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1 Document of The World Bank FOR OFFICIAL USE ONLY Report No: AM PROJECT APPRAISAL DOCUMENT ON A PROPOSED CREDIT IN THE AMOUNT OF SDR 4.4 MILLION (US$6.25 MILLION EQUIVALENT) TO THE REPUBLIC OF ARMENIA FOR A AVIAN INFLUENZA PREPAREDNESS (AIP) PROJECT AS PART OF THE GLOBAL PROGRAM FOR AVIAN INFLUENZA (GPAI) May 1,26 Environmentally and Socially Sustainable Development Unit Europe and Central Asia 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.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective March 31,26) Currency Units = Armenian Dram (AMD) AMD455 = US$1 FISCAL YEAR January 1 - December 3 1 ABBREVIATIONS ANI) ACRONYMS AI AIP APL ASEAN BSL CDC CE DIVA EA ECDPC EMP ERA ERL FA FMR GDP GF-TAD GPAI HIV/AIDS mai H5N1 HSMP ICB ILI IMTF JSDF LDCC Avian Influenza Avian Influenza Preparedness Adaptable Program Loan Association of Southeast Asian Nations Bio-Safety Level US Center for Disease Control Catastrophic Events Differentiation of infected from vaccinated Animals Environmental assessment European Center for Disease Prevention and Control Environmental Management Plan Emergency Recovery Assistance Emergency Recovery Loan Food and Agricultural Organization Financial Management Report Gross Domestic Product Global Framework for Progressive Control of Trans-boundary Diseases Global Program for Avian Influenza and Human Pandemic Preparedness and Response Human Immune-deficiency ViruslAcquired Immune Deficiency Syndrome Highly pathogenic avian influenza Avian Influenza A virus subtype H5N 1 Health Systems Modernization Project International Competitive Bidding Influenza-like illness Inter-Ministerial Task Force Japanese Social Development Fund Local Disease Crisis Centers MAP MDTF MOA M&E MONP MOH NAPA NARES NCB NDCC OIE OP POM PP NGO San-Epid Multi-country APL Multi-Donor Trust Fund Ministry of Agriculture Monitoring and Evaluation Ministry of Nature Protection Ministry of Health National advance purchase agreements National Agricultural Research and Extension Systems National Competitive Bidding National Disease Crisis Center World Organization for Animal Health Operational Policy Project Operational Manual Procurement Plan Non-governmental organization State Hygiene and Anti-Epidemic Inspectorate SARS Severe Acute Respiratory Syndrome SOE TCP TF TF UNDP VMI VSI WAHIS Statement of Expenditures Technical Cooperation Program Task Force Trust Fund United Nations Development Program Veterinary Marz Inspection Veterinary State Inspection World Animal Health Information System Vice President: Country Managermirector: Sector Manager: Task Team Leader: Shigeo Katsu Donna Dowsett-Coirolo Juergen Voegele Mark R. Lundell

3 ARMENIA AVIAN INFLUENZA PREPAREDNESS PROJECT CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE Global regional and national sector issues... 1 Rationale for Bank involvement... 4 B. PROJECT DESCRIPTION Lending instrument... 5 Project development objective... 5 Project components... 5 Lessons learned and reflected in the project design Alternatives considered and reasons for rejection C. IMPLEMENTATION Partnership arrangements Institutional and implementation arrangements Monitoring and evaluation of outcomeslresults * 4... Sustainability Critical risks and possible controversial aspects Main credit conditions D. APPRAISAL SUMMARY Economic analysis Technical Fiduciary Environment and social aspects Safeguard policies Policy Exceptions and Readiness Annex 1: Ten things you need to know about pandemic influenza (WHO. 14 October 25) Annex 2a: Summary and Review of the Avian Influenza Action Plan. 26

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5 of the Republic of Armenia Annex 2b: Organization of the Veterinary Services and the Health Care System in the Republic of Armenia Annex 3: Results Framework and Monitoring Annex 4a: Detailed Project Description... 4 Annex 4b: Culling and Compensation Procedures Annex 5: Project Costs Annex 6: Implementation Arrangements Annex 7: Procurement, Financial Management, and Disbursement Arrangements Annex 8: Economic Analysis Annex 9: Safeguard Policy Issues Annex 1: Project Preparation and Supervision Annex 11: Documents in the Project File... 8 Annex 12: Statement of Loans and Credits Annex 13: Country at a Glance Annex 14: IBRD

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7 Date: May 1,26 Country Director: D-M Dowsett-Coirolo Sector ManagerDirector: Juergen Voegele Project ID: PO99832 Lending Instrument: Emergency Recovery - Credit ARMENIA AVIAN INFLUENZA PREPAREDNESS PROJECT PROJECT APPRAISAL DOCUMENT EUROPE AND CENTRAL ASIA ECSSD Project Financing Data [ ]Loan [XI Credit [ 3 Grant [ ] Guarantee [ ] Other: Team Leader: Mark R. Lundell Sectors: General agriculture, fishing and forestry sector (5%); Health (5%) Themes: Natural disaster management (P);Other communicable diseases (P);Rural policies and institutions (S);Other environment and natural resources management (S) Environmental screening category: Partial Assessment For LoanslCreditslOthers: Total Bank financing (US$m.): 6.25 Proposed terms: Standard IDA charges and terms of 4 years maturity including 1 years grace Financing Plan (US$m) Source Local Foreign Total B O ~ O ~ ~ C ~ ~ N T INTERNATIONAL DEVELOPMENT AS SOCIATION US: AGENCY FOR INTERNATIONAL DEVELOPMENT (USAID) JAPAN: MINISTRY OF FINANCE PHRDGWTS Total: Borrower: Republic of Armenia Armenia Responsible Agency: Ministry of Agriculture Government Building No. 3 Yerevan, 3751 Armenia Tel: t , Fax: Ministry of Health Government Building No. 3

8 Yerevan, 3751 Armenia Tel: Fax: Does the project depart from the CAS in content or other significant respects? As part of the Global Program for Avian Influenza, this operation is of an emergency nature. It was not foreseen in the CAS, but is not inconsistent with the CAS. Does the project require any exceptions from Bank policies? Re$ PAD D.6 The only policy exception requested has been with regard to the waiver of the completion of the EA and EMP per para. 12 of OP 4.1. This waiver has been Does the project include any critical risks rated substantial or high? Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D.6 [ ]Yes [XINO [XIYes [ ] No [XIYes [ ]No [ ]yes [XINO [XIYes [ ]No [XIYes [ ]No Component 1 : Animal Health will support activities on prevention, control and eradication of the HPAI. Component 2: Human Health will focus on activities to reduce the impact of HPAI by building an effective national public health response strategy and an enabling environment and the necessary resources to bring proven interventions quickly up to nationwide scale. Component 3: Public Awareness and Implementation Support will provide information and communication activities to increase the attention and commitment of government, private sector, and civil society organizations, and to raise awareness, knowledge and understanding among the general population about the risk and impact of a potential pandemic.

9 Component 4. Support to Critical Imports would finance, under Emergency Recovery Assistance (ERA) procedures, a positive list of critically needed imports identified as necessary to a response program in the event an AI human pandemic were to occur. Which safeguard policies are triggered, if any? Re$ PAD DS, Technical Annex 9 There are two safeguard issues: (i) environmental assessment for technologies to be deployed for the disposal of culled poultry and (ii) mitigation of the negative impacts of mandated culling of poultry on small scale backyard poultry producers. Overall, activities under the Project are not expected to generate any adverse environmental effects as they are focused largely on public sector capacity building and improved readiness for dealing with outbreaks of avian influenza in domestic poultry. These prevention-focused activities are expected to have a positive environmental impact as the Project's investments in facilities, equipment, and training for laboratories will improve the effectiveness and safety over existing avian influenza handling and testing procedures by meeting international standards established by the OIE. This would be reinforced by the mainstreaming of environmental safeguards into protocols and procedures for the culling and disposal of animals during AI outbreaks. Significant, non-standard conditions, if any, for: Re$ PAD C.6 Board presentation: None Loanlcredit effectiveness: (a) The Recipient has appointed the head of the Secretariat of the Inter-Ministerial Committee 1 for Avian Influenza. (b) The Recipient has appointed Project Component Coordinators with terms of reference and experience satisfactory to the Bank. (c) A Project Operational Manual, satisfactory to the Bank, has been adopted by the Recipient. Covenants applicable to project implementation: a) A disbursement condition for the Animal Health component is the adoption by the Recipient of an Environmental Management Plan satisfactory to the Bank. b) Disbursement conditions for the Compensation Fund sub-component are that: (i) the Compensation Fund has been established in a manner satisfactory to the Bank; (ii) the compensation Procedures Manual, satisfactory to the Bank, has been adopted by the Recipient; and, (iii) the Compensation Fund payments are being made in accordance with criteria and procedures set forth in the Compensation Procedures Manual. c) A disbursement condition for the poultry restructuring co-financing grants is that the Poultry Restructuring Sub-projects are being selected and implemented in accordance with criteria and procedures set forth in the Project Operational Manual. d) A disbursement condition for the Critical Imports component is that the Recipient has declared a national emergency on avian influenza and adopted a well-defined emergency recovery program satisfactory to the Bank.

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11 A. STRATEGIC CONTEXT AND RATIONALE 1. Global regional and national sector issues (a) Introduction 1, The continuing outbreaks of highly pathogenic avian influenza (HPAI), which begun in late 23 in several Southeast Asian countries and have occurred more recently in Central Asia, Europe, the Middle East, and recently Africa, have been disastrous to the poultry industry in the two regions and have raised serious global public health concerns. As of February 26, nearly 2 million domestic poultry had either died or been destroyed, and economic losses to the Asian poultry sector alone are estimated at around $1 billion. Of the 17 people known to have been infected by the disease in seven countries, 92 have died, These recent increases in the number of known cases of avian influenza (AI) transmission have raised concerns over the potential emergence of a pandemic, which could have devastating effects on human health and livelihoods. 2. It is impossible to anticipate when the next influenza pandemic may occur or how severe its consequences may be. On. average, three pandemics per century have been documented since the 16th century, occurring at intervals of 1-5 years. In the 2th century, pandemics occurred in 1918, 1957 and The pandemic of 1918 is estimated to have killed almost 5 million people in eighteen months, with peak mortality rates occurring in people aged 2-45 years. The pandemics of 1957 and 1968 were milder, but many countries nevertheless experienced major strains on health care resources. If a major pandemic were to appear again, similar to the one in 19 18, even with modem advances in medicine, an unparalleled toll of illness and death could result. Air travel might hasten the spread of a new virus, and decrease the time available for preparing interventions. Countries health care systems could be rapidly overwhelmed, economies strained, and social order disrupted. Through interventions as proposed in this Project, and in collaboration with other national and international partners, it should be possible to minimize a pandemic s consequences in Armenia through advance preparation to meet the challenge. (b) Key Issues 3. A coordinated global response to HPAI should involve three types of strategic activities: (i) preventing the occurrence and spread of the disease in domesticated animals, thus lowering the virus load in the environment, (ii) preventing andlor mitigating the effects of an outbreak in humans, and (iii) in the event of a pandemic, helping affected populations cope with its effects. This response should entail immediate measures while ensuring that these measures fit within a coherent longer-term strategy with respect to both animal and human health considerations. Key issues that have been identified in formulating this response include: e a Prevention and control of avian influenza is multi-sectoral in nature. It involves many players, including those in the areas of health, agriculture, environment, economics, and finance among others. At the country level, in particular, an integrated, multi and inter-sectoral response is needed based on shared objectives. Responses must address both the animal health and human health dimensions and also appropriate social measures (quarantines, transport restrictions, mass communication strategies). The risk of a human pandemic is real. The H5N1 strain currently affecting over twenty countries has proven highly fatal to humans. The risk that a pandemic virus will emerge depends on opportunities for human exposure and infection, which will persist as long as the H5N1 virus continues to circulate in animals. With the present situation, the potential of the HPAI virus to 1

12 become transmissible among humans needs to be a serious concern. If the virus adapts itself to human-to-human transmission, lives may be threatened on a large scale. The geographic coverage of a response should be determined by both immediate and anticipated needs. Asia is today the most affected region, but the disease has spread to other areas of the world at an alarming rate and recent scientific evidence indicates that wild birds play a role in the spread of the virus from one country or region to another. The response should, therefore, combine control measures in countries where the virus has been already detected, with prevention measures in countries at risks (countries neighboring infected countries andor in migratory bird fly way paths). A minimum level of preparedness is essential in all countries. An appropriate balance between short and long-term actions needs to be taken. Immediate action is needed in a number of areas. The immediate to short-term objective is to reduce the risk to humans by preventing further spread of HPAI in those countries that are currently infected. The long-term vision of the strategy is to minimize the global threat and risk of HPAI in domestic poultry and humans, through progressive control and eradication of HPAI. Achieving this goal will diminish the global threat of a human pandemic, stabilize poultry production, enhance a robust regional and international trade in poultry and poultry products, increase human and food safety, and prevent the erosion of the livelihoods of the rural poor. Global and regional aspects of the response need to be addressed and coordinated. Actions to secure borders and control international tradeltravel in the event of a pandemic, as well as measures to limit the effects of disease transmission by migratory birds, are trans-boundary issues requiring regional andlor international coordination. Global and regional efforts should build on existing mechanisms such as the joint OIElWorld Bank initiative for the Prevention and Control of Global Emerging and Re-emerging Diseases of Animal Origin, and the joint Global Framework for Progressive Control of Transboundary Animal Diseases (GF-TADs), a joint FAOlOIE initiative and regional organizations such as the Association of Southeast Asian Nations and South Asian Association for Regional Cooperation. 4. The FAOIOIE s Global Strategy. The long-term vision of the strategy prepared by FA and OIE in collaboration with WHO is to minimize the global threat and risk of HPAI in humans and domestic poultry, through progressive control and eradication of HPAI, particularly that caused by H5N1 virus, from terrestrial domestic poultry. The global strategy is being implemented over three time frames: immediate to short (1-3 years), short to medium (4-6 years) and medium to long-term (7-1 years). During this period the spread of HPAI, mainly of the H5N1 strain, will have been progressively controlled in domestic poultry of all infected countries, and prevented from affecting those countries not currently infected, but at high risk. The strategy originally prepared to control HPAI in Asia is being revised by FA and OIE to take into account the current spread on the disease outside Asia. The strategy will be complemented by more detailed country specific HPAI control plans. FAOlOIE have also issued specific recommendations for avian influenza and OIE has recently issued recommendations for each region, in addition to its standards and guidelines provided for the prevention and control of HPAI in animals. 5. The Recommended Strategic Action plan prepared by WHO for Responding to the Avian Influenza Pandemic Threat lays out activities for individual countries, the international community, and WHO to prepare for a pandemic and mitigate its impact. The objectives of the plan correspond to the opportunities and capacities to intervene and are structured in three phases: (i) pre-pandemic - supporting the FAOIOIE s control strategy and increasing collaboration between animal and health services; (ii) emergence of a pandemic - containing or delaying spread at the source; and, (iii) pandemic declared and spreading internationally - reducing morbidity, mortality and social disruption and conducting research to 2

13 guide response measures, WHO has also prepared a global plan, guidelines for pandemic preparedness, and a model country plan that will allow countries to assess their state of preparedness and identify priority needs. 6. The Bank has developed a global facility through a multi-country adjustable program loan (MAP). In parallel, the Bank is presently establishing with the EU, WHO and FAOIOE, and bilateral donors a multi-donor trust fund (TF) that primarily supports country level activities in conjunction with a smaller and complementary role at the regional and global level. (e) The regional dimensi~n 7. Cases of avian flu have already occurred in several countries, including most recently in Western Europe (Germany, France, and the UK) after having appeared in October 25-January 26 in Croatia, Romania, Ukraine, Greece, and Turkey. The earlier (mid-25) Russian outbreak of HPAI H5N1 has to date affected six administrative regions, beginning in the Ural Mountains and moved west to within 2 km of Moscow. In the first three weeks of August 25, outbreaks in poultry of HPAI H5N1 were reported in four regions of northern and central Kazakhstan. Other countries in the Balkan peninsula and the Caucasus are at risk due to their proximity to two main flyways, the East Afiica-West Asia Flyway, which crosses Turkey, and the Central Asia Flyway, Both flyways cross-areas in North-eastern Europe, where avian influenza in wild and domestic fowl has been diagnosed. From a geographical point of view, Central Asian countries represent a vast area in which introduction of AI is likely to occur, and where the sensitivity of the system for early detection of HPAI is low. (d) The national dimension 8. Veterinarv Services Situation Being on a major migratory bird flyway and with outbreaks in a number of neighboring countries (Turkey, Azerbaijan, and Iraq), Armenia is now clearly faced with the threat of avian influenza. In reaction to this threat, the Ministry of Agriculture (MOA) established on October 31, 25 an Inter-Ministerial Task Force on Avian Influenza to coordinate nationwide measures to combat the potential spread of AI in Armenia. Soon thereafter the MOA developed with the MOH an Action Plan for AI which specifies measures they have targeted. On January 19, 26, the Government drafted a broader National Strategy for AI to be implemented by an Inter-Ministerial Committee on AI, to which the Inter-Ministerial Task Force reports. In line with this National Strategy for AI, and in order to prevent the incursion of AI into the country, the Government has prohibited the import of poultry and poultry products from the countries that have reported H5N1 outbreak cases. Transportation means are being compulsorily disinfected at the border checkpoints, and veterinary services continually check dead birds in order to clarify the causes of their death. In addition, under the national law on Veterinary affairs, the Veterinary State Inspection has within the scope of its functions the responsibility to implement: prevention activities referring to the incursion of quarantinable, specifically dangerous notifiable animal diseases; anti-endemic and veterinary-sanitary activities for the prevention, treatment and eradication of infectious and non-infectious animal diseases; the processes of veterinary services related to protecting the population from general diseases for humans and animals; and, veterinary-sanitary inspection of food products, raw materials, fodder and additives of animal origin, and veterinary drugs, as well as of inspection of supervision of animal carcass eradication. 9. Presently, the following veterinary subdivisions act within the structure of the Ministry of Agriculture: 3

14 e Veterinary State Inspection - 1 division (6 people); Border control veterinary points of state veterinary inspection - 8 divisions (12 people); Marz inspection department of state veterinary inspection divisions (1 1 people); Regional inspectors - (38 people); Veterinary anti-epidemic and diagnostic republican center - 1 division (92 people); Group for serological monitoring - 1 division (4 people); and, Veterinary anti-epidemic and diagnostic republican center personnel in marzes. 1. At the marz level these personnel typically include a virologist, a serologist, and four or more veterinary service staff. Overall there are 757 community veterinarians in 92 communities, as well as private veterinarians. Veterinary service personnel are insufficiently equipped and do not have enough capacity for diagnostics and disinfections. Depending on the marz, regional veterinary and border control points lack complex veterinary laboratories and make it highly improbable to resist the spread of AI in case it appears in the country. In order to organize and implement effective measures against the spread of AI, supplemental financial resources are clearly needed. 11. Reported cases of AI outbreaks in Turkey, Russia and other nearby countries have created concern among the population that have resulted in decreased consumption of poultry products and negatively impacted producers. This negative impact has been particularly pronounced among the largescale closed cycle enterprises which market through urban stores, because this is the source of most commercial sales. These producers are carrying out active advertising market campaigns in order not to lose their market. Ironically, backyard poultry producers that sell their production in open markets (with dubious veterinary permission) seem to have been impacted less to date (though this may change as open market trade of live animals is increasingly banned). 2. Rationale for Bank involvement 12. HPAI control programs require a multi-disciplinary approach to integrate technical, social, economic, political, policy, and regulatory issues in addressing a complex problem. The Bank is well placed to build upon its knowledge base on multi-disciplinary approaches needed in the proposed Project, which draws on evidence and lessons learned in the various regions regarding emergency preparedness responses and multi-disciplinary approaches. The Bank s experience in multi-sectoral, emergency response, and risk-mitigation projects gives it considerable qualifications in bringing together the relevant ministries, government agencies, and the donor community in Armenia, in understanding and addressing the social and economic impact, and in assuring high level political coordination. 13, Given the Bank s work with FAO, WHO, OIE, EU and other partners in country and at the international level to address both preparedness and outbreaks and to assist with institutional assessments, the Bank can assist Armenia in leveraging additional resources from other international and bilateral agencies. In addition to its financial role, the technical assistance provided by the Bank has been important in similar global or regional emergency situations such as SARS, Tsunami relief, and HIVIAIDS. The Bank s national and regional support is closely linked with the activities of FAO, WHO, OIE, and the EU, and the proposed Project is fully consistent with, and draws heavily on, the global strategies proposed by FA and WHO and the field assessments executed by them in Armenia in February-March 26. 4

15 B. PROJECT DESCRIPTION 1. Lending instrument 14. The proposed Project is supported by the Bank's multi-country adaptable program loan (MAP) instrument, similar to the instrument already used to support the HIVfALDS' efforts in Africa and the Caribbean. The funds supplied fiom the MAP for the Global Program for Avian Influenza (GPAI) will complement activities supported by other international organizations and donor agencies and help ensure the availability of adequate resources to fund the priority investments and technical assistance which Armenia has identified as critical needs in implementing its response to HPAI. Funds under the GPAI are available to countries which have demonstrated satisfactory preparation to implement an expanded response by preparing a project which has the following characteristics: a) a national strategc plan showing understanding of the issues and goals for addressing them; b) national commitment and leadership, including well structured implementation arrangements; c) an implementation strategy that includes program execution through multiple ministries and through non-governmental organizations (NGOs), community groups and civil society organizations; and, d) clearly defined institutional arrangements for, and readiness to initiate, monitor and evaluate project progress and impact. 15. Credit Processinrr. The credit is being processed as an emergency investment operation using procedures under OP Emergency Recovery Loan (ERL) Procedures. However, the credit still meets all applicable Bank policies, practices and standards as discussed below. 2. Project development objective 16. The overall objective of the Project is to minimize the threat in Armenia posed to humans by HPAI infection and other zoonoses in domestic poultry and prepare for the control and response to an influenza pandemic and other infectious disease emergencies in humans. To achieve this, three areas will be supported (i) prevention, (ii) preparedness and planning and (iii) response and containment. Achieving these goals will contribute to diminishing the risk and burden of disease and loss of productivity in Armenia, limiting the regional spread of HPAI, and enhancing economic and social prospects at the national, regional, and global levels. 3. Project components 17. The Project will finance activities under four components: (i) animal health, (ii) human health, (iii) public awareness and implementation support; and, (iv) critical imports. Given the urgency of the situation, and a financing gap identified during program preparation of roughly US$2.5 million, the project team reached agreement with GOA counterparts during the appraisal of the project that the focus of the current project would be primarily on activities able to be completed during the first two years of project implementation (through mid-28). Thus, a reduction of roughly US$2.5 in project scope was achieved by paring back some medium-tern activities. If sufficient additional parallel financing were not forthcoming from other multilateral and bilateral sources over the course of 26, these pared back activities could possibly be covered in a second phase of the AI program in Armenia through a supplemental IDA credit (and corresponding government budget funds) to be agreed on in the future. 5

16 COMPONENT 1 - ANIMAL HEALTH 18. The Project will support activities to cover the needs in the short to medium-term, and rangmg from prevention, to control and eradication of HPAI, which have been based on an assessment of the particular conditions, constraints and possibilities in Armenia (including a rapid assessment of veterinary services and recent assessments of the poultry sector by the FAO). These activities fall into the main components and sub-components described below and total US$5.55 million. A. National Policy Framework and Development of a National Strategic Plan Al: Policy development and enabling environment. The Project activities support will include strategy development and the improvement of the regulatory framework to address key policy issues and ensure that disease control, prevention and eradication measures are implemented in a uniform and effective way in accordance with OIE standards and guidelines. It will support definition of disease control options and reviews of existing regulations and policies and fund related policy studies, strategy development and dissemination workshops. The main short-term outputs will be a detailed assessment of the capacity of MOA veterinary services and an elaboration of the AI Action Plan of the MOA and the MOH and National Strategy for AI into a strengthened national strategic plan for AI. Poultry sector compensation and restructuring studies and a veterinary monitoring and information system will also be supported. (US$.18 million) A2: Updating Essential Information on Migratory Birds. Flight and rest patterns of certain species of migratory birds, as they concern the territory of Armenia, are likely to have changed since the extensive studies carried out in the 197s and 198s, because of significant development of irrigation facilities, ponds, etc., in the southern oblasts. The project will finance an immediate effort to update this critical information, so as to identify hot spots and high-risk locations where migratory fowl may come into contact with domestic poultry. (US$.7 million) B. Strengthening Disease Surveillance and Diagnostic Capacity Sub-component B1: Strengthening Animal Disease Surveillance and Diagnostic Capacity. Project support in this area will aim at strengthening the capacity of the MOA Veterinary State Inspection PSI) and its affiliated reference and regional diagnostic laboratories in detection, reporting and follow-up of reported AI cases. This will cover the immediate formation and equipping of a Bio-Safety Level 3 (BSL3) central laboratory in Yerevan, as well as office equipment and rehabilitation of marz laboratories and border posts. Rapid test kits and consumables will be funded for the central laboratory, sprayers and disinfection means for the border posts, and vehicles for the VSI and marz levels as needed for the execution of their relevant roles in the National Strategy for AI. (USS2.61 million) B2: Veterinary Services Training. Training will target the personnel of the MOA VSI, including those of the marz level and border posts. The focus of the training will be on disease surveillance (screening, sampling, and testing), outbreak management procedures (including simulation exercises, culling and disposal), and laboratory diagnosis (including analysis of epidemiological data and performance of risk assessments). Increased risk-based AI surveillance activities will also be supported at the marz level, coordinated through the VSI central laboratory. (US$.16 million) C. Outbreak Containment Plan 19. The sub-component will provide support to activities related to the implementation of the MOA responsibilities under the National Strategy for AI which details the containment plan for AI outbreaks. 6

17 The National Strategy for AI details the roles of the National Center (NC) of the MOA, the Local Disease Crisis Centers (LDCCs) set up on the basis of marz and raion-level Veterinary Inspection and Marz Agricultural Departments, and National and Local Expert groups. The sub-component will include the following activities. C1: Targeting virus eradication at the source. Early detection and reporting, as well as rapid response, depend critically on the incentives for poultry owners to report very quickly any sick and dead poultry to their veterinarians. For this to happen, adequate compensation arrangements are absolutely essential. In order to target the eradication of the disease at the source of infection, the Project will target the following activities over the short-to medium-term: (i) culling of infected and at-risk poultry and compensation to farmers and producing companies at a reasonable (75% share) of market price; and (ii) disposal of carcasses and potentially infective materials in a bio-secure and environmentally acceptable manner (using a mobile incineration plant and a rehabilitated and expanded network of bio-thermal holes). The Government's National Strategy for AI makes reference to the right of poultry owners to receive compensation for damages suffered as a result of mandatory culling, but no steps have been taken as yet to develop the required implementation arrangements - including financing, institutional arrangements, legal authority over the fund, fiduciary aspects, eligibility criteria, payment arrangements, flow of funds, etc. Thus, the project will also provide technical support to develop these required implementation arrangements, which will be specified in a Compensation Procedures Manual. (US$ 1.68 million) Policies associated with virus eradication that the Government of Armenia is developing and would trigger in outbreak areas include: enhanced bio-security at poultry farms and associated premises, through bio-containment and bioexclusion, and control of movement of birds and products that may be infected, including controls at the interface of infectednon-infected areas and border controls. C2: Veterinary personnel safety. Due to the highly pathogenic nature of the HPAI virus to humans, particularly the currently circulating H5N1 strain, this activity of the project would provide biosafety hoods and other appropriate personal protective clothing support (over a three year period) to veterinary personnel to be involved in the disease surveillance and culling and disposal procedures, as well as to laboratory workers involved in virus isolation and diagnosis. (US$.2 million) C3: Restructuring the Poultry Sector. Restructuring the poultry sector in Armenia will focus on improving bio-security of backyard poultry raising and promoting manure management of backyard poultry in conformity with existing environmental regulations. Improving bio-security of backyard poultry farming could take the form of investments in improving penning of animals and closing up of barns, integration of backyard poultry activities of families into small village-level. enterprises practicing confined poultry raising, and possibly of banning unconfined backyard poultry raising in protection bands around known areas of high prevalence of migratory birds farms. This last mode would involve offering support for diversification of family enterprise away from poultry raising into other activities. Since it would be extremely costly for the state to fund widespread programs for poultry sector restructuring, the introduction of restructuring modalities will be piloted under the Project (primarily in the second and third years of the project) with matching grants to be provided under a competitive proposal submission and award process (with at least 25% co-financing by private beneficiaries). During project appraisal, a draft set of implementation arrangements was developed with the MOA. These will be elaborated as part of the Project Operational Manual and updated with the results of technical assistance to be provided under a PHRD Grant from the Government of Japan'. (US$.67 million) ' The PHRD Grant from the Government of Japan covers a wide range of technical assistance and training activities under the Animal Health component, as well as under the Human Health and Public Awareness and Implementation Support components. 7

18 COMPONENT 2 - HUMAN HEALTH 2. Following the outbreak of Avian Influenza in both humans and animals across the border with Turkey, the MOH in Armenia has been proactive in partnering with other ministries as part of the Inter- Ministerial Task Force (IMTF) that was set up in October 25 and in devising an Action Plan for AI preparedness and response in December 25. The MOH has also instituted a series of measures to mitigate the risk of introduction and further transmission of the HPAI into Armenia. Most of the measures entail activities geared towards increased vigilance in border posts, e.g., screening passengers, banning importation of poultry and its products, disinfecting incoming vehicles, immunizing high risk groups against human influenza, procuring test kits, anti-viral medicine and information, education and communication (IEC) material, and collaborating with UN agencies (WHO and UNICEF in particular). 21. In further developing this response in the public health field, an appropriate balance needs to be struck between short-term crisis responses and medium-term actions to address systemic shortcomings with respect to core public health functions. The crisis measures include actions such as strengthened logistical support, prevention through further immunization of high-risk groups, and symptomatic case management with anti-viral drugs. The medium-term measures include routine and active surveillance in areas of AI outbreaks in poultry and case finding and ascertainment through serological testing and virological sub-typing. Building an effective national public health response in the medium term will also require an enabling environment and the necessary resources to bring proven interventions up to nationwide scale. 22. Thus, the Project will help in the short-term to operationalize some elements that are contemplated as part of the global strategic plan, expanding and intensifying these responses in the medium-term, As it is unlikely that the global spread of a pandemic influenza virus could be prevented once it emerges, the emphasis is on reducing its impact. Several tools will help achieve this aim: (i) yearround surveillance; (ii) effective and accurate methods of diagnosis; (iii) social distance interventions; (iv) vaccines (once they become available); (v) anti-viral drugs; and (vi) strengthened medical services. The interventions supported under the Project are based on Armenia s epidemiological and programmatic needs, and well-assessed options for meeting them. The interventions will be grouped in three subcomponents, totaling US$2.75 million. A. Enhancing Public Health Program Planning and Coordination 23. The human health sections of the National Strategy for AI developed by the MOH are quite comprehensive in scope in covering the activities that need to be undertaken during the inter-pandemic, pre-pandemic and pandemic alert phases, clearly identifying the responsible agency for each measure at different stages of an eventual pandemic. However, the agencies in charge of implementation do not currently have the organizational and logistical means to implement the plan (i-e., trained personnel, protective gear, transport, and information and communications equipment). These are to be provided as quickly as possible under the project, In addition, it is not clear if the current legislative and regulatory framework allows for drastic measures such as social distancing and deployment of the health workforce under emergency conditions. These will be supported under the project through medium-term technical assistance, which will also target MOH to build its institutional and logistic capacity to participate in the Inter-Ministerial Committee for AI and to coordinate the implementation of the National Strategy for AI with the MOA and other sector representatives. (US$ 1.5 million) B. Strengthening of National Public Health Surveillance Systems 24. In Armenia, the State Hygiene and Anti-Epidemic Inspectorate (San-Epid) of the MOH is responsible for all disease surveillance activities. In addition to its central office, the agency has 1 8

19 regional centers and 7 centers situated in Yerevan. The existing surveillance system is organised in a vertical way following the vertical organization of health programmes. Health workers at the primary level report to the marz level for a first analysis. The aggregate data is then sent to central level. There are no standard case definitions, so notifiable diseases are reported based on each clinician s judgement. Routine surveillance data are sent on a monthly basis, while any urgent problem representing a health threat must immediately be reported to the marz level by means of paper ( emergency card ) or telephone call. Human influenza is a notifiable disease and, as such, is part of the regular surveillance activities which involves monthly reporting of all cases to the central office. However, at present there is no standard case definition-for Influenza Like Illness (ILI) nor any set criteria for more fkequent reporting in case of an outbreak. 25. In addition, diagnostic facilities are limited. The central San-Epid laboratory does not have the diagnostic capability, nor the required bio-safety level facilities for virus isolation and sub-typing. Accordingly, the MOH has designated the Genetic Centre of the National Academy of Science as the National Influenza Center. The protocols and guidelines for active case surveillance in the case of an outbreak, detection of suspect cases, case ascertainment and reporting need to be defined and adopted, as well as all the training and information, education, and communication (EC) activities that need to be carried out in order to render surveillance activities more effective. Consequently, the sub-component will support the following: improvements of laboratory networks, improvement of health information and telecommunication systems, training of personnel at MOH and other selected agencies, and development of standard reporting forms and guidelines. (US$.61 million) C. Strengthening Health System Response Capacity 26. Aggressive containment measures such as isolation if ILI and confirmed cases, and prophylactic use of antiviral drugs may slow pandemic spread and allow time for response measures. Although mass vaccination is the preferred intervention, an efficacious vaccine may not be ready andor available for use as part of a large-scale vaccination campaign soon enough to contain the pandemic. Anti-viral supply and production capacity are also limited. Thus, the project will help MOH to strengthen health system response capacity with: expanded regular seasonal flu vaccination as a vital step to prevent an outbreak among humans; anti-virals of sufficient quantity for prevention of influenza in those groups at highest risk such as poultry fanners, healthcare workers, children, those in close contact with confirmed cases, etc.; and with prophylactic and preventive equipment and supplies for patient care in the intensive care unit of the Infectious Disease reference hospital and for active case detection. This sub-component will also finance procurement of human influenza vaccines for administration to high risk populations and of new vaccines should there be available against avian influenza in humans. (US$ 1.9 million) COMPONENT 3 - PUBLIC AWARENESS AND IMPLEMENTATION SUPPORT 27. This component will support strategic communication activities for stakeholders and beneficiaries. Similarly, resources will be allocated for improved coordination between the MOA S regulatory framework and the roles of other ministries in the National Strategy for AI. A. Public Awareness through Information and Communication Services 28. Support under this sub-component will be provided for the research, design, implementation and evaluation of an integrated communications strategy, addressing the needs of priority populations at the national, marz and community levels. The strategy will elevate knowledge and promote behavior-change in populations at-risk, to control the spread of the virus, prevent infection, foster timely reporting and support containment actions. At the same time, the strategy will educate vulnerable groups on preparedness plans and mitigation measures across pre-pandemic and pandemic phases. The 9

20 communications strategy will incorporate measures called for in the Environmental Management Plan (EMP) for safe culling and disposal of backyard poultry (US$.3 1 million). B. Coordination and Implementation Support 29, The multi-dimensional problems associated with HPAI infection necessitate collaboration fiom a wide range of stakeholders within each country, which in Armenia include: the Ministry of Finance and Economy, the Ministry or Territorial Affairs, the Ministry of Nature Protection, the MOA, the MOH, their associated diagnostic laboratories, NGOs and civil society organizations, and private sector companies and associations (e.g. large poultry production companies, farmers associations, veterinarians and farmer involvement at the grass roots level). The sub-component will support activities to improve the effective coordination and collaboration among these stakeholders and to bolster project implementation and monitoring capacity at existing project implementation structures in the MOA and MOH (US$.62 million). B1. National Coordination 3. The Inter-Ministerial Committee for Avian Influenza (which supervises the work of the Inter- Ministerial Task Force for Avian Influenza) will establish a Secretariat to implement the national awareness activities described above. It will be responsible for reviewing annual work plans and ensure coordination and linkages across relevant agencies and international partners. In AI outbreak situations, it will be in charge of triggering emergency responses by MOA and MOH, monitoring the actions taken, and coordinating public statements to the media. The Secretariat will be comprised of a Director, two Science Officers (spanning animal and human health issues), and a Public Information and Communications specialist. These staff would be contracted under the project. (US$.11 million) B2. Project Implementation 3 1. The Apculture Reform Support Project Implementation Unit (ARSP PIU) of the MOA (which currently implements the Rural Enterprise and Small Scale Commercial Agriculture Development Project) and the Project Implementation Unit of the Health Systems Modernization Project (HSMP) in the MOH will be entrusted with the fiduciary tasks of procurement and financial management. The relevant structures will be strengthened with additional fiduciary staff in each Unit. Both the MOA and the MOH will appoint Project Coordinators to liaise with the ARSP PIU and MOH HSMP PIU, respectively, and to prepare annual work programs and budgets as well as semi-annual interim unaudited financial reports. The Project Coordinators will manage the respective components for which their ministry is responsible and attend the regular meeting of the Secretariat and the periodic meetings of the Inter-Ministerial Committee for Avian Influenza. The ARSP PW will be responsible for consolidating the annual work plans, budgets, and financial reports for submission to the Secretariat and the Bank. (US$.37 million) 32. At the local level, implementation would be the direct responsibility of each Marz Committee. Under marz task forces would be established under these Marz Committees and would implement the functions of Local Disease Crisis Centers (LDCCs) as noted in the National Strategy for AI. 33: Monitoring and 33. Support would be provided to enable project monitoring and impact evaluation assessments. Two types of M&E are envisaged. First, the ARSP PIU and the MOH HSMP PIU would collect relevant data fiom their ministries and other implementation agencies and then compile them into semi-annual progress The Secretariat of the Task Force will also play the role of the NDCC - National Disease Crisis Center. 1

21 reports focusing on output indicators and the status of physical implementation by component and use of project funds. For some output indicators, specific surveys will need to be conducted to obtain data for this purpose. These would be financed by the Project. As for the financial reports (noted above), the ARSP PIU will be responsible for consolidating the ministerial progress reports into an integrated Project progress report. (US$.13 million) 34. Impact evaluation reports. The aim of evaluation is to find out whether the interventions are effective or the program is having the desired impact. The evaluation will include both quantitative and qualitative aspects and be conducted on a yearly basis. The quantitative aspects will rely on new information systems and surveys implemented as part of the various components of the project, currently existing data sources, and primary evaluative data collection efforts. The goal of the qualitative aspect of the evaluation will be to document perceptions of program managers, staff, patients, and local and national leaders. Qualitative information will be collected using site-visit interviews, focus groups, and respondent surveys. COMPONENT 4 - SUPPORT FOR CRITICAL IMPORTS 35. This component would finance, under Emergency Recovery Assistance (ERA) procedures, a positive list of critically needed imports identified as necessary to a response program in the event an AI human pandemic were to occur. This list includes protective clothing and gear, pharmaceuticals and vaccines, and medical and veterinary supplies and equipment. This component may be expanded in future for other items on the positive list (as to be agreed on by the Bank in the case of a pandemic). Under ERA procedures, critical imports would be procured through organized international commodity markets (in accordance with the provisions of paragraph 2.68 of the Guidelines) or other channels of procurement acceptable to the Bank. 4. Lessons learned and reflected in the project design 36. Relevant lessons for the design of the proposed operation have been drawn from previous World BanklIDA and FAO-supported emergency recovery projects. All these experiences and lessons learned have been taken into account in the design of the GPAI. These included the Vietnam Avian Influenza Emergency Recovery Project (approved in early FY5 under OP 8.5 procedures), which was the first project that has been approved by the Bank in response to Avian Influenza. Under the GPAI, projects for Kyrgyzstan and Nigeria have been prepared and approved over December 25-March 26, and a similar project for Turkey has been negotiated. The structure and content of the projects have been consulted thoroughly in the elaboration of the Armenia AIP project. 37. The lessons learned indicate that project success depends to a large extent on the speed of the response provided and, particularly when dealing with smallholders production systems, a speedy, efficient and transparent distribution of suitable key inputs is clearly a major factor in limiting the impact of a crisis and hastening recovery. A performance audit of some of the emergency projects supported by the Bank in various regons drew the following general lessons: (i) emergency projects should avoid policy conditionality; (ii) project design must be simple and take into account a realistic assessment of the existing Borrower s capacity; (iii) a speedy appraisal and approval are crucial to provide a prompt response and a substantial contribution to project success; (iv) procurement arrangements need to be flexible and should be finalized at an early stage; (v)mitigation and prevention measures should be included in the design to minimize impacts of a possible recurrence of the disaster; and (vi)realistic assessments should be made of counterparts absorption capacity, as well as of the effective communications and coordination mechanisms among all relevant stakeholders. 11

22 38. Even though the Vietnam Avian Influenza Emergency Recovery Project has been in implementation for only about one year (effective on November 9, 24), the main recommendations arising from its implementation have been the following: (a) Preparedness is a key factor. While Vietnam had a national strategy document to control Avian Influenza in the domestic poultry population, it was not clearly understood and shared by all relevant agencies and stakeholders and some aspects of the response have been lagging behind. (b) A two-pronged strategy is recommended. This should include: (i) the control of Avian Influenza at the source in high-risk regions (through aggressive measures including culling, movement control and vaccination campaigns for poultry and ducks); and (ii) simultaneously prepare with short and medium-term measures to minimize the risks to humans and prepare for an eventual pandemic. (c) A compensation framework is an essential element to obtain real cooperation from affected stakeholders (farmerslproducers) and to ensure the efficacy of the surveillance and diagnosis mechanisms. (d) The importance of strengthening the technical, scientific and operational capacity of the relevant participating agencies should not be overlooked. The AI crisis highlighted several weaknesses in the animal health as well as public health services systems, including: poor surveillance at the local level, weak diagnostic capacity, lack of epidemiological expertise and information system, and inadequate operating budget to bear the additional costs of containing the spread of AI. (e) There is a urgent need to organize an effective national response, including all technical ministries in charge of agriculturelanimal health and human health, as well as other relevant sectors, at the national and sub-national level, in case of a human epidemic, (f) It is extremely important to raise awareness in the public and private sectors fiom the initial moments, and to strengthen effective coordination mechanisms for the implementation of the necessary technical responses, involving the Government, the donor community, the private sector and the civil society. (g) Attention should be given to support the integration of each country to a regional and global framework for the control of HPAI, and more broadly of all trans-boundary animal diseases and other emerging infectious diseases, to increase cost-effectiveness and ensure the harmonization of activities and responses 39. In terms of public health, the following relevant lessons were derived &om emergency operations: e Key data needs should be anticipated and infrastructure developed to provide information that reduces the number of assumptions ( what is not known is as important as stating what is known ). e The program should include mileposts for periodic re-evaluation, so that necessary changes can be made based on new information. e External reviews of the program should be conducted periodically to increase objectivity and improve decision-making. e Ensure that all localities are able to respond to a pandemic and implement mass vaccination programs effectively. Provide funding to regional and local levels for preparedness and infiastructure development coupled with guidance and technical support. National oversight and assistance is important to assure nationwide protection and consistency of the response. e Surveillance systems should be in place, preferably, before starting the program. Communications materials should be developed to educate health care providers and the public. 12

23 5. Alternatives considered and reasons for rejection 4. Restructure of and additional financing to existing projects. An alternative that was considered was only to restructure ongoing projects and inject financing, in the form of additional financing (a new IDA credit) to support the implementation of the activities contemplated under this Project. After considering this option, it was decided that the importance o f the issue and the need to scale-up the response at the country-level, requires additional focus and impetus to facilitate the implementation o f priority activities. A separate project option allows for the establishment of a broader policy framework and alternative mechanisms to manage resource use and monitor the implementation of activities. More specifically, a separate project allows the preparation of a multi-sectoral national plan that includes the engagement of different governmental institutions and civil society, as well as scaled up efforts to serve the entire population. This will also facilitate advocacy and communication to mobilize political support at the highest political level needed for mounting effective and sustainable prevention and control efforts. C. IMPLE~ENTATION 1. Partnership arrangements 41. The Bank and the international community can play a key role in the response to AI, especially at the country level where there is a need to develop an overall framework to guide national action plans that can be the basis for government and donor support. Such a framework should address both animal and public health aspects as well as economic impact. Many of the investments needed to address this disease are core public health and animal health functions that are considered public goods. The cross-border dimension of Avian Influenza also necessitates a regional response with support from the international community. 42. Armenia is receiving support on the technical content of an Avian Influenza response from key technical agencies -- WHO for public health and FAOlOIE for animal health. For example, FA has a regional Technical Cooperation Programs (TCPs) in the ECA region, in which Armenia participates. The program s primary objective is to strengthen the capacity for generating and sharing HPAI disease intelligence and emergency preparedness planning. The program s interaction with Armenia will, among other activities, target improved knowledge of migratory birds role in HPAI transmission, strengthened laboratory capacity for HPAI diagnosis, and support for a National AI Strategic Plan in Armenia. 43. Currently, the EU has established a task force to address AI and is considering the allocation of funds into the multi-donor TF to be coordinated by the Bank. The degree to which Armenia will be able to access the multi-donor TF will be known in May 26. The Bank has discussed the overall program supported by the AIHP project with the EU, the Government of Japan, the US Agency for International Development, and other international stakeholders at length, and is in the process of receiving endorsement for making grant financing available to Armenia to support the wider program. The Bank project team and ECA management will seek to reach agreement on identified grant financing during the course of early April Institutional and implementation arrangements 44. The Project will be implemented by existing project implementation structures in the MOA and the MOH, However, institutional and implementation arrangements will be coordinated by the prime Minister who is the chairman of Inter-Ministerial Committee for Avian Influenza (under which a Secretariat is to be established). This Committee has been established to deal with zoonotic emergencies 13

24 and will provide general policies and guidelines for Project implementation. The Committee comprises representatives of the MOA, the Republican Agricultural Support Center (MSC), the MOH, the Ministry of Nature Protection, the Ministry of Territorial Administration, the National Police, the National Academy of Sciences, the Armenian State Agrarian University, and the Union of Veterinarians (an NGO). The Committee will be responsible for reviewing annual work plans and the Secretariat will be responsible for ensuring coordination and linkages across relevant agencies and international partners. 45. Since the Bank is financing both agricultural sector and health sector projects in Armenia, the existing project implementation structures within the MOA (the ARSP PIU) and the MOH (the HSMP PIU) will be entrusted with fiduciary tasks of procurement and financial management. (Additional staff will to be recruited in the ARSP PIU and the MOH HTP PIU as needed for these fiduciary tasks.) One senior officer from the MOA and one from the MOH will be designated as Project Coordinators in charge of managing implementation of their relevant ministries project activities and liaising with the ARSP PIU and MOH RSMP PIU, respectively. These Project Coordinators will report to the Secretariat of the Committee and be members of the Committee. The Secretariat will recruit staff responsible for overall administration, public information, and coordination of scientific issues related to animal and human health. 46. At the local level, implementation will be the direct responsibility of each Marz Committee, including representatives of departments of Agriculture and Health. The Marz Committees will be strengthened to set up marz task forces (small coordination units) comprising representatives from the Marz Agricultural and Health departments and veterinary experts to work under the supervision and guidance of the national Secretariat. A Project Operational Manual (POM) is being prepared to integrate the relevant aspects of the National Strategy for AI. This POM will guide the management and implementation of the Project. 3. Monitoring and evaluation of outcomeslresults 47. Monitoring and evaluation (M&E) activities related to the project will be the responsibility of the ARSP PIU and the MOH HSMP PIU, with the participation of the staff of the departments of the MOA and MOH. These two implementation units have built up M&E capacity, but some detailed surveys for M&E would be contracted out. Monitoring project progress and the achievement of objectives will entail a process for reviewing continuously and systematically the various project implementation activities. The purpose of the M&E activities are to: (i) measure input, output and outcome indicators (see Annex 3); (ii) provide information regularly on progress toward achieving results and facilitating reporting to the government and the Bank (iii) alert managers, both in government and the Bank, to actual or potential problems in implementation so that adjustments can be made; (iv) determine whether the relevant stakeholders are responding as expected and intended by the project; and (v) provide a process whereby the coordinating and executing bodies can reflect and improve on their performance. 48. The results of relevant M&E activities will be reflected in the semi-annual and annual progress reports. The progress reports will cover the progress with the works, the institutional activities, training and studies, performance indicators, and financial management reports (FMR). A section of the progress reports will be devoted to issues identified during project implementation and the strategies and actions to be taken to resolve such issues that affect progress. The second semi-annual report of each year will be an annual report, providing information of the progress during the past year. 49. A comprehensive Mid-Term Progress Report will be prepared roughly half-way through project implementation (by November 15,27). This report would support the Mid-Term Review exercise to be carried out by the Borrower and the Bank to discuss the experience accumulated during the first two years of implementation and to discuss possible adjustment to the project design, implementation schedule and 14

25 expected outcomeslresults. Similarly, a final Evaluation Report should be prepared after the project completion (May 31, 29) providing detailed information on the accumulated impacts achieved by the project as well as the main lessons learned that could serve for similar operations outside the country. 4. Sustainability 5. Critical to the sustainability of the Project would be the continuous ownership of this initiative by the various stakeholders, coupled with strong political support and the availability of an adequate flow of financial resources to carry out project activities. In addition, institutional sustainability would be ensured by: (i) strengthening of programs to maintain public awareness of the threat of avian influenza and other rapid spreading infectious diseases; (ii) sustained surveillance and prevention and control activities, particularly in high risk regions; (iii) strengthened country capacity to manage at national and local levels the risk factors associated with the spread of avian influenza and other infectious diseases; and (iv) effectiveness of programs to control the spread of avian influenza from birds to the general population. 5. Critical risks and possible controversial aspects RISK From Outputs to Objective Decline in political commitment to AI and to the threat of a global influenza pandemic. Project implementing agencies do not have sufficient authority, leadership, and capacity to take leading role in AI prevention and control. Intervention activities not effective in containing the spread of Avian Influenza from birds to the human population. Inadequate or lack of multisectoral participation Low local-level commitment means that strong central commitment does not translate into action on the ground. From Components to Outputs Controlling the spread of the pandemic may expose the government to criticism for the curtailment of civil rights due to the adoption of quarantines and other related measures. RATING M M S M M M MITIGATION MEASURE Continuing support for inter-country collaboration through information exchanges, dialogue, and mobilization of international commitment and resources. Adequate implementation arrangements in place as a pre-condition of Bank financing; careful monitoring of leadership and project management during project implementation; technical assistance and training. Project activities will strengthen response capacity in selected priority areas in the short- and medium terms and lay the foundations for a broader-based strategy, including broad awareness and communication campaigns critical to containing the spread of AI. Interventions well designed, phased, and carefully monitored, allowing for modifications and redesign - as needed. Good M&E to flag emerging issues Inter-Ministerial Committee overseeing the program is selected to be representative and given visibility; annual work programming transparent. Implementation mechanisms explicitly address local decision making, communication strategies include decentralized authorities as targets. Project will support advocacy and coalition building to sensitize key groups including policy makers and the media. This will be complemented by carefully designed mass communication campaigns to build support for the project among the wider population 15

26 Lack of laboratory capacity for prompt diagnosis and surveillance and of sufficient quantity of drugs and other medical inputs needed to address the needs of the general population during a pandemic Inadequate institutional capacity to manage project and perform effectively Financial resources not accessible in a timely manner, weak procurement management Lack of timely and predictable access to expert advice and technical support Low priority given to public accountability and transparency in program management {e.g. Compensation Fund and Poultry Sector Restructuring Fund.) Inadequate capacity for planned.surveillance, surveys and monitoring and evaluation Overall Risk Rating: Risk Rating - H (High Risk), S {S S M M M S S MIS bstantial R Project activities will be coordinated with efforts undertaken by other international organizations Capacity building and institutional development as one of the project s key objectives. Rapid disbursement procedures and simplified public sector procurement in accordance with OP for emergency operations. Project activities are designed and implemented with leading multilateral agencies such as FA and WHO; regional bodies such as the European Union; and bilateral and other donor oreanizations. Transparency in decision and resource allocation; strengthened fiduciary risk mitigation through community involvement for the activities financed by the Compensation Fund and Poultry Sector Restructuring Fund; and, publication of audit results and achievements. Technical assistance and partnership between local organizations and international institutions will be provided. M&E plan will include information on instruments for data collection, agencies responsible and a detailed time table k), M (Modest Risk), N (Negligble or Low Risk) 51. In addition to the risk mitigation measures noted above, the Project will place strong emphasis on disclosure and transparency, complaint handling mechanisms coupled with specific remedial measures, and generally strengthened fiduciary risk mitigation. The corollary benefits regarding good governance are self-evident. The following measures are incorporated in project design to minimize the possible misuse of funds: Ex-ante controls. Appropriate ex-ante internal controls in the poultry culling and compensation program {outlined in Annexes 4b and h e x 7) will be implemented before any disbursement of Bank resources for the Compensation Fund, and ex-ante checks will be carried out before compensation payments are made, Annual operationu2 reviews. To supplement the annual project audit, an annual operational review will be camed out by external reviewers, acceptable to the Bank, who will review the internal control framework and procedures, especially for the Compensation Fund component, and the inventories of drugs, vaccines, medical and veterinary equipment, and other sensitive andor expensive assets. Prior review of procurement. Project procurement will be subject to prior-review in accordance with the Bank s procurement guidelines and with thresholds level indicated in Annex 7. 16

27 Complaints mechanisms. A strengthened complaint handling mechanism, especially for the Compensation Fund component implementation, will be put in place to handle complaints regarding alleged misuse of funds. Transparency and public infor~ation. Information about project activities will be continually posted on a Project website. Intensive supervision by the Bank. The project, including procurement and financial management activities, will be intensively supervised by Bank staff in the Country Office and by periodic supervision missions. 52. Possible Controversial Aspects. The Project will support the implementation of immediate responses to an influenza pandemic -- the classic social distancing measures -- such as quarantine, bans on mass gatherings, and travel restrictions that may be politically and socially controversial. This means that dialogue and compromises are needed among different stakeholders, backed by a well-designed communication strategy. A high degree of political commitment to preventing and controlling the spread of infectious diseases such as an influenza pandemic would be needed for managing controversies that will undoubtedly arise. 6. Main credit conditions 53. The key conditions needed to minimize the risks to the Project have been addressed by Armenia s having already met the eligibility requirements for entering the GPAI (noted in para. 14 above). An interministerial AI Action Plan was developed in late 25, and a National Strategy for AI was drafted by the GOA in January 26. (The National Strategy for AI was then approved the President of Armenia on April 2, 26). An Inter-Ministerial Committee on AI has been established, and its associated Task Force meets weekly (at the operational level of participating ministries, agencies and, NGOs). Specific provisions have been developed during project preparation which meet Bank requirements covering organization and staffing of program units, management arrangements, provisions for procurement and financial management, and institutional arrangements for monitoring and evaluating project progress and impact. These were confirmed during Project appraisal. In addition, the MOA and MOH have prepared an action plan for the first year of project implementation which is satisfactory to the Bank. 54. The conditions of effectiveness for the Credit would be that: (i) the Borrower has appointed the head of the Secretariat of the Inter-Ministerial Committee for Avian Influenza; (ii) the Borrower has appointed Project Component Coordinators with terms of reference and experience satisfactory to the Bank and (ii) a project Operational Manual, satisfactory to the Bank has been adopted by the Borrower. 55. A disbursement condition for the Animal Health component is the adoption by the Borrower of an Environmental Management Plan satisfactory to the Bank. Disbursement conditions for the Compensation Fund sub-component are that: (i) the Compensation Fund has been established in a manner satisfactory to the Bank; (ii) the Compensation Procedures Manual, satisfactory to the Bank, has been adopted by the Borrower; and, (iii) the Compensation Fund payments are being made in accordance with criteria and procedures set forth in the Compensation Procedures Manual. A disbursement condition for the poultry restructuring co-financing grants is that the Poultry Restructuring Sub-projects are being selected and implemented in accordance with criteria and procedures set forth in the Project Operational Manual. A disbursement condition for the Critical Imports component is that the Borrower has declared a national emergency on avian influenza and adopted a well-defined emergency recovery program satisfactory to the Bank. In addition, the Borrower shall monitor and evaluate the project and report on its progress through semi-annual Project Reports and prepare a mid-term review report by November 15,

28 D. APPRAISAL SUMMARY 1. Economic analysis 56. Neither the timing nor the severity of the next pandemic can be predicted, but with the virus now endemic in bird populations in Asia, the risk will not be easily diminished. The emergence of a human influenza pandemic caused by a lethal virus would have a social and economic impact many times greater than the impact on the poultry sector. This would be through the costs associated with public and private efforts to prevent the emergence or spread of the disease in humans and to treat its effects and the economic consequences of sickness or death resulting from the disease outbreaks. However, the much more uncertain predictability of a human pandemic has caused the economic analysis of the Project to focus on the economic losses in the poultry sector 57. In this treatment of HPAI as an animal health issue, actions to be taken by Armenia are analyzed using the traditional without project and with project scenarios. Under the without project case, the low capacity of government and the poultry industry to deal with outbreaks causes the sector to be increasingly vulnerable to a catastrophic AI occurrence. This catastrophic event (CE) would be characterized by multiple, simultaneous outbreaks leading to a spread of the disease to large sections of the country s poultry flock, and eventually to a long-term reduction of the sector by 24%. This is caused by massive public aversion to poultry consumption leading to a significant and sustained drop in prices and demand for poultry. 58. Under the with project scenario, the probability of the CE is reduced gradually to roughly twothirds of that under the without project scenario (after five years). The stream of expected costs in this scenario is calculated by multiplying these probabilities with the respective net present values of costs, Given project expenditures of US$ 9.2 million, the analysis yields an NPV of $ 37.2 million and an internal rate of return of 69.9 %. (Annex 8 presents a detailed discussion of the economic analysis and calculation of the project s NPV.) 2. Technical 59. Animal Health. The successful implementation of the program depends on a phased multidisciplinary strategy based on a sound epidemiological approach to control HPAI outbreaks. This strategy has to take into consideration a broad range of epidemiological scenarios that exist in different poultry production systems in the affected countries and different levels of incidence (ranging from high incidence with variable flock outbreaks, though low frequency disease outbreaks with partial flock immunity, to sporadic outbreaks). A balanced combination of appropriate disease-control options, tailored to the specific characteristics of each country and its farming systems is essential for the achievement of the program objectives. 6. The implementation of the Project raises important technical issues and presents substantial challenges. Key issues include the following: e The capacity of thepublic andprivate veterinary services. The Armenian veterinary services are inadequately equipped and trained to deal with HPAI and the potentially large scope, severity and rapid spread of any outbreaks. This is evident across the entire range of critical capabilities: surveillance and diagnostic capacity for early detection and reporting of outbreaks, monitoring the disease, rapid response and implementation of the required control measures within and around the outbreaks, and essential research to understand how the disease develops in a particular situation. 18

29 e Adequate regulatory and incentive framework. The current legal and regulatory framework is incomplete, not fully consistent internally, and in many instances poorly aligned with actual physical, technical and staff capacities on the ground. Amendments will be needed, therefore, to the veterinary law, to various decrees governing emergency situations as well as highly dangerous animal diseases, to regulations concerning institutional responsibilities and the like. In addition, the legal basis for effective compensation being provided to livestock owners will need to be put in place urgently to ensure good governance, transparent allocation of resources and probity in compensation payments. e Laboratory facilities and staff capabilities. As a consequence of the Soviet legacy and 15 years of post-soviet resource scarcity, most laboratory facilities are outdated and severely lacking in modern equipment needed to discharge critical diagnostic functions. Staff expertise, likewise, needs substantial upgrading. With the help of experts from FA and WHO and utilizing information and guidelines provided by WHO and OIE, the critical deficiencies have been identified and will be addressed by the Project. Bio-security measures. Bio-containment measures to prevent the spread of the virus from e infected premises and bio-exclusion measures to exclude the virus from uninfected locations are essential, but have often proven to be difficult to implement effectively. The lack of capacity and experience in practicing effective measures is one of the main reasons for the persistence of the disease and its spread in the world. It will be critical to develop and practice effective implementation under the specific conditions of Armenia and to develop and institutionalize efficient coordination among local and national institutions, agencies and services. e Epidemiological expertise. Incorporating epidemiological and epizoological studies linked to disease control programs, so as to generate quantitative and geo-referenced data on infection and transmission dynamics, is another key success factor. Scarce scientific expertise limits the availability of modem methodologes and tools, and the project will support initiatives to address this weakness. e Wildlre species and reservoirs are a source of HPAI. Some species of migratory birds appear to have played a role in the transmission of the H5N1 virus to domestic poultry. Armenia is an important stop-over place on the flyways of a broad range of migratory birds and for many of them their main wintering location. The country therefore faces significant risk. It is very difficult to apply biosecurity measures aimed at avoiding contact between migratory and other wild birds and domestic poultry, particularly where, as in Armenia, backyard poultry is widely practiced and domestic birds are allowed to roam freely. In these circumstances, it is likely to prove very difficult, if not impossible, to completely eradicate the HPAI virus, but the project will place heavy emphasis on efforts to minimize the contact between wild and domestic birds. e Poor coordination among public agencies and weak linkages with the private sector. Ineffective coordination among ministries and public agencies, as well as weak linkages with the private sector, are major impediments to long-term planning for infectious disease control. Given the zoonotic and transboundary nature of HPAI, a well coordinated public-private response is essential. The project will seek to establish efficient coordination arrangements and mechanisms. 59. Public Health - Technical Considerations. In terms of public health, the swine influenza experience provides a benchmark for decision-making and public health response to the threat of an influenza pandemic. Yet, how relevant are the experiences and lessons of 1976 for a pandemic response today? Substantial changes in public health preparedness and infrastructure, in vaccine manufacturing and delivery, and in society have occurred which will affect a pandemic response. International surveillance for influenza and the strains that cause infection is much stronger than in The 19

30 additional surveillance data available today will provide a much stronger basis for assessing the likelihood of a pandemic, Experience has shown that new influenza strains can cause clusters of human diseases without becoming widespread. Improvements also have been made in public health preparedness planning, and communications between the different levels of a health system. 6. Despite these changes, many of the lessons from the swine influenza experience remain relevant and, as demonstrated by the experience implementing smallpox vaccination, remain as significant challenges. The need to identify adverse effects following vaccination as coincidental or causal also remained problematic. Separating risk assessment and risk management, conduct of external program reviews, improved communications planning, and strong surveillance for vaccine safety all are areas where the lessons of swine influenza were appropriately applied in the smallpox program. 61. Lessons from swine influenza also were considered in developing the pandemic influenza preparedness and response plan under the Global Program for Avian Influenza. The importance of planning by Armenia s MOH at the different levels of the system during the inter-pandemic period of strengthening key infrastructures, and of exercising response plans needs greater emphasis and will be addressed by the Project. 3. Fiduciary 62. Financial management. The financial management and procurement functions for the Animal Health and Public Awareness and Implementation Support components will be handled by the ARSP Project Implementation Unit (Pnr) in MOA and for the Human Health and Critical Imports components by the HSMP PIU in MOH. Both PIUs will be responsible for the flow of funds, accounting and reporting in their respective ministries. PIUs will be coordinating their work, and the reports will be consolidated by the ARSP PIU for submission to the Bank. 63. A financial management assessment of both ARSP and HSMP PIUs to be responsible for the project implementation was undertaken in March 26 to determine whether the existing financial management arrangements are acceptable to the Bank This was in addition to assessment of the financial management arrangements of the ARSP PIU conducted in April 25 during preparation of the Rural Enterprise and Small-scale Commercial Agriculture Development (RESCAD) project, and that of the HSMP PIU performed in February 24 during preparation of the HSMP. Furthermore, the FM systems have also been reviewed periodically as part of previous projects supervisions for last several years and have been found satisfactory in both PIUs. The ARSP PIU and HSMF PIU have established and maintained good financial management systems for the implementation of the active RESCAD and HSMP projects respectively. 64. The financial management systems of both PWs are capable of supporting the implementation of the proposed project in accordance with the requirements of OP 1.2, except for the Compensation Fund sub-component under ARSP PTU for which internal control and fund flow arrangements have been prepared (see Annex 4.b) but are yet to be finalized. The flow of funds under this sub-component will only begin after appropriate internal control and fund-flow procedures, satisfactory to the Bank, have been adopted and documented in the Compensation Procedures Manual (as noted above in para. 55 concerning disbursement conditions.) In addition, an action plan is prepared to further strengthen the financial management arrangements in both units and is presented in h e x 7 of the PAD. 65. Procurement assessments of the ARSP PIU and the HSMP PIU have been made in accordance with the requirements of OP 11.OO. The agreements covering procurement methods and thresholds have been determined for Armenia according to its capacity and experience with Bank procurement and are consistent with ERA assistance guidelines. The procurement agreements have been appraised and 2

31 detailed in the procurement plan for the first three years of the Project (summarized in Annex 7). The General Procurement Notice is to be issued on or about April 7, Procurement will be accelerated in the first six months of the Project by allowing Shopping procedures to be used for a certain number of emergency contracts, whose size would usually be above the normal ceiling for Shopping. These cover mainly the following: safety gear for veterinary and health services personnel; equipment and rapid test kits, and other reagents for the VSI reference laboratory and MOH laboratories; and, one mobile incineration plant and related containers for culling. In the event of a human AI pandemic, Emergency Recovery Assistance (ERA) procedures could be used for purchase of human vaccines (and for acceleration of procurement of other items as to be agreed with by the Bank in the case of a pandemic). 4. Environment and social aspects 67. Overall, the Project will assist the government to develop a strategy for managing future emerging and re-emerging zoonotic and infectious disease outbreaks. As a result, the two safeguard issues which pertain to the Project are those of environmental assessment for technologies to be deployed for disposal of culled poultry and of mitigating the negative impacts of mandated culling of poultry on small scale backyard poultry producers. 68. In general, activities under the Project are not expected to generate any adverse environmental effects as they are focused largely on public sector capacity building and improved readiness for dealing with outbreaks of avian influenza in domestic poultry. These prevention-focused activities are expected to have a positive environmental impact as the Project's investments in facilities, equipment, and training for laboratories will improve the effectiveness and safety over existing avian influenza handling and testing procedures by meeting international standards established by the OLE. This would be reinforced by the mainstreaming of environmental safeguards into protocols and procedures for the culling and disposal of animals during AI outbreaks. 69. Whatever medical waste is generated in health care facilities will be managed using existing guidelines in Armenia, which have been found satisfactory under previous projects. The Project would also support updating these guidelines, training health care workers to manage medical waste following these guidelines, and the possible purchase of equipment for the proper handling and disposal of medical waste in participating facilities. These provisions would be included in the Project Operational Manual. 5. Safeguard policies Environmental assessment Environmental Category B 69. Environmental Assessment and Environmental Management Plan. Since the Project supports investments in carcass disposal for culled poultry, the Project is assessed as a B-category project. An Environmental Assessment (EA) and an Environmental Management Plan (Em) for the deployment of carcass disposal capacity (mainly using bio-thermal holes, but also potentially using mobile incineration units) will be necessary. This EMP will also cover the clean up of animal wastes o f culled poultry by the local public veterinary services supported under the Project. The scope of this EMP will be specified in early project implementation, as a waiver for the requirement to complete the EA and EMP during project preparation has been sought and obtained per para. 12 of OP 4.1. Preparation of the EA and EMP is expected early in project implementation, and their adoption by the Government is set as a disbursement condition for the Animal Health component of the Project. 21

32 Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPIBPIGP 4. 1) Natural Habitats (OPIBP 4.4) Pest Management (OP 4.9) Cultural Property (OPN 11.3, being revised as OP 4.11) Involuntary Resettlement (OPIBP 4.12) Indigenous Peoples (OD 4.2, being revised as OP 4.1) Forests (OPIBP 4.36) Safety of Dams (OPIBP 4.37) Projects in Disputed Areas (OPIBPIGP 7.6)* Projects on International Waterways (OPIBPIGP 7.5) 6. Policy Exceptions and Readiness 7. The only policy exception requested has been with regard to the waiver of the completion of the EA and EMP per para. 12 of OP 4.1. This waiver has been approved by Bank senior management. The project meets the regional criteria for readiness for implementation. * By supporting theproposedproject, the Bank does not intend to prejudice thefinal de~erminat~on of the parties' claims on the disputed areas 22

33 Annex 1: Ten things you need to know about pandemic influenza (WHO - 14 October 25) ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT A. Pandemic influenza is different from avian influenza 1. Avian influenza refers to a large group of different influenza viruses that primarily affect birds. On rare occasions, these bird viruses can infect other species, including pigs and humans. The vast majority of avian influenza viruses do not infect humans. An influenza pandemic happens when a new subtype emerges that has not previously circulated in humans, 2. For this reason, avian H5N1 is a strain with pandemic potential, since it might ultimately adapt into a strain that is contagious among humans. Once this adaptation occurs, it will no longer be a bird virus--it will be a human influenza virus. Influenza pandemics are caused by new influenza viruses that have adapted to humans. B. Influenza pandemics are recurring events 3. An influenza pandemic is a rare but recurrent event. Three pandemics occurred in the previous century: Spanish influenza in 1918, Asian influenza in 1957, and Hong Kong influenza in The 1918 pandemic killed an estimated 4-5 million people worldwide, That pandemic, which was exceptional, is considered one of the deadliest disease events in human history. Subsequent pandemics were much milder, with an estimated 2 million deaths in 1957 and 1 million deaths in A pandemic occurs when a new influenza virus emerges and starts spreading as easily as normal influenza - by coughing and sneezing. Because the virus is new, the human immune system will have no pre-existing immunity. This makes it likely that people who contract pandemic influenza will experience more serious disease than that caused by normal influenza. C. The world may be on the brink of another pandemic 5. Health experts have been monitoring a new and extremely severe influenza virus - the H5N1 strain - for almost eight years. The H5N1 strain first infected humans in Hong Kong in 1997, causing 18 cases, including six deaths. Since mid-23, this virus has caused the largest and most severe outbreaks in poultry on record. In December 23, infections in people exposed to sick birds were identified. 6. Since then, over 1 human cases have been laboratory confirmed in four Asian countries (Cambodia, Indonesia, Thailand, and Viet Nam), and more than half of these people have died. Most cases have occurred in previously healthy children and young adults. Fortunately, the virus does not jump easily from birds to humans nor spread readily and sustainably among humans. Should H5N1 evolve to a form as contagious as normal influenza, a pandemic could begin. D. All countries will be affected 7. Once a fully contagious virus emerges, its global spread is considered inevitable. Countries might, through measures such as border closures and travel restrictions, delay arrival of the virus, but cannot stop it. The pandemics of the previous century encircled the globe in 6 to 9 months, even when 23

34 most international travel was by ship. Given the speed and volume of international air travel today, the virus could spread more rapidly, possibly reaching all continents in less than 3 months. E. Widespread illness will occur 8. Because most people will have no immunity to the pandemic virus, infection and illness rates are expected to be higher than during seasonal epidemics of normal influenza. Current projections for the next pandemic estimate that a substantial percentage of the world s population will require some form of medical care. Few counties have the staff, facilities, equipment, and hospital beds needed to cope with large numbers of people who suddenly fall ill. F. Medical supplies will be inadequate 9. Supplies of vaccines and antiviral drugs - the two most important medical interventions for reducing illness and deaths during a pandemic - will be inadequate in all counties at the start of a pandemic and for many months thereafter. Inadequate supplies of vaccines are of particular concern, as vaccines are considered the first line of defense for protecting populations. On present trends, many developing countries will have no access to vaccines throughout the duration of a pandemic. G. Large numbers of deaths will occur 1. Historically, the number of deaths during a pandemic has varied greatly. Death rates are largely determined by four factors: the number of people who become infected, the virulence of the virus, the underlying characteristics and vulnerability of affected populations, and the effectiveness of preventive measures. Accurate predictions of mortality cannot be made before the pandemic virus emerges and begins to spread. All estimates of the number of deaths are purely speculative. 11. WHO has used a relatively conservative estimate - from 2 million to 7.4 million deaths - because it provides a useful and plausible planning target. This estimate is based on the comparatively mild 1957 pandemic. Estimates based on a more virulent virus, closer to the one seen in 1918, have been made and are much higher. However, the pandemic was considered exceptional. H. Economic and social disruption will be great 12. High rates of illness and worker absenteeism are expected, and these will contribute to social and economic disruption. Past pandemics have spread globally in two and sometimes three waves. Not all parts of the world or of a single country are expected to be severely affected at the same time. Social and economic disruptions could be temporary, but may be amplified in today s closely interrelated and interdependent systems of trade and commerce. Social disruption may be greatest when rates of absenteeism impair essential services, such as power, transportation, and communications. I. Every country must be prepared 13. WHO has issued a series of recommended strategic actions Tpdf 113kbl for responding to the influenza pandemic threat. The actions are designed to provide different layers of defense that reflect the complexity of the evolving situation. Recommended actions are different for the present phase of pandemic alert, the emergence of a pandemic virus, and the declaration of a pandemic and its subsequent international spread. 24

35 J. WHO will alert the world when the pandemic threat increases 14. WHO works closely with ministries of health and various public health organizations to support countries' surveillance of circulating influenza strains. A sensitive surveillance system that can detect emerging influenza strains is essential for the rapid detection of a pandemic virus. 15. Six distinct phases have been defined to facilitate pandemic preparedness planning, with roles defined for governments, industry, and WHO. The present situation is categorized as phase 3: a virus new to humans is causing infections, but does not spread easily from one person to another. 25

36 Annex 2a: Summary and Review of the Avian Influenza Action Plan of the Republic of Armenia ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT 1. To have maximum impact on reducing the spread and cost of a pandemic influenza, it is critical that Armenia begin implementing its own country preparedness and response plans. Achieving this is one of the development objectives of the proposed project. As a first step, the Avian Influenza Action Plan of Armenia has been reviewed and summarized. Pandemic Preparedness Assessment Tool 2. To evaluate the preparedness status and readiness in Armenia, the existing tools prepared by the European Center for Disease Prevention and Control (ECDC), in collaboration with WHO and the European Commission have been used3. In using these tools, the objectives have been to: a) To evaluate the status of pandemic influenza preparedness in the country b) To determine a baseline of preparedness, or to determine progress made since an earlier assessment. c) To identify weaknesses and strengths of pandemic influenza preparedness. d) To identify steps for improvement. 3. The assessment has focused on the following issues: I. Avian Influenza Preparedness (Animal Component) Is there awareness of the current situation in the work regarding avian influenzalconcern about its introduction into the country? YES Contingency plan for an outbreak among birds available, including protection of people living in the area and workers handling or killing affected birds? DEVELOPED, BUT TO BE REFINED Collaboration arrangements established with international agencies such as FAO? YES Is there laboratory capacity to test animal specimens for influenza? NOT YET Is the Ministry of Agriculture involved in pandemic preparednesslmember of national pandemic committee? YES Have exercises been conducted on how to respond to an outbreak in birds? NO II. Public Health Preparedness Seasonal Influenza: Seasonal influenza surveillance systems in place and functional? PARTIALLY Seasonal influenza vaccination program for target groups in place? NOT YET ECDC with WHO and the EC, 25, draft Assessment Tool for National Pandemic Influenza Preparedness. 26

37 Pandemic Influenza (national level) Planning and Coordination Relevance of pandemic planning recognized by decision makers and preparedness policies developed and adopted? YES Legal and ethical frameworks established coherent with international legislation (International Health Regulations)? PARTIALLY National Pandemic Planning Committee established? NO Command and control structure in place outlining management and decision-making processes of all organizations involved in response to a health emergency? NO Country has national influenza pandemic preparedness plan that is consistent with international plans and periodically updated? YES Situation Monitoring and Assessment National system available for influenza surveillance in both humans and animals? NO Access to at least one laboratory able to offer routine influenza diagnosis, typing and sub-typing, but not necessarily strain identification? YES Outbreak investigation capacity available (inventory of resources available)? LIMITED Contingency plans developed for ongoing monitoring of impact and resource needs during the pandemic phase. NO Prevention and Containment National guidance for public health response developed? LIMITED, NEEDS STRENGTHENING National guidance for civil emergency response developed? LIMITED, NEEDS STRENGTHENING Anticipated resource implications for implementation addressed? DURING AIP PREPARATION Tabletop exercises conducted and results used to improve planning? NO Strategy to access antivirals for national use (e.g., stockpiling) developed? YES Priorities and criteria for deployment and use of antivirals defined? IN PROCESS Strategy to access pandemic vaccines exploreddeveloped; regulatory issues, liability, intellectual property rights addressed? NOT YET Priorities and criteria for use of pandemic vaccines defined; preliminary priorities for pandemic vaccines use developed, based on expected availability? NO Logistic and operational needs for implementation of pandemic vaccines strategy reviewed? NO Health System Response Health services are informed about national pandemic influenza policies including preparedness plan? NOT UNIFORMLY THROUGHOUT THE COUNTRY 27

38 Contingency plans developed on how to maintain essential services? NO Authorities, responsibilities and pathways identified for command and control of health systems in the event of a pandemic? NO Pharmaceutical and other material supply needs estimated; arrangements to secure supply commenced? PARTIALLY Plans for health workers training in pandemic influenza response developed? NO Communication National communication strategy for pandemic influenza established? NO Capacity planned and tested for meeting expected domestic information demands for diverse audiences, including professionalitechnical groups, the news media and general public? NO Networks among key response stakeholders established, including risk communicators, nonhealth government departments, and professional and technical groups? NO News media with national plans familiarized, including preparedness activities and decisionmaking related to seasonal and pandemic influenza? NO, BUT TRAINING FUNDS SPECIFIED FOR SUCH Categorization of Country Readiness 4. On the basis of the results of the preparedness assessment, Armenia is assessed as: LOW 5. Advanced: An eligible country would have a well developed and approved national preparedness and response plan showing understanding of the issues and goals for addressing them, actions adapted from international guidelines and best practices to meet national priorities, evidence of strong public support and a well balanced range of stakeholders. It would have identified investment priorities to support the implementation of the plans, have included financing estimates of the needs; defined key indicators for monitoring and evaluating the implementation of national programs; and be conducting ongoing public dialogue andlor involvement. 6. Moderate: As for "Advanced" but missing some key elements in the plans and without reliable financial estimations. 7. Low: Many key aspects missing, especially public dialogue and establishment of goals, requiring significant additional identification of implementable actions and direction. 28

39 Annex 2b: Organization of the Veterinary Services and the Health Care System in the Republic of Armenia A. Veterinary Care ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT 1. In the result of agrarian reforms new businesses were created and state finances animal health services ceased to function. The established input and output distribution chains collapsed and a wide range of alternative processing (often home-based) and marketing systems developed, in most instances without veterinary oversight. These changes have brought serious challenges for the staff of the Veterinary State Inspection (VSI). Instead of working only with the veterinary fraternity in the state and collective farms, they now have to interact and communicate extensively with numerous individual livestock producers, private veterinarians, consumers and their organizations. Moreover, WTO membership has added a commitment to communicate about animal health, trade and food safety issues at the international level and to develop a domestic food safety assurance system that is compliant with the Codex Alimentarius. 2. Because of budgetary constraints, the number of diseases for which the SDV intends to have active control campaign has been reduced from 55 to 7 (brucellosis, tuberculosis, anthrax, pasterellosis, Foot and Mouth disease (FMD), gangrene emphysematous and hog classis cholera). The Government has stopped the provision of animal health medicine except for measures defined by state order. The previous Zoovetsnab together with its shops were privatized, 3. The diagnostic works of diseases are carried out not on due level, which is conditioned with laboratory equipment physical wear out and the staff under completeness. None of the 38 veterinary laboratories currently meet international standards (IS 1725).4 Veterinary Services 4. The governmental veterinary inspection consists of structural subdivisions and regional entities (77 employees). At present 75 veterinary specialists are working in the communities and they are paid by the village authorities. Gradually the number of private veterinary practitioners service is developing, and they are licensed by the Ministry of Finance and Economy. 5. The annual plan developed by the VSI is the basis for all the activities of community veterinaries, and the activity framework of each community is conditioned by that. The community veterinarians are accountable to regional inspectors, who in turn are accountable to the Marz State Veterinary Inspector, The latter regularly presents reports to Yerevan RA Agricultural Veterinary State Inspection. Laboratories 6. Acting in the whole country, the veterinary laboratory chain is centralized in Yerevan at the Republican Veterinary Anti-epidemic and Diagnosis Center State Non-commercial Organization (SNCO) as central veterinary laboratory. At present 1 Marz and 27 regional subdivisions of SNCO are acting. The Central Veterinary Laboratory is under the responsibility of VSI. The central lab has the only ELISAS equipment and CPR6 test in the veterinary services, and funds to procure test kits are limited. ISOiIEC 1725= International Organization for StandardizatiodInternational Electrotechnical Commission s standard for the competence of testing and calibration laboratories. Enzyme-linked Immunosorbent Assay 29

40 7. The SNCO Marz branches have bacteriological and serological examination capabilities, and the regional laboratories have only serological capabilities. The absence of in-service training has the staff increasingly out of touch with advances in their field. 8. According to the RA Government corresponding Decree about the Order of Implementation of Meat and Animal Waste Products Veterinary-Sanitary Examination in markets, shops, public food places the veterinary-sanitary examination is implemented by physical and legal entities having license for private veterinary activity. Procurement and Distribution of Vaccines 9. In the Republic, for the implementation of animal anti-epidemic preventive measures the procurement of necessary veterinary vaccines is carried out through public tender. 1. The vaccines are provided to communities veterinarians free-of-charge. After the procurement of veterinary vaccines, refrigerated trucks transport the procured veterinary vaccines and diagnosis means from Yerevan to Marz centers, from where the Marz inspectors distribute them to regions, and the latter to communities. Marz inspectors have to report to the Veterinary State Service (Inspection) on vaccination they have performed. Management of Veterinary Drugs 11. The past system of state distribution of veterinary drugs through the Zoovetsnab outlets has been replaced by private operators. Due to the RA Government corresponding decree, a state registration order was set up for biological vaccines, serums and diagnosis means used in the RA veterinary field and it is authorized to RA Ministry of Agriculture. Currently, there is a list with 28 registered drugs and vaccines, and a further 2 applications are pending approval. Veterinary control border checkpoints 12. In fact, none of the boundary posts or checkpoints is equipped according to boundary quarantine post requirements, and none have any facilities to quarantine animals or keep animal products in safe seclusion. They are not located in buildings instead they work in vans. All lack effective communications equipment. Association of Private Veterinarians 13. The Pan-Armenian Veterinarian Association was founded and acts on public bases. Presently, the National Association has 98 physical members that are not active. Animal Carcass Disposal Arrangements 14. There are no rendering plants in the Republic of Armenia. Disposal of animal carcasses is done through burial. Animal owners are, by law, required to inform a veterinarian when an animal has died; the veterinarian inspects the animal and decides if further bacteriological, virological or other tests are required. If not, the carcass is to be disposed in an official animal burial ground. Cyclic Polymerase Reaction 3

41 15. In addition, there are roughly 4 bio-thermal holes for the destruction of animal carcasses. Currently these bio-thermal holes are in various degrees of disrepair relative to their original condition. Ideally, these bio-thermal are of standardized design, constructed at a dry, high-ground place with a low level of subsoil water, at least 3 m from the livestock sheds, processing facilities, rivers, ponds and wells, and the area is fenced to a height of not less than 2 m. The hole itself is 1-12 m deep, with a diameter of 2-3 m, The facility is constructed of moisture- and thermo-resistant material (bricks, ferroconcrete, wood and clay), with a hermetic cover and a ventilation system (see drawing below). Construction costs are about 2.2 million Armenian dram. Within 2 days after being loaded with animal carcasses, the internal temperature rises to 65' C. The decaying process is completed within 35-4 days, with the formation of uniform and odorless compost, suitable for fertilizing. The bio-thermal hole has a significant advantage over burial grounds in that it causes fairly rapid destruction of many microbes. In the absence of rendering facilities, bio-thermal holes provide effective carcass sterilization and, thus, a high sanitary status at livestock farms. 31

42 Annex 3: Results Framework and Monitoring ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT Results Framework PI3 To minimize the threat in Armenia lased to humans by HPAI nfection and other zoonoses in lomestic poultry and prepare for he control and response to an nfluenza pandemic and other nfectious disease emergencies in iumans. Intermediate Outcomes [. Animal Health Component Zomponent LA: National Policy ramework and development of a zational strategic plan - A :ountry-specific strategy (and its :orresponding information system) Nas developed, adopted, and lisseminated to control and xadicate HPAI in areas at risk. Component 1.B: Strengthening Disease Surveillance and Diagnostic Capacity - Animal lisease surveillance and diagnostic capacities strengthened and training of the veterinary services designed and completed. Component 1.C: Outbreak Containment Plan - supplies and incineration investments deployed in field and certification of readiness for rapid response (necessary to control and eradicate an outbreak of HPAI) attained in areas at risk. 11. Human Health Component Component 1I.A: Enhancing Program Planning and Coordination -Improved command and control structures for quarantine and disease control in a health emergency were developed and implemented. Project Outcome Indicators Evidence* of improved effectiveness of participating animal and public health services in limiting the spread of an HPAI outbreak and consequent pandemic in Armenia; Evidence* of widespread adoption of recommended practices for the prevention and control of HPAI among poultry producers, distributors, and retail vendors; Improving trend in poll of experts designed to gauge HPAI readiness in Armenia. Intermediate Outcome Indicators For Each Component Component LA: Evidence* of timely and satisfactory progress toward delivery of Component LA outputs, as compared to the original plan, including specific indicators as follows: Detailed assessment of the MOA Veterinary State Inspection; National AI strategic plan developed and adopted by government. Component 1.B: Evidence* of timely and satisfactory progress toward delivery of Component LB outputs, as compared to the original plan, including specific indicators as follows: BSL-2+ attained in one reference laboratory; Self-assessment of the veterinary services executed; 1% monitoring of poultry breeding stock farms. Component 1.C: Evidence* of timely and satisfactory progress toward delivery of Component 1.C outputs, as compared to the original plan, including specific indicators as follows: Emergency supplies procured and available at strategic locations in the field; One mobile incineration unit deployed and 16 bio-thermal disposal holes constructed or reconstructed; Certification of readiness rating obtained from FAOlOIE (following readiness review); Backyard poultry farming in unconfined conditions addressed in at least 2 farms; Compensation Fund established with clear operating modalities. Component 1I.A: Evidence* of timely and satisfactory progress toward delivery of Component 1I.A outputs, as compared to the original plan, including specific indicators as follows: Inter-institutional and multi-sectoral coordination arrangements in place between MOH and MOA National strategic plans for improvement of public health surveillance and disease control systems prepared according to WHO recommendations, approved and adequately resourced for implementation. Use of Project Outcome Information To determine whether or not the project objective has been achieved. Use of Intermediate Outcome Monitoring Component LA: To verify satisfactory and timely progress in, or completion of Component LA. Component 1.B: To verify satisfactory and timely progress in, or completion of Component I.B. Component 1.C: To verify satisfactory and timely progress in, or completion of Component LC. Component 1I.A: To verify satisfactory and timely progress in, or completion of Component ILA. 32

43 [ntermediate Outcomes Component 1I.B: Strengthening National Public Health Surveillance Systems - Measures to improve communicable disease surveillance and control in human populations at risk were developed, tested and implemented. Component 1I.C. Healthcare System Response Capaciv - - "Social distancing measures" such as quarantine, bans on mass gatherings, and travel restrictions, were developed and implemented backed up by a communication strategy. - Critical medical care networks were strengthened and readied to cope with increased demand for services, and to prevent the spread of infection among high-risk populations and health care workers. Intermediate Outcome Indicators For Each Component Component 1I.B: Evidence* of timely and satisfactory progress toward delivery of Component 1I.B outputs, as compared to the original plan, including specific indicators as follows: Increased surveillance and outbreak investigation capacity; Number of public health laboratories (at least two) available for routine influenza diagnosis and typing rehabilitated and equipped, and with appropriate biomedical waste management systems; 4 Number of health personnel trained in influenza virus surveillance and control; 4 Number of sentinel site marzes {at polyclinics) complying with bi-weekly (winter) and monthly (summer) reporting on influenza occurrence; Increased laboratory capacity to collect and analyze specimens per day for viral typing, sub-typing and isolation in times of surging specimen load; % of positive tests of specimens confirmed by reference laboratory; Component 1I.C: Evidence* of timely and satisfactory progress toward delivery of Component 1I.C outputs, as compared to the original plan, including specific indicators as follows: Strategy for procurement of and access to human influenza vaccine on the basis of well-defined criteria developed; Strategy for access to and appropriate use of anti-virals (e.g., stockpiling and standard treatment protocol) developed; A contingency plan for procurement of AI vaccine for humans is developed should one become available and needed; Number of professionals and support personnel trained for active surveillance, case finding, and proper diagnosis, treatment and care to contain outbreaks and reduce occurrence and case fatality during both pre-epidemic and pan-endemic phases ; 4 Cumulative incidence rate (CIR); 4 % change in the AI case fatality rate. Use of Intermediate Outcome Monitoring Component 1I.B: To verify satisfactory and timely progress in, or completion of Component ILB. Component 1I.C: To verify satisfactory and timely progress in, or completion of Component 1I.C. 33

44 Intermediate Outcomes 111. Public Awareness and Implem~ Component 1II.A: Public Awareness - -- Coordinated communications process involving MOA, MOH, Ministry of Territorial Administration addressing information /communication needs of priority audiences, during prepandemic and pandemic A-I phases; -- Informed at-risk communities adopting safe health practices, reporting, and contributing to outbreak control actions; -- Educated citizenry, aware of the impact and social containment measures needed if AI escalates across pandemic phases Component 1II.B: Coordination Support - Coordination and management of project implementation and M&E activities carried out in a professional manner * - via reports from technical and SOC from international agencies and other experts. Intermediate Outcome Indicators For Each Component tation Support Component Component 1II.A: Evidence* of timely and satisfactory progress toward delivery of Component 1II.A outputs, as compared to the original plan, including specific indicators as follows: Political and civic leadership organized around a national strategic risk communication plan; Research-based risk communication strategies and products, responding to the needs of priority audiences; Consistent awareness-raising and behavior change interventions with population at risk using appropriate communications channels; Communications strategies and products highlighting the actions and investments of participating ministries and the mobilization of group resources to contain the epidemic, generating social trust and credibility; Evidence of consistent communication and information technologies, to promote reporting of outbreaks, fast response and an uninterrupted social dialogue; Production and dissemination of informational products that educate priority audiences about possible scenarios and mitigation and control actions to be undertaken. Component I1I.B: Evidence* of timely and satisfactory progress toward delivery of Component 1II.B outputs, as compared to the original plan, including specific indicators as follows: Program reports, financial monitoring, procurement and disbursement reports, audits, management and financial reports prepared and submitted periodically Methodology defined and monitoring and evaluation periodically undertaken audit teams (as required). The actual composition of teams TBD Use of Intermediate Outcome Monitoring Component 1II.A: To verify satisfactory and timely progress in, or completion of Component 1I.A. Component 1II.B: To verify satisfactory and timely progress in, or completion of Component 1II.B. at likely would draw 34

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50 Annex 4a: Detailed Project Description ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT 1, The Project will finance activities under four components: (i) animal health, (ii) human health, (iii) public awareness and implementation support; and, (iv) critical imports. Given the urgency of the situation, following the recent experiences with HN/AIDS projects in Africa and the Caribbean, priority has been given to detailing the activities to be included in the first year of the project with subsequent activities for later years to be refined in more detail as part of annual project reviews. I. ANIMAL HEALTH COMPONENT 2. The Project will support activities proposed by Armenia to cover the needs in the short, longterm, and ranging from prevention, to control and total eradication of HPAI. These proposed measures comprise an integrated package maximizing the possibilities of success based on a detailed assessment of the particular conditions, constraints and possibilities of the country (including a rapid assessment of veterinary services and recent assessments of the poultry sector). In general, these activities fall into three major areas: Improvements to the national policy framework, development of strategies and increasing preparedness. Strengthening disease surveillance, diagnostic capacity and applied research. Carrying out outbreak containment plans and restructuring of the poultry sector. A. National policy framework and development of a national strategic plan A1 : Policy development and enabling environment 3. To ensure that disease control, prevention and eradication measures are implemented in a uniform and effective way and in accordance with OIE standards and guidelines, improvement in the regulatory framework and the harmonization and rationalization of animal health governance and policy issues will be addressed, These are related to bio-security, vaccination, control of animal movement, border control, culling and disposal of carcasses, compensation, restructuring of poultry industry, compartmentalization and zoning, and other regulations related to the poultry sector. Thus, the Project will support definition of disease control options and reviews and strengthening of existing regulations and policies, and will fund related policy studies and dissemination workshops. The main outputs will be a detailed assessment of the capacity of its veterinary services and development of the Action Plan on AI and the National Strategy for AI into a strengthened national AI strategic plan. (US$.18 million) A2: Updating Essential Information on Migratory Birds 4. In this area, the Project will support epidemiological studies with a focus on scaling up the knowledge base of the Ministry of Nature Protection on movement of migratory birds in the main areas of their known transit. Flight and rest patterns of certain species of migratory birds, as they concern the territory of Armenia, are likely to have changed since the extensive studies carried out in the 197s and 198Os, because of significant development of irrigation facilities, ponds, etc. The project will finance an immediate effort to update this critical information, so as to identify hot spots and high-risk locations where migratory fowl may come into contact with domestic poultry. (US$.7 million) 4

51 B: Strengthening Disease Surveillance and Diagnostic Capacity B1: Strengthening Animal Disease Surveillance and Diagnostic Capacity 5, Project support in this area will aim at strengthening the capacity of the MOA Veterinary State Inspection (VSI) and its affiliated reference and regional diagnostic laboratories in detection, reporting and follow-up of reported AI cases. This will cover the formation and equipping of a Bio-Safety Level 3 (BSL3) laboratory in Yerevan, as well as office equipment and rehabilitation of marz laboratories and border posts. Rapid test kits and consumables will be funded for the central laboratory, sprayers and disinfection means for the border posts, and vehicles for the VSI and marz levels as needed for the execution of their relevant roles in the National Strategy for AI. The costs of funded activities (US$ 2.61 million) are composed as follows: Cost in US$ Needs of National Reference Laboratory (Yerevan) Laboratory Equipments 282,239 Rapid Test Kits and Consumables 31,885 Laboratory Rehabilitation 36, Needs of the border-post and Regional Laboratories (Syuniq-Vayots Dzor, Ararat- Arrnavir, Kotayk-Gegharquniq, Aragatsotn-Shirak, Lori-Tavush) Laboratory and border post rehabilitation 6, Other veterinary services needs 965,833 Border post equipments and chemicals 187,364 Technical Assistance for Disease Surveillance 178,5 Total 2,65,822 B2: Veterinary Services Training and AI Surveillance 6. Training will target the personnel of the MOA VSI, including those of the marz level and border posts. The focus of the training will be on disease surveillance (screening, sampling, and testing), outbreak management procedures (including simulation exercises, culling and disposal), and laboratory diagnosis (including analysis of epidemiological data and performance of risk assessments). Increased risk-based AI surveillance activities will also be supported at the marz level, coordinated through the VSI. (US$.16 million) C. Outbreak Containment Plan 7. The sub-component will provide support to activities related to the implementation of the National Strategy for Avian Influenza, which details the containment plan for AI outbreaks. The National Strategy for Avian Influenza details the roles of the National Center (NC) of the MOA, the Local Disease Crisis Centers (LDCCs) set up on the basis of Local Veterinary Inspection and Marz Agricultural Departments, and National and Local Expert groups. The sub-component will include the following activities: Cl: Targeting virus eradication at the source 8. Armenia s HPAI control programs include the principle of targeting the disease at the source of infection, This refers predominantly to the backyard poultry sector. Wild birds are also implicated as reservoirs of disease, but the Project does not address the eradication of avian influenza viruses in avian 41

52 wildlife. Policies associated with this sub-component that the Government of Armenia has already introduced and would trigger in outbreak areas include: enhanced bio-security at poultry farms and associated premises, through bio-containment and bio-exclusion, and control of movement of birds and products that may be infected, including controls at the interface of infectednon-infected areas and border controls. 9. In order to target the eradication of the disease at the source of infection, the Project will target the following activities (totaling US$ 1.68 million): (a) culling of infected and at-risk poultry and compensation to farmers and producing companies (at a reasonable market price); and, (b) disposal of carcasses and potentially infective materials in a bio-secure and environmentally acceptable manner (using a mobile incineration plant and a rehabilitated and expanded network of bio-thermal holes). 1. Assuming producer prices of roughly 12 dramikg, live weights of 1.5 kg per animal, and a 75 percent compensation rate, the initial US$.75 million reserve fund would be able to cover the culling of over 25, birds (about 4 percent of average poultry stocks). However, the role of the reserve is to assure the public (both producers and consumers) that a formal compensation policy has been devised, with operational procedures well defined and publicized, and ready to be used. Over time once producers are assured that the reserve fund is well organized, administered in a timely manner, and effective in attracting backyard producers to bring forth potentially infected poultry animals, the Government of Armenia may work out a mechanism whereby commercial poultry producers pay into the reserve fund, basically as a form of insurance premia. Given the high potential losses from even a small, localized outbreak, commercial poultry producers would likely be willing to pay a small insurance premia of this type if the overall National Strategy for AI were being well implemented The incineration plants to be deployed for disposal of infected and suspect poultry in an outbreak situation would be owned and managed by the MOA VSI. The costs of running these incinerators would be shared by the national budget and provincial budgets (with a relevant policy on this cost sharing to be worked out). In times of outbreak, disposal of infected and suspect animals would be done without costs to poultry producers. 12. Establishment of a National Compensation Policy and Fund. Early detection and reporting as well as rapid response depend critically on the incentives for poultry owners to report very quickly any sick and dead poultry to their veterinarians. Without adequate compensation arrangements in place, poultry owners have no incentive to do so, but must fear that their animals will be destroyed and they lose this valuable capital. The Veterinary Law of November 19, 25 established the state s right to cull infected and suspected infected livestock in the case of outbreak of epizootic diseases. In addition, the Government s National Strategy for AI makes reference to the right of legal entities, private entrepreneurs and individuals to receive compensation for damages suffered as a result of mandatory culling, but no steps have been taken as yet to develop the required implementation arrangements - including financing, institutional arrangements, legal authority over the fund, fiduciary aspects, eligbility criteria, payment arrangements, flow of funds, etc. The project will provide technical support to do so. \ 13. Compensation payments could, depending on the scope of disease outbreaks, pose a significant fiscal burden on the state, and the project will provide financial resources to establish the foundation of a compensation facility. The Government will establish a Compensation Fund from which the owners of animals culled will be compensated, and the Project will provide (in its first stage) US$.75 million to finance this Fund (which could be increased by a further US.75 million in the second phase). 42

53 US$ 1, will be disbursed into a specially established account so as to provide sufficient resources for immediate needs; it will be a condition of disbursement for this subcomponent that the modalities for operating the fund have been established and have been approved by IDA. The remaining US$.65 million will be disbursed only in the event of actual need. 14. The legal, institutional and operational details will be developed and agreed upon during the first months of project implementation. Key parameters guiding this effort include the following: e Compensation payment to livestock owners will be through bank transfer. There will be no vouchers or animal replacements, Payment will be made within four weeks from the date of culling. e For smallholders (owning up to 2 birds), payment per bird will be at 75% of the market price of laying hens in the respective marz as reported by the Armenian National Statistical Service (NSS) for the third month preceding the month in which culling took place. Payments will be posted at the village level, in public, and under the supervision of the committee members from the village who attended the culling and signed the culling records. e For commercial poultry producers (with the exclusion of the 6 largest commercial poultry enterprises), compensation will be provided at a reasonable replacement cost - i.e., for birds less than 3 months old at the cost of one-day chicks, and for birds older than 3 months at the cost of 3- months-old birds, as reported by the NSS during the third month preceding the month in which culling took place. e Flow-of-funds arrangements for making compensation payments will minimize the number of stages through which hds will need to pass before reaching the intended beneficiaries, while ensuring maximum transparency C2: Veterinary personnel safety 15, Due to the highly pathogenic nature of the HPAI virus to humans, particularly the currently circulating H5N1 strain, this activity of the project would provide bio-safety hoods and other appropriate personal protective clothing support to veterinary personnel to be involved in the disease surveillance and culling and disposal procedures, as well as to laboratory workers involved in virus isolation and diagnosis, (US$.2 million). Cost in US$ Gear for 12 staff (4 teams) 139,894 Disinfections for the Teams 55,221 Total 195,115 C3: Restructuring the Poultry Sector 16. Restructuring the poultry sector is an important strategy to guard against the damaging effects of HPAI, but also one of the most complicated interventions to be undertaken since it requires taking into account the structure of backyard versus commercial poultry production, marketing characteristics, and potential socioeconomic impact. Although backyard poultry accounts for are about 3 percent of production in Armenia, the ban on marketing of live backyard poultry has necessitated a ban on the marketing of live poultry layers (which are mainly in the commercial sector) in order to ensure compliance by backyard poultry producers. Thus, restructuring policy needs to carefully consider this linkage. In any case, restructuring should be a gradual process, coordinated with an overall disease control strategy that includes bio-security, zoning andlor compartmentalization, and possibly vaccination, and be based on the following factors and principles: 43

54 e Well-defined socio-economic impact analysis, taking into account the interests of all stakeholders, particularly smallholder poultry farmers; Public awareness to gain full support from these stakeholders (producers, consumers, government agencies, private sector institutions); Market forces should drive the restructuring strategy taking into account commercial and smallholder poultry producers. Public and private sectors should collaborate and be transparent in implementing restructuring strategies. 17. In this context, restructuring the poultry sector in Armenia will focus on improving bio-security of backyard poultry raising and promoting manure management of backyard poultry in conformity with existing environmental regulations. Improving bio-security of backyard poultry farming could take the form of investments in improving penning of animals and closing up of barns, integration of backyard poultry activities of families into small village-level enterprises practicing confined poultry raising, and possibly of banning unconfined backyard poultry raising in protection bands around known areas of high prevalence of migratory birds farms. This last mode would involve offering support for diversification of family enterprise away from poultry raising into other activities. Since it would be extremely costly for the state to fund widespread programs for poultry sector restructuring, the introduction of restructuring modalities will be piloted under the Project with matching grants to be provided under a competitive proposal submission and award process (with at least 25% co-financing by private beneficiaries). (US$.67 million) 11. HUMAN aealth COMPONENT 18. In the public health field, short-and long-term actions need to be taken and an appropriate balance struck between the two. While immediate steps can be taken to address the crisis, there is also a longerterm agenda given systemic shortcomings with respect to core public health functions. Work on both the short- and long-term fronts, therefore, needs to proceed in parallel, and efforts should be made to ensure that short-term responses are consistent with and contribute to proposed longer-term interventions. Setting priorities in both cases is essential. 19. Building an effective national public health response will require an enabling environment and the necessary resources to bring proven interventions quickly up to nationwide scale. Thus, the Project will help to operationalize some elements that are contemplated as part of the global strategic plan, expanding and intensifying the responses rapidly. As it is unlikely that the global spread of a pandemic influenza virus could be prevented once it emerges, the emphasis is on reducing its impact. Several tools will help achieve this aim: (i) year-round surveillance; (ii) effective and accurate methods of diagnosis; (iii) social distance interventions; (iv) vaccines (once they become available); (v) anti-viral drugs; and (vi) strengthened medical services. The interventions supported under the Project will be based on Armenia s epidemiological and programmatic needs, and well-assessed options for meeting them. The interventions will be grouped in three sub-components, totaling US$ 2.75 million. These activities comprise a comprehensive mix of goods, technical assistance and training activities. Enhancing Public Health Program Planning and Coordination Strengthening of National Public Health Surveillance Systems Strengthening Health System Response Capacity A. Enhancing Public Health Program Planning and Coordination 2. The human health sections of the National Strategy for AI developed by the MOH are quite 44

55 comprehensive in scope in covering the activities that need to be undertaken during the inter-pandemic, pre-pandemic and pandemic alert phases, clearly identifying the responsible agency for each measure at different stages of an eventual pandemic. However, the agencies in charge of implementation do not currently have the organizational and logistical means to implement the plan (i.e., trained personnel, protective gear, transport, and information and communications equipment). Thus, this component will finance protective gear and clothing, information and communications equipment, rapid test kits, and other activities to protect healthcare workers and other personnel and to ensure that they can and are willing to continue to do their job in the case of a pandemic. Funds would also be made available for the procurement of vehicles for the regional branches of the San-Epid network to facilitate coordination, supervision and outreach activities. In addition, it is not clear if the current legislative and regulatory framework allows for drastic measures such as social distancing and deployment of the health workforce under emergency conditions. These will be supported under the project through medium-term technical assistance, which will also target MOH to build its institutional capacity to participate in the Inter- Ministerial Committee for AI and to coordinate the implementation of the National Strategy for AI with the MOA and other sector representatives. (US$ 1.5 million) B. Strengthening of National Public Health Surveillance Systems 21. This component intends to improve the current public health surveillance system to achieve standardization and better reactivity in order to ensure the early identification and early reporting of possible avian influenza cases for the early implementation of control measures. The main activities supported under this component would include: (1) improvement of laboratory networks; (ii) improvement of health information and telecommunication systems; and (iii) training of personnel at MOH and other selected agencies, and development of standard reporting forms and guidelines. In addition, the component will support technical assistance and additional investments needed to strengthen the areas of surveillance, communications, and information technology at the different levels of the health care system to support the country s preparedness and capacity to respond to avian influenza and other infectious disease outbreaks and to fast-track available treatments for the disease. (US$.61 million) 31. Improvement of Laboratory Networks 22. Under this activity, Armenia s weak laboratory capacity will be strengthened and its supply needs will be met for specimen collection, transportation and laboratory investigations by upgrading the network of regional and national public health laboratories to cope with the increased demand in case of a pandemic. Laboratories of remote regions would be strengthened, as well as the connection between public health laboratories and epidemiologists and animal health laboratories and veterinary departments, In this area, the Project would finance establishment of: (i) a reference laboratory for diagnosis of avian flu at the San-Epid system; (ii) improvement of poor laboratory capacity at the central level and in remote reglons; (iii) improvement of laboratory capacity at the Republican Infectious Diseases reference hospital; and, (iv) rehabilitation of laboratory premises in Syunik marz and at the Infectious Diseases hospital B2, Improvement of Health Information and Telecommunication Systems 23. Under this activity, the Project will support technical assistance and additional investments needed to strengthen the areas of surveillance, communications, and information technology at the different levels of the health care system needed to support the country s preparedness and capacity to respond to avian influenza and other infectious disease outbreaks and to fast-track available treatments for the disease. The Project would finance: (i) computer sets for 56 central and regional offices (as well as for the border-post offices) of the San-Epid surveillance system and health care facilities; (ii) development of software on data collection and analysis; and (iii) internet connections for regional offices of the San-Epid system. 45

56 B3. Training and Development of Standard Reporting Forms and Guidelines 24. In this area, the Project will help with: (i) development of reporting forms, registries, guidelines and information material for improved effectiveness in surveillance; and (ii) case standardization, notification and feedback between the center and the marzes. Funds will also be provided to train staff at different levels of the health system in clinical management, epidemiology, laboratory reporting, laboratory bio-safety, molecular techniques applied to diagnosis and molecular epidemiology C. Strengthening Health System Response Capacity 25. This subcomponent will support activities to help contain and prevent the spread of AI through various social distancing, containment and mass prophylactic activities. Under this sub-component, the project will strengthen health system response capacity with: expanded regular seasonal flu vaccination as a vital step to prevent an outbreak among humans; anti-virals of sufficient quantity for prevention of influenza in those groups at highest risk such as poultry farmers, healthcare workers, children, those in close contact with confirmed cases, etc.; and with prophylactic and preventive equipment and supplies for patient care in the intensive care unit of the Infectious Disease reference hospital and for active case detection. This sub-component will also finance procurement of human influenza vaccines for administration to high risk populations and of new vaccines should there be available against avian influenza in humans. (US$ 1.9 million) 111. PUBLIC AWARENESS AND ~PLEMENTATION SUPPORT 26. This component will support strategic communication activities for stakeholders and beneficiaries. Similarly, resources will be allocated for improved coordination between the MOA S regulatory framework and the roles of other ministries in the National Strategy for AI. A. Public Awareness through Information and Communication Services 27. Support under this sub-component will be provided for the research, design, implementation and evaluation of an integrated communications strategy, addressing the needs of priority populations at the national, provincial and local levels. The strategy will elevate knowledge and promote behavior-change in populations at-risk, to control the spread of the virus, prevent infection, foster timely reporting and support containment actions. At the same time, the strategy will educate vulnerable groups on preparedness plans and mitigation measures across pre-pandemic and pandemic phases. The communications strategy will incorporate measures called for in the Environmental Management Plan (EMF ) for safe culling and disposal of backyard poultry. (US$.3 1 million) 3. Coordination Support 28. The multi-dimensional problems associated with HPAI infection necessitate collaboration fiom a wide range of stakeholders within each country, which in Armenia include: the Ministry of Finance and Economy, the Ministry or Territorial Affairs, the Ministry of Nature Protection, the MOA, the MOH, their associated diagnostic laboratories, NGOs and civil society organizations, and private sector companies and associations (e.g. large poultry production companies, farmers associations, veterinarians and farmer involvement at the grass roots level). The sub-component will support activities to improve the effective coordination and collaboration among these stakeholders and to bolster project implementation and monitoring capacity at existing project implementation structures in the MOA and MOH. (US$.6 million) 46

57 B1. National Coordination 29. The Inter-Ministerial Committee for Avian Influenza (which supervises the work of the Inter- Ministerial Task Force for Avian Influenza) will establish a Secretariat to implement the national awareness activities described above. It will be responsible for reviewing annual work plans and ensure coordination and linkages across relevant agencies and international partners. In AI outbreak situations, it will be in charge o f triggering emergency responses by MOA and MOH, monitoring the actions taken, and coordinating public statements to the media. The Secretariat will be comprised of a Director, two Science Officers (spanning animal and human health issues), and a Public Information and Communications specialist. These staff would be contracted under the project. (US$.1 million) B2. Project Implementation 3. The Agriculture Reform Support Project Implementation Unit (ARSP PIU) of the MOA (which currently implements the Rural Enterprise and Small Scale Commercial Agriculture Development Project) and the Project Implementation Unit of the Health Systems Modernization Project (HSMP PTU) in the MOH will be entrusted with the fiduciary tasks of procurement and financial management. The relevant structures will be strengthened with additional fiduciary staff in each Unit. Both the MOA and the MOH will appoint Project Coordinators to liaise with the ARSP PIU and MOH HSMP PIU, respectively, and to prepare annual work programs and budgets as well as semi-annual interim unaudited financial reports. The Project Coordinators will manage the respective component for which their ministry is responsible and attend the regular meeting of the Secretariat and the periodic meetings of the Inter-Ministerial Committee for Avian Influenza. The ARSP PIU will be responsible for consolidating the annual work plans, budgets, and financial reports for submission to the Secretariat and the Bank. (US$.37 million) 31. At the local level, implementation would be the direct responsibility of each Marz Committee. Under these committees should be established Marz secretariat (Marz Task Force), which should implement also functions of LDCC (Local Disease Crisis Center). B3: Monitoring and Evaluation (M&E) 32. Support would be provided to enable project monitoring and impact evaluation assessments. Two types of M&E are envisaged. First, the ARSP PIU and the MOH HSMP PIU would collect relevant data from their ministries and other implementation agencies and then compile them into semi-annual progress reports focusing on output indicators and the status of physical implementation by component and use of project funds. For some output indicators, specific surveys will need to be conducted to obtain data for this purpose. These would be financed by the Project. As for the financial reports (noted above), the ARSP PKJ will be responsible for consolidating the ministerial progress reports into an integrated Project progress report. (US$.13 million) 33. Impact evaluation reports. The aim of evaluation is to find out whether the interventions are effective or the program is having the desired impact. The evaluation will include both quantitative and qualitative aspects and be conducted on a yearly basis. The quantitative aspects will rely on new information systems and surveys implemented as part of the various components of the project, currently existing data sources, and primary evaluative data collection efforts. The goal of the qualitative aspect of the evaluation will be to document perceptions of program managers, staff, patients, and local and national leaders. Qualitative information will be collected using site-visit interviews, focus groups, and respondent surveys. The Secretariat of the Task Force will also play the role ofthe NDCC - National Disease Crisis Center. 47

58 IV. SUPPORT FOR CRITICAL IMPORTS 34, This component would finance, under Emergency Recovery Assistance (ERA) procedures, a positive list of critically needed imports identified as necessary to a response program in the event an AI human pandemic were to occur. This list includes protective clothing and gear, pharmaceuticals and vaccines, and medical and veterinary supplies and equipment. This component may be expanded in future for other items on the positive list (as to be agreed on by the Bank in the case of a pandemic). Under ERA procedures, critical imports would be procured through organized international commodity markets (in accordance with the provisions of paragraph 2.68 of the Guidelines) or other channels of procurement acceptable to the Bank. 48

59 A. Compensation Fund Annex 4b: Culling and Compensation Procedures ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT 1. Early detection and reporting as well as rapid response depend critically on the incentives for poultry owners to report very quickly any sick and dead poultry to their veterinarians. Without adequate compensation arrangements in place, poultry owners have no incentive to do so, but must fear that their animals will be destroyed and they lose this valuable capital. The Veterinary Law of November 19, 25 established the state s right to cull infected and suspected infected livestock in the case of outbreak of epizootic diseases. In addition, the Government s National Strategy Plan for Avian Influenza makes reference to the right of poultry owners to receive compensation for damages suffered as a result of mandatory culling, but no steps have been taken as yet to develop the required implementation arrangements - including financing, institutional arrangements, legal authority over the compensation funds disbursement, fiduciary aspects, eligibility criteria, payment arrangements, flow of funds, etc. The project will provide technical support to do so. All the necessary legal, institutional and operational details will be developed and agreed upon during the first months of project implementation. They will be included in the Compensation Procedures Manual, 2. The first issue to be addressed is the provision of the legal basis for establishing responsibilities for Compensation Fund administration (for owners of any animals culled on Government orders), which should be done through the promulgation of a corresponding order of the Ministry of Agriculture (or Government Decree). This order should include specific responsibilities for the Fund s operation (by the MOA S Livestock Department and the ARSP PIU) as well as the necessary fkamework provisions concerning its administration and events triggering payment from the Fund, as well as the appropriate oversight arrangements. The order should identify the proposed means and modalities of financing the Fund (e.g., budgetary allocations and farmer and enterprise contributions) and establish the essential principles governing eligibility for compensation payments from the Fund. 3, Farmer and enterprise fees are considered the most appropriate means to realize cost sharing from the beneficiaries of the Compensation Fund. With medium- and large-scale livestock and poultry producers the ones who face the largest financial risk, strong consideration will be given to establishing an appropriate mechanism to have them contribute to the financing of the Compensation Fund. For poultry owners with more than 2 birds, for instance, it is strongly recommended that they be required to register with the Veterinary State Inspection (VSI) and the MOA Livestock Department, submit a quarterly report on the number of birds they have, and pay a small fee per bird into the Compensation Fund s cofinancing account. In the event of subsequent mandatory culling, they would then be compensated for the number of birds they have reported and paid for. 4. It will take time before adequate domestic financing, fiom governmental or other sources, can be mobilized and will be available in sufficient amounts to operate an effective national Compensation Fund. Farmer and enterprise contributions in particular will take considerable time to accumulate in sufficient quantities to amount to a significant share of the overall Fund. In the immediate short run, therefore, and considering that the need for compensation payments could arise very soon, the main source of financing will be contingency funding to be provided by IDA under the Project (see para. 6 below). Government budget funds would be needed if the needs exceed the resources being made available by IDA. Over time, the Government will in any case need to set aside additional funds to cover for such a contingency and to substitute for IDA resources once the Project has closed. 49

60 5. The next step will be to prepare and approve the necessary specific regulations, procedures and operational guidelines for financing the Compensation Fund and operating the compensation mechanism. Critical in this context will be specific and transparent rules and regulations on: (i) the actual mobilization of the needed financing, notably as regards cost-sharing by livestock owners, (ii) the intermediate disposition of such funds until they are actually needed, (iii) the procedural steps required to trigger actual compensation payments, and (iv) the administrative and payment arrangements in the event of an authorized case of compensation. Also needed are precise guidelines for: (i) establishing and verifying compensation claims, (ii) determining the amount of compensation per animal, (iii) recording and reporting culling and compensation claims, (iv) the actual payment to legitimate beneficiaries, and (v) monitoring payments. 6. IDA Financial Support. Compensation payments could, depending on the scope of disease outbreaks, pose a significant fiscal burden on the state, and the project will provide financial resources to establish the foundation of a compensation facility. Once the Government has developed the Compensation Procedures Manual, the Project will provide (in its first stage) up to US$.75 million to finance this facility, exclusively earmarked, however, for outbreaks of HPAI. It will be a condition of disbursement for this sub-component that the modalities for operating the compensation mechanism have been established and documented in this Manual in a manner satisfactory to IDA. US$lOO,OOO will be disbursed into a specially established account so as to provide sufficient resources for immediate needs, The remaining US$.65 million will be disbursed only in the event of actual need. B. Culling 7. In the event of an HPAI outbreak, the overriding objective for the veterinary services is eradication of the disease at the source of infection. Accordingly, the project will provide support for: (i) culling of infected and at-risk poultry, (ii) compensation to farmers and commercial poultry producers, (iii) disposal of carcasses and potentially infective materials in a bio-secure and environmentally acceptable manner, and (iv) control of movement of birds and products that may be infected, including controls at the interface of infectednon-infected areas and border controls. 8. The project will provide the technical and logistical means to contain an HPAI outbreak through location quarantining and culling of the affected animals and those in the surrounding risk area. Culling and carcass disposal will be done under the supervision of the VSI or of VSI-contracted private veterinarians by properly equipped and protected staff (VSI staff, police of the Ministry of Internal Affairs, the national army, andor laborers hired by VSI for the purpose). Appropriate equipment and materials will be provided for efficient and humane animal culling as well as for the safe disposal of carcasses and contaminated materials. Carcass disposal will be case-specific, depending on local circumstances, but in all cases in an authorized and bio-environmentally safe manner. Protective clothing and other gear will be procured and kept in ready supply, to be issued to all staff and' workers involved in containing an outbreak. Accurate lists will be kept of all animals culled, so as to provide the basis for subsequent compensation to their owners. 9. In the event that mandatory culling is ordered for a particular location, the MOA Livestock Department will provide the applicable list of compensation values for each type of poultry (see para, 17) to the VSI as well as to the marz administration concerned. This information will be then used by the Community Culling Supervision Committee (see para. 1) to calculate the compensation payable to each poultry owner. To minimize the risk of fraud and misuse, stringent requirements will apply to the recording, reporting and verification of poultry cullings, compensation claims and compensation payments. They place heavy emphasis on transparency, community involvement and multiple ex-ante and ex-post verifications and reflect experience gained under previous and ongoing operations in the country. The procedures to satisfy these requirements involve considerable work, but they are considered 5

61 essential to ensure adequate fiduciary safeguards in the present Armenian environment. Practical experience will be closely monitored. Once it has become evident that the control mechanisms are effective, some streamlining could be considered if it is deemed not to increase the risk to an unacceptable level. 1. Village and Backyard Poultry. For village and backyard poultry operations, the culling will be done in the presence and under the technical and social supervision of a small local ad-hoc committee, the Community Culling Supervision Committee (CCSC), established for this purpose by order of the marz administration. The CCSC comprises one official from the marz administration, the raion-level VSI veterinarian, and two trusted members of the village community, of which at least one must be a woman. The community representatives may be from locally recognized and trusted community organizations; they are nominated by majority vote at a general village meeting. The CCSC will verify the number of birds culled and their owners, so as to ensure a correct count and full transparency for subsequent compensation payments. 11. At the time of culling, each individual poultry owner will receive a culling certijicate noting the date and the type and number of hislher birds culled (see attached sample Form 1). The blank certificates will provided to the marz administration by the MOA Livestock Department and are pre-numbered; the numbers are stored in the MOA Livestock Department s data base (see para. 16). Each certificate will be signed by all four members of the CCSC and countersigned by the poultry owner; it is the poultry owner s record of the claim to compensation. Since backyard poultry is predominantly the domain of women, ownership records on the owner s certificate and on the summary community culling lists will be required to identify the actual owners (rather than simply the head of household ). The certificate will be completed in four copies: one will be retained by the poultry owner, one will be kept by the marz administration, and one each will be attached to the community summary culling record compiled by the CCSC (see para. 12) and sent by the marz administration to the MOA Livestock Department (operating the Compensation Fund) and to the ARSP PIU, respectively. Certificates not signed by all members of the CCSC and the poultry owner will be declared invalid. 12. Based on the individual poultry owner certificates, the CCSC will then compile a summary record of the culling in the village (see attached sample Form 2). Blank pre-numbered community summary poultry culzing records are provided to the marz administration by the MOA Livestock Department; the numbers are stored in the Compensation Fund s data base (see para. 16). All four CCSC members will sign and the poultry owners will countersign this list of birds culled and their owners. Forms not signed by all four members of the CCSC will be declared invalid, and all claims included on an invalid Community Summary Poultry Culling Record are rendered invalid as well. The community summary culling record is the official record that establishes the poultry owners right to compensation from the Compensation Fund. The summary record will be completed in eight identical copies: one will be posted in a weather-protected public place in the village; one will be kept by the raion representative of the VSI; two will be kept in the marz administration office; one will be sent by the CCSC to the ARSP PIU; one will be sent by the CCSC to the MOA Livestock Department Fund; one will be sent by the marz administration (together with the Marz Summary Report, see para. 13) to the ARSP PIU; and one will be sent by the marz administration (together with the Marz Summary Report to the MOA Livestock Department), Attached to the copies that are to be sent by the marz administration to the MOA Livestock Department and to the ARSP PIU must be copies of all individual owners culling certificates that form the basis for the compilation of the community summary culling list. 13. The marz administration will compile a Summary Report on the basis of all community summary poultry culling records, listing all villages and for each village the total number of different poultry culled (see attached sample Form 3). Blank pre-numbered Marz Summary Report forms are provided to the marz administration by the MOA Livestock Department; the numbers are stored in the MOA Livestock 51

62 Department s data base (see para. 16). The Marz Summary Report will be made out in five copies and signed by the governor of the marz. Two copies will be kept by the marz administration, one will be provided to the raion VSI veterinarian, one is to be sent to the ARSP PIU, and one is to be sent to the MOA Livestock Department. Attached to the copies sent to the ARSP PIU and to the MOA Livestock Department are the community summary poultry culling records and copies of all individual owners culling certificates. 14, Medium- and Large-Scale Poultry Operations. At larger poultry farms and enterprises (with more than 2 birds), the culling will be carried out in the presence of the owner or manager or of a person designated by himlher and under the supervision of the raion VSI and one official of the marz administration. All three will sign the list of birds culled (see attached sample Form 4). In addition, an audit firm acceptable to IDA will be required to monitor the culling and to certify the culling report. Blank pre-numbered enterprise culling lists will be provided to the marz administration by the MOA Livestock Department; the numbers will be stored in the MOA Livestock Department s data base (see para. 16). The culling record (list) will be made with five identical copies: one will be kept in the marz office; one will be kept by the raion-representative of the VSI; one will be given to the owner or manager of the farm or to the person designated by himher; one will be sent to the ARSP PIlJ by the marz administration; and one will be sent to the MOA Livestock Department by the marz administration. The culling list will be the official record that establishes the poultry owners right to compensation from the Fund. The copy given to the farm owner or hislher designated representative will be the poultry owner s record of the claim to compensation. Actual compensation payments will be based, however, on the lower ofi (a) the number of birds reported by the enterprise to the MOA Livestock Department at the end of the quarter preceding the mandatory culling and for which the required fee has been paid to the Com~ensation Fund cofinancing account (see para. 3) or (b) the number of birds reported and certijied on the Enterprise Poultry Culling Record. If all or part of the fee due to the Fund is overdue by more than three months, no compensation will be paid. 15. Forms. All forms will be provided by the MOA Livestock Department. They will be printed in booklets (of 2 or 25) and will be pre-numbered. The MOA Livestock Department will maintain a data base containing, inter alia, the numbers of all forms provided to each marz administration. All unused forms, as well as any invalid or incorrectly completed forms, must be returned to the MOA Livestock Department when the culling records are submitted. 16. Database. The MOA Livestock Department will establish and maintain a database to facilitate record keeping, monitoring and auditing. This database will include all marz and villageslsettlements. It will also include all livestock and poultry enterprises registered with the MOA Livestock Department, with the number of animals reported and the fees paid to the Compensation Fund s cofinancing account for these animals. As mandatory culling orders are issued, the affected communities will be tagged accordingly. Once culling reports are received from marz administrations, the information from the Marz Summary Reports and the attached Community Summary Culling Lists will be entered into the database. The database will also contain a record of all pre-numbered forms provided to marz administrations, so as to allow subsequent cross-checking of forms submitted or returned. C. Compensation Payments 17. The key parameters governing the design of implementation arrangements for the actual operation of the compensation mechanism and the provision of compensation payments to poultry owners will include the following: In 25, there were an estimated six industrial enterprises with more than 5, birds each, 2 poultry farms with 2-5 birds, and roughly 2, backyard farm with more than 1 birds. 52

63 a a Compensation payment to poultry owners by bank transfer. There will be no vouchers or animal replacements. Payment will be made within four weeks from the date of culling. For smallholders (owning up to 2 birds), payment per bird will be made by bank transfer at 75% of the market price of laying hens in the respective marz center as reported by the NSS for the third month preceding the month in which culling took place. Payments will be posted at the village level, in public, and under the supervision of the two community representatives on the CCSC who attended the culling and signed the culling records. Special care will be taken to ensure that payments are made to the women poultry owners of record. For poultry ownerslproducers with more than 2 birds, compensation will be made by bank transfer at a reasonable replacement cost - i.e., for birds less than 3 months old at the cost of oneday chicks, and for birds older than 3 months at the cost of 3-months-old birds, as reported by the NSS during the third month preceding the month in which culling took place. 18. The MOA Livestock Department will establish the amounts of compensation to be paid, based on the parameters identified in para. 17. For village and backyard poultry owners, the culling record prepared and signed at the time of the culling and subsequently submitted by the marz administration to the MOA Livestock Department and the ARSP PIU (see paras. 9-13) will be the basis for compensation payments to be made. The culling record received and filed by the MOA Livestock Department will be used to calculate the amount of payment due to each village (in the case of smallholders) and to prepare the payment list - which is a copy of the Marz Summary Report with the appropriate compensation amounts added in the final column -- but the copy received by and filed at the ARSP PIU is the binding one for purposes of verifymg payment claims. No payment will be made unless and until the ARSP PIU has compared its records against the payment list prepared by the MOA Livestock Department. 19. For medium- and large poultry owners, the MOA Livestock Department will calculate the amount of payment due based on the reported number of birds and the fees paid (see para. 14) and will prepare the requisite payment list - which is based on the database records. However, no payment will be made unless and until the ARSP PIU has compared its records against the payment list prepared by the MOA Livestock Department. 2. Database Cross-Checking. Before finalizing the payment list, the MOA Livestock Department will check the culling records received for completeness, accuracy and validity (no blank lines, all signatures provided, all supporting documents attached, no duplicate claims submitted, etc.). It will also cross-check them against its database records to ensure that the pre-numbered forms match with the forms provided to the respective marz administration and that mandatory culling was in fact ordered for the village concerned. With respect to payment claims from medium- and large-scale poultry enterprises, the database check will verify that the enterprise is registered the MOA Livestock Department, has reported its poultry numbers on a quarterly basis, and has no fees overdue to the Compensation Fund cofinancing account for more than three months FZow of Funds. Flow-of-funds arrangements for making compensation payments are being designed to minimize the number o f stages through which lnds will need to pass before reaching the intended beneficiaries, while ensuring maximum transparency. Once the payment lists are reconciled by the ARSP PIU, compensation payments will be effected from the Compensation Fund accounts through the banking system. At the time of project appraisal, owners of poultry would have been compensated at roughly 9 AMD per kg (US$2.65 per bird. The US$.75 million fimd would, thus, cover almost 28, birds in poultry systems. 53

64 22. For payments to village and backyard poultry owners, whose poultry was culled under the supervision of the CCSC, separate but identical notices will be sent to the marz administration, to the two community representatives on the CCSC, to the VSI representative in the corresponding raion, and to the ARSP PIU that contain information on the total amount being transmitted and on the amount of compensation per bird (by type). The marz administration, in consultation with the village mayor (gyughapet), will establish a date for the actual transfers to be made and will notify the gyughapet and the two community representatives on the CCSC accordingly; the date must be within one week of the notices sent to the marz administration and no more than four weeks after the date of culling in the village. 23. Confirmation of receipt of payment by the poultry owners will be supervised by officials of the marz administration and by the two community representatives on the CCSC, based on the village summary culling list kept by the marz administration and cross-checked against that kept in the village. Each poultry owner will sign the list to verify receipt of payment. To receive payment, each poultry owner will be required to present hislher culling voucher received at the time o f the culling. The date and amount of payment will be recorded on the voucher and countersigned by the poultry owner. 24. All individual payments made to poultry owners will be recorded on the two copies of the community summary poultry culling record kept by the marz administration, and each poultry owner must sign for the payment received on both lists. These two copies of the community summary poultry culling record thus become the community culling-and-payment record. They must be signed by the marz administration representative and the two community representatives on the CCSC. Once the payments have been made to the eligible beneficiaries, and based on the completed community cullingand-payment records from all settlements in the marz, the marz administration completes the Marz Summary Report by entering in the final column for each community the amounts paid, by village and by type of poultry. The Marz administration will then submit to the MOA Livestock Department one copy of the completed Marz Summary Report, with one of the two copies of each community s culling-andpayment record attached. The cover letter, signed by the governor, confirms that the eligible poultry owners have been paid. 25. For medium- and large-scale poultry enterprises who have provided the necessary account details when their poultry was culled, the compensation payments will be made by the ARSP PIU through the banking system. The MOA Livestock Department will transfer the list of payments to be made to the ARSP PIU, which will instruct bank branches in the appropriate locations to credit the account(s) of the eligible recipients. Banking fees associated with this service will be financed by the Project. The ARSP PIU will inform the MOA Livestock Department of the dates and amounts of payments made, with appropriate documentary evidence. D. Operational Controls, Reviews and Audits 26. The ARSP PIU will arrange to have carried out, additional checks to ensure that the eliglble poultry owners, and only they, are paid and are paid in full. This will include, but not be limited to, (exante or ex-post) periodic operational reviews, under terms of reference (TORS) acceptable to IDA, to confirm the validity and legitimacy of the compensation payments made. The reviewers will be required to verify compensation claims and payments made in randomly selected samples o f villages and marzes; this verification will include: checking against the database maintained by the MOA Livestock Department, collecting and verifylng information available and obtained at the village level, checking with individual poultry owners, checking forms and reports, etc. Any significant weaknesses identified will be promptly rectified in close consultation with IDA. 54

65 27. In addition, the external independent auditors will be asked to provide an opinion on the reasonableness of the accounting, reporting and internal controls in respect of the operations of the Compensation Fund, and the audit TORS (acceptable to IDA) will include these specific requirements. 28. All ineligible claims will be refunded to IDA. Attachments: Draft Forms for Culling and Compensation Form 1 : Poultry Culling Record - Owner s Certificate (record of birds culled for individual poultry owner) Form 2: Community Summary Poultry Culling Record (record of poultry owners and birds culled by village, used to record cullings and subsequent compensation payments) Form 3: Marz Poultry Culling Summary Record (summary record of birds culled in all villages in the marz) Form 4: Enterprise Poultry Culling Record (record of birds culled for individual larger poultry operations, used to record cullings and subsequent compensation payments) 55

66 Form 1: Poultry Culling Record - Owner's Certificate Community - Raion - Marz - Date I. Name " of... Poultry ""..."" Owner:! Address: "...".."..."-...~..~.ii.._... I """... l".l... "".l.." " _,,, l. l l.... l l l ~ l "... ".l 1 1 j.. i 3 j i Culling Verified by the Community Culling Supervision Committee: Marz representative (Name) VSI representative (Name) Community Representative (Name) Community Representative (Name) Poultry Owner (Name) Signature Signature Signature Signature Signature 56

67 Instructions: (a) Enter new line for each different type of poultry. (b) Running numbers must be included in first column, continuing on each additional sheet. (c) Lines not used must be crossed out across the entire sheet. (d) Voucher must be signed by all four members of the Community Culling Supervision Committee and by the poultry owner. 57

68 U - _. = ".." ""....- _..".I.."... UJ E P a 4... c -... d -... ".".

69 9) E G

70 Sheet No. Form 3: Marz Poultry Culling Summary Report MARZ POULTRY CULLING SUMMARY RIEPORT COPY No.: I Raion: I Marz: I Date of Culling: Date of Compensation Payment: -l-l."... "... ".I... ".."...I """,,,,,1 Culling Verified: Payment Verified: (Name) (Signature) (Signature) Governor, Marz 6

71 Instructions: A. At the Time of Culling (a) Complete for each villagelsettlement a new line for each different type of poultry. Only the last column must remain empty. (b) Running numbers must be included in first column, continuing on each additional sheet. Sheets must be numbered consecutively. (c) Lines not used must be crossed out across the entire sheet. (d) Each sheet must contain in the last line the sheet totals for the number of birds culled and for the total compensation value. (e) Each sheet (and copy thereof) must be signed by the governor of the marz. (f) Each sheet must be completed with at least five copies for the following distribution: (i) Copies No. 1 and No. 2 to be kept in the marz administration; (ii) Copy No. 3 to be kept by the raion-representative of the VSI; (iii) Copy No. 4 to be sent by the marz administration to the ARSP PIU; (iv) Copy No. 5 to be sent by the marz administration to the MOA Livestock Department, B. At the Time of Compensation Payment (g) Both copies of the sheet kept at the marz administration must be completed. (h) Enter the authorized compensation payment in each line, based on the valuation formula provided by the MOA Livestock Department. (i) Each sheet (and copy thereof) must be signed by the governor of the marz. (j) One completed copy of each sheet is kept in the marz administration. (k) The other copy of the sheet is sent by the marz administration to the MOA Livestock Department. 61

72 ~ "l""".".... I I "" I" Community: Raion: Marz: Name of Enterprise or Poultry Owner:..." " "... Passport or ID Number:. - _I... 1""- "... "" "." Address: ' : Type of poultry (chickens, ducks, Number of 1 ] Culling Completed: No. I geese, etc. - under 3 monthslover 3 I poultry I Remarks I Signature of Owner or months) 1 i i I I Representative...,I,t_, _"." 1 1 ""_ Culling Verified: "... " " ",l_.,,._l,,.-~".... "... " ".l"l_".. 4 ""......"... "-4.I ~ "" "..."......"".l 1. 1 j ""... 2",'".""'?" "_j_ "" l--.-l".-"- " " j i... I. " "...".. "".-. ". i "..."...."A.-. "" 1. ". "... j i ! " " " " l," "...i..."..."i l.l-._l.l._." "..l"..." l".l I" l._._, l.._ I 3 1.-!." I...",ltl.~,,, "" l.l.-. I" ".,.-._I-".... I"....~ ~-" 6 1 " " 1." 1- " " - i " i ". ll"."." " 7 1 y"" A, I tl-lt "..."...I..."..*,,l,_l_..._ ~ "... "... f I" " l.l.l".....". r-" ". i. "I 9 1.I".... ".. "... ".".l."."... "...".... "...".""l" "4.."... ". ".l". "..."... I" 1 1 I j j "..." ~. A". -- v-"." "...-.._.,_., C._...: "...". " "... " l_,l.l l.l l... i _.I ".l..."... l".l ".l" i ". "".".l.l "......""..".l"""_"-. I."... 4.I..._l-...l-..--._ I ~ "" -3.. "."l" "... j j "... " _. ".. "... I."... lil- "" I" " l".." 11 I I! 12 I - 4 " ,._.._..I"... " 13 I! ""1 "-."" "L "...".I. "..."..."- 1" -_._._.._. ^,,," 14 {.I." I,,,._t- 4, j_-..--l..-.._l_-l..i..".i"" ---l-_.--_l.l_-_---(l_ltl ll...,, ll --,- 15 marz representative (name) VSI representative (name) Enterprise Representative (name) Signature Signature Signature Auditor's Certification: (name) (date) (stamp) 62

73 Instructions: At the Time of Culling (a) Enter a complete new line for each different type of poultry. Only the last two columns must remain empty* (b) Running numbers must be included in first column, continuing on each additional sheet. Sheets must be numbered consecutively. (c) Lines not used must be crossed out across the entire sheet. (d) Each line must be signed by the owner or representative of the enterprise. (e) Each sheet (and copy thereof) must be signed at the bottom by the marz representative, the VSI representative and the poultry owner or hidher representative. (f) Each sheet must be completed with at least six copies for the following distribution: (i) Copies No. 1 and No. 2 to be kept in the marz administration; (ii) Copy No. 3 to be kept by the raion-representative of the VSI; (iii) Copy No. 4 to be kept by the poultry enterprise; (iv) (v) Copy No. 5 to be sent by the marz administration to the ARSP PIU; Copy No. 6 to be sent by the marz administration to the MOA Livestock Department. 63

74 Annex 5: Project Costs ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT Project Cost By Component andor Activity Local Foreign Total US $million US $million US $million 1. Animal Health Component Human Health Component Public Awareness and Communication Support Total Baseline Cost Contingencies Total Project Costs

75 Annex 6: Implementation Arrangements ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT 1. The Project will be implemented by existing project implementation structures in the MOA and the MOH. However, institutional and implementation arrangements will be coordinated by the Government of Armenia, in which a Secretariat of the existing Inter-Ministerial Committee for Avian Influenza is established. This Committee has been established to deal with zoonotic emergencies and will provide general policies and guidelines for Project implementation. The Committee comprises representatives of the MOA, the Republican Agricultural Support Center (MSC), the MOH, the Ministry of Nature Protection, the Ministry of Territorial Administration, the National Police, the National Academy of Sciences, the Armenian State Agrarian University, and the Union of Veterinarians (an NGO). The Committee will be responsible for reviewing annual work plans and the Secretariat will be responsible for ensuring coordination and linkages across relevant agencies and international partners., 2. Since the Bank is financing both agricultural sector and health sector projects in Armenia, the existing project implementation structures within the MOA (the Agriculture Reform Implementation PIU) and the MOH (the Health Systems Modernization Project Implementation Unit, HSMP PIU) will be entrusted with fiduciary tasks of procurement and financial management. (Additional staff will to be recruited in the ARSP PIU and the MOH HSMP PIU as needed for these fiduciary tasks.) One senior officer from the MOA and one from the MOH will be designated as Project Coordinators in charge of managing implementation of thdr relevant ministries project activities and liaising with the ARSP PIU and MOH HSMP PIU, respectively. These Project Coordinators will report to the Secretariat of the Committee and be members of the Committee. The Secretariat will recruit staff responsible for overall administration, public information, and coordination of scientific issues related to animal and human health. 3. The Project Coordinators will be responsible for the preparation of annual work programs and budgets and monitoring project implementation at the central and local levels. The ARSP PIU and the MOH HSMP will assist the Project Coordinators in preparation of semi-annual project management reports for the two ministries. The ARSP PIU will be responsible for consolidating the annual work plans and budgets for submission to the Secretariat and the Bank. 4. At the local level, implementation will be the direct responsibility of each marz Secretariat (task force) and should report to the Deputy Governor of the marz. The Deputy Governor will be the key marz official to be in contact with the Inter-Ministerial Committee for AI and its Secretariat in times of AI outbreak or other emergency situations. The marz level committees will be strengthened to set up marz level secretariats comprising officials and specialists to work under the supervision and guidance of the national Secretariat. 5. A Project Operational Manual (POM) is being prepared to integrate the relevant aspects of the MOA and MOH under the National Strategy for AI that has been prepared by the MOA and the MOH. This POM will guide the management and implementation of the Project and be updated as Armenia s national AI strategic plan is finalized and updated periodically during the course of the Project. 65

76 Annex 7: Procurement, Financial Management, and Disbursement Arrangements ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT A. Procurement Arrangements 1. As described in OP 8.5 for Emergency Recovery Assistance (ERA), in addition to emergency assistance, the Bank may support operations for prevention and mitigation in countries prone to specific types of emergencies. Such operations could assist in: (a) developing a national strategy, (b) establishing an adequate institutional and regulatory framework, (c) carrying out studies of vulnerability and risk assessment, (d) reinforcing vulnerable structures, and (e) acquiring hazard-reduction technology. 2. Given the threat that HPAI may pose to the economic and social fabric of the country, as well as to the health of the population because of the risk of an influenza pandemic, the Project will be financed through a Credit to be approved following ERA procedures. 3. Procurement under the Project will be carried out in accordance with the Bank s Guidelines: Procurement under IBRD Loans and IDA Credits dated May 24, and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 24, and with the provisions stipulated in the Legal Agreement. Agreements covering procurement methods, thresholds, and other conditionality will be consistent with ERA assistance guidelines and determined for the Armenia Republic according to its capacity and experience with Bank procurement. 4. The activities covered under the Project will be implemented on the basis of annual work plans to allow for needed flexibility in adjusting activities to account for in-country experience and the lessons from implementation by other countries participating in the multi-country GPAI. Accordingly, the following approach to procurement will be adopted. 5. Implementjng Agency Assessment. The Bank has carried out a procurement capacity assessment of the Project Implementation Unit (PIU) in the MOH currently implementing the Health Systems Modernization Project (HSMP), which will be responsible for the implementation of the Human Health component of the AIP. The HSMP PIU has procurement specialists in place for the HSMP and these arrangements will be relied upon for the AIP. The PIU in the MOA (the ARSP PIU) currently responsible for the implementation of the Rural Enterprise and Small Scale Commercial Agriculture Development Project will be responsible for the implementation of the Animal Health component of the AIP. Procurement staff in both PIUs are experienced with procurement following World Bank guidelines, including with all the procurement methods to be included under the Project. The same qualified staff will be responsible for procurement under this Project, but both PIUs will recruit an additional procurement specialist to assist the implementation of the ATP project However, given the country conditions, the Project has been classified in category C, signifying high risk (A - low, B - medium). The annual Procurement Plan (PP) will define thresholds for prior review appropriate to the category; these thresholds will be determined so as to minimize prior review as appropriate to the level of risk. 6. Procurement Plan. A Procurement Plan (PP) covering the initial 18 month period of Project implementation was prepared at appraisal and agreed at Negotiations. The updated PP for each subsequent year will be submitted to the Bank for approval before the end of the previous year and will use a pre-defined standard format which will, at a minimum, list: (i) goods and services to be procured during the following calendar year, (ii) the estimated value; (iii) the method of procurement; and (iv) the timetable for carrying out the procurement. When reviewing the annual work program, IDA will require consistent application of Bank procurement guidelines to the specific procurement lots expected during the year and their procurement methods. If needed, the PP could be revised and re-submitted. 66

77 7. Procurement Methods and Thresh~lds. The Financing Agreement defines the appropriate methods for International Competitive Bidding (ICB), National Competitive Bidding (NCB), Limited International Bidding (LIB), Shopping, Direct Contracting (including through UN agencies), and Community Participation Practices. Thresholds for such procurement methods and prior review requirements have been initially indicated in the table below on the basis of the Bank s assessment of the capacity of the PIUs which will be responsible for procurement. Such thresholds may be adjusted in the Procurement Plan based on the updated estimated risks of comption in the country, and the country s capacity of construction and manufacturing industries. ICB: Goods ICB Works LIB: Goods NCB: Goods NCB: Works Shopping: Goods and Works For emergency Community Participation Practices Direct Contracting UN Agencies - Direct Contracting with specialized agencies, e.g., WHO, FAO, UNICEF Quality and Cost Based Selection (QCBS) for Consultant Services Selection Based on Consultants Qualifications Individual Consultants Single-Source Selection >US$3, >us$2,, <US$3, <us$2,, <us$2, < US$6, >us$1, (Int l shortlist) <us$1, (National shortlist) <us$2, For specialized equipment If goods available competitively from within the country and the bidding documents shall contain draft contract and conditions of contract acceptable to the Bank. The Bank s sample form may be used. This emergency shopping method refers to the use of shopping for contracts expected to be above the normal threshold but for goods which are needed on a nrioritv basis in the first few months of nroiect For goods, works and services for restructuring of poultry sector under the sub-projects (maximum of $1,) to be implemented by small farmers and sub-projects (maximum of $3,) to be implemented by small and medium sized enterprises Goods and works which the Bank agrees meet the requirements of the Procurement Guidelines For procurement of drugs, vaccines, specialized test equipment and supplies and other materials. This procedure is described in Para 1 1. Services for assignments that meet the requirements set forth in the first sentence of para. 5.1 of the Consultant Guidelines. Services for tasks in circumstances which meet the requirements of para. 3.1 of the Consultant Guidelines, with the Bank s prior agreement. All All First contract None All contracts above $3, None All NA All >$1, > $5, All 67

78 8. Prior Review by the Bank. The Procurement Plan shall set forth those contracts which shall be subject to the Bank's prior review process. All other contract shall be subject to post review. 9. Advertisement. A General Procurement Notice (GPN) would be published in the UN "Development Business" on -line (UNDBonline) and in the Development Gateway's dgmarket around the period of Negotiation. For ICB goods and works contracts and large-value consultants contracts (more than US$2,), Specific Procurement Notice would be advertised in the Development Business online (UNDBonline) and in the Development Gateway's dgmarket and national press, and in the case of NCB, in a major local newspaper (in the national language). Information on contract awards for the same shall be published within two weeks of receiving Bank's no-objections. 1. The Plus will follow the Bank's anti-comption measures and will not engage services of firms and individuals debarred by the Bank. The listing of debarred firms and individuals is located at: ht~://~.worldbank.or~h~l/opr/urocure/deba~.h~l 11. UN Agencies as Procurement Agents. For several years, a number of specialized UN and bilateral agencies operating in the Region have supported various country agencies in the procurement of drugs, vaccines, specialized test equipment and supplies, and other materials. Using this type of assistance will be part of the Project's procurement arrangements. In accordance with the Procurement Guidelines Section 3.9, the Project will include the use of Specialized Agencies of the United Nations (WHO, FA and UNICEF) as suppliers of goods (mainly for drugs and vaccines and some medical supplies such as reagents), following their own procedures of procurement. 12. Procurement under Emergency Assistance Provisions. Following ERA procedures, the Project is likely to include financing for items included on a positive list of imports identified as necessary under a well-defined preparedness and response program to be prepared as part of project implementation. In case of a declared global influenza pandemic, which will trigger disbursement conditions for critical imports, support will be provided under the Project for the procurement of a positive list of critical imports. These may be procured under Modified International Competitive Bidding (MICB), according to paragraphs 2.66 and 2.67 of the Procurement Guidelines. Also, commonly traded commodities may be procured through organized international commodity markets or other channels of competitive procurement acceptable to the Bank, in accordance with the provision. 13. The positive list of critical inputs to be prepared by the Republic of Armenia or to be purchased by the Borrower from the private sector, based on historical imports during national emergencies, could include: e Pharmaceuticals and vaccines e Medical and veterinary supplies and equipment e Protective clothing and gear 14. Disbursements for items procured under emergency assistance provisions can be made for up to 1 percent of import costs. No more than 2 percent of the Credit proceeds may be used for retroactive financing of expenditures, and the payments must have been made after the appraisal mission. B. Financial Management and Disbursement 15. Country Issues. The draft CFAA report, which is being finalized currently, concluded that the overall fiduciary risk" in Armenia is significant. The key reasons are: (i) inadequate capacity of core lo Risk of illegal, irregular or unjustified transactions not being detected, measured on a four point scale according to the CFAA Guidelines (low, moderate, significant or high). 68

79 control and supervisory agencies performing the audits within the public sector; (ii) although most of the basic laws are in place with respect to various entities (private sector and public enterprises, including state non-commercial organizations) financial reporting, but compliance remains a problem and authorities need to improve the quality of auditing, monitoring and supervision. 16. However, the fiduciary risk of the stand-alone financial management arrangements for Bankfinanced investment projects in Armenia is considered low. The government counterpart funding remains a major concern but actions have been taken by the Government and the Bank to monitor the status of this problem. Weaknesses in the banking sector mean that there are inadequate commercial banks to manage the designated accounts. The project financial staffs are considered adequate. The audit arrangements are acceptable and no significant issues have been identified. 17. Strengths and Weaknesses The significant strengths that provide a basis for reliance on the project financial management system include: (i) significant experience of both PIUs management and FM staff in implementing Bank-financed projects for past several years; and (ii) adequate accounting software utilized by both PIUS. The significant weaknesses were not identified at the PIUS. 18, Internal Controls. The existing FMS staffing in the ARSP and HSMP PIUs are considered adequate to implement this new project at the initial phase, but additional staff will be needed to strengthen the existing capacity in both PIUs and particularly in ARSP PIU to allow for regular reconciliation of the documents to be received as well as periodic visits to the village level to review the implementation of the Compensation Fund. The additional FM staff will report to the PIUs financial managers and will be responsible for disbursement functions as well as project accounting -- maintaining books of accounts, reporting day-to-day transactions and preparing accounting reports and financial statements, as well as monitoring financial flows to project beneficiaries. The financial managers of both PIUs will have primary responsibility for the quarterly financial reports (FIMRs) and will prepare the annual financial statements for audit. However, the ARSP PIU s financial manager will be also responsible for consolidation of the separate FMRs into one for regular submission to the Bank. 19, Accounting. The accounting books and records of the both PIUs will be maintained on an accrual basis and project financial statements, including quarterly FMRs, are going to be presented in United States dollars. The financial management manuals are being updated based on the agreed organizational structure of the FM team to reflect relevant accounting policies and internal control procedures. 2. Internal Audit. Neither internal audit units exists nor are going to be established in the PIUs, considering the small size of the entities. 21. Reporting and Monitoring. For project monitoring purposes, semi-annual financial reports will be required to be prepared by each PIU for the component s under their management. Both PIUs will be responsible for designing appropriate financial reports to include: (a) Project Sources and Uses of Funds, (b) Uses of Funds by Project Activity, (c) Designated AccountLocal Bank Account Statements, (d) Physical progress report, and (e) Procurement report. These financial reports will be submitted to IDA within 45 days of the end of each semester. The first semi-annual financial report will be submitted after the end of the first full semester following the initial disbursement. Formats of the annual financial statements and the financial reports will be incorporated in the financial management section of the Project Operational Manual. The accounting software currently used by the ARSP and HSMP PIUs will need to be upgraded to have the capacity to prepare financial reports incorporating all components, subcomponents and expenditure categories, as may be appropriate. 69

80 22. Information Systems. ARSP PIU has been using 1C accounting software which is implemented in a number of PIUs and found to be adequate. The only drawback of the software is that it does not produce financial reports, and they are currently prepared in Excel, The HSMP PIU also uses 1C accounting software which has been upgraded in December 24, incorporating new functionalities including automatic generation of financial reports. The software in ARSP PIU needs to be upgraded to generate financial reports for the project automatically. Allocation of Credit Proceeds and Financing Percentage Expenditure Category Amount in US$ Financing Percentage (1) Goods, works, consultant services and training under Part I of the Project, excluding Part 1.3.(a) and 1.3.(d) (2) Goods, works, consultant services and training under Part I1 of the Project (3) Goods, works, consultant services and training under Part I11 of the Project (4) Compensation Fund under Part I. 3(a) of 2,28, 1,61, 33, 72, 74% 74% 74% 96% the Project (5) Poultry Restructuring Sub-projects 5, 74% under Part 1.3 (d) of the Project I (6) Eligible imported goods and 22, 74% commodities under Part IV of the Project as specified in Section 1V.C of Schedule 2 of the Financing Agreement (7) Operational Costs 36, 74% (8) Unallocated 23, Total Credit 6,25, 24. Quick Disbursable Funds. In the event of a global influenza pandemic, the Borrower could obtain quick disbursing funds. These funds would be disbursed against a positive list of imports, identified as critical following emergency events. The declaration of a national emergency will be a disbursement condition for this element of the project. Upon declaration of an emergency, the Government will submit to IDA an initial recovery plan documenting the disaster declaration, the related budget appropriation and the proposed use of the funds. The ARSP PIU will keep IDA informed of updates in the recovery plan as the emergency response operations unfold. 25. Co~~en~a~on Fund. The Compensation mechanism and the internal controls are described in Annex 4.b above. 26. Financial Audits. There will be annual audits of the project financial statements prepared for relevant components by ARSP and HSMP PIUs and consolidated by ARSP PIU, covering all aspects of the project, including specific requirements for the Compensation Fund. The audits will be performed by 7

81 independent auditors acceptable to the Bank, and in accordance with International Standards on Auditing (ISA), and the Bank s guidelines on auditing as stated in the guidelines: Annual Financial Reporting and Auditing for World Bank-~nanced Activities (June 23). The auditors TORS will be prepared by the ARSP PIU in coordination with HSMP PIU and cleared by the Bank before the engagement of the auditor. The audit TOR will include both the audit of financial transactions, an assessment of the internal control, funds flow mechanisms at the PIUS, and the reasonableness of the accounting, reporting and internal controls in respect of the Compensation Fund operation. 27. The annual audit reports will consist of a single opinion on the financial statements of the project, incorporating the project accounts, including two Designated Accounts Reconciliation, and SOE Withdrawal Schedules; as well as a Management Letter. The audit reports will be submitted to the Bank not later than six months after the end of the fiscal year to which they relate. The cost of the audits will be eligible for financing from the Credit. The both PIUs will provide the auditor with full access to project-related documents and records, including the compensation claims database (in case of ARSP PIU), and with the information required for the purpose of the audit. Sample TORS for project audit will be included in the Financial Manual. 28. Financial Management Action Plan. Financial management arrangements of the ARSP and HSMP PIUs are generally adequate, but a number of actions are required to ensure that arrangements are fully satisfactory for the project, with its specific FM needs, especially with respect to the Compensation Fund. The following action plan will be discussed with the Borrower during Negotiations. Satisfactory implementation of the action plan will ensure the establishment of a financial management system that fully meets requirements of the Project and of the Bank. Action Implementation of appropriate internal control procedures and fund flow arrangements for the Compensation Fund component acceptable to the Bank and documented in the relevant operational manuals. Staffing of the FM Unit. Recruitment of FinanciallDisbursement Specialist. This is only an action for capacity building and not a FM condition. Responsibility ARSP PIU, MOA Livestock Department ARSP and HSMP PIUs Due Date Disbursement Condition for the Compensation Fund subcomponent To be ready before project implementation Remarks The Compensation Fund subcomponent will be disbursed after the MOA Livestock Department and ARSP PIU have implemented and documented appropriate internal control and fund flow procedures. FM Procedures Manuals. Revise existing manuals to fully document the procedures for accounting and internal control, including disbursement and flow of funds (including flow chart), financial reporting, including FMR, annual reports and audit. This is only an action for capacity building and not a FM condition. ARSP and HSMP PIUs To be ready before project implementation Manuals already exist and will require only minor updates to reflect the characteristics of the project, including flow of funds and accountability for cash grants/ compensation fund. 29. Supervision Plaa During project implementation, the Bank will supervise the project s financial management arrangements in two main ways: (i) review the project s semi-annual financial reports and project progress reports as well as the project s annual audited financial statements and auditor s management letter; and (ii) during the Bank s supervision missions, review the project s financial management and disbursement arrangements (including a review of a sample of SOEs and movements on the Designated Account) to ensure compliance with the Bank s minimum requirements. As required by the Bank and ECA guidelines, the Country Financial Management Specialist for Armenia and Georgia will carry out regular annual FM supervisions of the project. 71

82 Annex 8: Economic Analysis ARMENIA: AVIAN INFLUENZA PFWPAFWDNESS PROJECT 1. Evidence shows that the H5N1 strain of Highly Pathogenic Avian Influenza (HPAI) is now endemic in parts of Southeast Asia, where Cambodia, China, Indonesia, Laos, Thailand and Indonesia are the worst-affected countries. The continuing outbreaks that began in late 23 and early 24 have been disastrous for the poultry industry in the region, By early-25, more than 2 million birds had died or been destroyed and losses to the poultry industry are estimated to be in excess of US$lO billion. The costs were related to the death of poultry from the disease itself, the culling of poultry to stem its spread, and the costs to governments of containing the epidemic in terms of equipment, materials, transport and personnel. 2. In Vietnam, one of the most seriously affected countries, some 44 million birds or 17 percent of the total population of poultry, were culled at an estimated cost of $12 million (.3 percent of GDP). The costs would have been substantially higher if there had been a serious impact on tourism, where an estimated 5 percent drop in tourist and business arrivals would reduce GDP by a further.4 percent. (Fortunately, there has been only a small impact on tourism so far; the number of tourist arrivals in Vietnam increased by 2.5 percent in 24 and rose further by 23 percent in the first seven months of 25.) In Indonesia, an FA survey indicates that in the most seriously affected parts of the country, more than 2 percent of permanent industrial and commercial farm workers lost their jobs. So although the overall macro-economic effects have been relatively small, the impact on the poultry sector and on associated input and distribution channels has been severe. 3. Although HPAI is mainly an animal health problem, more than half of the over 1 human cases have been fatal. Moreover, it is widely believed in the scientific community that a global pandemic of human influenza is overdue. Such a pandemic would be the result of the emergence of a strain of vims to which the world s population had little or no immunity. A widespread epidemic needs not be severe or particularly deadly; the pandemics of and were relatively mild. However, there is the possibility that the H5N1 strain could, through genetic re-assortment or a more gradual process of adaptive mutation, become readily transmissible from human-to-human and become the basis of a global pandemic comparable to that of , the Spanish influenza, which recent research has shown to have had its origin in an avian influenza virus. 4. Neither the timing nor the severity of the next pandemic can be predicted, but with the virus now endemic in bird populations in Asia the risk will not be easily diminished. Moreover, it is clear that containing and eradicating the virus will be a desirable objective, even if the problem were restricted to one of animal health in Armenia. Thus, economic analysis of the Project, takes into account the two main categories of economic impacts: (a) the economic consequences and costs associated with public and private efforts to prevent the emergence or spread of the disease and to treat its effects; and (b) the economic consequences and costs of sickness or death resulting from the disease outbreaks. 5. These two are clearly related as a greater effort at prevention andlor treatment for a given severity of epidemic would be expected to reduce the spread of sickness andlor the percentage of mortality and thus reduce the economic impact and costs. There are also two levels of potential economic costs. The l1 World Bank. (24). Avian Influenza Emergency Recovery Project. Technical Annex, Appendix 2. Other earlier and widely cited estimates by Oxford Economic Forecasting had been rather higher, suggesting costs of over $2 million or around.6 percent of GDP for Vietnam, and costs of $1-15 billion for East Asia as a whole, about.3-.5 percent of regional GDP. 72

83 present spread of HPAI of the H5N1 strain involves transmission between animals and (so far) a limited incidence of transmission between animals and humans; as such, given the lethal nature of the virus, especially in poultry, it is principally an animal health crisis. However, the emergence of a human influenza pandemic caused by a lethal virus would have a social and economic impact many times greater. Losses to the Poultry Sector, Related Industries, and Involved Populations. 6. The economic analysis follows a with-project scenario I without-project scenario approach to estimate net benefits of the Project to Armenia in the case of HPAI. The analysis focuses on the benefit of averting significant expected costs to the economy of a catastrophic spreading of the disease in Armenia's poultry flock due to a reduction in the probability of such a catastrophic event. The main costs averted that are considered in this analysis are: (i) dramatic reductions in poultry prices and quantities demanded resulting in large-scale decreases in value added in the poultry sector (adjusted however for the positive substitution effect into other sources of protein, notably red meat and fish); (ii) loss of capital assets due to decommissioning as a result long termdecreases in demand and of poultry stock due to culling; and, (iii) the cost of culling in outbreak areas itself (and other activities to stem the further spreading above and beyond what would be done in the with project scenario). 7. Costs related to illness or death o f humans (either in one country or internationally) as a result of infection from continual AI outbreaks in Armenia are not estimated owing to the current lack of adequate information on the probabilities of virus mutation and transmissibility. Given the time constraints and unavailability of precise data on some of the variables used in the analysis, this should be treated as a simulation exercise that indicates that even under very conservative assumptions and with only few of the benefits quantified, the returns on the project investments are sizeable. Scenarios Considered 8. The without-uroiect scenario: As a result of the low capacity of government and the poultry industry to deal with outbreaks, the sector is vulnerable to a catastrophic AI occurrence. This catastrophic event (CE) would be characterized by multiple, simultaneous outbreaks leading to a spread of the disease to large sections of the country's poultry flock. Significant numbers of poultry would have to be culled with associated costs o f culling and compensation to the farmers incurred by the state and the private sector. Subsequently, there would be massive public aversion to poultry consumption leading to a significant and sustained drop in prices and demand for poultry. 9. In turn, the poultry sector remains depressed in the medium term, leading to large sunk costs in the form of abandoned facilities. The public substitutes red meat, fish and other sources of protein for poultry. Prices of such substitutes go up, leading to increased net revenues for those sectors.'* Overall consumer surplus decreases.13 (In the long term the sector recovers partially.) The economic analysis l2 In the medium run, the red meat sector may expand, leading to a reduction in price levels. l3 CS of those consumers who have to switch to substitutes decreases because (i) those products are not their first choice; (ii) the price increase in the other products. Consumers who are risk averse and continue to consume poultry products experience an increase in CS in the short run as poultry prices go down before the sector adjusts and supply decreases. Consumer surplus related to substitutes decreases as a result of price increases, at least in the short run before the sector adjusts and supply expands. The overall impact on CS is expected to be negative as consumers are forced to consume a mix that does not represent their first preference. 73

84 ~ assigns the CE described above an annual probability of occ~rrence.'~ Under this scenario, this probability increases annually as the virus in the environment becomes endemic. 1. The with-uroiect scenario. The project builds capacity on the part of local government agencies and the private sector to respond effectively to outbreaks in such a way that multiple and simultaneous outbreaks may be contained with much higher efficiency, leading to a lower annual probability of the worst case scenario occurring. This is achieved through: (i) the adoption of a country-specific strategy (and its corresponding information system) to control and eradicate HPAI in areas of risk; (ii) the strengthening of disease surveillance and diagnostic capacity; (ii) the implementation of an outbreak containment plan, including deployment of supplies and incineration investments in field and certification of readiness for rapid response in areas at risk (all under Component 1: Animal Health). 11. Significant support to public awareness raising (under Component 3: Public Awareness and Implementation Support) will also help to: (i) increase the level of information among producer groups and their families and hence support the containment of the disease in risk areas; and, (ii) increase public confidence that the outbreaks will be contained effective and hence not lead to widespread illness among humans, which should reduce the risk of significant drops in demand for poultry products. The positive impact under this with project scenario is measured through a decrease in the annual probability of a CE. Estimation of Benefits and Costs of the Project 12. In this section we present the methods used to estimate the main costs and benefits of the project, including assumptions made in this process. It is underlined that the objective of the analysis is to provide an order of magnitude approximation rather than precise estimates. Table 1 summarizes base case assumptions on key parameters which are discussed below. 24 GDP contribution values are used. An annual average exchange rate of 486 dram/$ for 24 is used to convert these figures into US Dollars. The period of analysis is 15 years, beginning in 26. An annual discount rate of 12% is used in calculating the NPV, Parame ter Annual probability of CE occurring in first year of wlout project scenario (26) Annual increase in probability of CE occurring Probability reduction factor due to project Decrease of poultry sector added value due to CE, in year of CE and in long term new market equilibrium One time loss of capital in poultry sector Increase in value added of red meat and fish sectors, in year of CE and in long term new market eauilibrium Value 15.O% 1.O% 12% 4%, 2% 2% lo%, 5% 13. Without Project Scenario In this scenario, the main costs to the economy of multiple, simultaneous outbreaks that cannot be contained properly due to insufficient public and private sector capacity is the net cost incurred as a result of significant decrease in demand for poultry products, including meat and eggs. The net cost represents cost to the poultry sector and the positive impact on alternative protein sources, notably the red meat and fish sub-sectors. l4 There are several reasons for the focus in this analysis on a catastrophic event rather than multiple events of varying degrees of severity: (i) a probability distribution for events of varying severity is not available; (ii) related to the first point, employing an approach of the worst case scenario allows for simplicity in the analysis through the use a single variable probability. One can vary the assumed probability and see the impact on the net benefit due to the project. 74

85 ~ (i) (ii) (iii) It is assumed that in the year in which the CE occurs, the impact on the poultry sector is a 4% decrease in the value added of production of meat and eggs. In the subsequent three years, the value added in the poultry sector is assumed to regain 8% of the pre-ce level. A further, one-time cost to the poultry sector occurs in the form of abandoned capital production assets as a result of the permanent decrease in demand and poultry stock that has to be culled in response to the outbreaks. This loss is estimated at 2% of the capital stock. The value of the poultry sector capital stock itself is assumed to be equal to three times the value of annual production it the poultry sector. Gains to the red meat and fisheries sub-sectors that are alternative sources of protein are assumed to be 1% of the value added in the year in which the CE occurs, gradually decreasing to 5% over the following 3 years. 14. The Government and the private sector would also incur incremental cost associated to the administration of containing the outbreaks. However, these costs are extremely difficult to estimate and are hence not included in this analysis. As discussed above, there is a significant loss of consumer surplus resulting from the perceived risk associated with poultry product consumption. These losses are not captured in the GDP data uses since the latter reflect production values. However, shortage of data makes it impossible to quantify this loss. 15. The stream of total annual costs due to a CE in a particular year thus obtained is summarized in the form on present value as of the year of the CE. This value is then multiplied with the probability of the CE occurring in a particular year to arrive at the expected cost. In the without project scenario, the probability of the CE occurring is assumed to be 15% in 26, increasing annually at a rate of 1.O% due to increasing presence of the virus in the environment. This process results in an increasing stream of expected costs for the period 26-22, as presented in Table 2. Year 6 7 I Costs due to a CE (in NPV I terms ) Probability of CE occurring (%) in the wlout project scenario Expected costs in the wlout project scenario Probability of CE occurring (%) in the with project scenario Expected costs in the with project scenario Expected costs averted due to project Project cost ~ ~ ~ ~ ~ 3.5 I 1.1 I I 6.74 I ~ ~ ~ ~ I 12.8 I With-project Scenario It is assumed that the positive impact of the project will be felt starting in the third year of the project, 28. In other words, the probability of the full impact of the catastrophic event being felt is assumed to range from 15-16% in 26-27, as under the without project scenario. From year 3, the annual probabilities are gradually reduced thanks to the project. The stream of expected 75

86 costs in this scenario are calculated by multiplying these probabilities with respective NPVs of costs and presented in Table The total project cost is estimated at US$9.2, which would disburse over four years: $.3 million, $4.3 million, $3.5 million, and $1.1 million in 26,27,28, and 29. Results of the Analysis 18. Based on the above assumptions, the analysis yields an NPV of $ 37.2 million and an internal rate of return of 69.9 %. Sensitivity Analysis 19 A sensitivity analysis was carried out to gauge the impact of varying assumptions on the results of internal rate of return of the project. The analysis indicates that the model is robust as substantial reductions (or increases) in the assumed values are necessary for the IRR decrease to 2%, notably: Holding all other values constant, assuming a value added loss in the poultry sector to 5% in the CE year and 1% in the long term (as opposed to the base values of 4% and 2% ); Reducing the losses sustained by the poultry sector in terms of value added loss (from 4% to 2% in the CE year and from 2% to 1% in the long term), while also increasing the gain in the red meat and fisheries sectors (fi-om 1% to 2% in the first year and from 5% to 1% in the long run); and, Reducing the probability of the CE in 26 to 4% (from the base case value of 15%) and the annual increase in probability to.2% (from 1%). 2. The IRR was not found to be very sensitive to variations in the value of the share of capital loss of investment in the poultry sector. 76

87 Annex 9: Safeguard Policy Issues ARMENIA: AVIAN INFLUENZA PREPAREDNESS PROJECT 1. Overall, the Project will assist the government to develop a strategy for managing future emerging and re-emerging zoonotic and infectious disease outbreaks. As a result, the two safeguard issues which pertain to the Project are those of environmental assessment for technologies to be deployed for disposal of culled poultry and of mitigating the negative impacts of mandated culling of poultry on small scale backyard poultry producers. 2. In general, activities under the Project are not expected to generate any adverse environmental effects as they are focused largely on public sector capacity building and improved readiness for dealing with outbreaks of avian influenza in domestic poultry. These prevention-focused activities are expected to have a positive environmental impact as the Project's investments in facilities, equipment, and training for laboratories will improve the effectiveness and safety over existing avian influenza handling and testing procedures by meeting international standards established by the OIE. This would be reinforced by the mainstreaming of environmental safeguards into protocols and procedures for the culling and disposal o f animals during AI outbreaks. 3. Whatever medical waste is generated in health care facilities will be managed using existing guidelines in Armenia, which have been found satisfactory under previous projects. The Project would also support updating these guidelines, training health care workers to manage medical waste following these guidelines, and the possible purchase of equipment for the proper handling and disposal of medical waste in participating facilities. These provisions would be included in the Project Operational Manual, Environmental assessment Environmental Category B 4. Environmental Assessment and Environmental Management Plan. Since the Project supports investments in carcass disposal for culled poultry, the Project is assessed as a B-category project. An Environmental Assessment (EA) and an Environmental Management Plan (EMP) for the deployment of carcass disposal capacity (mainly using bio-thermal holes, but also potentially using mobile incineration units) will be necessary. This EMP will also cover the clean up of animal wastes of culled poultry by the local public veterinary services supported under the Project. The scope of this EMP will be specified in early project implementation, as a waiver for the requirement to complete the EA and EMP during project preparation has been sought and obtained per para. 12 of OP 4.1. Preparation of the EA and EMP is expected early in project implementation, and their adoption by the Government is set as a disbursement condition for the Animal Health component of the Project. Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OPIBPIGP 4. 1) [X 1 E1 Natural Habitats (OPIBP 4.4) tl [ XI Pest Management (OP 4.9) [I XI Cultural Property (OPN 1 1.3, being revised as OP 4.1 1) [I [ XI Involuntary Resettlement (OPIBP 4.12) [I [X 1 Indigenous Peoples (OD 4.2, being revised as OP 4.1) [I EX 1 Forests (OPIBP 4.36) 11 [X 1 77