if applicable) ........................................................... 27
B. Fiduciary.......................................................................................................................................... 30
C. Safeguards ...................................................................................................................................... 34
V. KEY RISKS ..................................................................................................................... 37
VI. RESULTS FRAMEWORK AND MONITORING ................................................................... 41
ANNEX 1: DETAILED PROJECT DESCRIPTION ......................................................................... 51
ANNEX 2: IMPLEMENTATION ARRANGEMENTS AND SUPPORT PLAN ................................... 67
ANNEX 3: FINANCIAL AND ECONOMIC ANALYSIS ................................................................. 70
ANNEX 4: FINANCIAL MANAGEMENT AND DISBURSEMENT ARRANGEMENTS ...................... 77
ANNEX 5: ENVIRONMENTAL SAFEGUARDS........................................................................... 88
ANNEX 6: TEAM COMPOSITION ........................................................................................... 91
ANNEX 7: MAP .................................................................................................................... 92
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DATASHEET
BASIC INFORMATION
BASIC INFO TABLE
Country(ies) Project Name
Mongolia Livestock Commercialization Project
Project ID Financing Instrument Environmental Assessment Category
Investment Project
P165945 B-Partial Assessment
Financing
Financing & Implementation Modalities

[ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC)
[ ] Series of Projects (SOP) [ ] Fragile State(s)
[ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)
[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country
[ ] Project-Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster
[ ] Alternate Procurement Arrangements (APA)
Expected Approval Date Expected Closing Date
13-Dec-2019 30-Jun-2025
Bank/IFC Collaboration Joint Level
Yes Joint Project - involving co financing with IFC (loan, equity, budget, other) or staffing
Proposed Development Objective(s)
To improve livestock health, productivity, and commercialization of targeted value chains in project locations and to
provide immediate and effective response in the event of an eligible crisis or emergency.
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Components
Component Name Cost (US$, millions)
Animal Health Services 20.00
Value Chain Commercialization 8.00
Project Implementation Support 2.00
Contingent Emergency Response Component 0.00
Organizations
Borrower: Mongolia
Implementing Agency: Ministry of Food Agriculture and Light Industry, Government of Mongolia
PROJECT FINANCING DATA (US$, Millions)
SUMMARY -NewFin1
Total Project Cost 38.00

Total Financing 38.00
of which IBRD/IDA 30.00

Financing Gap 0.00
DETAILS -NewFinEnh1
World Bank Group Financing
International Development Association (IDA) 30.00

IDA Credit 30.00
Non-World Bank Group Financing
Counterpart Funding 8.00

Borrowing Agency 6.00
Local Beneficiaries 2.00
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IDA Resources (in US$, Millions)
Credit Amount Grant Amount Guarantee Amount Total Amount
Mongolia 30.00 0.00 0.00 30.00

National PBA 30.00 0.00 0.00 30.00
Total 30.00 0.00 0.00 30.00
Expected Disbursements (in US$, Millions)
WB Fiscal Year 2020 2021 2022 2023 2024 2025 2026
Annual 0.45 2.03 2.85 5.01 8.56 10.28 0.82
Cumulative 0.45 2.48 5.33 10.34 18.90 29.18 30.00
INSTITUTIONAL DATA
Practice Area (Lead) Contributing Practice Areas

Agriculture and Food Macroeconomics, Trade and Investment
Climate Change and Disaster Screening

This operation has been screened for short and long-term climate change and disaster risks
Gender Tag
Does the project plan to undertake any of the following?
a. Analysis to identify Project-relevant gaps between males and females, especially in light of Yes
country gaps identified through SCD and CPF
b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or Yes
men's empowerment
c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes
SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)
Risk Category Rating
1. Political and Governance  High
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2. Macroeconomic  High
3. Sector Strategies and Policies  Substantial
4. Technical Design of Project or Program  Substantial
5. Institutional Capacity for Implementation and Sustainability  High
6. Fiduciary  High
7. Environment and Social  Moderate
8. Stakeholders  Moderate
9. Other
10. Overall  High
COMPLIANCE
Policy
Does the project depart from the CPF in content or in other significant respects?
[ ] Yes [✓] No
Does the project require any waivers of Bank policies?

[ ] Yes [✓] No
Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 ✔
Performance Standards for Private Sector Activities OP/BP 4.03 ✔
Natural Habitats OP/BP 4.04 ✔
Forests OP/BP 4.36 ✔
Pest Management OP 4.09 ✔
Physical Cultural Resources OP/BP 4.11 ✔
Indigenous Peoples OP/BP 4.10 ✔
Involuntary Resettlement OP/BP 4.12 ✔
Safety of Dams OP/BP 4.37 ✔
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Projects on International Waterways OP/BP 7.50 ✔

Projects in Disputed Areas OP/BP 7.60 ✔
Legal Covenants
Sections and Description

Institutional Arrangements
Financing Agreement: Schedule 2, Section I.A.2
Recurrent, Continuous
The Recipient shall:
(i) maintain a Project Steering Committee and a Project Implementation Unit throughout the Project
implementation period, both with functions, staffing and resources satisfactory to the Association; and
(ii) no later than three (3) months after the Effective Date, appoint at least one (1) implementation advisor, and
thereafter appoint other implementation advisors as needed; all on terms of reference and with qualifications
acceptable to the Association to provide support for the implementation of the Project; and maintain the
engagement with the said implementation advisor(s) in a manner acceptable to the Association.

Project Implementation Manual
Financing Agreement: Schedule 2, Section I.B
The Recipient shall carry out the Project in accordance with the Project Implementation Manual, and not amend,
waive or abrogate any provisions of the manual unless the Association agrees otherwise in writing.

Annual Work Plans and Budgets
Financing Agreement: Schedule 2, Section I.C
Recurrent, Annual
The Recipient shall prepare and furnish to the Association for its no-objection no later than December 31 of each
fiscal year an annual work plan and budget during the implementation of the Project containing relevant Project
activities and expenditures proposed to be included in the Project in the following fiscal year, including a
specification of the sources of financing and the Recipient’s proposed counterpart share in the cost of the AWPB.

Productive Partnerships
Financing Agreement: Schedule 2, Section I.D
The Recipient shall make Performance-based Incentives available to a Productive Partnership in accordance with
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the eligibility criteria and administration arrangements set out in the Project Implementation Manual.

Environmental and Social Safeguards
Financing Agreement: Schedule 2, Section I.E
The Recipient shall ensure that the Project is carried out in accordance with the provisions of the Safeguards
Instruments and the site-specific safeguard plans, not amend, abrogate, repeal, suspend or waive any of their
provisions unless the Association agrees otherwise, and report on their status of implementation as part of the
project reports.

Contingent Emergency Response
Financing Agreement: Schedule 2, Section I.F
In case of an Eligible Crisis or Emergency
The Recipient shall adopt a satisfactory Emergency Response Manual for Part 4 of the Project and, in the event of
an eligible crisis or emergency, ensure that the activities under said part are carried out in accordance with such
manual and all relevant safeguard requirements.

Mid-term Review
Financing Agreement: Schedule 2, Section II.B
Once, 30 months after the Effective Date
The Recipient shall prepare and furnish to the Association a mid-term report in form and substance satisfactory to
the Association.
Conditions
Type Description
Effectiveness Financing Agreement: Article V.01
(i) Project Implementation Manual has been adopted in form and substance satisfactory
to the Association; and
(ii) the Project Implementation Unit has been established with a mandate, composition,
and terms of reference satisfactory to the Association.
Type Description
Disbursement Emergency Expenditures
Financing Agreement: Schedule 2, Section III.B
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(i) The Recipient may not withdraw the proceeds of the Financing as may be allocated to
Part 4 unless an Eligible Crisis or Emergency has occurred, all related safeguards instruments
and requirements have been completed, the emergency response implementing entities
have adequate staff and resources, and the Recipient has adopted the Emergency Response
Manual, acceptable to the Association.
(ii) The Recipient shall ensure that (a) the amounts requested for withdrawal for
Performance-based Incentives shall be determined and calculated on the basis of the Output
Value; and (b) the activities to be financed by the Performance-based Incentives are verified
by an independent expert as elaborated in a verification report of said independent expert.
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I. STRATEGIC CONTEXT
A. Country Context
1. Mongolia is a unique country with extreme features. It has a population of 3 million people
residing in a large landmass (most sparsely populated country in the world), with a vibrant democracy
landlocked between the Russian Federation and China. A largely mining-dependent economy, Mongolia
is favored with key assets: world-class mineral deposits (including coking coal, copper, and gold), a large
base of grass-fed livestock assets, pastureland and pristine nature, proximity to the second-largest
economy in the world 1 (China), and an educated population. Mongolia is a high plateau with an extreme
continental climate with long, cold winters and short summers—the country is considered at major risk
from climate change that would result in lower agricultural/livestock productivity. The domestic private
sector has vastly expanded in all key sectors (banking, property, telecom, food and beverage) and foreign
direct investment (FDI) has shown clear, albeit sporadic, potential. With substantial mineral riches,
Mongolia quickly became a low-middle-income country with a gross domestic product (GDP) per capita
of US$3,663 in 2018 from US$330 in 1995. However, nearly one-third (28.4 percent) of the population
lived under poverty in 2018, and rapid urbanization resulted in more than half of the population living in
the capital city Ulaanbaatar. The country has a continental climate characterized by long and extremely
cold winters.
2. Mongolia showed the highest economic growth in the world in 2011 at over 17 percent. The
mining sector has been the main pillar of economic growth and development in Mongolia over the decade.
Indeed, the GDP growth shot up mostly due to a peak in mining investment, which in 2011 and 2012
represented around 49 percent of the total GDP. In recent years, the mining sector contribution has been
around 20 percent of the GDP, about 60 percent of the industrial output, and about 80 percent of total
exports. On the other hand, agriculture was the traditional source of growth in the past, but it remains
the largest source of employment. The contribution of the agriculture sector to GDP declined from 38.5
percent in 1996 to just 11.7 percent in 2016, yet it absorbs about a third of the total employment.
Agricultural products are the second-largest source of export revenue after mineral products, accounting
for 7 percent of the total export value in 2018. Meat and milk are the primary products of the livestock
sector, contributing to 61 percent of livestock output and 7 percent of the country’s GDP. The number of
livestock heads reached 66.8 million in 2018 and about 20 percent of the total households are herding
households. During this period of high growth, the poverty head count ratio declined from 38.8 percent
in 2010 to just 21.6 percent in 2014.
3. Mongolia had substantial economic challenges due to externally driven shocks as well as
internal shortcomings in macroeconomic policy. After strong growth in 2011–2013, the economic boom
started to drop sharply from 2014 due to a deteriorating external environment marked by declining
commodity prices and slowing demand for commodities, especially coal, from Mongolia’s main trading
partner China. Private investment was severely affected as FDI inflows dried up to less than 2 percent of
GDP in 2014–2016 from 40 percent of GDP in 2011 due to the delay in new mining projects. The
Government responded to the economic slowdown with higher and ultimately unsustainable public
1 China accounts for about 90 percent of the country’s exports.
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spending. However, the consequences were devastating (almost negative growth, deterioration of the
external sector, debt, private consumption, and increasing poverty).
4. The Government’s response was anchored in the Economic Recovery Program (ERP), which has
been supported by a multi-donor support package including the International Monetary Fund and the
World Bank. The objective of the ERP has been to mitigate the impact of the economic crisis and restore
fiscal sustainability while pursuing structural reforms aimed at regaining the confidence of foreign
investors and diversifying the economy. The ERP was adequate and timely and economic recovery has
been stronger than anticipated. The agriculture sector experienced growth in the range of 2.0–4.5
percent, which is still lower than its historical average (5–7 percent). Recently, poverty declined by only
1.2 percentage points between 2016 and 2018. Interestingly, rural poverty decreased by about 4
percentage points while urban poverty remained almost unchanged over this period. The Government
agrees that economic diversification beyond mining is a priority. Agriculture is a promising sector in that
regard.
5. During the periods of adverse economic conditions, Mongolia has seen the reversal of the
previously fast reduction in poverty and weakened human development growth. For instance, the 2008
global economic crisis seriously affected the key export sector (mining) and the agriculture and livestock
sectors. In 2010, extreme winter conditions, in terms of extremely low temperatures and high wind
velocity (locally called dzud), 2 led to a double-digit contraction in the agriculture sector. Between 2014
and 2016, the poverty rate in Mongolia again climbed back to 29.6 percent with only 35.3 percent of
households found to be food secure and 50.2 percent experiencing moderate or severe food insecurity.
The percentage of children ages 6–23 months who had minimum dietary diversity and minimum meal
frequency during the previous day was 43.8 percent. Paradoxically, 44 percent of men, 54 percent women,
and 11 percent of the children under five in the country were overweight and obese. The pastoral and
nomadic background in Mongolia is associated with unique food consumption patterns, with high intake
of proteins and carbohydrates from meat and milk products but little dietary diversity, leaving the
population increasingly susceptible to nutrient deficiencies and excess weight gain.
6. The demand for animal source food products, especially meat, is increasing with rapid
urbanization and rising incomes both domestically and abroad. Mongolia’s income per capita doubled
from US$1,717 in 2009 to US$3,686 in 2016. The young and growing population of Mongolia is projected
to reach 4.3 million by 2050, up by 40 percent from the current level. Above two-thirds of the country’s
population lives in urban centers with a growing middle class that has exposure to international diets. This
growing awareness of the link between diet and health creates a strong pressure to supply safe and good
quality food, especially animal food products. Mongolia is self-sufficient in meat supply and it also aims to
generate revenues from exports to the global market. While per capita availability of meat (132.1
kilograms) has significantly increased to meet the domestic demand, the sector’s performance is limited
in terms of quality and in meeting quality standards for exports, particularly in high-value export markets
such as the European Union.
7. Animal and human health risks, growing environmental stress, and climate change issues can
hinder economic growth and potentially put the population’s well-being at risk. The large herder
2Dzud refers to extreme winter weather conditions with negative consequences for animals, as they die in large numbers
primarily due to starvation being unable to graze and in other cases directly from the cold.
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population with increasing livestock numbers increases the risk of zoonotic diseases. In recent years,
zoonotic diseases have expanded, and outbreaks of transboundary diseases have emerged in animals and
humans. Despite the progress achieved, brucellosis, anthrax, tick-borne disease, and rabies still constitute
a threat to human health and welfare. The larger livestock populations have also resulted in loss of
production efficiency with increases in endemic diseases and inadequate nutrition. Climate change and
human action have brought about higher disaster risks and environmental degradation. Over the last six
decades, the growing frequency and severity of natural disasters (dzud, drought, and flood), as well as a
clear upward trend in Mongolian average temperatures and reduced rainfall, have been observed. If not
addressed, these trends could likely hinder economic growth and adversely affect the rural population’s
well-being in the long term.
B. Sectoral and Institutional Context
8. The Mongolian agriculture and livestock sectors have huge potential as a driver for economic
diversification and as a key source of broad-based employment. The Government of Mongolia (GoM)
has formulated several government programs and laws, particularly the Animal Health Law (2017) and
Animal Genetics Law (2018), that would contribute to enhanced competitiveness of the agriculture and
livestock sectors. These programs help promote rural employment and the well-being of the rural
population. The vast majority of herding households live at subsistence level and they are highly
vulnerable to production and income shocks. In 2016, only 21 percent of herders had 500 heads or more
livestock, the size at which herders begin to invest in productivity and animal health improvements. On
the other hand, 56 percent of the herders own 200 heads or fewer and they are trapped in low-input, low-
output and low-productivity extensive production. Across the sector, production is limited by the high
prevalence of endemic diseases and inadequate nutrition and supporting husbandry systems. These
developments in turn have implications on the food and nutrition security of the rural population,
especially women and children. Improving animal health and livestock productivity through value chain
commercialization will enable Mongolia to achieve economic diversification while also creating broad-
based employment and income growth in rural areas and improving food security and food safety.
9. Mongolia has a comparative advantage in its vast pasturelands (110 million ha) to sustain a
grass-fed livestock production system. Mongolia’s pastoral production system gives the country a huge
advantage of a large quantity of organically bred and fed livestock. However, the quality of pasture has
suffered from severe degradation (with an average overstocking of 2.3 times above the current carrying
capacity). Nearly 65 percent of the rangelands were degraded relative to the ecological potential
(reference condition) and nearly 7 percent of the long-term monitoring sites have been reported to suffer
from desertification. The country also experienced a sharp decline in fodder availability, from around 20
kg of feed units per head in the late 1980s to just 6.2 in 2016. Livestock sector is highly vulnerable to
climate change and extreme weather events, including dzuds. Inadequate nutritional reserves reduce the
livestock’s resilience to environmental shocks and increase the severity of winter livestock disasters. It is
important for Mongolia to take steps to reduce the herding population’s vulnerability to these severe
storms by identifying the most resilient breeds of livestock, strengthening the risk management system
for pastoral livestock (including the insurance system), and strengthening the early warning systems and
response capabilities of the National Emergency Management Agency (NEMA).
10. Improving livestock productivity is key to achieving sector competitiveness. With a comparable
stock of cattle and sheep to Mongolia, New Zealand generates 224 times more revenue from meat exports
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than Mongolia. The offtake and yields of beef, sheep, and goat perform poorly against global comparators.
For example, while annual offtake for beef is 30 percent in Canada, it is only 18 percent in Mongolia. The
World Bank’s Livestock Sector Study indicated that Mongolian beef carcasses weighed less than half of
the international yields (ranging from 120 kg to 130 kg compared to international yields of 250 kg to 300
kg). Similarly, Mongolian sheep carcass weight ranges from 15 kg to 18 kg compared to international yields
of 18–30 kg. While sheep carcass weight decreased by about 14 percent between 1990 and 2016, beef
carcass decreased by nearly 30 kg between 2004 and 2014. Furthermore, the average cow milk yield
dropped by 19 percent between 2010 and 2015. Several factors explain the low and declining productivity,
including malnutrition, animal diseases, natural risks, besides climate hazards.
11. Animal diseases coupled with poor food hygiene and sanitary and phytosanitary conditions are
binding constraints for enhancing livestock sector competitiveness. It is recognized that animal
productivity is dependent on husbandry, stocking rates, nutrition, breeding, and genetic fitness
and animal health. Unhealthy animals will never be productive whatever breeding/husbandry
improvements are made. Major disease outbreaks including foot-and-mouth disease (FMD) and peste des
petits ruminants (PPR) and endemic diseases such as brucellosis, anthrax, and high levels of parasitism are
not under control, impairing the ability of Mongolian producers to provide high-quality products to access
markets and export products. The analysis of brucellosis control in Mongolia by Roth et al. (2003)
separately estimated the value of benefits to agriculture and public health. They showed that depending
on the assumptions about vaccination efficacy and coverage, the benefit ranged from 42,400 to 63,200
disability-adjusted life years (DALYs) and cost per DALY saved would be in the range of US$19.1 to
US$71.4. Similarly, during the FMD outbreak in 2010, Mongolia had to cull more than 25,000 animals,
while many more fell sick. There has been significant progress in addressing the animal health situation in
Mongolia, including the Cabinet’s approval of a national strategy for FMD in 2015 and the endorsement
by the World Organization for Animal Health (Office International des Epizooties, OIE) of an official FMD
control program in 2016. Investments are needed to focus on proper transboundary animal disease (TAD)
control plans that could strengthen Mongolia’s capacity to reach export markets. Public-private
partnerships (‘sanitary mandate’) are critical to deliver improved animal health and improve product
quality with the need to work with herders, traders, and processors on constraints and opportunities.
12. There is a need to redefine the role of the private sector for effective implementation of the
new Animal Health Law and to address the institutional challenges of the animal disease surveillance
and control system. Existing veterinary service programs lack human, physical, and monetary resources
to adequately address the control of infectious diseases and support comprehensive herd health
programs. Recognizing the need for competent veterinary services that meet international standards, a
dedicated agency, the General Authority of Veterinary Services (GAVS), was established, under the aegis
of the Animal Health Law, with a unified chain of command from the national level to the soum level.
However, veterinary service delivery largely remains in the private sector. Biocombinat, a Mongolian
public enterprise, leads vaccine production and reconstitution in the county. It powers the public-private
partnership in the animal health sector by arranging vaccine supplies through private animal drug supply
chains/pharmacies. Field veterinary services are provided by the soum/bagh-level private veterinary
clinics, but currently access to this frontline service is constrained by insufficient numbers of veterinarians
and inadequate competencies and low financial returns. The private sector can play an important role in
developing capacity and sustainability of veterinary services delivery by bundling them with other value
chain services and enhancing supply chain relationships with lead firms. Such a private sector engagement
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is found to be more effective and sustainable in other countries such as India (Allana Farms) and Thailand
(Charoen Pokphand Group).
13. Mongolia has not reaped its export potential despite being near the largest global markets in
the region (China, Russia, Japan, and the Republic of Korea). Mongolian meat export has stagnated at
less than 10 percent of its potential. Less than 10 percent of the meat and dairy production is processed
by slaughterhouses and dairy processing factories (indeed 97 percent of meat is slaughtered by herders).
These processors hardly utilize their installed capacities up to 50 percent. Mongolia boasts of export
potential of 150,000 tons of meat and meat products each year. But it was able to export only 54,900 tons
of meat in 2018. Only 29 of the total 49 meat processing businesses in the country could meet the food
safety and health standards to receive export permissions because of multiple constraints. Besides animal
health, product quality, and food safety, there are other issues such as logistics from far-flung areas and
inefficient cross-border logistics, inspections, and customs. Furthermore, severe climate and lack of
additional feed and shelter throughout winter make it difficult for animals to reach market weight at a
young age and older animals often have leaner, tougher meat, which is not as desirable in export markets.
Meat exports from Mongolia are sold at very low unit prices and with a high risk. Past disease outbreaks
and the resulting stop-and-start nature of exports have led to arm’s-length trade, with few long-term
buyer-supplier relationships and little evidence of the knowledge, skills, and technology spillovers that are
more common in integrated value chains. The increase in unit value realization for herders will require
value chain upgrading and putting in place a strong foundation for export competitiveness. Targeting
export markets will lead to the development of a more profitable quality-assured livestock economy.
14. There have been improvements in the gender policy and legal frameworks in Mongolia during
the last decade. The Law on Promotion of Gender Equality (2011) and the second National Program on
Gender Equality (2017–2021) form the basis for gender actions at the strategic and policy level, but the
gender gaps remain:
(a) Women remain heavily dependent on family relationships to conduct businesses and they
are largely engaged in small businesses that are vulnerable to fierce competition. This is
mainly because women—disproportionally more than men—face limited access to financial
services and resources. According to the World Bank’s draft Country Gender Action Plan
(CGAP) for Mongolia 2019–2023, women are perceived to have more “challenges in fulfilling
collateral requirements than men.” A contributing factor to this could be that property titles
are commonly issued to the household head, who is traditionally perceived to be the male
head of the household. These challenges are substantial for women in agricultural and dairy
industries.
(b) Women’s participation in community activities at local administrative levels (such as soum,
bagh, and in herder’s organizations) is quite limited. For example, women lead just 15
percent of community-based pastureland management organizations. The main cause for
the lack of female participation and representation in these groups is related to lack of
mobility, skills, and time to spend at meetings because of household responsibilities and
limited participation in trainings.
(c) Women hold limited senior management positions in government offices relevant for the
livestock sector, though the majority of graduates from veterinary schools are female.
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According to data from the Swiss Agency for Development Cooperation (SDC), during 1994
and 2014, less than one-fifth of senior positions were held by women in the country’s top
five central veterinary institutions. A recent study identifies that lack of family-friendly
policies places the double burden of motherhood and career, which is one of the key reasons
for this gap. 3
C. Relevance to Higher Level Objectives
15. The project supports the World Bank’s twin goals of ending extreme poverty and promoting
shared prosperity. It is also closely aligned with the World Bank Country Partnership Strategy (CPS) for
Mongolia for FY2013–2020. 4 It is in line with Pillar 2: Build a Sustained and Diversified Basis for Economic
Growth and Employment in Urban and Rural Areas. The project would support Outcome 2.1: Enhancing
the investment climate and financial intermediation by working with small and medium enterprises
(SMEs). It will also contribute to Outcome 2.2: Create more opportunities in the rural economy for
enhanced livelihoods through productive, healthier, and sustainable livestock sector and promoting
higher quality and higher value agribusinesses. It also contributes to Pillar 3: Address Vulnerability through
Improved Access to Services and Better Service Delivery, Safety Net Provision, and Improved Disaster Risk
Management by targeting poor and vulnerable households, increasing incomes through employment
creation and livestock productivity improvements, enhancing nutrition outcomes through improved diet
diversity, and mitigating pandemic and climate risks in rural areas. It is also consistent with the
observations in the Performance and Learning Review of the CPS that concluded in FY2016. Further, the
project is also aligned with the new Country Strategy of the International Finance Corporation (IFC), which
has agri-livestock exports as its key pillar, by supporting framework conditions for greater private sector
involvement by strengthening key public institutions and working on issues such as animal health
management systems and product quality and food safety standards promotion. It will also address
constraints for herders in market access, price-quality relationships, and livestock production in selected
project soums and help increase household incomes.
16. The development of the agriculture and livestock sectors are top priorities for Mongolia’s
Sustainable Development Vision 2030. The project is aligned with Mongolia’s policy priority—as described
in the Mongolian Government Action Plan for 2016–2020 and in the Government’s Agenda for Sustainable
Livestock 2018. The key objective of the action plan is to diversify the country’s export capacity to non-
mining products and goods while the Agenda for Sustainable Livestock aims to support sustainable
development of the livestock sector. The development objective of the project—improving livestock
health, productivity, and commercialization—plays a key and direct role in achieving these government
priority objectives. The project’s activities will also contribute to the successful implementation of the
Mongolian ‘One Health’ plan by developing greater policy and program cohesion between the human and
animal sectors and improved coordination and information sharing. The project will support making
strategic investments for the creation of public goods and services and facilitating private sector
partnerships with herders and herder groups to improve their access to markets. Livestock productivity
improvements often require coordinated investments in animal health, breeding, nutrition, and market
linkages.
3Children and Female Employment in Mongolia, School of Slavonic and East European Studies 2019.
4The CPS (Report no. 67567) for FY2013–2017 and its pillars for the partnership between Mongolia and the World Bank Group
were extended until December 31, 2020.
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17. The agriculture sector in Mongolia is the second-largest (43 percent) source of greenhouse gas
(GHG) emissions after the energy sector (50 percent). The ever-increasing herd size contributed to the
rise in the national GHG emissions by 58 percent between 1990 and 2014. The Intended Nationally
Determined Contribution (INDC) by Mongolia aims to cut its GHG emissions by 14 percent by 2030
compared to the projected emissions under a business-as-usual scenario. The project has the potential to
directly contribute to these commitments by (a) limiting the livestock density to appropriate levels
according to the pasture carrying capacity and (b) emphasizing green production and low carbon practices
and promoting water and energy use efficiency along the livestock value chain.
18. Livestock export from Mongolia is limited by both the type and quality of the livestock products
produced. Although the leading processors in Mongolia have increased the variety of their products, most
exports continue to be in the form of carcasses. Limited supplies of beef and lamb preclude some export
markets while trade-related procedures and tariffs impede their cost competitiveness. Efforts to identify
new markets and market requirements are constrained by the capacity of processors in building
sustainable supply chains, product development, marketing, and sales promotion. The project will also
link to IFC’s ongoing advisory services programs that support (a) creating an enabling business
environment for agriculture and agribusiness, and (b) improving value chain competitiveness and livestock
exports with food safety and environment considerations.
II. PROJECT DESCRIPTION
A. Project Development Objective
PDO Statement
19. To improve livestock health, productivity, and commercialization of targeted value chains in
project locations and to provide immediate and effective response in the event of an eligible crisis or
emergency.
PDO Level Indicators
(a) Reduced prevalence of priority diseases in project intervention areas (percentage)
(b) Increased yield of livestock products (meat and dairy) (percentage)
(c) Increased inflation-adjusted value of livestock products (percentage)
B. Project Components
20. Mongolia’s Ministry of Food, Agriculture, and Light Industry (MOFALI) has identified the livestock
sector’s competitiveness as a development policy priority. The project is aimed to directly benefit small
herders and other vulnerable groups, particularly women and youths, in remote pastoral communities
and small and medium enterprises (SMEs) and other livestock value chain actors. The project is structured
as an Investment Project Financing (IPF) with the following four components, financed with an IDA credit
in the amount of US$30 million over five years.
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Component 1: Animal Health Services (US$20 million)
21. This component aims to improve the quality of and access to veterinary services nationally and to
contribute to the establishment of TAD-free zone(s) in specified areas. The proposed interventions will
reduce animal diseases and provide better veterinary public health through strengthened veterinary
services and improved program delivery. The project activities under this component will strengthen the
Mongolian national veterinary services in line with international standards, finance activities that will
contribute to the establishment of disease-free zones for FMD and PPR, and improve the quality and
safety of animals and animal products entering the value chain through improved management of animal
health. The component will support animal identification and traceability from herders and producers to
processors. All project activities under this component, including institutional and capacity building,
disease surveillance and control and food safety, the digital livestock interventions, and participatory
animal health risk management initiatives, will also strengthen climate adaptation mechanisms,
enhancing the resilience of Mongolia’s livestock system against adverse climate change events.
22. Subcomponent 1.1: Institutional and Capacity Building (US$5 million). The project will
strengthen the institutional capabilities of the recently established GAVS for effective implementation of
the Animal Health Law (2018). This will be achieved by supporting investments that will enhance the
performance of the Mongolian Veterinary Services to be benchmarked against international standards.
As a result, the GAVS will improve its ability nationally to effectively control animal diseases, promote
animal welfare and the responsible use of antimicrobials, provide veterinary public health, and improve
food safety. The project will support the GAVS in developing and executing a comprehensive human
resource development plan and capacity-building programs for veterinary personnel, including
paraprofessionals (in both the public and private sectors) and other technical staff such as scientists and
laboratory technicians. This will include piloting of a Young Professionals Program for fresh veterinary
graduates and an internship program for veterinary students in senior years for attracting young talent
and shaping their technical knowledge and managerial skills to successfully drive, achieve, and sustain the
GAVS initiatives. The project will support reviews by the OIE using its Performance of Veterinary Services
(PVS) evaluation tool and ensure that there is effective and systematic response as well as follow up on
its recommendations. The Mongolia One Health plan will also be supported in bringing greater policy and
program cohesion between humans and the animal sector.
23. Subcomponent 1.2: Disease Surveillance and Control and Food Safety (US$9 million). The
project will support improving the delivery of risk-based disease surveillance and control programs for
TADs, particularly FMD and PPR priority endemic diseases, and food safety in line with global and regional
strategies. This will entail investments in developing national risk-based food safety supervision
frameworks, epidemiological research, food risks assessments and food safety standards, effective
immunization plans, improved disease surveillance methods, disease monitoring/surveys, and disease
control activities, including risk communications with herders and producers. Nationally, veterinary drug
quality control, disease diagnosis, and food safety laboratories networks will be strengthened, and their
investigation capacity will be redefined with a greater hierarchy of diagnostic laboratory capabilities—
central/reference laboratories, regional/aimag laboratories and ‘inter-soum’ laboratories provided for
local field support. The project will also contribute to the establishment of ‘high health’ animal production
compartments as per OIE guidelines. Operationally, disease surveillance and control activities and pilot
initiatives will be focused on the project intervention areas.
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24. Subcomponent 1.3: Digital Livestock Interventions (US$4 million). The project will pilot
disruptive and digital technologies including big data, Internet of Things, sensors and smart devices, aerial
logistics and surveillance (remote sensing and drones) tools for risk analytics, and livestock early warning
systems for triggering risk management actions necessary for high health animal production systems,
veterinary health services delivery, disease surveillance activities, and improved control of animal
movements. The project will take a modular approach for building a comprehensive livestock information
system to enhance data and evidence-based decision support systems for livestock programs in public
and private sectors. This will entail developing/strengthening and integrating the animal health
information system and laboratory information management systems (LIMSs) with animal/animal product
traceability system for veterinary certification system (VCS), livestock movement control, and assurances
for product quality and food safety. Based on the results of the ongoing pilot on animal identification and
registration system (AIRS), a scale-up/integration road map will also be explored under the project. It will
also institutionalize nomadic herding (transhumance) trails using digital tools such as the Geo-enabling
Initiative for Monitoring and Supervision (GEMS) and ensure proper service delivery and citizens’ feedback
via ICT platforms such as SMS/text on the services provided by the project.
25. Subcomponent 1.4: Participatory Animal Health Risk Management Initiatives (US$2 million). A
community partnership in animal health risk management will be enhanced under the project.
Community-based initiatives will be piloted that allow herder groups/associations to pool resources for
improving delivery of quality veterinary services to herders/producers with greater compliance to disease
surveillance and disease control programs. The already developed ‘vulnerability and risk assessment tool’
will also be used to support herders and primary producers to identify animal health risks and prioritize
veterinary services delivery in the local areas. The project will ensure that women take leadership
positions in this animal health risk community initiatives.
Component 2: Value Chain Commercialization (US$8 million)
26. The objective of this component is to improve livestock productivity and increase the volume of
livestock products that meet market requirements on quality and food safety standards. The key strategy
is promoting and supporting ‘productive partnerships’ between producers and processors/service
providers based on the market needs and requirements. The project activities under this component,
including extension, research, service delivery relating to animal breeding and related climate smart
practices, and animal nutrition-related activities, will not only enhance herders and herder groups
adaptation mechanisms to increased climate risks, but they also have climate mitigation potential. The
expected project outcomes, including improved livestock productivity and access to markets, will
contribute to an increase in the livestock offtake rate. This will have implications for destocking of
livestock (that is, herders will be encouraged to move from a quantity-centered to a quality-centered
production system), which in turn contributes to GHG emission reduction and an improvement in
pastureland that increases the land-based carbon sequestration.
27. Subcomponent 2.1: Livestock Productivity (US$2 million). This subcomponent will focus on the
provision of technical, extension, and collaborative research with academic and research institutions. The
project will strengthen policy-driven service delivery relating to animal breeding, animal nutrition, and
high health production models in select aimags/soums. Making links between Component 1 and
Subcomponent 2.2, it will support the following:
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(a) Animal breeding services. The project will support breed improvement of small ruminants
and cattle through the creation of ‘nucleus flocks’ (elite herds of male or female sheep
serving as genetic resource), ‘male flocks’ (male animals of indigenous breed with high
genetic merit maintained in a high state of health), and artificial insemination units and
through the capacity building of private breeding units/local breeders.
(b) Animal nutrition. Deterioration in pastures and low levels of supplementary feeding cause
severe malnutrition in animals, especially during the winter and spring seasons. The project
will promote best practice models that foster year-round availability of animal nutrition,
including growing fodder crops, hay making, and production of animal feed supplements.
This activity will involve capacity building, trainings, and demonstrations for feed, fodder,
and concentrates.
(c) High health production models. The project will support semi-intensive and intensive
production models in the meat and dairy sectors by establishing dairy clusters, feedlots, and
high health compartments. These will be targeted in government-identified regions, mostly
in the central north areas, suitable for fodder production and promotion of intensive and
semi-intensive livestock farming.
28. Subcomponent 2.2: Productive Partnerships (US$6 million). The key strategy for value chain
commercialization is promoting and supporting ‘productive partnerships’ between producers and
processors/service providers based on the market needs and requirements. The project will facilitate
these partnerships aimed at delivering high-quality animal health, livestock breeding, high health
production, and commercialization services to herders and intermediate aggregators/processors for
ensuring quality supply of raw products to downstream value chain players. The project will encourage
interventions related to mobilizing herders/herder organizations; improving breeding services delivery;
organizing food and livestock processing clusters; improving the cost and product competitiveness of
livestock and agriculture products, particularly milk and meat; increasing market access by
herders/producers; introducing advanced technologies for intensive food production systems; and
increasing domestic supply/exports of healthy and safe food products. The proposals from the private
sector, large producer organizations, and public agencies will be selected through a transparent and
competitive process and will be financed through output-based agreements/performance-based
incentives. The selection process will encourage productive partnerships in livestock production systems
that adhere to climate-smart agriculture (CSA), thereby contributing to climate mitigation. Furthermore,
the project gives priorities and incentives to women-led enterprises and herder organizations to establish
project-financed productive partnerships. A joint review mechanism will be instituted under the project
for systematic monitoring of outcomes from these engagements.
Component 3: Project Implementation Support (US$2 million)
29. This component will strengthen the project’s implementation architecture. It will support the
coordination of project activities, environmental and social safeguards, and the fiduciary functions of the
Project Implementation Unit (PIU) under the guidance of MOFALI. The PIU will be staffed and equipped
to enable it to effectively carry out these activities. The component will finance incremental staff,
consultants, operating costs, technical assistance (TA), training, monitoring and evaluation (M&E)
activities, baseline and final impact assessments, information dissemination, and annual audits. Under
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this component, the project will ensure that at least half of the participants in M&E workshops, training
events, seminars, and conferences will be women. Furthermore, the project aims that at least half of all
project-funded professional positions such as PIU staff, young professionals, and technical service
providers (TSPs) will be filled by women.
Component 4: Contingent Emergency Response Component (US$0 million)
30. Following an eligible crisis or emergency, such as widespread droughts, dzuds, transboundary
disease outbreak, steppe fires, and so on, notified by the NEMA or any agency under relevant provisions
of Law on Disaster Protection 2017, Animal Health Law 2017, or any other statute, the recipient may
request the World Bank to reallocate project funds to support emergency response and reconstruction.
The project will prioritize emergencies having significant impact on agriculture, livestock, and rural
development. The Contingent Emergency Response Component (CERC) would draw upon the
uncommitted credit resources from other project components to cover emergency response, relief, and
rehabilitation activities. However, if more financing is required, the restructuring of other projects would
also be considered before the triggering of the Pandemic Emergency Financing Facility (PEF). A ‘CERC
Project Implementation Manual’ (C-PIM) will be prepared by MOFALI within three months from
effectiveness consistent with national disaster preparedness plans and emergency procedures. Triggers
for the CERC will be clearly outlined in the C-PIM acceptable to the World Bank. Disbursements will be
made against an approved list of goods, works, and services required to support crisis mitigation,
response, and recovery.
C. Project Financing
31. The lending instrument will be IPF, and the implementation period for the project is five years.
IPF provides the flexibility to build human and institutional capacity, create productive infrastructure, and
support the reform agenda in the agriculture/livestock development sector. Under IPF, close follow-up of
defined activities and procedures will be carried out making adjustments where necessary, on the part of
both the Government and the World Bank. The total project cost for the proposed project has been
estimated at US$38 million, out of which the Government/beneficiary share would be US$8 million. The
remaining US$30 million would come in the form of an IDA credit. Table 1 summarizes the overall project
costs.
Table 1. Project Financing (US$, millions)
Component IDA Government/Beneficiary Total
1. Animal Health Services 20 5 25
1.1 Institutional and Capacity Building 5 2 7
1.2 Disease Surveillance and Control and Food Safety 9 3 12
1.3 Digital Livestock Interventions 4 — 4
1.4 Participatory Animal Health Risk Management Initiatives 2 — 2
2. Value Chain Commercialization 8 3 11
2.1 Livestock Productivity 2 1 3
2.2 Productive Partnerships 6 2 8
3. Project Implementation Support 2 — 2
4. Contingent Emergency Response Component 0 — —
Total project cost 30 8 38
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D. Project Beneficiaries and Project Scope
32. Project beneficiaries. The project design includes activities at the national level as well as at
regional and local levels. The key beneficiaries of the project include (a) small herders, poor households
and other vulnerable groups, particularly women and youths, in remote pastoral communities; (b)
community organizations such as herder groups, pasture groups, producer organizations, civil society
organizations (CSOs), and nongovernmental organizations (NGOs); (c) the livestock extension and animal
health service delivery agents in the last mile such as public and private veterinary service providers
(paraprofessionals); (d) central and local (aimag and soum) governments and staff engaged in food,
agriculture, and livestock program implementation; and (e) small- and medium-scale private livestock
value chain actors operating in the targeted livestock value chains in the project areas. The project is
expected to benefit at least 20,000 livestock households (about 72,000 people) and 60 small livestock
operators and enterprises in target areas. Specific nutrition counseling programs will be targeted to
women beneficiaries under the project. Furthermore, the project will benefit other herders not directly
involved with the project activities through improved control of animal diseases. Mongolian consumers
will also benefit from increased supply of safe and quality animal products in the domestic markets.
33. Project scope. The project will strengthen the institutional systems and governance of veterinary
services at the national level by supporting (a) analytical studies and surveys, (b) strategy formulation and
policy making, (c) development of national immunization plans and monitoring of rollout plans, (d) staff
capacity building, (e) upgrade of trainings and extension systems, and (f) information systems in about
150 soums of 14 aimags (including 7 western aimags with a potential to be declared disease-free zone)
focused on last-mile veterinary service delivery and investments in animal disease surveillance,
prevention, and control and food safety. These aimags are Arkhangai, Bayankhongor, Bayan-Ulgii, Bulgan,
Gobi-Altai, Khentii, Khovd, Khuvsgul, Orkhon, Sukhbaatar, Tuv, Uvurkhangai, Uvs, and Zavkhan. The
central and regional laboratories for animal disease surveillance and control will be upgraded as reference
laboratories in Ulaanbaatar, Erdenet, and Khovd.
34. The project will implement value chain commercialization in conjunction with animal health
interventions with strategic focus on meat and dairy sectors in selected soums of the eight aimags of
Arkhangai, Bulgan, Khentii, Khuvsgul, Sukhbaatar, Tuv, Uvurkhangai and Uvs. These aimags were selected
based on objective criteria such as (a) willingness of local governments to put in additional resources for
project implementation; (b) size of healthy herds of cattle and small ruminants; (c) presence of good-
quality institutions at the grassroots level nurtured under the Livestock and Agricultural Marketing Project
(LAMP) and SDC and U.S. Agency for International Development (USAID) projects; (d) status of logistics
and infrastructure development; and (e) potential for export-oriented value chains.
D. Results Chain
35. The project design follows an inclusive approach that brings together the different government
administrative levels, small and medium food enterprises along the entire food value chain, and the
consumers. The key challenges identified for a competitive livestock sector include three highly
intertwined areas (a) poor animal health service delivery, (b) low productivity, and (c) weak market access
and competitiveness. The project directly addresses these challenges with integrated interventions. As
detailed earlier, the project will be structured around four components: (1) Animal Health Services, (2)
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Value Chain Commercialization, (3) Project Implementation Support, and (4) Contingent Emergency
Response Component. Component 1 is designed to build basic capacity of core public services and
improve access to key livestock services for livestock producers, especially animal health services.
Component 2 is designed to improve productivity and marketing for the pastoral livestock communities
by creating market links with private sector processors and traders. The project will give due attention to
equitable participation of women and youths through the project activities. Component 3 will support
implementation of the projects as well as monitor and evaluate project progress. Component 4 will defend
the project gains from unforeseen natural or man-made calamities by supporting crisis mitigation,
response, and recovery efforts. The results chain and theory of change are graphically represented in
figure 1.
36. The theory of change, aligned to the PDO, illustrates a balance between ‘hardware’ and ‘software’
components of the strategy as well as between private and public investments with a view to inform the
larger National Livestock Program in the country. Accordingly, the project interventions, outputs,
intermediate results, and the desired outcomes are in line with the development objectives. Specifically,
the project will strengthen institutional capabilities of the recently established GAVS for effective
implementation of the Animal Health Law (2018). This is done by supporting investments to enhance the
performance of Mongolian Veterinary Services benchmarked against international standards and by
improving the ability to deliver effective animal disease control, improved veterinary public health, and
better food safety programs. The rationale for these project activities is as follows: (a) animals that are
healthy and well cared for are more productive and less prone to diseases, including zoonoses; (b) robust
veterinary services and animal health systems are likely to reduce the risk of diseases, including TADs; and
(c) strong animal health management improves access to markets and competitiveness. Besides improved
animal health, interventions to enhance animal breeding, nutrition, and management are essential to
improve livestock productivity and competitiveness in the country. The project gives emphasis to
investments in linking herders with markets through productive partnerships, thereby contributing to
commercialization of the sector. The achievement of the PDO will eventually improve herders’ incomes
as well as enhance the livestock sector’s competitiveness and help in diversifying the country’s export
capacity to non-mining products.
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Figure 1. The Project’s Theory of Change
Note: Critical assumptions:

A1: There will be coordination across agencies working on digital livestock tools.
A2: There will be strong policy support to meet the OIE’s standards during the project period.
A3: Funds will be allocated according to plans.
A4: The private sector will continue to be interested in partnerships.
A5: Partnerships will be beneficial for herders.
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E. Rationale for Bank Involvement and Role of Partners
37. The Government, donors, and the World Bank have been active in the livestock sector for nearly
two decades. The World Bank’s Sustainable Livelihoods Project (SLP) has been mainstreamed into all the
provinces of Mongolia and now supports livestock production, pasture management, and rural
community development in all aimags. LAMP piloted several innovative ways to deliver services to
herders, women farmers, and their cooperatives (hay production, genetic improvement of animals, link
to markets, and agro-processing) with satisfactory outcomes. The GoM has requested for a follow-on
operation with a view to scaling up interventions piloted under LAMP, such as enhancing livestock
productivity, improved market access, and diversification in livestock-based production systems by
investing in core public goods that helps in achieving the policy priority set by MOFALI, namely, increased
livestock exports and enhanced sector competitiveness. The project is focused on animal health and
animal productivity aspects taking advantage of the enabling environment created through passing of the
Animal Health Law and Animal Breeding Law supported by Development Policy Operations (DPOs) in
Mongolia, namely, the Second Economic Management Support Operation (EMSO-2). Very recently,
Mongolia has initiated a quality-based incentive scheme for cashmere products, which removes a strong
policy disincentive to reduce the stock of livestock. Incentivizing legislation on the ‘Pastureland Law’ which
seeks to address issues relating to ‘pastureland common property resource’ and reducing the herd size is
an important policy trigger aimed under the next DPO in the EMSO series. The project will also benefit
from the ONE SOLUTIONS BANK by combining IDA credit with IFC’s Advisory Services projects that focus
on (a) attracting investment in the agriculture sector, especially those with export orientation; (b)
strengthening regulatory systems for food safety standards based on risk-based approaches; and (c)
developing rules and code of good practices for high health compartments.
38. A GEF 5-7 initiative of ‘Promoting Dryland Sustainable Landscapes and Biodiversity Conservation
in the Eastern Steppe of Mongolia’, currently under development for an investment of US$6 million and
implemented by the Food and Agriculture Organization (FAO) and World Wildlife Fund for Nature (WWF),
will complement the project by promoting sustainable pasture management and fodder production in
some of the project areas, creating a national platform for the sharing and replication of good practices,
and supporting the development of policy and planning mechanisms for sustainable pasture management
and livestock production in Khentiy and Sukhbaatar aimags.
39. Mongolia is developing a national e-agriculture strategy, with TA of the FAO and the International
Telecommunication Union. Linking to this effort, the project will support strengthening the fragmented
digital agriculture applications and solutions, particularly those relating to digital extension services,
livestock identity, traceability management system for enhancing export competitiveness of the meat
processors and exporters with better quality, fully traceable, and safe livestock products. The SDC and
USAID through Mercy Corps are active in livestock and pastureland management, agribusiness
development and traceability, and veterinary certification systems. Their programs have laid the
groundwork for the project.
5 Global Environment Facility.
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F. Lessons Learned and Reflected in the Project Design
40. The proposed project extensively builds on the achievements of the preceding project, LAMP.
LAMP’s innovative project design using a value chain approach for the livestock sector development has
contributed to the national policy formulation and emerging legal framework. The major lessons learned
relate to the need for private sector demand-driven activities to have a central role in project design and
implementation. The project design is consistent with the Mongolian government policy and strategy at
the national and subnational levels and with the policy of increasing herder community participation. The
design of Component 1 has benefited from the OIE’s work in Mongolia. Mongolia developed its National
FMD Strategy according to the OIE Terrestrial Animal Health Code, and the strategy was endorsed by the
OIE World Assembly of Delegates as an official control program for FMD of Mongolia in 2016.
41. The project design was also informed by the ongoing and planned initiatives in the livestock
sector, including that of the SDC, FAO, WWF, and Japan International Cooperation Agency. Evidence on
the factors affecting livestock productivity and competitiveness suggests that project investments in (a)
technology and business innovations for improving total factor productivity, (b) high-quality input supply
and advisory services, and (c) enhancement of producers’ skills and institutional capacities play a key role.
The collapse of Mongolia’s former public extension service due to its high cost and limited effectiveness
has left a vacuum in the country’s extension service delivery to rural communities. This vacuum provides
an opportunity to build new types of advisory service delivery systems, publicly funded but implemented
by private service providers on a fee-for-service basis and driven by the power of the rapidly evolving
information and communication technology (ICT) sector, which has dramatically lowered the cost of
accessing and delivering information. Global experiences suggest that farmers of all types are willing to
pay for extension advice when the advice is relevant and profit enhancing.
42. The design of the value chain development project activity (through productive partnership)
benefited from the World Bank’s extensive work on productive alliances in multiple countries across Latin
America and Africa. Some of the lessons include the importance of market infrastructure, capacity building
and TA, and community mobilization and participation. The project design incorporated these lessons by
giving strong emphasis on capacity-building and community participatory activities in all project
components. Global experience shows that successful agribusinesses in SMEs create positive influence
among their surrounding communities. These relate to job creation, production markets, and new
infrastructure investments. Ultimately, the most important factor determining how successful relations
are with surrounding communities is whether the business is financially successful. These companies
typically have a committed and systematic approach to ‘responsible investing’, which normally includes
community consultation, grievance-handling mechanisms, transparent pricing arrangements, and the
rapid settlement of outstanding payments. The project will support the establishment of productive
partnerships that will be participatory and beneficial to rural pastoral communities in Mongolia.
43. The project’s design also reflects the international consensus on livestock productivity project
initiatives, including sustainability and reducing (increasing) negative (positive) externalities of the sector.
The livestock sector is a large contributor of GHG emissions and land degradation in Mongolia, while it
has significant implications for herders’ livelihoods, food and nutrition security, and the country’s
economy. Other key lessons learned were also drawn from the World Bank’s livestock projects—such as
the Vietnam Livestock Competitiveness and Food Safety Project and the ongoing Cameroon Livestock
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Development Project. These projects have demonstrated how productive partnerships contribute to
improving livestock while also showing the challenges in mobilizing herders into groups or cooperatives.
III. IMPLEMENTATION ARRANGEMENTS
A. Institutional and Implementation Arrangements
44. The project will be implemented under the overall leadership of MOFALI. The Project Steering
Committee (PSC) will be chaired by the State Secretary with the heads of key departments of MOFALI and
the GAVS as its members will oversee the project implementation at the policy level. A dedicated PIU
created within MOFALI will undertake the project operational implementation and coordination. A
Technical Working Group at the PIU with technical experts from MOFALI, the GAVS, and others will assist
the PIU in implementing Component 1 and 2 activities with the participation of central and local
stakeholders - diagnostic laboratories; the provincial and district veterinary units; and bodies in charge of
animal breeding and registration, animal nutrition, and agri-SME development. At the aimag and soum
levels, the project coordination will be led by local governments with responsibilities for the line agencies
defined.
Figure 2. Project Implementation Arrangements
45. Project Implementation Unit. By the date of Effectiveness, GoM shall establish a PIU within
MOFALI, and maintain it throughout the period of Project implementation with qualified staff in sufficient
numbers and under terms of reference (ToR) satisfactory to the Association. The PIU responsible for
overall day-to-day implementation and coordination, shall led by the Project Coordinator and will include
the following key staff: a procurement specialist, a financial management (FM) specialist, an M&E
specialist, an agribusiness specialist, an animal health specialist, environment and social specialists, a
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communication specialist, and an extension services specialist, among others. The functions of the PIU
will include (i) preparing annual work plans and budgets; (ii) preparing disbursement applications; (iii)
ensuring that all procurement activities are undertaken; (iv) facilitating the audits; (v) carrying out the
outreach campaign; (vi) hiring resource persons and consultants; (vii) carrying out appraisals of proposed
subprojects and making recommendations to the PSC with regard to their approval; and (viii) overseeing
the implementation of subprojects, including the inspection of works and delivery of goods.
46. Technical Support Unit. The project will directly contract the FAO to embed a technical support
unit (TSU) to help the GAVS build institutional capacity by convening global knowledge, building
foundations for evidence-based policy development, formulating disease surveillance plans, and
executing large-scale capacity-building programs for the entire staff of the GAVS and national extension
agencies. FAO will also undertake disease surveillance infrastructure assessments benchmarked against
international standards, develop technical specifications and likely conduct the procurement of laboratory
and other technical equipment under the project. 6 The TSU will implement the agreed project activities
and will have a clear phaseout plan after building the internal capacity of the GAVS.
47. Technical Service Providers. The project will hire, as needed, NGOs, CSOs, professional
associations, and development agencies for facilitating the delivery of capacity building, technical services,
and so on to the project beneficiaries.
48. Private Sector. It will also enter into output/performance-based productive partnership
agreements for delivery of value chain services to the herders and their organizations.
B. Results Monitoring and Evaluation Arrangements
49. Results Framework. The Results Framework in annex 1 defines the performance indicators for
each component and subcomponent. A robust M&E system will be implemented to provide high-quality
information and allow the World Bank team to effectively respond to any issues. The PIU will be in charge
of the overall M&E and for meeting the agreed reporting requirements. The M&E system will be designed
to link technical and financial data on project progress and impact. It will serve as a tool to assess project
results and a live management tool. It will support project supervision by ensuring that baseline and
follow-up surveys are conducted and that the key performance indicators are regularly updated. The
baseline data needed for impact evaluation will be collected in project and non-project areas by a third
party specialized in data collection and processing.
50. Management information system. A simple but effective web-based management information
system (MIS) will be developed for the project at the onset of the project implementation, reflecting the
final design of the project and the Project Implementation Manual (PIM). This will avoid the need for
adjustments as well as a backlog of information. It is suggested that the MIS should be designed by an
experienced consulting firm or individual. National consultants will be contracted for the development
and establishment of the system and training of project staff in the use of the system. Emphasis will be
given to make the system user-friendly and compatible for use on standard computers. The MIS will be
designed to provide data for all necessary regular reports on project implementation including sub-loan
pipeline, progress on physical implementation, and capacity-building activities. The MIS will also track
6 The FAO might need to hire the United Nations Office for Project Services (UNOPS) to conduct procurement.
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nomadic herding (transhumance) trails using digital tools such as GEMS and ensure proper service delivery
and feedback on services received by the poor herders.
51. Regular reporting. M&E reports will be produced quarterly at the aimag level and semiannually
at the national level. The PIU shall synthesize the individual reports into the project annual report, which
will be prepared within one month after the close of the fiscal year, and after discussion with the PSC,
submit the same to the World Bank and all relevant stakeholders. The annual reports will be circulated to
sectoral ministries and to concerned development partners.
52. Supervision. Semiannual joint supervision missions with representatives from the GoM and World
Bank will assess the status of key project outcomes and ensure compliance with legal covenants. A
midterm review (MTR) will be conducted halfway through the project life cycle to assess progress made
across the various components. The PIU shall prepare all the documentation needed for conducting the
MTR and facilitate a joint GoM-World Bank MTR. A project completion report will be conducted in the last
six months of project implementation to assess overall achievement of expected project results. This
serves as a key input for the mandatory Implementation Completion and Results Report (ICR), which the
World Bank prepares within six months of project closure.
C. Sustainability
53. The key for sustainability of the project’s activities is the strong commitment of the GoM to the
sustainable development of the livestock sector, as shown by its approval of the National Livestock
Program in 2010. The project has a strong capacity-building component, which will build the capacity of
MOFALI and the newly established GAVS to provide guidance and strategic direction to support the sector.
Capacity building is also a key part of the project at aimag and soum levels to promote effective and
efficient service delivery. The project will also train private sector para-veterinarians and community
service providers at the local level, who will continue to provide services beyond project closure. The
project’s productive partnerships will also build win-win business/commercial links between private
enterprises and herders/herder groups. All partners in such commercial relationships will have incentive
to continue the formal agreements beyond the project period.
54. The Livestock Commercialization Project (LCP) will promote sustainable livestock services access
and delivery to benefit communities and SMEs. The project will improve pastoral productivity, access to
market, and resilience of pastoral communities. The capacity that local NGOs, service providers, and
community-based dialogue platforms develop through all components of the project should enable
communities and herder groups to continue operating after the project’s closure. Components 1 and 2
also include policy provisions to support service providers, public and private alike, to ensure that access
and quality of service delivery are sustained beyond the project implementation period. Public
institutions, particularly the various divisions under MOFALI and the GAVS, will be strengthened, and more
efficient links will be created. The resulting policy, regulatory, and institutional changes and the innovative
approaches that will be introduced with the project will strengthen the technical viability and
sustainability of future investments in the sector.
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IV. PROJECT APPRAISAL SUMMARY
A. Technical, Economic, and Financial Analysis (if applicable)
Technical Assessment
55. The proposed project interventions are technically feasible. The prevalence of high disease levels
and seasonal imbalances in feed supply are the two most important constraints affecting Mongolia’s
livestock production system. The project will support improvements in disease surveillance, prevention
and control; facilitate the animal welfare and food safety regulatory system to transition to risk-based
supervision approaches; and strengthen the key veterinary and food safety laboratories to meet
international standards. The project will support the use of the PVS evaluation tool to ensure that
bottlenecks found in the veterinary service delivery systems are effectively addressed. Important animal
diseases targeted include FMD, PPR, brucellosis, rabies, glanders (all One Health/zoonosis issues), and
goat/sheep pox. The livestock production, processing, and commercialization activities will lay a strong
foundation for building the export competitiveness of the sector, leading to higher employment and
incomes. The selection of activities and approaches are consistent with good practices endorsed by the
OIE and piloted and used by projects financed by the World Bank.
56. A focus on the quality of the productive partnerships has been incorporated into the design of the
project as a result of lessons learned (see section II.F) and sustainability (section III.C) considerations.
Levers for this subcomponent lie with (a) the selection criteria and business model propounded by the
agri-SMEs, herder organizations, and service providers and (b) the characteristics of demand and market
capacity. Agri-SMEs can clearly specify the demand in terms of quality, quantity, and delivery, which
facilitates partnership negotiation, design, and appraisal, and the design of the productive partnerships
becomes focused on the technological/service delivery innovations required for reaching the agreed
specifications. This allows for efficient use of resources, as all funding is geared toward obtaining clearly
defined outputs. The value chains selected will be those that are most relevant for poor farmers for a
greater likelihood of successful poverty reduction and a pro-poor growth strategy. However, there is a risk
that product standards are not always clearly detailed and sometimes the design of the technological
package is limited by the knowledge of all participating actors, including the partnership facilitators. The
training of service providers and Agri SMEs ex ante evaluation will help reduce the risks of inadequate
productive partnership design. The delays in the implementation of the productive partnership
subcomponent will be avoided by developing clear policy guidelines and disseminating widely through
media communication and road shows the details of the scope of productive partnerships and competitive
program; the criteria for the selection of proposals by Agri SMEs, herder organizations, and service
providers in the private/public sector; the eligible items of expenditure; the output-based disbursement
methods; and reporting/monitoring mechanisms.
Economic and Financial Analysis
57. Project benefits. This proposed project will generate significant benefits to the livestock sector in
Mongolia. The benefits would be accrued from (a) losses to be avoided from incidence reduction of the
target priority diseases; (b) increased international trade of meat/dairy products attributable to the
establishment of disease-free zones; (c) enhanced livestock productivity due to the support to policy
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provisions to improve animal breeding, animal nutrition, and livestock management practice; (d)
increased value addition from the herders’ better access to markets through productive partnerships with
processors and traders along the livestock value chain; and (e) global benefits, such as reduced GHG
emission through mitigation of pastureland degradation, which would be achieved through the destocking
of the animal population associated with increased offtake rates.
58. Methodologies: cost-effectiveness analysis for Component 1. The preferred methodology for the
economic evaluation of Component 1 (two-thirds of total project costs) is ‘cost-effectiveness.’ The
rationale for adopting a cost-effectiveness methodology is that for improved animal health service
delivery, benefits to be gained and production losses to be avoided as outlined earlier are difficult to
quantify, ex ante, in a reasonably reliable manner. The key objective of a cost-effectiveness analysis is to
demonstrate that the proposed investments have a sound strategic rationale for the overall project
objectives and that these objectives are met in the most cost-effective way.
59. It is widely accepted that ‘prevention is better than cure’ for addressing problems early and
avoiding costly efforts for recovery and rehabilitation, particularly for transboundary and zoonotic
diseases, which also constitute a threat to human health and welfare. Under the ‘without project’
scenario, rough estimates (based on data from the past 10 years) show that incremental disease control
cost after major outbreaks, production loss, and costs of export restriction could be as high as US$ 800
million annually. This is way above the amount that the Government could mobilize for the strengthened
disease control efforts (including this project). Therefore, the activities in component 1 are justified
without the need to estimate an economic rate of return (ERR) or net present value (NPV).
60. Furthermore, the cost-effectiveness approach to the economic analysis is appropriate considering
the underlying political decision. The new Animal Health Law adopted in December 2017 and
subsequently the ‘Animal Health National Program’ launched by the GoM have specifically covered
measures to prevent TADs and other infectious diseases and maintain the infectious-disease-free status.
The project interventions are already on the ‘must do’ list. The Government is counting on the World Bank
project to find cost-effective ways to achieve the PDO. Cost-effectiveness (least costs) will be achieved
through adopting internationally recognized norms and standards for laboratory network and good
practices for disease surveillance and control (see annex 3 for details).
61. Economic and financial analysis for Component 2. The project will encourage interventions
related to improving breeding services; organizing food and livestock processing clusters; improving the
cost and product competitiveness of livestock and agriculture products, particularly milk and meat;
increasing market access to herders/producers; introducing advanced technologies for intensive food
production systems; and increasing domestic supply/exports of healthy and safe food products. The
productive partnership proposals from the private sector, large producer organizations, and public
agencies will be selected through a transparent and competitive process and will be financed through
performance-based incentives/contracts.
62. Based on data and consultations with experts from MOFALI and the GAVS, and drawing the
experiences from recently completed LAMP, the ex ante financial and economic analyses covering most
expected subproject types have been conducted and the results are presented in table 2. The results are
only indicative given the demand driven nature of the sub-project selection process, and the models
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developed will serve as a tool and reference for the analysis during the project implementation. The
underlying assumptions for these estimations and a sensitivity analysis are given in Annex 3.
Table 2. Economic and Financial Rate of Returns Based on Selected Enterprise Models
Meat Processing (annually Milk Processing (annual Wool Processing (annual
2,000 heads of animals) capacity of 400 tons) capacity of 6,000 tons)
FIRR (%) 22 19 27
EIRR (%) 28 23 33
Note: FIRR stands for financial internal rate of return and EIRR for economic internal rate of return.
63. The World Bank also had recent experience with a similar project, LAMP, which has similar
expected benefit parameters to the current project. Thus, the financial and economic analysis of the ICR
of the LAMP could serve as, indicatively, ex ante financial and economic analysis with results for
prospective subprojects in the current project. These results are largely consistent with the
abovementioned estimates and confirm that the project activities under Component 2 are economically
viable (see annex 3).
64. Fiscal impact. The fiscal impact after project completion is related to the funding of laboratory
operating costs, which is vital to the sustainability of the laboratories constructed/rehabilitated under the
project. The Government has firmly committed that operating costs of the laboratories will be fully
covered by the government budgets after project closing. Further, the project will generate fiscal revenues
through the value added tax and corporate income tax collection as shown in the financial analysis for
Component 2.
65. Climate Co-benefits (including GHG screening). The project, which aims to improve livestock
health, productivity, and commercialization of targeted value chains in project locations, would generate
climate benefits in both adaptation and mitigation.
66. Adaptation. As there is a clear link between climate risks and increased health risks/diseases, the
project interventions under Component 1, including all subcomponents (Institutional and Capacity
Building, Disease Surveillance and Control and Food Safety, Digital Livestock Interventions, and
Participatory Animal Health Risk Management Initiatives), will strengthen the adaptation mechanisms
toward increased resilience. Further, under Subcomponent 2.1: Livestock Productivity, extension,
research, service delivery relating to animal breeding and related practices, and animal nutrition-related
activities will also contribute to adaptation mechanisms to increased climate risks. The adaptation
strategies under the project can be classified as measures to (i) conserve natural resources through
reduced stocking density of animals, (ii) strengthening animal biocapacity through animal health and
breed improvement actions, (iii) increase nutrition security of the animals using different kinds of
supplementary feeds not only in winter but also in summer to increase daily feed intake, and (iv) improve
understanding of climate extremes and forecasting.
67. Mitigation. The project will contribute to GHG emission reduction specifically through higher
offtake rate resulting from improved livestock productivity and market access. This will effectively
contribute to reduction in the livestock population and subsequently increase the land-based carbon
sequestration through mitigating the pastureland degradation. The quality of pasture has suffered from
severe degradation (with an average overstocking of 2.3 times above the current carrying capacity).
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Currently, some 71 million ha of rangeland (nearly 65 percent of the total rangeland of 110 million ha)
was degraded relative to the ecological potential (reference condition) and nearly 7 percent of the long-
term monitoring sites have reported desertification.
68. GHG screening. It is conservatively assumed that (a) 7.1 million ha of degraded land (only 10
percent of degraded rangeland) will be stabilized by the project activities, as against the ‘without project’
situation, which would further deteriorate from the current moderate degradation status to large
degradation (per EX-Ante Carbon-balance Tool [EX-ACT] definitions), and (b) the total livestock population
will be reduced by about 3.3 million heads (about 5 percent of the total of 66 million). As such, the GHG
emission reduction would be reduced by 348.4 million (tCO2eq) in the next 20 years, as detailed in table
3 (based on calculations from EX-ACT tool).
Table 3. Results of the Ex Ante GHG Analysis

Over the Project Life of 20 Years (tCO2eq) Annual Average (tCO2eq per year)
GHG GHG
Gross Gross
Sources for Emissions of Emissions of
Emissions Net GHG Emissions of Net GHG
GHG Emission the ‘without the ‘without
of Project Emissions Project Emissions
Reduction Project’ Project’
Scenario (2 − 1) Scenario (4 − 3)
Scenario Scenario
(2) (4)
(1) (3)
Mitigation of 284,739,583 0 -284,739,583 14,236,979 0 -14,236,979
pastureland
degradation
Destocking 63,629,671 0 −63,629,671 3,181,484 0 −3,181,484
livestock
population
Total 348,369,255 0 -348,369,255 -17,418,463 0 -17,418,463
B. Fiduciary
(i) Financial Management
69. As the project implementing agency, MOFALI will be responsible for the overall project oversight
and a PSC will be established and maintained at MOFALI. A PIU will be established under MOFALI to carry
out day-to-day implementation and coordination of the project activities. The project’s FM arrangements,
including the handling of World Bank credit proceeds through the project’s Designated Account (DA), will
be managed by the PIU with proper approvals from both MOFALI and the Ministry of Finance (MOF). The
DA will be set up with a commercial bank acceptable to the World Bank. The World Bank conducted an
FM assessment on MOFALI and has identified actions/measures to strengthen the project’s FM capacity.
This has been agreed with the implementing agency. The residual FM risk for the project after the
mitigating measures is assessed to be Moderate. The FM assessment concludes that with the
implementation of the proposed actions, the FM arrangements will meet the World Bank’s minimum
requirements under the Bank Directive: Financial Management Manual for World Bank Investment
Project Financing Operations. The FM assessment in annex 4 of the Project Appraisal Document (PAD)
provides detailed information on the project FM arrangements. The draft Financial Management Manual
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(FMM) will be developed and finalized by the Technical Working Group before project effectiveness as an
integral part of the PIM.
70. The project will directly contract the FAO to help the GAVS build its institutional capacity and
implement activities under Component 1. A Standard Output-based Agreement shall be signed between
the Government and the FAO that will clearly indicate the scope of involvement and the specific role of
the latter under the project. The agreement shall contain specific annexes on the payment schedule and
financial reporting requirements by the FAO. Therefore, the specific terms of the FM arrangements
related to the FAO contract including the financial reporting requirements by the FAO will be based on
the mutually agreed-upon terms between the FAO and the Government reflected in those pertinent
annexes of the Standard Agreement.
71. Advance contracting and retroactive Financing. Retroactive financing of up to an aggregate

amount not to exceed US$1 million of the IDA credit will be allowed for eligible expenditures incurred 12
months prior to the Signature Date of the Financing Agreement. Payments will be made only for project
expenditures and those against contracts procured in accordance with applicable World Bank
procurement procedures.
(ii) Procurement
72. Applicable procurement rules and procedures. Procurement will be carried out in accordance
with the World Bank’s Procurement Regulations for IPF Borrowers, dated July 2016, and the provisions
stipulated in the Financing Agreement. Alternative procurement arrangements will not be used in the
project. Relatively large-value goods contracts will be procured through open competition by approaching
international markets, considering that there are no local manufacturers or suppliers. National
competition will be used for small-value contracts for works, goods, and non-consulting and consulting
services. One-envelope, single-stage requests for bids will be used without prequalification or initial
selection considering the nature and complexity of the works and goods to be procured. For non-
consultant services and relatively small-value goods and works contracts, open competition by
approaching national markets will be applied. For all goods and non-consultant services, Requests for
Proposal are not anticipated. Requests for Bids or Requests for Quotations will be adopted depending on
the value of the contract to be procured. Direct selection may be used for some non-consultant services
in exceptional cases where the service provider is unique, such as public awareness promotion through
radio and TV service providers, publication of books, production of relevant videos or audio materials, and
so on. It is agreed with the Government that the FAO will be contracted directly to provide TA in the
project implementation given its critical expertise and the recipient's capacity constraints. The standard
form of the agreement for use by World Bank borrowers approved in May 10, 2017, will be used for the
contract between the FAO and the GoM.
73. Procurement of firm consultant services. Most firm consultant services will be procured through
open competition by approaching international markets considering that there are no qualified local
consultants available. Quality- and Cost-Based Selection and Selection Based on Consultants’ Qualification
will be used in most contracts. Though the selection will be conducted by approaching international
markets, a fair number of local experts will be needed in the team composition considering the advantages
of including local experts with respect to the local language, knowledge, and expertise. For relatively
small-value consultant contracts, open competition by approaching national markets may be applied if it
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is demonstrated that there are a sufficient number of qualified firms in the local market. Direct selection
is not anticipated for procurement of firm consultant services.
74. Contracting the FAO. The FAO will be directly contracted as a technical support agency to build
the recipient’s capacities in implementing critical project actions such as (a) developing competent
veterinary services that meet international standards; (b) establishing robust systems for disease
surveillance, prevention, and control of transboundary animal diseases, and (c) institutionalizing risk-
based food safety supervision frameworks. The project will use ‘Delivery of Outputs Standard Form of
Agreement’ (May 2017) under World Bank-financed projects for contracting the FAO, considering that the
proposed engagement envisages a range of outputs including technical assistance, knowledge and
advisory, and capacity building.
75. Considering the previous experience with FAO undertaking procurement in the World Bank’s
projects, the team is working on the best options to ensure a timely and efficient procurement, which
include the following: (a) the FAO (Rome) undertakes procurement, 7 (b) the FAO subcontracts UNOPS 8 to
do the procurement or (c) MOFALI hires UNOPS directly to undertake the procurement. In any of the three
scenarios, the FAO should draft the technical specifications, oversee the installation of the equipment,
and work with MOFALI to ensure that buildings are prepared to appropriately install and operate the
laboratory equipment.
76. Procurement of individual consultant services. Most individual consultant services will be
procured through open competition. Direct selection may be used in exceptional cases where the
individual consultant has relevant experience and qualification of exceptional worth to the assignment or
where the assignment is with a total expected duration of less than six months.
77. Procurement risk assessment and mitigation measures. MOFALI will be responsible for the
project procurement through the PIU which will be established within the ministry. The PIU will be staffed
with qualified and experienced technical professionals, preferably with prior experience and knowledge
in implementing World Bank-financed projects. Although the project implementation covers different
agencies involving multiple layers of governance, the main procurement responsibilities will be
undertaken by MOFALI with support from the relevant agencies and the PIU.
78. There is a possible risk of adverse impact on the fiduciary arrangements and processes for the
project, considering the MOF assessment of MOFALI’s procurement performance and the World Bank’s
experience in implementing LAMP with frequent changes in decision-making officials and the current
overall slow implementation progress on the part of the Government for the other World Bank-financed
projects in the country as well as potential changes in the government officials involved in the project
activities due to the upcoming election cycle. As the project will employ the new procurement framework
for the project, the implementing agency will have to become familiar with the new regulations through
technical support, training, and capacity-building activities. Therefore, the project procurement risk is
assessed as Substantial.
7 Due to the size of the contracts, the FAO’s local and regional offices are not qualified to undertake the procurement of
laboratory equipment
8 UNOPS is a UN agency very experienced in conducting public procurement and applies open and transparent procurement
procedures.
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79. From the World Bank’s experience in implementing recipient-executed projects in Mongolia,
procurement risks will include the following:
(a) Frequent change of the decision-making officials for the project.
(b) Interference of the high-level officials in procurement decision making, which leads to
delays.
(c) Change of the core PIU staff, especially after government elections/changes, and new staff
normally have little knowledge and experience about procurement in World Bank-financed
projects.
(d) The World Bank’s Procurement Regulations for IPF Borrowers will be applicable for the
project and MOFALI is not familiar with them.
(e) The Evaluation Committee members normally do not have knowledge and experience in
procurement for World Bank-financed projects and their evaluation may not be conducted
in accordance with the World Bank’s Procurement Regulations for IPF Borrowers and the
provisions stipulated in the project’s Financing Agreement.
(f) Contract implementation may suffer delays due to insufficient coordination and
communication among the PIU at MOFALI, the MOF and relevant implementing agencies.
This may also cause delayed payment to the selected contractor/supplier/consultant arising
from delayed acceptance/assessment of deliverables that are the milestones for the client
to make the payment.
80. Mitigation actions are proposed to build the capacity and mitigate the identified risks. These
actions include the following:
(a) The World Bank team’s procurement specialist will deliver training to the PIU staff about
procurement in World Bank-financed projects and the Procurement Regulations for IPF
Borrowers. Such trainings will be provided during project preparation and during project
implementation on a regular basis.
(b) Appropriate prior review, especially for relatively large-value contracts, will be executed by
the World Bank team to ensure that the PIU staff are familiar with the required rules and
procedures. Procurement post review will be conducted annually, and relevant findings and
recommendations will be shared on time with the PIU/MOFALI to ensure that in future
similar issues with procurement activities are not repeated.
81. A Procurement Plan for the whole project implementation period or at least for the first 18
months will be prepared by the PIU and relevant government agencies responsible for project
implementation and will be made available on the World Bank’s external website. The Procurement Plan
will set forth the thresholds for procurement methods and prior/post review and will be updated annually,
or as required, to reflect implementation needs and improvements in institutional capacity.
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82. CERC. To save time in case the CERC is activated, it is recommended to include a section applicable
to the CERC in the Project Procurement Strategy for Development. Expected procurement under the CERC
will be handled by MOFALI. In emergency situations, the selection methods, selection arrangements, and
the market approaches used to procure goods, works, and consulting and non-consulting services will be
simple. Simplified procedures, which are consistent with the provisions of the World Bank’s Procurement
Regulations for IPF Borrowers, should be used as appropriate.
(a) Framework Agreements are an important tool for rapid procurement in emergency
situations. A Financing Agreement is an agreement with one or more firms that establishes
the terms and conditions governing any contract awarded during the term of the Financing
Agreement. The other simplified methods to be used will be detailed in the project’s
Operations Manual.
(b) During the immediate response and recovery phase of emergencies, there is no World Bank
prior review for procurement required, and the oversight and due diligence of procurement
will be done through implementation support/ procurement post reviews.
C. Safeguards
(i) Environmental Safeguards
83. Environmental Assessment (OP 4.01). The project is expected to bring about positive
environmental and social impacts in terms of more sustainable animal husbandry practices and better
animal welfare practices, water conservation, reduced burden on pastures, increased food safety, and
livelihood improvement. Meanwhile, the project may bring adverse impacts during the operation of the
project, and the project is classified as Category B as per OP 4.01 since the anticipated impacts are mostly
localized, limited, and temporary and can be avoided or minimized with readily available measures.
84. Environmental and Social Management Framework. Specific subprojects/activities will be

selected in eight aimags during implementation. Hence, the Environmental and Social Management
Framework (ESMF) is prepared in accordance with domestic and World Bank safeguards requirements,
which will guide the environmental and social screening and subsequent assessment of subprojects
activities. Site-specific Environment Management Plans will be prepared during project implementation
following the ESMF when they are confirmed.
85. Natural Habitats - OP 4.04. The project-supported activities may involve conversion of
pastureland to farming land and intensified livestock farming. Thus, this policy is triggered. The ESMF gives
special attention to the assessment of the pastureland carrying capacity, and it also lays out specific
requirements for the project to identify any ecological sensitive areas and screen for specific
subprojects/activities to avoid or minimize any impacts on natural habitats.
86. Pest Management - OP 4.09. The project will not procure or supply any pesticides. However,
pesticides may be used under the project activities that improve fodder production. A generic Pest
Management Plan (PMP) is developed to address integrated pest management requirement. The PMP
describes a range of pest and disease control and management methods and the scope of the
recommended application under various conditions. The PMP proposes necessary activities to avoid,
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minimize, mitigate potential risks and negative impacts of using and distributing pesticides, and provide
relevant guidance. The PMP also specifies the institutional arrangement, monitoring requirements, and
the budget for the PMP implementation.
87. Consultations. Consultations with key stakeholders from the public agencies, private sectors,
herders, and other stakeholders were undertaken during August 23–30, September 11–17, and October
15–17, 2019, with project information disclosed before and during the public consultation. The ESMF
incorporates countermeasures to address the concerns of the key stakeholders consulted. In accordance
with the World Bank’s Access to Information policy, on October 19, 2019, the ESMF in Mongolian was
disclosed in the project areas and on websites of the relevant government agencies and made accessible
at MOFALI. The ESMF was also disclosed on the World Bank’s website on November 5, 2019.
(ii) Social Safeguards
88. Project’s social impacts and beneficiaries. The project will have positive impact in terms of
improving incomes and livelihoods of rural pastoral communities through animal productivity
improvements, livestock value addition, and market linkages, at the same time critically addressing their
vulnerabilities in animal diseases, fodder availability, and winter nutrition. The project gives special
emphasis to vulnerable groups of the population including women and remotely located communities.
The key beneficiaries of the project include small herders and poor and other vulnerable household
groups, particularly women and youth, in remote pastoral communities. Moreover, the project targets
community organizations such as herder groups, pasture groups, producer organizations, CSOs, and
NGOs. Furthermore, the project will benefit other herders not directly involved with the project activities
through improved control of animal diseases. Mongolian consumers will also benefit from increased
supply of safe and quality animal products in the domestic markets.
89. Involuntary Resettlement Policy (OP 4.12) is not triggered. Four components have been designed
to achieve project PDOs. Component 1 focuses on animal health services and aims to improve the quality
of, and access to, veterinary services and establish TAD-free zone(s) in specified areas. This is intended to
reduce incidence of animal diseases and provide better veterinary public health through strengthened
veterinary services and improved program service delivery. MOFALI confirms that the project will support
existing laboratories in selected aimags by renovating the buildings and installing necessary equipment.
No extra land will be needed for this activity. The establishment of TAD-free zones can potentially restrict
animal movement if epidemic diseases are identified. The restriction of animal movement takes place
between very large areas across different boundaries. There is sufficient grassland for grazing within
allowed areas, and therefore very little livelihoods impact will be caused by animal movement restrictions.
90. Component 2 focuses on value chain commercialization to increase volume of livestock products
that meet market requirements on quality and food safety. This component will finance goods,
equipment, input supplies, consultancy services, training and capacity-building activities, and
performance-based incentives/output-based contracts. No civil works will be necessary for this
component, and no land acquisition and restrictions to income resources will take place. However,
commercialization could benefit the livestock SMEs more and to ensure that project benefits are fairly
shared, the project will give preference to those private enterprises that demonstrate greater interest to
work with small herders and vulnerable groups through the productive partnership arrangements. The
ESMF will include inclusive growth aspect to address this issue.
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91. Component 3 focuses on project implementation support to strengthen the project’s

implementation architecture at both national and subnational levels to manage, implement, supervise,
and monitor project activities and progress. No civil works are required under this component, and land
acquisition is not needed.
92. Indigenous Peoples Policy (OP 4.10) is triggered. The Indigenous People Policy is triggered
because ethnic minorities could potentially be covered by the project benefits in some of the project
aimags, such as Bayan-ulgii, Khuvsgul, and Khovd. At this stage, it is still not clear whether project activities
will take place in soums where these minorities live and whether the project has direct impact on these
ethnic groups, but the project will actively seek opportunities to benefit these ethnic minority people by
designing meaningful activities that support the PDO. However, specific safeguards instruments are not
required as the ESMF includes guidance on involving ethnic minorities such as including indigenous
peoples in project activities through free and informed consultations during implementation; ensuring the
provision of culturally appropriate project benefits by using the indigenous peoples' languages in the
provision of services; measuring their inclusion to the project benefits/services including tracking their
use of animal health services, local disclosures, feedback loops, and so on; and informing the
implementation.
93. Citizen engagement. Stakeholder consultations with selected entities from the private sector and
SMEs were organized by MOFALI to seek comments/recommendations on project design. Consultations
with agencies from sample soums responsible for social development, land acquisition, and ethnic
minority affairs were conducted in the early preparation stage to understand (a) needs of poor herder
households and how they could benefit from the proposed project intervention and (b) the existing policy
framework and common practice managing land acquisition procedures. To equally benefit poor and small
herder households, specific requirements on outreach to poor herders will be included in the selection
criteria under Component 2 to establish production partnerships where the private sector will be involved
in the commercialization of meat and dairy products. Participatory processes such as social audit, citizens
report cards, and community score cards that would acquire feedback on performance of the
interventions and of the agencies involved in planning and execution will be the key tools used for social
accountability. In the areas with significant ethnic minority populations, outreach mechanisms,
consultative processes, feedback loops will be in local language and will use culturally appropriate
methodologies as relevant to their unique geographic and cultural requirement.
(iii) Gender
94. The project will contribute to the promotion of gender equality. Rural women, especially those
producing dairy foodstuffs, lack collateralizable assets and hence less likely to obtain commercial loans to
run their businesses as compared to men. This leads to significant gender gaps in women-owned
livelihood businesses’ access to markets and buyers. The project will address the identified gender gap by
ensuring at least 20 percent of productive partnerships are with women-owned or women-led
enterprises, thereby improving their access to finance and markets. Women-owned and women-led
businesses will be targeted and prioritized in the selection process. To this end, all bidding documents and
Request for Proposals (RFP)/Terms of References (TORs) will explicitly request applications from qualified
women and men applicants. Proposals from women-owned businesses will receive additional scores, and
female applicants will be provided with technical assistance in the application process if needed to
prepare their applications.
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95. Other gender gap-filling actions under the project include (a) ensuring at least 50 percent
participation in all the trainings and capacity-building events, (b) increasing women’s participation in
herder organizations by increasing their mobility to join the meetings as well as ensuring that women hold
leadership positions in herder organizations; (c) providing trainings on nutrition issues targeting women
and vulnerable households; and (d) ensuring half of all ‘project’-funded professional positions such as PIU
staff, young professionals, and TSPs are held by women; and (e) periodically monitoring and reporting
gender gap-filling actions. Orientation training materials in line with the ‘social participation and gender
mainstreaming strategy’ will be developed and disseminated through the project staff, TSPs, local
government officials, and other stakeholders. These activities will contribute to promoting gender
equality in herder organizations and community-level initiatives at lower administrative levels as well as
in the GAVS/MOFALI at the central level. These actions will be periodically reviewed and endorsed in a
regular PSC meeting. To adequately implement the strategy, local focal points on gender and social
participation will be selected in aimags.
(iv) Grievance Redress Mechanisms
96. A grievance redress mechanism (GRM) will be established under MOFALI and at aimag and soum
levels, with procedures for timely disclosure of project information, and contact details of designated staff
at all levels will be made available to the public for raising concerns/complaints including citizens’
feedback via ICT platforms such as SMS/text on the services provided by the project. Besides, MOFALI will
also establish a Public Complaint Unit for environment and social impacts having suitable grievance
redress procedure for the project-affected persons. The GRM procedure would include detailed
arrangements to receive and document complaints and time lines to respond to complaints/feedbacks
and record keeping of the processes.
97. Communities and individuals who believe that they are adversely affected by a World Bank (WB)
supported project may submit complaints to existing project-level grievance redress mechanisms or the
WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed
to address project-related concerns. Project affected communities and individuals may submit their
complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could
occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted
at any time after concerns have been brought directly to the World Bank's attention, and Bank
Management has been given an opportunity to respond. For information on how to submit complaints to
the World Bank’s corporate Grievance Redress Service (GRS), please visit
http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service.
For further information on how to submit complaints to the World Bank Inspection Panel, please visit
www.inspectionpanel.org.
V. KEY RISKS
98. The overall risk for the IPF is High; most critical factors—political and governance and
macroeconomic - carry High risk. Other key risks are technical design institutional capacity of MOFALI and
the GAVS and fiduciary aspects. On the other hand, the stakeholder risk and the environment and social
risks are Moderate.
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99. Political and governance risks are rated High considering the upcoming parliamentary election in
2020 and high government turnover in Mongolia, which might lead to review/reordering of fiscal and
policy priorities. A loose fiscal policy before elections has been a norm rather than an exception in
Mongolia’s democratic history. However, livestock sector development and programs favoring herders
receive overwhelming support across the political spectrum. The World Bank’s mitigation measures also
include policy outreach activities through frequent consultations and communication with technical
counterparts, political decision makers, and other stakeholders and participation of World Bank staff in
the electronic media and knowledge exchange events. Moreover, the World Bank Group country team
continues to engage in various good governance, transparency, and oversight initiatives at the national
level and extend support to the anticorruption institutions in detailed anticorruption action plans at the
project level.
100. Macroeconomic risk is rated High. Mongolia’s economic outlook is dependent on global
macroeconomic factors, particularly (a) weaker-than-expected global commodity prices; (b) lower-than-
planned minerals production due to weaker import demand from China; and (c) lack of sustainable
resolution of southern border bottlenecks, the main commodity export gateway for Mongolia. These
external factors could undermine growth recovery, fiscal sustainability, and external balance, thereby
slowing the projected improvement in fiscal and external sustainability. The agriculture sector is the
largest employer in the economy and is one of the fastest-growing non-mining sectors in the country. Yet,
the sector is prone to exogenous shocks that can have substantial impact on the economy and the
population. Policy reforms led by the International Monetary Fund and supported by the World Bank
Group will help ensure that the country remains on track to stable economic growth. The World Bank
Group has been and will continue engaging with authorities on proper economic policies to restore
stability of the economy and establishing more efficient and fiscally sustainable investment planning
system through economic reports and various TA works.
101. Risks in sector strategies and technical design of the project are rated Substantial. There is a
broad-based support for livestock and agriculture sector improvements across the political spectrum. The
sector policy objectives are consistent with a market-oriented economy, but the strategies are not fully
funded and budget (variable from year to year) lacks credibility and coherence due to poor alignment with
overall sector goals and priorities. The design of the project reflects the key reform priorities of the
Government recently approved by the Parliament. It seeks to align these priorities taking a value chain
approach focusing on (a) improvement in livestock health and livestock productivity, (b) livestock SME
development, (c) food safety, and (e) trade facilitation for improving incomes of herder households for
building livestock sector competitiveness. In the process, the project will also build resilience by
addressing service delivery failures (veterinary and vaccination services), pandemic risks (zoonotic
diseases), and climate risks (dzuds and droughts). The theory of change (and the results chain) of the
project largely relies on successful experiences of LAMP and other donor-financed initiatives in Mongolia.
Mitigation measures include actively engaging in multi-stakeholder coordination meetings and providing
technical advice and capacity building to key stakeholders.
102. Risks in institutional capacity for implementation and sustainability are High. The high turnover
of technical staff accompanying frequent changes in political executive has a destabilizing influence on
determining program priorities and its results orientation. Siloed program implementation structures
coupled with weak program management systems (for example, capacity building, fiduciary assurance,
and M&E) pose challenges for accomplishing project outcomes. The GAVS will play a key role in executing
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the activities under Component 1. It lacks capacity for convening global knowledge, building foundations
for evidence-based policy development, formulating disease surveillance plans, and executing large-scale
capacity-building programs. Key steps to mitigate the ensuing risks related to the institutional capacity for
implementation will include the following three elements. First, the collaborative preparation and project
design process will strengthen the capacity of different officials of MOFALI/GAVS. Second, the project
design is informed by the relatively low implementation capacity, particularly of the GAVS, and will include
coordination arrangements (such as Steering Committees and Technical Working Groups resourced with
dedicated technical experts) to minimize the implementation risks. Third, the FAO will be contracted out
of IDA proceeds to embed a technical team in the PIU for implementing agreed project activities including
critical procurement of laboratory equipment and advanced technologies and will have a clear phaseout
plan after building internal capacity of the GAVS.
103. Fiduciary risk is High. MOFALI will be responsible for implementation and management of the
project through the PIU which will be established within the ministry. The PIU will be staffed with qualified
and experienced technical professionals, preferably with prior experience and knowledge in implementing
World Bank-financed projects. Although the project implementation covers different agencies involving
multiple layers of governance, the main fiduciary responsibilities will be undertaken by MOFALI with
support from the dedicated and experienced core FM and procurement staff at the PIU. There is a possible
risk of adverse impact on the fiduciary arrangements and processes for the project considering the World
Bank’s experience in implementing LAMP with frequent changes in decision-making officials and the
current overall slow implementation progress on the part of the Government for the other World Bank-
financed projects in the country as well as potential changes in the government officials involved in the
NLC project activities due to the upcoming election cycle. As the project will employ the new procurement
regulations for the project, the implementing agency will have to become familiar with the new
regulations through technical support, training, and capacity-building activities.
104. The environmental and social safeguards risks are rated Moderate. The project is expected to
bring about positive environmental and social impacts in terms of more sustainable animal husbandry
practices, water conservation, reduced burden on pastures, increased food safety, and livelihood
improvement. However, over the last six decades, the growing frequency and severity of natural disasters
(dzud, drought, and flood) as well as a clear upward trend in Mongolian average temperatures have been
observed. Training activities and capacity building put in place for herders, cooperatives, and the private
sector on livestock-rearing practices by projected increasing temperatures and reduction in rainfall at the
project locations. The proposed project is classified as Category B as per OP 4.01 since the anticipated
impacts are mostly localized, limited, and temporary and can be avoided or minimized with readily
available measures. The activities to be supported by the IPF will trigger additional safeguard policies—
OP/BP 4.04 - Natural Habitats and OP/BP 4.09 - Pest Management. The ESMF and PMP will adequately
address the mitigation actions for these risks. There is a moderate likelihood that exogenous
environmental or social risks could adversely affect the achievement of the operation’s (or operational
engagement’s) objectives or the sustainability of results.
105. Stakeholders’ risks are Moderate. The project is well aligned with the reform priorities of the
government strategy and the commitment of the current Cabinet is strong. This project will actively
encourage strong participation and consultative process with all stakeholders and support policy outreach
activities to the political leaders and public on the importance of policy reforms. The operation will ensure
continued close coordination with various donors.
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VI. RESULTS FRAMEWORK AND MONITORING
Results Framework
COUNTRY: Mongolia
Livestock Commercialization Project
Project Development Objectives(s)

To improve livestock health, productivity, and commercialization of targeted value chains in project locations and to provide immediate and effective
response in the event of an eligible crisis or emergency.
Project Development Objective Indicators

RESULT_FRAME_T BL_ PD O
Indicator Name DLI Baseline End Target
Animal Health Services
Reduced prevalence of priority diseases in project intervention

0.00 20.00
areas (Percentage)
Value Chain Commercialization
Increased yield of livestock products (meat and diary)

0.00 10.00
(Percentage)
Increase in live animal weight of small ruminants (Percentage) 0.00 10.00
Increase in milk output (Percentage) 0.00 10.00
Increased inflation-adjusted value of livestock products

0.00 20.00
(Percentage)
PDO Table SPACE
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Intermediate Results Indicators by Components

RESULT_FRAME_T BL_ IO
Animal Health Services

Number of veterinarian and veterinary paraprofessionals trained
(Number) 0.00 500.00
Number of veterinarian and veterinary professionals trained -

0.00 200.00
Female (Number)
Increased coverage of quality animal health services in the
0.00 15,000.00
project intervention areas (Number)
Number of veterinary laboratories accredited to national or
0.00 4.00
international standards (Number)
Improved detection of suspect transboundary diseases (time to
report/confirmation) (Days) 15.00 7.00
Increased coverage of animal tracking system in project

0.00 40.00
intervention areas (Percentage)
Participatory animal health risk management pilots implemented
0.00 20.00
(Number)
Value Chain Commercialization
Number of herders participating in training (Number) 0.00 10,000.00
of which are female beneficialries (Number) 0.00 5,000.00
Number of private breeding units established (Number) 0.00 30.00
Productive Partnerships established and functioning (Number) 0.00 15.00
of which are women led or women owned enterprises
(Percentage) 0.00 20.00
Primary producers (herders) mobilized and benefited through

0.00 3,000.00
productive partnerships (Number)
Share of animal products marketed through commercial
0.00 20.00
channels (Percentage)
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RESULT_FRAME_T BL_ IO
Project Implementation Support

Farmers reached with agricultural assets or services (CRI,
Number) 0.00 20,000.00
Farmers reached with agricultural assets or services - Female

0.00 8,000.00
(CRI, Number)
At at least 50 percent women are hired for all ‘Project’ funded
0.00 50.00
professional positions (Percentage)
Grievances registered related to delivery of project benefits
addressed (Percentage) 0.00 100.00
Citizen’s feedback received via ICT applications on services

n/a Satisfactory
provided by Project (Text)
Contingent Emergency Response Component
Adoption of improved post disaster impact assessment practices
and procedures, as reflected in the improved quality and No Yes
comprehensiveness of assessments (Yes/No)
If the CERC is triggered, number of beneficiaries benefiting from
emergency response and recovery activities (Number) 0.00 5,000.00
IO Table SPACE
UL Table SPACE
Monitoring & Evaluation Plan: PDO Indicators

Methodology for Data Responsibility for Data
Indicator Name Definition/Description Frequency Datasource
Collection Collection
This indicator measures the
Reduced prevalence of priority diseases in reduction in the prevalence Annual Survey PIU/GAVS/OIE
project intervention areas of priority diseases, such as
FMD and PPR, project
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intervention areas.
Baseline,
percentage increase in the Herder
midterm and
Increased yield of livestock products productivity of meat and Survey and PIU and IPM
upon
(meat and diary) milk outputs from their M&E
completion
respective baseline values in
the project areas.
Herder
This indicators measures the households,
Base Line,
average weight of live market
Increase in live animal weight of small Mid Line and Direct observation PIU and IPM
animals of small ruminants intermediarie
ruminants End Line
(sheep and goats) of about 3 s and
years of age processors
Survey of
herder Direct
Base line,
This indicator measures households, observation during the
Mid line and Independent agency
Increase in milk output increase in milk productivity particularly herder household
End line
in percentage terms in dairy survey
clusters

increase in inflation
adjusted value of livestock Herders,
output. The value addition is Base line, market
Herder and market
Increased inflation-adjusted value of expected to come from mid line, and intermediarie PIU and IPM
surveys
livestock products improved production end line. s and
efficiency, product quality, processors
trace-ability, food safety,
improved market access and
from premium prices
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through productive
partnerships.
ME PDO Table SPACE
Monitoring & Evaluation Plan: Intermediate Results Indicators

Methodology for Data Responsibility for Data
Indicator Name Definition/Description Frequency Datasource
Collection Collection
number of staff, veterinary Annual and
professionals and para- quarterly
Number of veterinarian and veterinary Annual Training system PIU/GAVS
professionals in the GAVS progress
paraprofessionals trained
vertical that the project reports
support to improve their
veterinary skills.
Number of veterinarian and
veterinary professionals trained -
Female
Quarterly
number of herder
and annual
households covered by a
reports, GAV
Increased coverage of quality animal package of four quality PIU, GAVS, soum level
Annual S reports and MIS
health services in the project intervention veterinary services every extension workers
data from
areas year viz. surveillance –
herder surve
clinical checks; prevention –
y
vaccination; disinfection;
and parasitic treatment.
Number of veterinary laboratories count of veterinary Project Accreditation
GAVS
accredited to national or international laboratories that satisfy closure certificate
standards national or international
standards that will be
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upgraded during the

project.
This indicator measures the Annual or
Laboratory
Improved detection of suspect time required to detect, whenever
Information Laboratory testing PIU/GAVS
transboundary diseases (time to confirm, and report any TADs
System
report/confirmation) suspected trans-boundary occurs
disease in the country.
Trace-ability/Veterinary
percentage of
Herder and Certification
Increased coverage of animal tracking animals/products that Annual GAVS/PIU
herd surveys Data/Animal
system in project intervention areas registered/tracked through
registry data
animal tracking system in
project intervention areas.
number of locations where
participatory animal health
risk assessment tools have
developed and piloted. This
would include ‘vulnerability
and risk assessment tool’ or Annual and Participatory
'participatory disease quarterly qualitative/quantitative
Participatory animal health risk Annual PIU and IPM
epidemiology survey, etc. progress data collection
management pilots implemented
developed and piloted at reports methods
soum level for use by
MOFALI/GAVS to identify
the animal disease risks to
herders and producers and
the prioritize animal health
services required to address
such risks.
Number of herders participating in This indicator measures the Annual MIS Training attendance PIU
training person days of trainings on and evaluation
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animal health, livestock

productivity and
productivity partnerships,
supported by the project.
Training
female person days of
attendance
trainings on animal health, PIU
of which are female beneficialries and
livestock productivity and
evaluation
productivity partnerships,
supported by the project.
Number of private breeding units number of male/nucleus Annual MIS Reports PIU
established flocks established in the
project intervention areas.
Project
Productive Partnerships established and number of functional Annual MIS PIU
records
functioning productive partnerships
established by the project..
Productive partnerships
of which are women led or women made between herders and MIS PIU
owned enterprises women owned/women led
enterprises
Reports
Primary producers (herders) mobilized submitted by
number of herder Annual MIS Reports PIU, Partners
and benefited through productive productive
households and/or herder
partnerships partnerships
groups linked to markets.
This indicator measures the Progress
average share of livestock report, Data collection from
Share of animal products marketed Annual PIU and IPM
products sold through markets markets
through commercial channels
commercial channels in survey, Prod
targeted value chains. uctive
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partnerships

number of farmers who
were provided with
agricultural assets or
services as a result of World
Bank project support.
"Agriculture" or
"Agricultural" includes:
crops, livestock, capture
fisheries, aquaculture,
agroforestry, timber, and
non-timber forest products.
Assets include property,
biological assets, and farm Base Line,
MIS, Herder
Farmers reached with agricultural assets and processing equipment. Mid Line, PIU & IPM
survey
or services Biological assets may End Line.
include animal agriculture
breeds (e.g., livestock,
fisheries) and genetic
material of livestock, crops,
trees, and shrubs (including
fiber and fuel crops).
Services include research,
extension, training,
education, ICTs, inputs (e.g.,
fertilizers, pesticides, labor),
production-related services
(e.g., soil testing, animal
health/veterinary services),
phyto-sanitary and food
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safety services, agricultural

marketing support services
(e.g., price monitoring,
export promotion), access
to farm and post-harvest
machinery and storage
facilities, employment,
irrigation and drainage, and
finance. Farmers are people
engaged in agricultural
activities or members of an
agriculture-related business
(disaggregated by men and
women) targeted by the
project.
Farmers reached with agricultural
assets or services - Female
This indicators measures the
proportion of female that
At at least 50 percent women are hired are hired for all ‘Project’ Project
Annual MIS PIU
for all ‘Project’ funded professional funded professional records
positions positions such as PIU staff,
Young Professionals and
TSPs.
The indicator measures the
proportion of grievances
received by the Grievance
Progress
Grievances registered related to delivery Redress Mechanism system Annual MIS PIU
report
of project benefits addressed (GRM) set up
by the project that are
actually addressed within
the standard timeframe set
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up by the GRM system.

This indicator provides the
average
satisfaction/dissatisfaction
received from clients via
short message service (SMS)
Citizen’s feedback received via ICT
or interactive voice Quarterly GRM system PIU
applications on services provided by
response (IVR) and other ICT
Project
application that be used to
receive direct feedback from
herders on services
provided by the project
(more specifically by GAVS).
Adoption of improved post disaster
impact assessment practices and
procedures, as reflected in the improved
quality and comprehensiveness of
assessments
If the CERC is triggered, number of
beneficiaries benefiting from emergency
response and recovery activities
ME IO Table SPACE
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ANNEX 1: DETAILED PROJECT DESCRIPTION
Project Content, Scope, and Financing
1. The PDO is to improve livestock health, productivity, and commercialization of targeted value
chains in project locations and to provide immediate and effective response in the event of an eligible
crisis or emergency. Mongolia’s MOFALI has identified livestock sector's competitiveness as a
development policy priority. The project is structured as an IPF financed by an IDA credit in the amount
of US$30 million over five years. The key measures of success are (a) reduced prevalence of priority
diseases in project intervention areas (percentage); (b) increased yield of livestock products (meat and
dairy) (percentage); and (c) increased inflation-adjusted value of livestock products (percentage).
2. The project will strengthen institutional systems and governance of veterinary services at the
national level by supporting (a) analytical studies and surveys, (b) strategy formulation and policy making,
(c) developing national immunization plans and monitoring rollout plans, (d) staff capacity building, (e)
upgrading trainings and extension systems, and (f) information systems. In addition, it will provide
intensive support to western aimags for last-mile veterinary service delivery and investments in animal
disease surveillance, prevention, and control. These aimags are Uvs, Khuvsgul, Bayan-Ulgii, Khovd,
Zavkhan, Gobi-Altai, and Bayankhongor. Regional laboratories for animal disease surveillance and control
will be upgraded as reference laboratories in Ulaanbaatar, Erdenet, and Khovd.
3. The project will implement animal health services and value chain commercialization
interventions with strategic focus on meat and dairy sectors in selected soums of the eight aimags of Uvs,
Khuvsgul, Bulgaan, Arkhangai, Uvurhangai, Tuv, Hentiy, and Sukhbaatar. These aimags were selected
based on objective criteria such as (a) the willingness of local governments to put in additional resources
for project implementation; (b) the size of healthy herds of cattle and small ruminants; (c) the presence
of good quality institutions at grassroots level nurtured under LAMP and SDC and USAID projects; (d) the
status of logistics and infrastructure development; and (e) the potential for export-oriented value chains.
Component 1: Animal Health Services (US$20.0 million)
4. This component aims to improve the quality of, and access to, veterinary services and to improve
animal health. The proposed interventions will target the control of priority animal diseases and provide
better veterinary public health through strengthened veterinary services and improved program delivery
and so contribute to the objectives of increasing access and quality of the animal health services and
reducing the prevalence of priority diseases in project intervention areas resulting in increased quantity
of quality-assured animal products fit for domestic consumption and international trade.
5. These objectives will be achieved by (a) strengthening institutions and capacity building of
veterinary service institutions; (b) improving delivery of risk-based disease surveillance, disease control,
and food safety programs; (d) increasing the use of information systems and the use of novel and
innovative technologies; and (e) increasing engagement of the private sector in program delivery.
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6. Approach. The GoM has identified improved animal health and food safety as crucial for
protecting public health and to promote economic development. The Government has established the
‘Healthy Food-Healthy Mongolian’, a Government Action Plan 2016–2020, under its ‘National Security
Concept of Mongolia’ which includes support for improved animal health and food safety recognizing the
benefits to domestic consumers and to promote exports.
7. The ‘Animal Health Program’ recognizes that TADs are ‘not decreasing’ in Mongolia and that this
requires the Government to give special attention to ‘fighting, preventing from, reducing associated risks,
and carrying out target-based, long-term programs and measures’. To meet the requirements put forward
by the World Trade Organization and the OIE, Mongolia is to take measures such as ‘fighting; preventing
from; sterilizing; eradicating the epicenter; implementing measures to take under control; and bringing
the veterinary, sanitation, safety accreditation, and guarantee for animal products to international
standards’. There is a critical need to build the capacity and capability of the veterinary services as
currently the veterinary services do not meet international standards, sanitation control, guarantee for
livestock, animals, and their sourced products and raw materials is not being conducted, and the migration
of livestock and animal is not being managed or monitored’.
8. The importance of the private sector in delivering improved animal health and production is
recognized with the need to work closely with herders, commercial producers, traders, and industry to
identify their needs and to support economic development and increase resilience in the face of diseases
threats and climate changes including catastrophic weather events (dzuds). To sustainably improve
livestock production in addition to addressing the major TADs, it is imperative to address the high
prevalence production limiting endemic diseases. The project will address these issues by implementing
the following activities:
Subcomponent 1.1: Institutional and Capacity Building (US$5.0 million)
9. Enhance veterinary and animal health policy and regulations. Currently the Mongolian
Veterinary Services underperform when assessed against international standards, including for animal
welfare and in the prudent use of antimicrobials and reducing the risk of antimicrobial resistance, and this
compromises their ability to deliver effective animal disease prevention (including against major TADs),
control and eradication, improved veterinary public health and better food safety programs and this limits
access to and the development of both domestic and international markets.
10. Significant progress has been made by the veterinary services with particularly the enactment of
the Animal Health Law (2018) and the consequent establishment of the GAVS; further the Animal Genetics
Law (2018) has provided some clarification of veterinary and non-veterinary roles in the country.
Subsidiary legislation is being developed under the Animal Health Law with 120 ‘regulations’ proposed; a
number of regulations have been approved but many have merely been transferred from the previous
Animal Health Law (1993) and extensive revision is still required. In addition to animal health, regulations
are required to promote animal welfare including specific measures to enforce animal welfare at
slaughterhouses or when culling animals in response to a disease outbreak, in transport, and in
pastureland movements, for appropriate animal handling, husbandry, feeding, and access water in semi-
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intensive and intensive livestock systems. It is recognized that the legislation and regulations required to
establish disease-free zones and high-health compartments is not currently available.
11. The project will support a full review of policy and the current legislation with identification of
priorities and the enabling regulations required. This review will be undertaken through provision of TA
using a combination of international and national expertise. Following review, support will be provided to
develop the necessary policies and the additional regulations required. The Mongolia One Health plan will
also be supported with the development of greater policy and program cohesion between the human and
animal sectors and improved coordination and information sharing. The focus of the engagement on One
Health will be to support the reduction of priority zoonoses (rabies, brucellosis) and improve food safety
(residues, bacterial contamination). The investment will cover designated staff and meeting costs and
extension and socialization programs.
12. Increase the knowledge and skills of veterinarians and veterinary paraprofessionals. A number
of reviews (by the OIE, FAO, and others) have identified that the Mongolian Veterinary Services have
inadequate skills to deliver effective animal disease, veterinary public health, and food safety programs
when assessed against international standards. Critical technical skills are limited in areas such as basic
veterinary skills in clinical diagnosis and treatment; animal welfare and the management of disease
outbreaks; and in higher skills particularly in epidemiology, risk analysis, and food safety.
13. The project will support a review of technical staffing to identify specific needs and gaps in the
current veterinary services; this review will cover veterinarians, veterinary paraprofessionals (both public
and private sectors), and other technical staff such as laboratory technicians and scientists. A staff
development plan will then be prepared. This review and development work will be undertaken with TA
from international and national experts. The private sector soum veterinarians are a critically important
resource in developing relationships with the herders, promoting effective early disease
detection/surveillance, delivering disease prevention and control, and promoting animal welfare. These
veterinarians have no access to professional development and a program will be developed and delivered
with the emphasis on the project intervention areas.
14. The project will support the development of training materials and delivery of trainings, focusing
on project intervention areas. The training will use a mix of methodologies according to the identified
needs including mentoring, distance/e-learning packages, and study tours/short international
secondments. To further support the delivery of field services, currently under-resourced, because the
economics of delivery by the private sector are poor, young professionals for fresh graduates and
internship program for veterinary students in senior years will be supported. Such a scheme will provide
financial support to recent graduates who undertake an internship in rural areas. Additional funding will
also be provided to the School of Veterinary Medicine to improve practical training.
15. Support ongoing veterinary services monitoring and review. The project will support further
reviews by the OIE following its PVS evaluation and development program and importantly enable a more
effective response to the recommendations made. This will be undertaken by supporting GAVS in
delivering the changes required including the establishment of a standing committee for the ongoing
review of progress and support for implementation. The GAVS will be supported to undertake its own
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periodic reviews of the delivery of veterinary services by the aimags, soums, and the private sector. This
approach will result in greater compliance with international standards and support the development of
stronger domestic and export markets.
Subcomponent 1.2: Disease Surveillance and Control and Food Safety (US$9.0 million)
16. Enhance current disease surveillance, control, and eradication programs. Mongolia livestock
have been exposed to a number of TADs in recent years. Some diseases such as goat and sheep pox have
become well established, while others such as FMD and PPR have occurred more sporadically and the
Mongolian Veterinary Services have sought to eliminate the infection from the country. Recently a new
epidemic disease of pigs, African Swine Fever (ASF), has been detected and though the pig industry is
small in Mongolia, the GAVS has implemented an eradication program. The ongoing presence of FMD,
PPR, and other diseases causes increased costs and reduces producer returns with animal mortalities,
limits on productivity, and the cost of implementing control measures. Export access for Mongolian
animals and animal products is limited particularly by the presence of FMD. The veterinary services lack
sufficient capabilities to adequately control disease outbreaks (FAO-TCP 2017) with major TADs and
endemic diseases assessed as not being under control.
17. In addition to the presence of major TADs, a number of diseases important to animal and human
health are present in the country including rabies, anthrax, and brucellosis—all of which are zoonoses.
The veterinary services have disease control programs in place for all these diseases, but little progress
has been made in their control. Food safety programs are operating but there is no effective control of
residues (drugs, pesticides, and so on) or of food borne zoonoses (fascioliasis, cysticercosis, tuberculosis.
echinococcosis, and so on). As an example, brucellosis is an endemic disease and a major One Health issue
that has been the focus for a national control program for many years, but progress has been limited by
the lack of clear policy, poor monitoring and surveillance, scattered vaccination, and poor results in
reducing herd prevalence and the number of human cases.
18. The project will address these limitations and promote animal health and production, improve
animal product quality and safety, and allow improved value chain management and quality assurance
with higher returns from the domestic market and improved access to international markets by the
following:
(a) Supporting reviews of the priority disease control programs considering the disease
epidemiology and its economic impact, identifying risks, and so establishing priorities for
disease prevention, control, and eradication.
(b) Supporting the development of enhanced disease surveillance and disease control strategies
with revised plans for the prioritized animal diseases in line with global and regional
strategies. Such programs will need to address the most cost-effective options for disease
detection/disease surveillance, disease prevention, disease
control/vaccination/disinfection, disease eradication/culling/disposal, and so on.
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(c) Supporting the implementation of the revised plans, as (b), for disease surveillance and
control plans and so reducing the risks of disease incursions and spread with the
establishment of improved surveillance and disease surveys/monitoring, disease control
activities, communications with herders and producers, and the more effective use of
vaccinations and other prevention and control measures
19. TA will be provided for review and strategic planning (international and national TA); the
development of improved information management systems (databases); greater private sector
participation and engagement (communications with workshops and focus group discussions); technical
skills development (training and study tours); and resources for direct support of vaccination delivery,
movement control, and other specific control activities.
20. Improve infrastructure of veterinary services as necessary including disease-free zone and
compartmentalization. Much of the extensive physical resources and infrastructure of the Mongolian
Veterinary Services is old and in need of maintenance, major refurbishment, or complete replacement.
The project will support the renovation of GAVS structures following a process of needs assessment and
prioritization. Priority will be given to addressing the critical limitations in the buildings and equipment in
prioritized areas, particularly in preparation for the establishment of disease-free zones (offices,
movement control check points, transport, and equipment); disease control activities (cold stores,
disinfection/biosecurity equipment, incineration facilities); and food safety (cold stores, disposal
facilities). Support will also be provided to improve the delivery of veterinary services by the private
sector. Private veterinarians in prioritized areas will be supported by the provision of cold stores for
improved vaccine delivery and increased access to the Internet for ease of communication and
information access.
21. Upgrade the veterinary laboratories network. Mongolia has a well-established national network
of veterinary diagnostic laboratories operating at national and aimag levels and also with some very basic
capacity at the soum level. In addition, there is a veterinary drug testing laboratory and a public health
laboratory in Ulaan Baatar and laboratories at the main border crossing points with both Russia and China.
The national laboratory network has been variously assessed as inadequate by a number of agencies and
bilateral partners with extensive support being provided but considerable limitations remain.
22. The State Central Veterinary Laboratory has advanced capabilities in molecular, bacteriology,
virology, and serology testing in addition to more routine activities but these are housed in old and
difficult-to-manage facilities. An assessment of the State Central Veterinary Drug Quality Control
Laboratory concluded that the laboratory ‘was very poorly funded and had inadequate equipment to carry
out its mission’. The 21 aimags each have medium-level laboratories with the capability to conduct simple
diagnostic tests for animal diseases, veterinary public health, and food safety; the aimag laboratories have
committed staff, a moderate level of diagnostic, and safety equipment but operate from inadequate and
unsafe facilities—there are major concerns about staff exposure and safety. There is a recognized need
to upgrade the veterinary laboratories and to strengthen their diagnostic and food safety testing and to
introduce quality management systems across the laboratory network.
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23. The GAVS will be supported to redefine the veterinary laboratory network with a hierarchy of
laboratories of increasing capabilities. It is necessary to clearly define the role of each category of
laboratory recognizing the conflicting issues of the high capital cost of establishing laboratories and the
benefit of having easy, local access, particularly in a large country with poor road access in many areas.
Investment will then be made according to the defined hierarchy of laboratory capacity. In general, it is
proposed to develop base level sample handling/simple bench top testing at pilot ‘inter-soum’
laboratories, to support simple bacteriology, serology, and pathology at the aimag laboratories with more
advanced testing at the four regional laboratories and to establish national reference laboratories at State
Central Veterinary Laboratory, State Central Veterinary Drug Quality Control Laboratory, and the food
safety laboratory in Ulaanbaatar. The project will focus on developing this capacity at the national level
and in the project intervention areas (two regional and five aimag laboratories).
24. Investment in laboratories will include refurbishment/renovation to laboratory buildings and

infrastructure with a strong focus on biosafety and biocontainment. In addition, equipment will be
provided to ensure test reliability using best practice and modern technologies. Support for staff training
will be provided and also for the purchase of reagents and operating costs. It is anticipated that the
national reference laboratories and regional laboratories will be developed to the level of international
accreditation (ISO 17025 or equivalent).
25. Support for the establishment of disease-free zones for FMD and PPR. The potential of exports
of animals and animal products from Mongolia is being limited by the ongoing presence of major TADs,
particularly FMD and PPR. It is noted that exports are also limited by poor product quality control and
trade policy with a number of countries of comparable disease status continuing to use the presence of
disease in Mongolia as an impediment to trade—this is particularly so for China.
26. OIE standards set down specific requirements for disease-free zones and, though ultimately it is
an agreement between trading partners, these standards form the guidelines for such agreements. To
achieve recognized disease-free zones Mongolia Veterinary Services must develop the policy and establish
the legal mandate to use this approach and the infrastructure and resources for this to be implemented.
This must be supported by Mongolia Veterinary Services having a detailed knowledge and understanding
of the susceptible animal populations; the specific disease(s) status of the identified populations; and the
mitigation of risks of further disease incursions, particularly the control of animal movements, with
defined response mechanisms and close collaboration with the private sector—herders, producers,
traders, and processors. To be recognized internationally, disease-free zones require the development of
complete documentation of the above process and this must be made available to the trading partner,
the OIE, for scrutiny and endorsement.
27. Mongolia has a number of advantages in establishing disease-free zones as well as a number of
limitations. In recent years, Mongolia has had few outbreaks of FMD and these have almost exclusively
occurred in the east of the country, and outbreaks of PPR have occurred in the west of the country but
only in one area. The veterinary services have implemented national control programs in response to
these outbreaks including increasing awareness, promoting biosecurity and herd management, and
providing vaccines to high-risk populations. Conversely herders in Mongolia are highly mobile and their
animals can be walked or moved substantial distances creating challenges for movement control and
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resulting in increased risk of disease spread. It is noted that the seven westernmost aimags, the proposed
disease-free zones for FMD and PPR, are major suppliers of animals and so most animal movements are
out from this region—the lack of economic drivers to import animals mitigates the risk of further
incursions of disease and makes the control of animal movements easier.
Figure 1.1. Animal Disease Zones in Mongolia
28. In addition to the above and following activities, the project will support the establishment of
disease-free zones for FMD and PPR in the seven westernmost aimags (see figure 1.1) by the following:
(a) Working with livestock herders and producers to demonstrate the immediate and longer-
term benefits of establishing disease-free zones and the need for their commitment
(b) Defining the target population in the disease-free zone with a rigorous review of the
livestock populations and the risk factors for infection, particularly the ability to control
animal movements, the sensitivity of disease surveillance data, and the willingness of the
herders/dealers and industry to participate
(c) Working with industry to recognize the benefits of a disease-free status and to develop
improved quality-assured products (with Component 2)
29. Support will be provided through a program of TA and support for specific activities such as
reviews of disease history and epidemiology, ‘Information, Extension, and Communications’ campaigns,
studies on livestock movements and the value chain, movement control check points, and surveillance.
Subcomponent 1.3: Digital Livestock Interventions (US$4.0 million)
30. Develop an integrated animal health information and animal product quality assurance and
traceability system. The GAVS and MOFALI have developed and piloted a number of information
management database systems including for LIMS, and for animal certification and movement control—
the VCS and the AIRS. The GAVS and MOFALI have identified the need to develop a database system with
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broad functionality that will cover all aspects of animal health and production, and animal product
identification and traceability along the supply chain; tentatively the integrated database and reporting
system is to be called Mongolia Animal Health Information System (MAHIS); some initial development
work and piloting has already been undertaken.
31. The project will help define the functional specifications of MAHIS to be followed by support for
system design considering existing systems and ensuring their most efficient and cost-effective inclusion
into the final design. Using a modular approach, the project will provide TA for software development and
some supporting hardware. The project should be providing co-funding to ensure the prompt and efficient
development of the capacity to better monitor animal health, animal movement and traceability, and
associated information.
32. Support for animal identification and traceability. MOFALI with FAO support has identified that
Mongolia has the natural resource base to produce sufficient ‘green’ livestock products and a comparative
advantage in producing ‘green’ livestock products for export. However, the lack of traceability and animal
identification mechanisms hold back the potential both in domestic and international markets. It is noted
that ‘traceability’ refers to the ability to access the history of an animal or group of animals, through all
stages of its life with the documentation of events, such as movements, processes, and controls needed
to define an animal’s life history and should also allow traceability of animal products along the product
value chain. The absence of a functional animal identification and traceability system in Mongolia means
that this information is not currently available.
33. To develop capabilities in animal identification and traceability, the Mongolia Veterinary Services
has piloted the AIRS and has been adopting the VCS. As AIRS and VCS have broadly similar functionalities,
it is important that the two systems are either merged into one or that a high level of interoperability is
developed.
34. The project will support a review of the AIRS and VCS systems and rationalize how best a single
system with the necessary functionality should be developed and implemented with the vision of whole-
of-chain traceability. Technical IT assistance will be required to develop a single or at least interoperable
national system. Following design and development, the project will support the piloting and then
progressive rollout of the new system focusing initially on project intervention areas. Support will include
providing infrastructure and equipment, development of software, staff training, communications,
community engagement, and focus group discussions as required with
herders/producers/traders/processors.
35. Advanced technologies for livestock development. In addition to the knowledge applications,
digital extension management, and e-commerce platforms, the project will pilot disruptive technologies
including big data and remote sensing and monitoring (use of smart devices and drones) to improve
surveillance and disease control, pen/animal side diagnostic testing, to strengthen risk analysis and
prompt the timely risk management actions necessary to support high-health animal production systems,
improved veterinary health services delivery, enhanced disease surveillance activities with improved
targeting of resources, and improved control of animal movements.
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Subcomponent 1.4: Participatory Animal Health Risk Management Initiatives (US$2.0 million)
36. In a broader sense, this activity will support community-level collective actions for supporting
services for animal health diagnosis and treatment, disease prevention and treatment, animal nutrition,
breeding for disease and climate change resilience, advisory services for marketing of quality-examined
and certified livestock and extensions. This will be best realized through (a) increased participation of
herders in animal health support programs and (b) linking herders to extension services and markets to
translate improved health status of their livestock into sustainable income streams. However, in practice,
there are significant gaps in the existing system that prevent this to happen. They include herders’
inadequate knowledge and recognition of benefits of animal health-supporting services; lack of
cooperation among herders making the delivery of required services more costly and unreachable to
herder’ households scattered over huge territories with poor road conditions; and lack of willingness and
financial capacity for paying the services.
37. The community-based service delivery is designed to address these issues through (a) awareness
and capacity building among herders to demand and access animal health supporting services; (b)
strengthening herder organizations to access increased and quality services through scale economies; (c)
piloting ways to increase herders’ willingness and capacity to pay for quality services through cost-sharing
and incentive mechanisms. As a first step, participatory methodologies such as ‘participatory animal
disease epidemiology surveys’ and ‘vulnerability and risk assessment tool’ will be developed for use with
primary producers by MOFALI to identify the risks to herders and producers and the priority animal health
services required to address such risks.
38. An experienced TSP shall be hired to implement the community-based service delivery in a holistic
manner. The TSP will (a) organize awareness/capacity building activities, (b) mobilize herder communities
and strengthen herder institutions, and (c) assist them in accessing animal health support services in an
organized and cost-efficient manner. The project will also incentivize collective actions through grant
mechanisms linked to results such as improved animal health, animal nutrition, animal productivity, and
market participation managed through community contributions. The project will institutionalize third-
party monitoring of the pilot to ensure proper governance, transparency, and accountability.
Component 2: Value Chain Commercialization (US$8.0 million)
39. The objective of this component is to improve livestock productivity and increase the volume of
livestock products that meet market requirements on quality and food safety standards. Besides
promoting livestock productivity enhancement, the key strategy is promoting and supporting ‘productive
partnerships’ between producers and processors/service providers based on the market needs and
requirements.
40. Approach. Animal productivity is not a clear-cut single dimension activity but is dependent on
husbandry, stocking rates, nutrition, breeding and genetic fitness, and animal health. The basis for the
project logic is that unhealthy animals will never be productive whatever the breeding/husbandry
improvements that might be made—health is an a priori requirement. Healthy animals will not only be
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more productive but also provide high-quality products into the supply chain (again breeding, nutrition,
and growth rate interact this).
Subcomponent 2.1: Livestock Productivity (US$2.0 million)
41. The project is taking a three-pronged approach for livestock productivity improvements. This
subcomponent will focus on provision of technical, extension, and collaborative research with academic
and research institutions. The project will strengthen policy-driven service delivery relating to animal
breeding, animal nutrition, and high health production models in select aimags/soums. Making links
between Component 1 and Subcomponent 2.1, the project will support the following:
(a) Animal Breeding Services
42. The project will focus on breed improvement through support to ‘male flocks’ 9 and ‘nucleus
flocks’ 10 through support to PBUs. The strategy of the Government will be to take much of the sire
selection and male flock management completely out of the hands of the herders, entrusting this activity
and the associated responsibilities to the professionally managed PBUs. The PBU members will have a
greater stake in ensuring that the animals are of high genetic merit, physically fit for natural mating,
maintained in a high state of health, subjected to comprehensive vaccination programs, and kept well-fed
throughout the year—therefore establishing new or enhancing existing ‘nucleus flocks’. The project will
target specific PBUs, based on various criteria including geographical location, access to input and output
markets, breed of animal, and willingness of herders to participate in such a program.
(b) Animal Nutrition
43. A significant proportion of Mongolian livestock production is traditionally grazing based; few
inputs are required regarding nutrition. However, nutritional needs which are not met by seasonal growth
are largely not provided for, except in the emergency situation of severe winter climatic conditions (the
dzud). The project may encourage herders/herder organizations to focus on activities such as cutting
natural hay for feed or winter emergency that are initiated by the regional (aimag or soum) government
and stocks maintained at the aimag or soum. However recent projects such as LAMP had demonstrated
good results focused on providing nutrition throughout the animal’s growth cycle. This means that trusted
advisers or extension agents, such as the veterinarians from private veterinary units will need the
capability to provide this advice. Whether subsistence or business herders, any change will need to have
a clear cost benefit. Any proposed change, whether it be the provision of supplementary fodder or a move
to a more intensified system will need thorough socioeconomic modelling.
44. Deterioration in pastures and low levels of supplementary feeding cause severe malnutrition in
animals especially during winter and spring seasons. The project will promote best practice models that
foster year-round availability of animal nutrition, including growing fodder crops, hay making, and
9 Male animals of high genetic merit maintained in a high state of health.

10 Elite herds of male or female animals that serve as resources of genetic to improve male flocks.
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production of animal feed supplements. This activity will involve capacity building, trainings, and
demonstrations for feed, fodder, and concentrates.
(c) High Health Production Models
45. The project will support semi-intensive and intensive production models in meat and dairy sectors
by establishing dairy clusters, feedlots, and high health compartments. These will be targeted in
government-identified regions, mostly in central north areas, suitable for fodder production and
promotion of intensive and semi-intensive livestock farming.
Subcomponent 2.2: Productive Partnerships (US$6.0 million)
46. Productive partnerships. A productive partnership is a business relationship between producers

and the commercial private sector and/or institutional buyers (schools, hospitals, military). The productive
partnership approach involves three core agents: (a) a group of producers, (b) one or more buyers, and
(c) the public sector. The producers are typically united in a producer organization, the buyer(s) can be
active at different levels of a supply chain in either commercial or institutional markets, and the Ministry
of Agriculture commonly represents the public sector.
47. The key strategy for value chain commercialization is promoting and supporting ‘productive
partnerships’ between producers and processors/service providers based on the market needs and
requirements. These partnerships are aimed at delivering high quality animal health, livestock breeding,
high health production and commercialization services to herders and intermediate
aggregators/processors for ensuring quality supply of raw products to downstream value chain players.
The project will encourage interventions related to improving breeding services; organizing food and
livestock processing clusters; improving the cost and product competitiveness of livestock and agriculture
products, particularly milk and meat; increasing market access to herders/producers; introducing
advanced technologies for intensive food production systems; and increasing the domestic supply/exports
of healthy and safe food products. The proposals from private players, large producer organizations,
public agencies will be selected through a transparent and competitive process and will be financed by
way of output-based agreements/performance-based incentives. The selection process with encourage
productive partnerships with livestock production systems that adhere to CSA, thereby contributing to
climate mitigation. Furthermore, the project gives priorities and incentives to women-led enterprises and
herder organizations to establish project finances productive partnerships. A joint review mechanism will
be instituted under the project for systematic monitoring of outcomes from these engagements.
48. A productive partnership in the meat sector is in very initial stages. Feedlot operations have
started successful partnership with local herders by providing pure breed bulls at no cost and calf buy-
back programs. They also provide training to those herders who are interested becoming feedlot
operators. They have started supply of premium beef cuts to restaurants and supermarkets. Pure breed
cattle farms are also at the stage of emergence. There are several farms with more than 1,000 heads. They
supply semen to local herders and provide artificial insemination services. The farms also cooperate with
feedlot operators who buy the species that are not suitable for reproduction but good on productivity
(yield of meat per carcass). Both feedlot operators and pure cattle farms can supply good quality meat to
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processors year around which will increase utilization of installed capacities of slaughterhouses and
increase supply of safe meat to domestic market and add volume of exports.
Box 1. Model Productive Partnerships Framework

The LCP envisages to establish at least 50 productive partnerships between market players and small herder
households.
(a) Diversity of partners
(i) An agribusiness or private sector firm or association of firms engaged in the sector
(ii) A knowledge or service provider (private or public entity such as a university or an NGO)
(iii) Herders, herder cooperatives, or associations
(iv) A multiple partnership involving different entities with one designated as the lead
(b) Geographic targeting. Eligible firms should be operating or willing to operate in the intensive aimags of
LCP
(c) Inclusive partnership. Preference will be given to those lead partners who demonstrate their willingness
to work with targeted families with less than 250 heads of livestock. The LCP will also not exclude larger
herders when these function as partners in partnership proposals.
(d) Cost-sharing arrangement. The LCP will finance a business plan prepared by the partners and share of
investment is dependent upon by their assets and income level.
(e) Scale of assistance. The maximum project financing per partnership will be US$100,000. It is expected
that the scale of project support for large-scale partners will be in the range of US$100,000 to US$70,000;
while those with medium-size entities would be in the range of US$50,000 to US$20,000 and small-scale
entities from US$20,000 to US$10.000.
(f) Eligible activities. The partnerships will be demand-driven and based on development objectives of LCP
and consistent with the Government policy. The priority activities (no order of preference) to be covered
under the Partnership Agreements are the following:
(i) Specialized training in good herding and dairy farming practices including sustainable herd
management and other training approaches having demonstrated their efficiency and training of
herder group leaders.
(ii) Training of herders and dairy farmers to improve quality and productivity. This includes
restocking/herd improvement support to herders and dairy farmers for the implementation of
rotational methods and improved animals.
(iii) Value chain investments including processing, storage, trading, food safety and quality, and climate
smart and environmental sustainability.
(iv) Capacity building of herder and dairy farmer groups or cooperatives.
(v) Digital extension services to herders, organizing them into virtual cooperatives and alternative for
building new generation cooperatives.
(g) Selection process. Surfacing of innovative business models and high impact solutions through multiple
media platforms including innovation forums, solution round tables, and challenge rounds.
(h) Applicability of ESMF. All activities must comply with environmental and social safeguard framework
agreed with the World Bank.
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49. A business plan under a productive partnership project is supported through three core inputs
and/or activities directed toward the producer needs: (a) productive infrastructure services; (b) TA; and
(c) input supply, quality, and food safety testing. Productive partnership projects vary in the emphasis on
each of these core inputs, but all use support goods and services to enhance the fulfilment of a business
plan. One key characteristic of a productive partnership is that the core inputs to support the business
plan are normally co-financed through grants provided by the public sector, which are matched by the
producers and in few cases also by the buyer(s). Productive investments include the provision of
machinery and equipment (such as fencing materials and dairy processing equipment); infrastructure (on-
farm or off-farm); and production inputs (for example, seeds, fertilizer, semen, and veterinary supplies)
for the producers. Similarly, TA to the herders entails the delivery of extension services, technology
transfers, and specialized assistance on technical matters related to production, processing, and
environmental aspects, as well as market studies. Finally, business development focuses on strengthening
producers’ business development capacities in management, accounting, business administration, and
marketing skills.
Figure 1.2. Design of Productive Partnerships
Component 3: Project Implementation Support (US$2.0 million)
50. This component will strengthen the project’s implementation architecture. It will support the
coordination of project activities, environmental and social safeguards, and the fiduciary functions of the
PIU under the guidance of MOFALI. The PIU will be staffed and equipped to enable it to effectively carry
out these activities. The component finances incremental staff, consultants, operating costs, TA, training,
M&E activities and impact assessments, information dissemination, and annual audits. Under this
component, the project will ensure that at least half of the participants in M&E workshops, training
events, seminars, and conferences will be women. Furthermore, the project aims that at least half of all
project-funded professional positions such as PIU staff, young professionals, and TSPs will be filled by
women.
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Component 4: Contingent Emergency Response Component (US$0.0)
51. The objective of this component is to improve the Government’s response capacity in the event
of an emergency, following the procedures governed by OP/BP 10.00. The project will prioritize
emergencies having significant impact on agriculture, livestock, and rural development. There is a
moderate to low probability that during the life of the project that Mongolia will experience an outbreak
of animal disease or other disaster which causes a major adverse economic and/or social impact (for
example, dzud and widespread drought), which would result in a request from the country to the World
Bank to support mitigation, response, and recovery in the region(s) affected by such an emergency. In
anticipation of such an event, this CERC provides for a request from the country to the World Bank to
support mitigation, response, and recovery in the district(s) affected by such a crisis. The CERC will serve
as a first line financing option during an emergency response, country IDA funding that has not been used
will be allocated to this subcomponent in the case of an emergency. However, if more financing is
required, the restructuring of other projects would also be considered before the triggering of the PEF.
MOFALI will develop the C-PIM for the project and agree with the World Bank as a condition of
disbursement within three months of project effectiveness. MOFALI will begin drafting the C-PIM
immediately to ensure that the CERC is in place as soon as possible as precautionary measure to deal with
an any unforeseen emergency that occurs early in the implementation of the project. Triggers for the
CERC will be clearly outlined in the PIM and the C-PIM acceptable to the World Bank. Disbursements will
be made against an approved list of goods, works, and services required to support crisis mitigation,
response and recovery.
Project Implementation Arrangements
52. The project will be implemented under the overall leadership of MOFALI. MOFALI will maintain
the following throughout project implementation:
(a) Project Steering Committee. A PSC chaired by the State Secretary and having representation
satisfactory to the World Bank to, among other things: (i) deliberate policy issues and
provide policy guidance on project implementation; (ii) coordinate activities of the various
agencies of the GoM and other stakeholders involved in project implementation; (iii) review
and approve project annual work plans and budgets and annual implementation progress
reports; (iv) monitor and assess progress toward the achievement of project objectives,
including taking corrective actions to ensure smooth implementation of project activities;
and (v) provide final approval for subproject proposals.
(b) Technical Working Group. MOFALI will establish a Technical Working Group to provide
technical experts from the ministry and relevant agencies to assist in project
implementation. The Technical Working Group will convene on as needed basis, and in
particular cases where technical aspects of project interventions required specific expertise
beyond capacities of PSC and PIU. Effective collaboration with the National Animal Gene
Bank is a vital part of the project activities.
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(c) Project Implementation Unit. The GoM shall maintain, throughout the period of project
implementation, a PIU within MOFALI responsible for overall day to day implementation and
coordination, including (i) preparing annual work plans and budgets; (ii) preparing
disbursement applications; (iii) ensuring that all procurement activities are undertaken; (iv)
facilitating the audits; (v) carrying out the outreach campaign; (vi) hiring of resource persons
and consultants; (vii) carrying out appraisals of proposed subprojects and making
recommendations to the PSC with regard to approval of such; and (viii) overseeing the
implementation of subprojects, including the inspection of works and delivery of goods. The
PIU shall be led by the project coordinator and consist of qualified staff in sufficient numbers
and under ToR satisfactory to the World Bank, including the following key staff: a
procurement specialist, an FM specialist, an M&E specialist, agribusiness specialist, animal
health specialist, environment and social specialists, a communication specialist, and an
extension services specialist, among others.
(i) Technical Support Unit. The project will directly contract the FAO to embed a TSU to
help the GAVS build institutional capacity by convening global knowledge, building
foundations for evidence-based policy development, formulating disease surveillance
plans, and executing large-scale capacity-building programs for entire staff of the GAVS
and national extension agencies. The TSU will implement agreed project activities and
will have a clear phase out plan after building internal capacity of the GAVS.
(ii) Technical Service Providers. The project will hire, as needed NGOs, civil society
organizations, professional associations, and development agencies, for facilitating
delivery of capacity building, technical services, and so on to the project beneficiaries.
(iii) Private Sector. It will also enter into output/performance-based productive

partnership agreements for delivery value chain services to the herders and their
organizations.
(d) Aimag level. The GoM will require each selected aimag to designate and thereafter
maintain, throughout the project implementation a project unit, responsible for ensuring
integrated project implementation at the subnational level and interagency cooperation and
coordination in the field.
53. Justification for direct contracting of the FAO. The FAO, through the Animal Production and
Health Division at FAO headquarters, the Emergency Centre for Transboundary Animal Diseases, Animal
Production and Health Commission for Asia and the Pacific, and strong technical capacity on Animal Health
in various regional and country offices, has a long history of engagement on animal health globally. The
FAO has extended assistance to FAO members on the broader aspects of disease surveillance, risk
management, transboundary disease management and the more integrated One Health approach. The
FAO maintains strong network of institutions and individual experts to draw support to provide support
and services to member countries. In Mongolia as well, the FAO has long history of engagement on these
aspects including a comprehensive review of the Animal Health and Veterinary Services in 2017 (which
included a capacity-building plan for the veterinary services), emergency assistance on animal diseases
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including Sheep and Goat Pox and FMD (both resulted in the development of national strategies), support
of the development of a national eradication program on PPR. In view of strong technical capacity,
linkages with national and international development partners (including the OIE) and the Government,
the FAO will take a facilitating and capacity development role. In particular, the FAO will draw on its role
in relevant international frameworks such as Codex Alimentarius, OIE standards, or antimicrobial
resistance – all relevant prerequisites for the project’s success. This will help Mongolia acquire adequate
technical and programming capacity to meet international food safety standards and a risk management
approach that meets national and international standards.
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ANNEX 2: IMPLEMENTATION ARRANGEMENTS AND SUPPORT PLAN
1. The project will require intensive implementation support and a continuous dialogue with the
client. The World Bank’s implementation support strategy combines periodic supervision with timely
technical support and policy advice as necessary. Implementation support will include (a) an
implementation support mission (ISM) every six months; (b) interim technical discussions and field visits
by the World Bank; (c) monitoring and reporting by the PIU on implementation progress and achievement
of results; (d) third-party impact evaluation (baseline, midterm, and final); (e) annual internal and external
financial audits and FM reporting; and (f) periodic procurement post review. The ISM will visit randomly
selected project sites, to assess and physically verify the work financed by the project. These site visits will
include interaction with herders and their organizations, private sector, aimag and soum level officials,
and so on.
2. It is expected that the early implementation phase, in particular, could face implementation
challenges, which will be addressed through the following actions:
(a) Implementation support strategy. This will be largely built on dialogue and partnership. The
implementation support team will have continuous interaction with all stakeholders of the
project. This will require consistency in the composition of the core implementation support
team, technical expertise, and familiarity with country/local situations.
(b) Capacity building of the implementation agencies. Significant training and hands-on
support will be required on a technical level and in terms of fiduciary and safeguards
management. This will include supporting the PIU in (i) developing annual works and
financial plans, (ii) task planning and task supervision of the TSU (embedded by the FAO), (ii)
review of important ToRs for key consultancies, and (iii) coordination with development
partners.
(c) M&E and learning. Coordination of M&E and the capturing of project outcomes and results
will need professional guidance from an M&E expert on the implementation support team.
(d) Fiduciary assurance support. The proposed funds flow brings challenges for project financial
management. The implementation support team will provide hands-on guidance related to
review and audit reporting procedures. Similarly, procurement activities will be spread
widely among entities, types of procurement, and size of contracts. This will require
intensive implementation support.
(e) Social and environmental safeguards. M&E and mitigation of social risks require
experienced expertise on the implementation support team with a good understanding of
the culture and business process in Mongolia. In addition, sufficient staff time and resources
will be provided to review site-specific environmental management measures during the
investment planning process for herder organizations and agri-businesses. Special emphasis
will be placed on the (i) monitoring of the participation of ethnic minorities, (ii) strengthening
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of the GRM, and (iii) other feedback loops to solicit feedback and grievances from the
beneficiates. The World Bank team will be able to have access to the report.
3. Implementation support plan. The following implementation support plan reflects the
preliminary estimates of skill requirements, timing, and resource requirements over the life of the project.
Keeping in mind the need to maintain flexibility over project activities from year to year, the
implementation support plan will be reviewed periodically to ensure that it continues to meet the
implementation support needs of the project. Table 2.1 indicates the World Bank team’s implementation
support plan and the required skill mix.
Table 2.1. Implementation Support Plan and Skill Mix

Time Needed Focus Skills
0–18 months • Setting up core team at the PIU, project • Core team, particularly FM,
management systems including fiduciary, procurement, M&E, and so on
safeguards, and M&E • Animal diseases, animal breeding,
• Baseline survey completed and nutrition experts
• Onboarding TSU in the PIU • Private sector development experts
• Staff capacity building of the GAVS • Digital agriculture experts
• Conducting animal disease and food safety risk
assessments and developing one health plan
• Action planning for livestock health and
livestock productivity interventions
• Call for proposals under productive
partnerships
• Upgrade of labs/equipment purchase and so
on
18–36 months • Performance of veterinary services (PVS) • Core team, particularly FM,
• Assessments of the animal disease surveillance procurement, M&E, and so on
and control measures • Animal diseases, animal breeding,
• Evaluation of digital livestock pilots and scale- and nutrition experts
up plans • Private sector development experts
• Livestock productivity pilots scaled up • Digital agriculture experts
• Review of performance of productive
partnerships and second call for proposals
• Facilitate exchange among aimags/soums,
herder organizations, and the private sector to
learn from each other
36–54 months • Continued improvements in project • Core team, particularly FM,
management systems including fiduciary, procurement, M&E, and so on
safeguards, and M&E • Technical specialists based on
• Midterm evaluation of the project thematic focus of the missions
• Stocktaking of project interventions and
design improvements
• Prepare detailed learning and analysis
framework
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Time Needed Focus Skills

54–60 months • Completion of activities • Core team, particularly FM,
• Understand failure and success parameters in procurement, M&E, and so on
close dialogue with the implementing • Animal diseases, animal breeding,
agencies. and nutrition experts
• Facilitate knowledge exchange and events to • Private sector development experts
consolidate project learnings • Digital agriculture experts
• Prepare detailed learning and analysis
framework and prepare for end-of-project
evaluation
• Support technical and financial analysis of
project investments
• End-term evaluation and project completion
report
4. Skill mix. The skill mix and team composition for supporting project implementation is as
proposed in table 2.2.
Table 2.2. Skill Mix and Team Composition

Skills Needed No. of Staff Weeks Number of Missions Comments
Task team leader 12 Two per year but three in the Staff in the country office
first year or Washington, DC
Procurement specialist 3 Two per year including field Staff in the country office
travel
FM specialist 3 Two per year including field Staff in the country office
travel
Social safeguards specialist 3 Two per year including field Staff in the country office
travel
Private sector development 8 Two per year but three in Staff in the country office
specialists first year
Animal health expert 3 Two per year including field Consultant (international)
travel
Livestock productivity expert 3 Two per year including field Consultant (international)
travel
Digital livestock expert 3 Two per year including field Consultant (international)
travel
Agriculture economist 10 Two per year including field Consultant
travel
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ANNEX 3: FINANCIAL AND ECONOMIC ANALYSIS
Introduction
1. According to OP/BP 10.00 (Investment Project Financing) and the Guidance Note on Economic
and Financial Analysis, the following aspects should be addressed by the analysis:
(a) What is the project’s development impact? This is the traditional question underlying the
World Bank’s approach to cost-benefit analysis. It requires careful consideration of the
expected stream of project benefits and costs, grounded in an explicit causal framework
linking project activities to targeted outcomes.
(b) Is public sector provision or financing the appropriate vehicle? This question probes the
rationale for public involvement with respect to financing and/or implementation and
should explicitly consider alternative modes of provision.
(c) What is the World Bank’s value added? This question examines the World Bank’s
contribution to the project. It seeks to determine the benefit from World Bank staff
involvement and whether the proposed project maximizes the development impact of staff
effort.
2. PDO. The PDO is to improve livestock health, productivity, and commercialization of targeted
value chains in project locations and to provide immediate and effective response in the event of an
eligible crisis or emergency. The project includes the following components: Component 1: Animal Health
Services (US$20 million); Component 2: Value Chain Commercialization (US$8 million); Component 3:
Project Implementation Support (US$2 million); and Component 4: Contingent Emergency Response
Component (US$0 million).
Expected Development Impact and Project Benefits
3. Project benefits. This proposed project will generate significant benefits to the livestock sector in
Mongolia. The benefits would be accrued from (a) losses to be avoided from incidence reduction of the
target priority diseases; (b) increased international trade of meat/dairy products attributable to the
establishment of disease-free zones; (c) enhanced livestock productivity due to the support to policy
provisions to improve animal breeding, animal nutrition, and livestock management practice; (d)
increased value addition from the herders’ better access to markets through productive partnerships with
processors and traders along the livestock value chain; and (e) global benefits, such as reduced GHG
emission through mitigation of pastureland degradation, which would be achieved through the destocking
of the animal population associated with increased offtake rates.
4. Project beneficiaries. The project design includes activities at the national level as well as regional
and local levels. The intensive project investments will be implemented in eight aimags with strategic
focus on meat and dairy value chains. The key beneficiaries of the project include (a) small herders and
poor and other vulnerable household groups, particularly women and youth, in remote pastoral
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communities; (b) community organizations such as herder groups, pasture groups, producer
organizations, CSOs, and NGOs; (c) the livestock extension and animal health service delivery agents in
the last mile such as public and private veterinary service providers (paraprofessionals); (d) central and
local (aimag and soum) governments and staff engaged in food, agriculture, and livestock program
implementation; and (e) small- and medium-scale private livestock value chain actors operating in the
targeted livestock value chains in the project areas. The project is expected to benefit at least 20,000
livestock households and 60 small livestock operators and enterprises in target areas. Specific nutrition
counseling programs will be targeted to women beneficiaries under the project. Furthermore, the project
will benefit other herders not directly involved with the project activities through improved control of
animal diseases. Mongolian consumers will also benefit from increased supply of safe and quality animal
products in the domestic markets.
Rationale for Public Interventions
5. Public interventions in livestock sector are justified by the following: (a) the project will support
the newly established GAVS in performing its core public functions of providing public goods for the
livestock, including disease surveillance and control; (b) the project will address market failures that result
in insufficient formal market links between headers and buyers/processors, which create asymmetries in
marketing information and bargaining power; (c) the project will facilitate the herders’ adoption of
improved technologies; and (d) the project investments will contribute to climate change adaptation and
mitigation ( see section ‘Climate Co-benefits’).
Rationale for Bank Involvement
6. The Government, donors, and the World Bank have been active in the livestock sector for nearly
two decades. The World Bank’s SLP has been mainstreamed into all the provinces of Mongolia and now
supports livestock production, pasture management, and rural community development in all aimags.
LAMP piloted several innovative ways to deliver services to herders, women farmers, and their
cooperatives (hay production, genetic improvement of animals, link to markets and agro-processing) with
satisfactory outcomes. The GoM has requested for a follow-on operation with a view to scaling up
interventions piloted under LAMP, such as enhancing livestock productivity, improved market access, and
diversification in livestock-based production systems by investing in core public goods that helps in
achieving the policy priority set by MOFALI, namely, increased livestock exports and enhanced sector
competitiveness. The project will benefit from ONE SOLUTIONS BANK by combining the IDA credit with
IFC’s Advisory Services projects that focus on (a) attracting investment in the agricultural sector, especially
those with export orientation; (b) strengthening regulatory systems for food safety standards based on
risk-based approaches; and (c) developing rules and code of good practices for high health compartments.
Methodologies for the Analysis
Cost-effectiveness Analysis for Component 1
7. The preferred methodology for the economic evaluation of Component 1 (two-thirds of total
project costs) is ‘cost-effectiveness.’ The rationale for adopting a cost-effectiveness methodology is that
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for improved animal health service delivery, benefits to be gained and production losses to be avoided as
outlined earlier are difficult to quantify, ex ante, in a reasonably reliable manner. The key objective of a
cost-effectiveness analysis is to demonstrate that the proposed investments have a sound strategic
rationale for the overall project objectives and that these objectives are met in the most cost-effective
way. Due to lack of robust quantitative estimates of project benefits, no EIRRs could be calculated.
8. Nevertheless, it is widely accepted that ‘prevention is better than cure’ for addressing problems
early and avoiding costly efforts for recovery and rehabilitation, particularly for transboundary and
zoonotic diseases, which also constitute a threat to human health and welfare. Under the ‘without project’
scenario, rough estimates based on the past 10 years for the increased disease control cost after major
outbreaks, production loss, and export restriction could be as high as US$800 million annually, dwarfing
any costs the Government could mobilize for the disease control efforts (including this project). Therefore,
this is a typical case for the cost-effectiveness approach as an ERR/NPV estimation is not required to justify
the project.
9. Further, undertaking economic analysis with the cost-effectiveness approach is based on the
underlying political decision that has been taken. The new Animal Health Law adopted in December 2017
and subsequently the ‘Animal Health National Program’ launched by the GoM have specifically covered
measures to prevent the TADs and other infectious diseases and maintain the infectious-disease-free
status. The project interventions are already on the ‘must do’ list. The Government is counting on the
World Bank project to find cost-effective ways to achieve the PDO.
10. The cost-effectiveness (the least costs) will be achieved through the following:
(a) Strengthened institutional capabilities of the recently established GAVS, which will be
achieved by supporting investments that will enhance the performance of Mongolian
Veterinary Services to be benchmarked against international standards. As a result, the
GAVS will improve its ability to effectively control animal diseases, provide veterinary public
health, and improve food safety.
(b) The design to fit the specific requirements of the laboratories and enhanced building codes
per internationally recognized standards to ensure the assets’ longer economic life and
efficient gains. Nationally veterinary drug quality control and food safety laboratory
networks will be strengthened, and their investigation capacity will be redefined with a
greater hierarchy of diagnostic laboratory capabilities—central/reference laboratories,
regional/aimag laboratories, and ‘inter-soum’ laboratories;
(c) Establishment of disease-free zones and ‘high health’ animal production compartments will
be undertaken as per well-tested OIE guidelines.
(d) World Bank competitive bidding procurement procedures for all the equipment and civil
works.
(e) The selection of TA providers subjected to World Bank procurement procedures for least-
cost choices.
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Cost-Benefit Analysis for Component 2
11. Financial analysis. The project will encourage interventions related to improving breeding
services; organizing food and livestock processing clusters; improving the cost and product
competitiveness of livestock and agriculture products, particularly milk and meat; increasing market
access to herders/producers; introducing advanced technologies for intensive food production systems;
and increasing domestic supply/exports of healthy and safe food products. Financial analysis will be on
the specific entity data and from the data key financial parameters (investment cost, total income, and
total operational and general costs). The financial model will be developed with the following
assumptions: (a) corporate income tax will be applied to the processing units but not to herders’
production activities, (b) subproject life of 20 years with salvage value at 5 percent of the investment cost,
(c) subprojects achieve full production capacity within three years of operation; and (d) discount rate of 8
percent.
12. Economic analysis. Financial cash flow will be adjusted to reflect the economic values by applying
conversion factors for each category of costs, eliminating taxes and transfers and considering incremental
operational costs after the project implementation. ERRs will be calculated based on the adjusted financial
flows accordingly.
13. The productive partnership proposals from private players, large producer organizations, and
public agencies will be selected through a transparent and competitive process and will be financed
through performance-based incentives/contracts. A joint review mechanism will be instituted under the
project for systematic monitoring of outcomes from these engagements.
14. Given its demand-driven nature and framework approach of the design of the component, ex ante
financial and economic analysis is virtually impossible. As one of the key selection criteria, financial and
economic analyses outlined earlier will be conducted to ensure that the expected rate of return is higher
than the opportunity cost of capital. Nevertheless, based on data and consultations with experts from
MOFALI and the GAVS, and drawing the experiences from recently completed LAMP, the ex-ante financial
and economic analyses covering most expected subproject types have been conducted (see table 2in the
EFA section).
15. Sensitivity analysis. With the baseline scenario in table 2 (see section IV in the main text),
switching values were estimated for the proposed subprojects to test the impact of two key variables
(project investment cost and output prices). The switching values indicate that the subprojects are
economically viable unless a significantly large drop in output prices or a large increase in project costs is
experienced as shown in table 3.1. The sensitivity analysis also shows that the project’s viability is more
influenced by the output price decreases than investment cost increases.
Table 3.1 FIRR at 8 Percent with Corresponding Cost Increases and Output Price Decreases
Meat Processing Milk Processing Wool Processing
Cost increases (%) 38 31 35
Output price decreases (%) 22 18 23
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16. The World Bank also had recent experience with a similar project, LAMP, which has similar
expected benefit parameters to the current project. Thus, the financial and economic analysis of the ICR
of the LAMP could serve as, indicatively, ex ante financial and economic analysis with results for
prospective subprojects in the current project. The results presented in table 3.2 are largely consistent
with the abovementioned estimates and confirm that the project activities under Component 2 are
economically viable.
Table 3.2. Results from LAMP Economic and Financial Analysis
Meat Storage Milk Processing Wool Processing

FIRR (%) 24 21 31
EIRR (%) 25 23 33
17. Fiscal impact. The fiscal impact after project completion is related to the funding of laboratory
operating costs, which is vital to the sustainability of the laboratories constructed /rehabilitated under
the project. The Government has firmly committed that operating costs of the laboratories will be fully
covered by the government budgets after project closing.
Climate Co-benefits (including GHG Screening)
18. The agriculture and livestock sectors are top priorities for Mongolia’s Sustainable Development
Vision 2030, with huge implications for climate change. The livestock sector is generally vulnerable to
climate change and extreme weather events, including dzuds. Mongolia should take steps to reduce the
herding population’s vulnerability to these severe storms by identifying the most resilient breeds of
livestock, strengthening risk management of pastoral livestock and the insurance system, and
strengthening the NEMA’s early warning systems and response capabilities. The agriculture sector in
Mongolia is the second-largest (43 percent) source of GHG emissions after the energy sector (50 percent).
The ever-increasing herd size contributed to the rise in the national GHG emissions by 58 percent
between1990 and 2014. The INDC by Mongolia aims to cut its GHG emissions by 14 percent by 2030
compared to the projected emissions under a business-as-usual scenario. The project has potential to
directly contribute to these commitments by (a) limiting the livestock density at appropriate levels
according to the pasture carrying capacity and (b) emphasizing green production and low carbon practices
and promoting water and energy use efficiency along the value chain.
19. The project, which aims to improve livestock health, productivity, and commercialization of
targeted value chains in project locations, would generate climate benefits in both adaptation and
mitigation.
20. Adaptation. As there is clear link between climate risks and increased health risks/diseases, the
project interventions under Component 1, including all subcomponents (Institutional and Capacity
Building, Disease Surveillance and Control and Food Safety, Digital Livestock Interventions, and
Participatory Animal Health Risk Management Initiatives), will strengthen the adaptation mechanisms
toward increased resilience. Further, under Subcomponent 2.1: Livestock Productivity, extension,
research, service delivery relating to animal breeding and related practices, and animal nutrition-related
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activities will also contribute to adaptation mechanisms to increased climate risks. The adaptation
strategies under the project can be classified as measures to (i) conserve natural resources through
reduced stocking density of animals, (ii) strengthening animal biocapacity through animal health and
breed improvement actions, (iii) increase nutrition security of the animals using different kinds of
supplementary feeds not only in winter but also in summer to increase daily feed intake, and (iv) improve
understanding of climate extremes and forecasting.
21. Mitigation. The project will contribute to GHG emission reduction specifically through higher
offtake rate resulting from improved livestock productivity and market access. This will effectively destock
the livestock population and subsequently increase the land-based carbon sequestration through
mitigating the pastureland degradation. The quality of pasture has suffered from severe degradation (with
an average overstocking of 2.3 times above the current carrying capacity). Currently, some 71 million ha
of rangeland (nearly 65 percent of the total rangeland of 110 million ha) was degraded relative to the
ecological potential (reference condition) and nearly 7 percent of the long-term monitoring sites have
reported desertification.
22. GHG screening. It was conservatively assumed that (a) 7.1 million ha of degraded land (only 10
percent of degraded rangeland) will be stabilized by the project impact, as against the ‘without project’
situation, which would further deteriorate from the current moderate degradation status to large
degradation (per EX-ACT definitions), and (b) the total livestock population will be reduced by about 3.3
million heads (about 5 percent of the total of 66 million). As such, the GHG emission reduction would be
reduced by 348.4 million (tCO2eq) in the next 20 years, as shown in table 3.3 (based on calculations using
EX-ACT tool).
Table 3.3. Results of the Ex Ante GHG Analysis

Over the Project Life of 20 Years (tCO2eq) Annual Average (tCO2eq per year)
GHG Gross Gross
Sources for GHG Emissions of
Emissions of Emissions Net GHG Emissions Net GHG
GHG Emission the ‘without
the ‘without of Project Emissions of Project Emissions
Reduction Project’ Scenario
Project’ Scenario (2 − 1) Scenario (4 − 3)
(3)
Scenario (1) (2) (4)
Mitigation of 284,739,583 0 -284,739,583 14,236,979 0 -14,236,979
pastureland
degradation
Destocking 63,629,671 0 −63,629,671 3,181,484 0 −3,181,484
livestock
population
Total 348,369,255 0 -348,369,255 17,418,463 0 -17,418,463
23. For cost-effective analysis (Component 1), the sensitivity test of carbon shadow prices on the
ERR/NPV is not applicable, as long as the project is expected to contribute to GHG emission reduction. For
the economic and financial analysis (Component 2), subproject internal rates of return must be above the
opportunity cost of capital (as one of the selection criteria) and ERRs are invariably above corresponding
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FIRRs (mainly because corporate tax, as cost in financial analysis, is treated as benefit in economic
analysis). The GHG reduction benefits could only increase ERRs of the selected subprojects, which will
have to be above the economic cost of the capital without factoring in the beneficial externalities.
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ANNEX 4: FINANCIAL MANAGEMENT AND DISBURSEMENT ARRANGEMENTS
Introduction/Summary
1. The World Bank FM team has conducted an assessment of the adequacy of the project FM
arrangements for the proposed National Livestock Commercialization Project. The assessment, based on
the World Bank Directive: Financial Management Manual for World Bank Investment Project Financing
Operations issued on February 10, 2017, concluded that the project will meet the World Bank’s FM
requirements. In the FM team’s opinion, the project will have FM arrangements acceptable to the World
Bank and, as part of the overall arrangements that the recipient will put in place for implementing the
operation, provide reasonable assurance that the proceeds of the IDA credit will be used for the intended
purposes for which the credit is provided.
2. FM risk is the risk that the credit proceeds will not be used for the purposes intended and is a
combination of country, sector, and project-specific risk factors. However, the FM capacity assessment
did not identify major risks associated with the proposed implementation arrangements as the
implementing agency, MOFALI, has previous knowledge and experience with regard to managing a World
Bank-financed project. The PIU will be established with qualified staff, including experienced FM staff,
preferably with experience of working on World Bank-financed projects, who shall be appointed early
enough to be trained in the World Bank’s FM and disbursement policies and procedures, if needed, and
involved in the preparation of the FMM.
3. Overall, the residual FM risk for the project is assessed as Moderate.
Weaknesses and Action Plan
4. As part of the assessment, certain project FM weaknesses were detected and actions for
addressing and mitigating these weaknesses have been identified, as in table 4.1.
Table 4.1. Project FM Weaknesses and Mitigation Actions

Responsible
Significant Weaknesses Actions Completion Date
Person
The PIU is not yet in place A PIU should be established with a MOFALI Before
and no FM staff has been qualified financial staff member who effectiveness/during
appointed would assist putting in place the project
project FM arrangements discussed in implementation
this document.
The World Bank will help train this World Bank
financial staff member in the relevant
World Bank FM and disbursement
procedures and practices.
Project FM-related The Project Operations Manual should MOFALI/Working Before effectiveness
procedures and practices be prepared along with an FMM on
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Responsible
Significant Weaknesses Actions Completion Date
Person
are not yet defined or project FM procedures including, but Group
ready for project not limited to, the following:
implementation. • Chart of accounts including
account descriptions
• Design of manual accounting
registers for recording project
transactions during the initial
months of project implementation
(the manual registers shall then be
replaced by a suitable
computerized accounting system
within 3 months of effectiveness)
• Formats of the project interim
financial reports (IFRs) as agreed
by the World Bank
• Other project FM arrangements
Lack of experience in Close monitoring and guidance for PIU During project
project implementation at project implementation at local levels implementation
local levels
Lack of timely and Government counterpart funds to be Government and During project
sufficient counterpart confirmed in the annual budget. local implementation
funds Assurance of contributions of local beneficiaries
beneficiaries through mutually
agreeable channels to be obtained.
Risk Assessment and Mitigation
5. The following risks with corresponding risk mitigating measures have been identified during the
assessment.
Table 4.2. Risks and Risk Mitigation Measures

Conditions of
Risk Rating
Risk Mitigating Measures Negotiation
Risk after
Risk Incorporated into Project and Signing
Rating Mitigating
Design Legal
Measures
Document
Inherent Risk
Country Level High Collaborate with the new or Substantial
Potential changes in reelected government and
government officials its officials to ensure that
involved in project project continuity is
activities due to the maintained.
upcoming election cycle
and possible impact on PIU
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Conditions of
Risk Rating
Risk after
Rating Mitigating
Design Legal
Measures
Document
and FM staffing
Entity Level Substantial MOFALI has experience in Moderate
Project implementation successfully implementing
will cover different the World Bank-financed
agencies involving multiple LAMP and it will be
layers of governance. responsible for the overall
Lack of capacity/resources project implementation and
at the GAVS, which will be management through the
responsible for PSC and PIU which will be
implementing Component established under MOFALI.
1 of the project. The FAO will be contracted
to support the GAVS in
project implementation and
build its capacity.
Project Level Substantial The PIU will be established Moderate Condition of
Readiness of the project’s with key staff under MOFALI effectiveness
FM arrangements: to effectively carry out daily
A PIU is not yet established activities of the project.
and a qualified financial A qualified project financial Implementatio
officer for the project is officer will be recruited and n arrangement
also to be appointed. will work on the FM
readiness matters including
preparation of the FMM.
A detailed FMM will specify Disbursement
adequate FM and condition
disbursement procedures
for successful
implementation of the
project from an FM
perspective.
Control Risk
Budgeting: Poor budgeting Substantial A budget covering the entire Moderate
The project funds were not implementation period of
used for the intended the project with annual and
purposes due to poor quarterly breakdowns will
budgeting and budget be prepared and approved
controls. The project funds by the relevant project
may not be spent in authorities.
accordance with the The PIU shall regularly
project budget. conduct variance analysis
between actual versus
planned expenses of the
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Conditions of
Risk Rating
Risk after
Rating Mitigating
Design Legal
Measures
Document
project and communicate
the issues with large
discrepancies with the task
team for resolution.
Accounting: Reliability of Substantial The PIU will work closely Moderate
the accounting system with potential software
There is a risk associated vendors and the World Bank
with selection of the on identifying the most
software and its accuracy appropriate accounting
and reliability for the software for the project and
project accounting. making sure to meet specific
requirements of the project.
Before purchasing and
utilizing the accounting
software, manual
accounting records can be
maintained in the beginning
of the project as a
temporary arrangement.
Internal control: Weak High The FMM will be prepared Substantial Disbursement
internal controls by the MOFALI Working condition
There are no established Group and approved by the
internal control-related FM World Bank.
policies and procedures The internal control
appropriate for the project procedures will be designed
yet. for the project and
documented in the project
FMM which will include, but
not be limited to, the
following:
• Proper authorization and
approval procedures for
payments
• Appropriate segregation
of duties and job
description for each PIU
staff
• The World Bank’s no-
objection for significant
project activities
• Control mechanism for
accounting and reporting
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Conditions of
Risk Rating
Risk after
Rating Mitigating
Design Legal
Measures
Document
• Regular bank
reconciliation and
periodic cash count
• Suitable filing
documentation
procedures for relevant
documents
Funds flow Substantial Collaborate with the MOF Moderate Implementatio
Delays and bottlenecks in and MOFALI in ensuring the n arrangement
the project’s funds flow project funds are managed
made complicated by as efficiently as possible
addition of an investment through the Government
project account within Treasury system.
Treasury The DA for the project will
be opened with a
commercial bank acceptable
to the World Bank and will
be transferred to the
Treasury Single Account
once it is able to handle
transactions in U.S. dollars.
The project’s finance officer Before project
will attend the World Bank’s disbursement
disbursement training.
Financial reporting: Substantial The project will adopt Moderate Before project
Reliability and timeliness financial reporting effectiveness
of financial reporting templates that satisfy the
The financial statements do World Bank’s reporting
not fully and accurately requirements.
report on the project IFRs will be prepared and
activities and usage of submitted to the World
project funds. Bank for review on a
quarterly basis, as specified
in the legal agreement.
The IFRs will be generated
from the software to be
purchased.
Auditing: Audit quality Substantial An independent external Moderate
Unqualified auditors may audit firm, acceptable to the
audit the project World Bank, will be
implementation. appointed by the Mongolian
Poor follow-up on audit National Audit Office to
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Conditions of
Risk Rating
Risk after
Rating Mitigating
Design Legal
Measures
Document
findings. The PIU does not conduct the project’s annual
address audit findings audit under agreed ToR.
noted by the auditors. The World Bank’s FM team
will monitor the PIU’s
implementation of annual
audit findings.
Overall Substantial Moderate
Disbursement and Funds Flow Arrangements
6. Four disbursement methods will be available for the project: Advance, Reimbursement, Direct
Payment, and Special Commitment. The primary method of disbursement for the project will be the
Advance method. Supporting documents for the World Bank disbursements will be statements of
expenditures (SOEs) and summary sheets. The detailed requirements will be laid out in the project
Disbursement Letter to be issued by the World Bank.
7. The MOF and MOFALI will jointly maintain and manage a segregated U.S. dollar DA at a
commercial bank, on terms and conditions satisfactory to the World Bank, including appropriate
protection against set-off, seizure, and attachments. The ceiling of the DA will be discussed and agreed
between the World Bank and the recipient and will be specified in the Disbursement Letter.
8. Funds will be disbursed from the World Bank to the project DA in U.S. dollars. The DA will mainly
be used for U.S. dollar transactions. For all other local currency payments in Mongolian tugriks, an
investment subaccount will be used that will be replenished from the DA. The project subaccount in
Mongolian tugriks will be opened with the Treasury. The disbursement against eligible project
expenditures from the DA and subaccount will be signed off by authorized representatives from the MOF
and MOFALI. Specific project payment approval procedures will be documented in the FMM. The SOEs
will report the payments made by the Government. The ceiling will not be established for the subaccount
but it will be dictated by the ceiling set for the DA.
9. The MOF ultimately will be responsible for managing the subaccounts in Mongolian tugriks and
establishing the procedures handling all transactions in Mongolian tugriks, including PIU operating and
non-operating expenses in accordance with the Government’s financial regulations.
10. The PIU can manage a petty cash account up to the ceiling to be approved under the project’s
internal control procedures.
11. Figure 4.1 shows the general flow of funds for the project as described.
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Figure 4.1. General Flow of Funds
12. The PIU will be directly responsible for the management, maintenance, reconciliations of the DA,
SAs, and cash transactions and will prepare the Withdrawal Applications. The withdrawal applications
submitted to the World Bank will be signed off by the authorized representatives from the MOF and
MOFALI.
13. Primary financial documents maintained for the project shall be made available for review by the
World Bank’s supervision missions, external auditors, public internal auditors, and other relevant local
inspections. If the auditors or the World Bank find disbursements that are not justified by supporting
documentation or made for ineligible expenditures, the World Bank may request the funds spent on
ineligible expenditures to be refunded to the World Bank or take other actions in line with related World
Bank policies.
14. The project proceeds will be disbursed against eligible expenditures (inclusive of taxes) according
to table 4.3.
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Table 4.3. Disbursements by the Project

Category Amount of the Financing Percentage of Expenditures to be
Allocated (expressed in SDR) Financed (inclusive of Taxes)
(1) Goods, works, non- SDR 17,440,000 100%
consulting services, consulting (USD 24,000,000 equivalent)
services, operating costs, and
Training under Part 1, 2.1, and
3 of the Project
(2) Goods, consulting services, SDR 4,360,000 100%
non-consulting services, and (USD 6,000,000 equivalent)
Performance-based Incentives
under Part 2.2 of the Project
(3) Emergency Expenditures 0 100%
under Part 4 of the Project
TOTAL AMOUNT SDR 21,800,000 100%s
(USD 30,000,000 equivalent)
Planning and Budgeting
15. The PIU will prepare an annual budget/disbursement plan based on realistic estimates with a
quarterly time table. The annual budget/disbursement plan will be discussed and approved by the PSC
and the World Bank and will be reflected in the appropriate parts of the state budget.
16. The PIU will conduct regular variance analyses and report the results in the IFRs during project
implementation to explain reasons for any differences between planned (budgeted) and actual
expenditures, and necessary actions to be taken to ensure that the project can be implemented as
planned.
Accounting and Financial Reporting
17. Separate administration, accounting, and reporting will be set up for this project in accordance
with World Bank requirements, which obligates MOFALI to prepare project financial statements in
accordance with acceptable accounting standards. The PIU can adopt the cash basis of accounting for
preparing the financial statements.
18. For the project’s initial few months of implementation until setting up a computerized accounting
system, the PIU can maintain manual accounting records and produce financial reports using MS Excel,
given the expected low level of transactions during this initial period. After this initial period—of no longer
than three months—the project accounting and reporting should be done in a commercially available
computerized accounting software package which will have been procured by the project. Before the
purchase and implementation of the accounting software, the project can consult with the World Bank’s
FM team as needed. The FM team will plan a supervision mission shortly after the system is put in place
to ensure its readiness to be used for the project.
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The World Bank
19. The World Bank does not mandate a specific format for project financial statements. The project
financial statements shall include the following in addition to the local reporting requirements:
• Balance sheet of the project
• Statement of sources and uses of funds by project components
• Statement of implementation of project proceeds
• Statement of DA
• Statement of subaccounts
• Notes to the financial statements
20. The PIU will prepare IFRs, inclusive of the above reports, in accordance with pre-agreed formats
as part of reporting on the project financial statements. These reports will be used to monitor and
supervise project implementation. The IFRs will be submitted to the World Bank within 45 days after the
end of each reporting quarter.
21. The World Bank task team will monitor the project’s accounting and financial reporting processes
during the project implementation to ensure complete and accurate financial information is available to
the relevant project stakeholders on time.
Internal Control
22. To mitigate risks in the area of internal control, regular oversight by the PSC, periodic World Bank
supervision, and annual external audits will serve as mechanisms to ensure that project FM system is
functioning appropriately. In addition, proper authorization for payment requests, segregation of duties,
and other internal control mechanisms relating to the project will be defined and included in the FMM.
The procedures in the FMM should be fully and adequately implemented by all the parties involved in
project implementation.
Audit Arrangements
23. The World Bank requires the project financial statements to be audited in accordance with
auditing standards acceptable to the World Bank. Therefore, the Mongolian National Audit Office will
appoint an independent external auditor acceptable to the World Bank to conduct an annual financial
audit of the project’s financial statements in accordance with International Standards on Auditing and
under ToR satisfactory to the World Bank. The annual project audits will be financed from the credit
proceeds. The auditors will (a) express an opinion on the project financial statements; (b) determine
whether the project funds have been (i) correctly accounted for and (ii) used in accordance with the legal
agreements; and (c) determine adequacy of the supporting documents and controls surrounding the use
of SOEs/summary sheets as the basis for disbursement. The auditors will also furnish a separate
Management Letter, which will (a) identify significant weaknesses in accounting and internal control as
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The World Bank
well as asset management, (b) report on the degree of compliance with financial covenants of the
Financing Agreement, and (c) communicate matters that have come to the attention of the auditors which
might have a significant impact on the implementation of the project.
24. MOFALI will submit the annual audit report on the project financial statements to the Association
within six months after the end of the reporting period (by June 30 of each calendar year). This
requirement will be stipulated in the Financing Agreement.
Supervision Plan
25. The FM supervision plan for this project will be based on its FM risk rating, which will be evaluated
on a regular basis by the World Bank’s FM team in line with the World Bank’s FMM and in consultation
with the task team leader. During the project preparation and early implementation, the FM team
supervision will focus on the following areas:
• Appropriateness of procedures and policies identified in the FMM
• The project’s adherence to the agreed FMM
• Timeliness and accuracy of the manual accounting and financial reporting of the project
• Proper and full recording of transactions through review of sample transactions
• Implementation of the accounting software
Other FM Arrangements
FAO Contracting
26. The project will directly contract the FAO to help the GAVS build its institutional capacity and
implement activities under Component 1. A Standard Output-based Agreement shall be signed between
the Government and the FAO that will clearly indicate the scope of involvement and the specific role of
the latter under the project. The agreement shall contain specific annexes on the payment schedule and
financial reporting requirements by the FAO. Therefore, the specific terms of the FM arrangements
related to the FAO contract including the financial reporting requirements by the FAO will be based on
the mutually agreed-upon terms between the FAO and the Government reflected in those pertinent
annexes of the Standard Agreement
27. An FM assessment of the FAO, being a UN agency, is performed by the World Bank and will be
shared with the project task team.
Piloting of a Young Professionals Program
28. A Young Professionals Program will be piloted to attract fresh veterinary graduates and shape
their technical knowledge and managerial skills to successfully drive, achieve, and sustain GAVS initiatives.
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The World Bank
Besides, an internship program for third and fourth-year veterinary students is also planned so they get
an opportunity to be involved in and contribute to project activities during summer internships. A separate
implementation manual for these programs will be developed by the GAVS and approved by MOFALI and
the World Bank. The internship will be paid and the project expenditures for it will be from the operating
costs category under Component 1 of the project. The manual shall describe in detail the criteria for
eligibility, selection, and ToRs to be performed by selected summer interns along with remuneration.
Contingent Emergency Response Component
29. Mongolia remains vulnerable to climate change and severe weather events as well as sudden
animal disease outbreaks. Supporting the GoM in dealing with such disasters if and when they occur is an
important feature of the CERC. The component is designed to provide swift response in the event of an
eligible crisis or emergency, by enabling the Government to request the World Bank to reallocate project
funds to support the emergency response. Before the implementation of the contingent emergency
response activities under Component 4 of the project, the recipient shall prepare and furnish to the World
Bank for its review and approval a C-PIM. In addition to the detailed institutional and implementation
arrangements and criteria for activating the CERC, the manual shall include the description of specific
activities which may be included in the emergency response part, eligible expenditures required therefor
(‘emergency expenditures’), and any procedures for such inclusion as well as FM arrangements and
documentation required for withdrawals of the emergency expenditures. Consequently, the FM and
disbursement procedures for the emergency response part under the project shall follow the relevant
provisions stated in the C-PIM. The CERC will be audited as part of the audit of the original project.
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The World Bank
ANNEX 5: ENVIRONMENTAL SAFEGUARDS
1. Environmental Assessment - OP/4.01. Activities related to livestock and animal health may
involve animal welfare issues, construction or rehabilitation of checkpoints, veterinary facilities,
laboratory and diagnostic infrastructure, and use of biocides or disinfectants. Fodder production and value
chain-related activities (meat and dairy processing) aim to increase agro-processing capacity and primary
agricultural production. These activities could involve converting pastureland to farmland and building or
rehabilitating basic irrigation systems, greenhouse, storage, and processing facilities. Fodder production
could require use of pesticides. The project is expected to bring about positive environmental and social
impacts in terms of more sustainable animal husbandry practices (including better animal welfare
practices), water conservation, reduced burden on pastures, increased food safety, and livelihood
improvement. However, the project may bring adverse impacts, anticipated potential environmental
issues include the following:(a) whether intensified livestock farming will exacerbate overgrazing and
pasture degradation which is already a severe issue in Mongolia and animal welfare caused issues by
intensified production; (b) small-scale construction-related nuisance, dust, noise, waste and wastewater,
safety concerns, and soil erosion; (c) transportation, use, and disposal of pesticides and chemicals and
their packaging materials; and (d) increased use of water, solid waste, air emissions, and wastewater
management during operation.
2. It is also noted that the production organizational model in Mongolia is very basic. The project
aims to support household or cooperative-level production activities. The abovementioned activities and
associated impacts are not expected to be significant. The project is classified as Category B according to
OP 4.01 because the anticipated impacts are mostly localized, limited, and temporary and can be avoided
or minimized with readily available measures. Specific subprojects or activities will be selected in eight
aimags during implementation. Hence, an ESMF was prepared in accordance with national and World
Bank safeguard requirements, which will guide the environmental and social screening and subsequent
assessment of subproject activities. Site-specific EMPs will be prepared during project implementation,
following the ESMF.
3. Key aspects to be covered in the ESMF include (a) an overview of the types of subprojects to be
assessed, (b) the environmental and social screening criteria, and (c) the possible range of subproject-
specific instruments that will be prepared once the project/subproject locations and other details are
identified and decided during implementation. It is expected that no Category A type of subproject will be
eligible for the project financing; a legal and regulatory framework that provides an assessment of
Mongolia’s national laws pertaining to the project and applicable to World Bank safeguard policies;
environmental and social baselines that cover various physical, ecological, ambient environmental quality,
and social aspects pertaining to the project; and an initial assessment and of potential environmental and
social impacts associated with proposed project activities and development of mitigation measures, that
is, food safety impacts and management, animal welfare issues, and antibiotics use in line with World
Health Organization/OIE recommendations will be provided. The World Bank Group Environmental,
Health, and Safety (EHS) Guidelines for annual crop production, livestock production, dairy processing,
and meat processing were referenced and applicable measures were incorporated. Where necessary,
regulations and procedures will be aligned with the recommendations of the OIE’s PVS tool to put in place
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risk-based surveillance and management frameworks for animal health and food safety. Likewise, it will
also discuss a slew of animal welfare issues related to access to pastures, animal breeding, animal housing,
animal health, painless slaughter, and animal and human interaction. Procedures to address
environmental and social impacts include screening for subproject environmental and social impacts;
development of safeguards instruments; public consultation and information disclosure of subproject
safeguard instruments; review and clearance of safeguard instruments; implementation, supervision,
monitoring, and reporting; project implementation arrangements, responsibilities, and capacity building;
public consultation and information disclosure of this ESMF; and the GRM.
4. The ESMF covers the safety issues comprehensively. These include worker safety during
construction activities and accidents and exposure to electricity shocks during construction. The World
Bank Group Environmental, Health, and Safety Guidelines for annual crop production, livestock
production, and dairy processing and meat processing industries were referenced and applicable
measures were incorporated. Construction companies will provide training to workers and will follow
Mongolian national occupational health and safety (OHS) standards, which require basic protection such
as necessary protective equipment. In addition to local OHS standards, OHS requirements defined by the
World Bank Group general EHS standards will also be followed (such as OHS risk assessments and OHS
management plans; contractors responsibility to develop, implement, and monitor its effectiveness). The
occupational health issues related to waste disposal from laboratories, exposure of laboratory personnel
to zoonotic infections, exposure to zoonotic for herders and workers working in meat processing factories,
intensive animal raising feedlots, and so on were incorporated into the ESMF. The PMP of the ESMF also
includes the measures to manage the risks of pesticides use. Community safety was considered and
covered by the ESMF, including traffic management around communities and for value chain-related
activities. All safety-related issues are also included in the training plan of the ESMF.
5. Natural Habitats - OP 4.04. The project-supported activities may involve conversion of

pastureland to farming land and intensified livestock farming. Thus, the policy is triggered. Considering
that overgrazing and pastureland degradation is already a severe issue in Mongolia, the ESMF gives special
attention to the assessment of the pastureland-carrying capacity. It also lays out specific requirements for
the project to identify any ecologically sensitive areas such as strictly protected areas, national parks,
nature reserves, national cultural and historical monuments, locally protected areas, and screening for
specific subprojects/activities to avoid or minimize any impacts on natural habitats.
6. Pest Management - OP 4.09. The project will not procure or supply any pesticides. However,
pesticides may be used by the improved fodder production activities. A generic PMP was developed and
included in the ESMF to address integrated pest management requirements. The PMP describes a range
of pest and disease control and management methods and the scope of the recommended application
under various conditions. The PMP also provides a list of pesticides and herbicides that may be required
under the project in compliance with the World Health Organization’s recommended categories.
Meanwhile, the PMP includes detailed provisions for training of project stakeholders and a monitoring
program.
7. The PMP proposes necessary activities to avoid, minimize, and mitigate potential risks and
negative impacts of using and distributing pesticides and provide relevant guidance. The proposed
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The World Bank
mitigation measures consist of, among others, (a) promoting practices which reduce risks in the handling
of pesticides and avoid/minimize adverse effects on humans and the environment; (b) promoting IPM to
reduce the use of toxic pesticides; (c) providing training and capacity building for local farmers and
governmental agencies in controlling and monitoring pesticide distribution, usage, storage, and
transportation; (d) introducing biological and botanical pesticides and encouraging and promoting the
development of alternatives for reducing risks such as biological control methods and techniques, non-
chemical pesticides, and pesticides of low risk to humans and the environment; (e) strengthening
monitoring; and (f) reinforcing regulatory aspects. The PMP also specifies the institutional arrangement,
monitoring requirements, and the budget for the PMP implementation.
8. Key stakeholders of the project were identified during the preparation of the project, which
include local government agencies, herders and herder organizations, livestock producers, agro-
processing enterprises, service providers in the livestock sector, and private sector partners in eight
selected aimags where the project will be implemented.
9. Public consultation with the key stakeholders was undertaken during August 23–30, September
11–17, and October 15–17, 2019, with project information disclosed before or during the public
consultation. To enhance positive and long-term environmental benefits of the project, the ESMF
incorporated countermeasures to address the concerns of the key stakeholders consulted. Mitigation
measures to the identified adverse impacts have been integrated into the project design, construction,
and operational plans. With implementation of the proposed mitigation measures, the potential adverse
impacts will be avoided, eliminated entirely, or mitigated to an acceptable level.
10. In accordance with the World Bank’s Access to Information policy, on October 19, 2019, the ESMF
in Mongolia was disclosed in the project areas and on the websites of the relevant government agencies
and made accessible at MOFALI. The ESMF was also disclosed on the World Bank’s website on November
4, 2019.
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ANNEX 6: TEAM COMPOSITION
Name Title Role Unit

Sitaramachandra Machiraju Senior Agribusiness Specialist Task Team Leader SEAAG
Gerelgua Tserendagva Procurement Specialist Procurement EEAR1
Erdene Ayush Financial Management Specialist Financial Management EEAG1
Yiren Feng Senior Environmental Specialist Environment Safeguards SEAE1
Aimin Hao Social Development Specialist Social Safeguards SEAS1
Thui Ha Le Associate Counsel Legal LEGES
Jigjidmaa Dugeree Senior Private Sector Specialist Value Chains EEAC1
Mekbib Haile Young Professional Monitoring & Evaluation SEEAG
Erdene Ochir Badarch Operations Officer Social Development SEAS1
Tam Thi Do Program Assistant Team Support SEAAG
Arailym Murat Team Assistant Team Support EACMF
Vikas Choudhary Senior Agricultural Specialist Peer Review SAFA3
Artavazd Hakobyan Senior Agriculture Economist Peer Review SCAAG
Franck Cesar Jean Berthe Senior Livestock Specialist Peer Review SAGGL
Extended Team - FAO
Xueming Liu Senior Project Economist Economic Analysis FAO
John Weaver Consultant Livestock Health Expert FAO
Enkh-Amgalan Ayurzana Consultant Agriculture Policy Expert FAO
Debaraj Behera Consultant Productive Partnerships FAO
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The World Bank
ANNEX 7: MAP
Page 92 of 92

Mongolia Livestock Commercialization Project

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Report No: PAD3517

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

IN THE AMOUNT OF SDR 21.80 MILLION

LIVESTOCK COMMERCIALIZATION PROJECT

NOVEMBER 21, 2019

Agriculture and Food Global Practice

(Exchange Rate Effective October 10, 2019)

Currency Unit = Mongolian Tugriks (MNT)

AIRS Animal Identification and Registration System

Mongolia Livestock Commercialization Project

Project ID Financing Instrument Environmental Assessment Category

Financing & Implementation Modalities

[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country

[ ] Project-Based Guarantee [ ] Conflict

[ ] Alternate Procurement Arrangements (APA)

Expected Approval Date Expected Closing Date

Bank/IFC Collaboration Joint Level

Proposed Development Objective(s)

Component Name Cost (US$, millions)

Animal Health Services 20.00

Value Chain Commercialization 8.00

Project Implementation Support 2.00

Contingent Emergency Response Component 0.00

PROJECT FINANCING DATA (US$, Millions)

Total Project Cost 38.00

of which IBRD/IDA 30.00

World Bank Group Financing

International Development Association (IDA) 30.00

Counterpart Funding 8.00

IDA Resources (in US$, Millions)

Credit Amount Grant Amount Guarantee Amount Total Amount

Mongolia 30.00 0.00 0.00 30.00

Total 30.00 0.00 0.00 30.00

Expected Disbursements (in US$, Millions)

WB Fiscal Year 2020 2021 2022 2023 2024 2025 2026

Annual 0.45 2.03 2.85 5.01 8.56 10.28 0.82

Cumulative 0.45 2.48 5.33 10.34 18.90 29.18 30.00

Practice Area (Lead) Contributing Practice Areas

Climate Change and Disaster Screening

Does the project plan to undertake any of the following?

SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)

Risk Category Rating

1. Political and Governance  High

3. Sector Strategies and Policies  Substantial

4. Technical Design of Project or Program  Substantial

5. Institutional Capacity for Implementation and Sustainability  High

7. Environment and Social  Moderate

10. Overall  High

Does the project require any waivers of Bank policies?

Safeguard Policies Triggered by the Project Yes No

Projects on International Waterways OP/BP 7.50 ✔

Sections and Description

The Recipient shall:

Sections and Description

Sections and Description

Sections and Description

Sections and Description

Sections and Description

Sections and Description

1 China accounts for about 90 percent of the country’s exports.